What Should Businesses Know About the New Form 1099 Reporting Rules

If your business hires independent contractors or outside vendors, there’s a new tax rule that may save you time during the 2026 filing season.

For decades, businesses generally issued a Form-1099 after paying a non-employee at least $600 during the year. But beginning with payments made in 2026, that threshold has increased to $2,000.

At first glance, this sounds like great news—and for many businesses, it will mean preparing fewer Forms 1099 each year. But don’t let the higher threshold create a false sense of security. Good recordkeeping and accurate vendor information remain just as important as ever.

Higher Reporting Threshold

The biggest change is simple: businesses generally won’t need to issue Forms 1099-NEC or 1099-MISC unless payments to a recipient total at least $2,000 during the calendar year. The threshold will also be adjusted for inflation beginning in 2027. [Link]

Keep in mind that the reporting threshold only affects whether a Form 1099 must be issued. It does not change whether income is taxable. Recipients remain responsible for reporting all taxable income, even if they never receive a Form-1099.

Don’t Forget about Form W-9

Although fewer Forms 1099 may be required, collecting a completed Form W-9 from vendors is still one of the best ways to avoid problems at year-end.

A current Form W-9 provides the taxpayer identification number (TIN) and tax classification needed to prepare an accurate 1099, and includes a certification from the vendor that they do not owe back taxes. Having this information on file before making payments can help avoid corrected Forms 1099, IRS mismatches, and unnecessary delays. It is best to collect the W-9 prior to making a payment to encourage the vendor to provide the requisite W-9 promptly.

Businesses should also remember that single-member LLCs and sole proprietorships are disregarded entities for federal tax purposes, meaning the Form 1099 may need to be issued using the owner’s Social Security or EIN number rather than the LLC’s. [Link]

Taking a few moments to review Forms W-9 before year-end can help businesses avoid IRS mismatch notices, corrected Forms 1099, and unnecessary administrative burdens. Failing to provide the IRS with correct taxpayer identification information can result in the payor owing backup withholding to the IRS at a rate of 24%.

Looking Ahead

The increase to the Form 1099 reporting threshold should reduce paperwork for many businesses. However, now is still a good time to review your vendor files, obtain updated Forms W-9 where needed, and confirm that your reporting procedures are in good shape before year-end.

A little preparation today can make next filing season much smoother.