Businesses should prepare for important changes to IRS tax reporting using Forms 1099-NEC and 1099-MISC. The changes increase the reporting thresholds for nonemployee compensation and certain other payments, but businesses will still need effective processes for tracking payments and maintaining accurate vendor records.
What is Changing about Forms 1099-NEC and 1099-MISC in 2026?
Beginning with payments made in 2026, the federal information-reporting thresholds for many payments reported on IRS Forms 1099-NEC and 1099-MISC increase from $600 to $2,000. Businesses should review their accounts payable systems and reporting procedures now. Additionally, they should still collect Form W-9, track all potentially reportable payments, identify payment method, capture qualified tips and overtime data when applicable, and prepare to file 2026 information returns through IRIS during the 2027 filing season.
While the threshold changes may reduce the number of information returns some businesses must issue, simplify year-end tax compliance activities, and decrease administrative burden, they do not reduce the importance of sound vendor onboarding, accurate payment records, or year-round monitoring.
2026 Form 1099 Threshold Changes and How to Prepare
| Tax Form | 2025 Tax Year | 2026 Tax Year |
|---|---|---|
| 1099-NEC | $600 | $2,000 |
| 1099-MISC | $600 | $2,000 |
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How to Prepare |
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A Higher 1099-NEC and 1099-MISC Reporting Threshold
For payments made after December 31, 2025, the threshold under Internal Revenue Code Sections 6041 and 6041A increases from $600 to $2,000 for many payment categories on Forms 1099-NEC and 1099-MISC. The $2,000 amount applies for calendar year 2026 and will be adjusted annually for inflation beginning in 2027.
The change generally affects
- Nonemployee compensation reported on Form 1099-NEC
- Form 1099-MISC categories tied to the Section 6041 threshold, including rents, prizes and awards, certain other income payments, healthcare payments, and crop insurance proceeds
Not every Form 1099-MISC threshold changes. For example, the $10 reporting threshold for royalties remains in place. The $600 threshold for gross proceeds paid to attorneys also remains unchanged.
The new threshold is a filing threshold—not an exclusion from income. A contractor or other recipient may still have taxable income even when total payments fall below $2,000, and no Form 1099 is required.
PYA Tax Tip
Businesses should continue tracking all potentially reportable payments rather than treating amounts below the threshold as outside the reporting process.
Revised Forms Address Qualified Tips and Overtime
The 2026 Forms 1099-NEC and 1099-MISC include new fields supporting the federal deductions for qualified tips and qualified overtime compensation, based on temporary tax relief provisions through OBBBA for tax years 2025-2028. When applicable, payers may need to separately capture and report qualified tips, the relevant Treasury Tipped Occupation Code, and qualified overtime compensation. (Read PYA’s tax resource about the tax implications of OBBBA, including the impacts on tips and overtime.)
PYA Tax Tip
These additions are not simply a year-end form-preparation issue. Businesses that may make these payments should confirm during 2026 that their payroll, accounts payable, point-of-sale, and other recordkeeping systems can retain the information needed to complete the revised forms accurately.
IRIS Replaces FIRE
The IRS announced that after January 1, 2027, its Information Returns Intake System (IRIS) will become the only electronic filing system for information returns currently filed through Filing Information Returns Electronically (FIRE). This means Forms 1099 covering calendar-year 2026 and filed in 2027 will generally need to be submitted through IRIS.
PYA Tax Tip
Businesses that file directly should apply for an IRIS Transmitter Control Code, test their filing processes, and update written procedures before filing season. Organizations using a payroll provider, accounting platform, or third-party filing service should confirm that the provider will support the required IRIS filing process.
What Has Not Changed about 2026 Tax Reporting
The higher thresholds for Forms 1099-NEC and 1099-MISC do not eliminate the foundational controls that support accurate information reporting and compliance obligations, and they do not alter 2026 recipient tax obligations.
Form W-9 Collection
Businesses should continue requesting a completed Form W-9 during vendor onboarding, regardless of the amount the business expects to pay. Form W-9 provides the vendor’s taxpayer identification number (TIN) and federal tax classification, both of which are necessary to determine whether reporting is required and to prepare an accurate return.
PYA Tax Tip
Waiting until year-end—or until payments cross $2,000—to request a Form W-9 can create avoidable delays, increase the likelihood of missing or incorrect information, and complicate backup withholding compliance.
Worker Classification
The threshold increase does not change the rules for determining whether a worker is an employee or an independent contractor. Worker classification remains an area of significant federal and state scrutiny.
Payments Made by Card or Third-Party Network
Payments settled through payment cards or qualifying third-party networks are generally reported on Form 1099-K rather than by the business on Form 1099-NEC or Form 1099-MISC. Payment method and settlement records should be reviewed when determining the appropriate reporting responsibility.
Attorney Reporting
Special reporting rules for attorneys continue to apply. Payments for legal services may be reportable even when the law firm is organized as a corporation. In addition, gross proceeds paid to an attorney may remain subject to the separate $600 reporting threshold.
Backup Withholding and Recordkeeping
Businesses still need procedures for identifying missing or incorrect taxpayer identification numbers, responding to IRS notices, and depositing and reporting amounts withheld when required.
PYA Tax Tip
Businesses should retain Form W-9, payment histories, documentation supporting reporting exemptions, and records showing how each vendor’s reporting treatment was determined.
How Should Businesses Prepare before Year-End?
Before the end of 2026, businesses should consider the following steps:
- Update reporting systems. Replace the $600 threshold with $2,000 only for the payment categories affected by the law, while preserving thresholds that did not change.
- Continue collecting Form W-9 at onboarding. Do not wait until a vendor approaches the reporting threshold.
- Review vendor classifications. Confirm that entity type, exemption status, payment category, and worker classification are recorded correctly.
- Track payments by method. Distinguish checks, automated clearing house (ACH) payments, payment cards, and third-party network transactions to reduce duplicate or omitted reporting.
- Evaluate tips and overtime data. Determine whether the new reporting fields apply and whether existing systems capture the required information.
- Prepare for IRIS. Confirm whether the business or its service provider will handle filing, obtain necessary credentials, and update training and procedures.
- Perform a pre-year-end review. Identify missing Forms W-9, potential name-and-TIN mismatches, and vendors nearing applicable reporting thresholds before filing deadlines arrive.
The Bottom Line
The increased reporting threshold may reduce the number of Forms 1099-NEC and 1099-MISC some businesses issue for 2026. It should not, however, lead organizations to relax compliance procedures and vendor controls or stop tracking lower-dollar payments. The combination of revised forms, new data requirements, and the transition to IRIS makes strategic planning especially important.
Businesses that review vendor records, update system settings, and clarify filing responsibilities before year-end will be better positioned to meet the 2027 filing deadlines and reduce the risk of penalties, corrections, and reporting errors.
PYA’s Tax professionals can help organizations evaluate how the 2026 information-reporting changes affect their systems, procedures, and compliance responsibilities.
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Contributing Author: Allison King, PYA Intern
