If you’re a small business owner, freelancer, or nonprofit leader, understanding the 1099 NEC threshold is essential for avoiding IRS penalties. The threshold determines when you must issue a 1099 NEC to contractors, and upcoming changes will affect how you report payments in the near future.
Key takeaway: The 1099 NEC threshold is $600 for tax year 2025, but it will increase to $2,000 beginning in tax year 2026 under new IRS rules.
What Is the Current 1099 NEC Threshold?
As of now, businesses must issue a Form 1099 NEC to any contractor, freelancer, or nonemployee they pay $600 or more in a calendar year. This applies to payments for services, not goods, and covers individuals such as:
- Freelancers or gig workers
- Independent contractors
- Consultants, designers, or marketing professionals
- Event staff such as photographers or musicians
If you pay less than $600 during the year, you generally don’t need to issue a 1099 NEC. But once you cross that threshold, you must file with both the IRS and the contractor by the deadline.
👉 For more details, the IRS explains how and when to issue 1099s in their reporting payments to independent contractors guidance.
What Is the 1099 NEC Threshold for 2025?
For tax year 2025 (payments made in 2025 and reported in 2026):
- The threshold remains $600.
- If you pay a contractor $600 or more during 2025, you must file Form 1099 NEC.
- This applies to service-based payments, not merchandise purchases.
Nothing changes for 2025 filings — you’ll still follow the same rules you do today.
What Is the 1099 NEC Threshold for 2026?
For tax year 2026 (payments made in 2026 and reported in 2027), the threshold increases:
- The new threshold is $2,000.
- This change comes from the One Big Beautiful Bill Act (Public Law 119-21), signed in July 2025.
- The law raises the reporting threshold for both 1099 NEC and 1099 MISC from $600 to $2,000.
- Beginning in 2027, the threshold will also be adjusted annually for inflation.
This change means fewer 1099 NEC forms for small, low-dollar payments, but businesses will need to update their accounting practices and staff training before 2026.
Why Is the Threshold Changing?
The IRS and lawmakers raised the threshold to reduce the burden on small businesses and contractors who deal with minor transactions. The original $600 threshold has been in place for decades and was not adjusted for inflation until now.
By increasing the threshold to $2,000, the IRS expects fewer information returns for small-dollar payments, while still ensuring larger contractor payments are properly reported.
What Deadlines Should Businesses Follow?
The deadlines for Form 1099 NEC are not changing with the new threshold:
- January 31: Send a copy of the 1099 NEC to the contractor.
- January 31: File with the IRS, whether online or by paper.
Missing these deadlines can lead to penalties ranging from $60 to $310 per form, depending on how late you file. For more details, see our blog What Are the 1099 NEC Deadlines and Penalties?.
How Can Businesses Prepare for the Change?
Here’s how small businesses, nonprofits, and tax professionals can get ready for the 2026 threshold increase:
- Review your vendor list: Identify which contractors typically fall in the $600–$2,000 range so you know who will be affected.
- Update accounting systems: Make sure your bookkeeping software can flag contractors who cross the new threshold.
- Collect W-9s early: Always request a completed W-9 form before paying a contractor. This ensures you have the correct taxpayer information.
- Train staff: Bookkeepers and admins should understand the 2026 rule change to avoid confusion.
- Use trusted e-filing software: Filing online with an IRS-approved service like WageFiling keeps you compliant and reduces the risk of mistakes.
Final Thoughts
The 1099 NEC threshold is $600 for tax year 2025 but will increase to $2,000 starting in 2026. This change reduces paperwork for smaller transactions, but businesses need to prepare now. The deadlines remain the same, and penalties for late filing can add up quickly.
When you’re ready to file, WageFiling makes it simple with flat-rate pricing, secure e-filing, and IRS approval since 1996.
Visit WageFiling.com to file your 1099 NEC and W2 forms online and stay compliant with confidence.
Frequently Asked Questions
What is the 1099 NEC threshold for 2025?
For tax year 2025, the threshold remains $600. Businesses must issue a 1099 NEC if they pay a contractor $600 or more.
What is the 1099 NEC threshold for 2026?
For tax year 2026, the threshold increases to $2,000. This change was made under the One Big Beautiful Bill Act (Public Law 119-21).
Will the 1099 NEC threshold change again after 2026?
Yes. Starting in 2027, the threshold will be adjusted annually for inflation.
