The 1099 threshold just changed for the first time since 1954. Here's the deal if you pay contractors or freelancers: $600 is out, $2,000 is in — but only for money you pay in 2026. Mix up the years and you'll file the wrong forms. There's no real downside to getting this right now, in October, while there's still time.
Quick version: 2026 payments → $2,000 threshold. 2025 payments (the ones you file this January) → still $600. And get those W-9s collected now, because a missing W-9 past $2,000 means 24% backup withholding. That's not a typo.
What Changed, Exactly?
The One Big Beautiful Bill Act (signed July 2025) did four things to 1099 thresholds:
- 1099-NEC (contractors, freelancers): $600 → $2,000 per person, per year.
- 1099-MISC (rent, prizes, other income): $600 → $2,000 per person, per year.
- Royalties (MISC Box 2): still $10. Untouched.
- 1099-K (PayPal, Stripe, etc.): back to $20,000 and 200 transactions. The whole phase-in plan — $5,000, then $2,500, then $600 — is dead, retroactive to 2022.
Three things people get wrong about the $2,000 number:
It's per person, per year — not per invoice. Ten $250 invoices to one designer = $2,500. That designer gets a 1099. Simple math, easy to miss.
No 1099 ≠ no tax. Pay a cleaner $1,500, no form goes out. That $1,500 is still taxable income on their return. The threshold only decides whether you have to file the paperwork.
It won't stay $2,000 forever. Inflation adjustments kick in starting 2027.
One more: Zelle doesn't exempt anyone. Still need the W-9, still file the 1099-NEC. The payment app doesn't change the rule.
Read Also: How to Create and File 1099s with QuickBooks
The Year Mix-Up That’ll Catch Everyone
This is the part that'll cause the most headaches this January, so let's nail it down.
The 1099s you file in early 2026 cover money you paid in 2025. Old rule applies: $600. The shiny new $2,000 threshold? That's for payments made on or after January 1, 2026 — the ones you report in early 2027.
Two thresholds, one filing season. Get them crossed and you're either doing pointless paperwork or skipping forms the IRS wants. Neither is fun.
Stick this on your monitor: 2025 money = $600. 2026 money = $2,000. Done.
The 24% Backup Withholding Trap
Here's the expensive part. Congress moved the backup withholding threshold to $2,000 too.
Say your contractor crosses $2,000 in 2026 and you've got no valid W-9 on file. From that payment on, you're required to hold back 24% of everything you pay them and send it to the IRS. Not optional. Required.
Think about that for a second. One missing piece of paper, and a quarter of every invoice goes to the IRS instead of your contractor. Your contractor won't love you for it either.
The fix is free: get the W-9 before you pay, not after. Do it this month and this problem never exists.
Your October Checklist (Don’t Wait Till January)
October is W-9 season. The firms that breeze through January are doing this work right now. Here's the order:
Step 1: Pull your 2026 vendor list
QuickBooks Desktop → Vendors > Vendor Center. Look at everyone you've paid this year. Flag whoever's near $2,000 already, plus anyone on pace to cross it by December. That list is the whole project.
Step 2: Chase the missing W-9s this week
Everyone flagged without a W-9 on file gets an email now. Keep it short:
"Hi [Name], closing out our year-end tax paperwork — please fill out the attached W-9 and send it back by [date]. We need it for 1099 reporting. Thanks!"
Heads up: if someone won't give you a W-9 and they're past $2,000, think twice before cutting the next check. Without that form, the backup withholding bill lands on you.
Step 3: Fix the vendor setup in QuickBooks
The step everyone skips — which is why January turns into chaos. For each contractor: double-click the vendor, open the Tax Settings tab, and check two things. "Vendor eligible for 1099" must be ticked. And the Tax ID has to match the W-9 exactly — one wrong digit and you're looking at an IRS mismatch notice in March.
Step 4: Rehearse the 1099 wizard
Before the holidays, go to Vendors > Print/E-file 1099s and run it once without filing. It'll show you exactly who crosses the threshold and flag every missing Tax ID. Finding gaps in November beats finding them on January 30th. You're all set from there.
Read Also: Year-End Checklist for Small Business Bookkeeping
Quick Note on 1099-K
Federal rule is simple again: $20,000 and 200+ transactions. One wrinkle — a handful of states (Massachusetts, Maryland, Virginia, Vermont, Montana, North Carolina, DC, New Jersey, Rhode Island) set their own lower 1099-K floors. Operating in one of those? Check the state rule separately.
Conclusion!
Good news: fewer 1099s for most small businesses. The catch: the W-9 habit matters more than ever, because the 24% backup withholding line moved to $2,000 right along with the threshold. Collect the forms in October, keep your QuickBooks vendor mapping clean, rehearse the wizard early — and January will be the most boring month of your year.
Rather hand the whole thing off? W-9 tracking, vendor mapping, filing, e-filing — our US-based team runs the full 1099 season for small businesses every year.
FAQs
Which threshold for the 1099s I file in January 2026?
$600 — the old one. Those forms cover 2025 payments. The $2,000 rule starts with payments made on or after January 1, 2026.
Contractor earned $1,200 — no 1099, so no tax?
Nope. The threshold only decides if you issue the form. They still report the $1,200.
When does 24% backup withholding kick in?
Someone crosses $2,000 in 2026 payments from you + no valid W-9 on file = 24% off every payment after that.
Zelle payments exempt?
No. Same rules, same W-9, same 1099-NEC.
Is the 1099-K $600 threshold really gone?
Gone. Back to $20,000 and 200+ transactions, retroactive to 2022.
Related Articles: