The 1099 Threshold for 2026 Is Now $2,000

S-Corp owners who pay independent contractors just had a key compliance rule shift under the One Big Beautiful Bill Act. The 1099 threshold 2026 has been raised from $600 to $2,000 for both Form 1099-NEC and Form 1099-MISC, effective for payments made after December 31, 2025 — in other words, the payments you are making right now during tax year 2026. If your business regularly engages freelancers, subcontractors, or outside service providers, here is exactly what changes — and what does not.

What the OBBBA 1099 Change Means in Practice

Under the old rule, S-Corp owners were required to file a Form 1099-NEC for any contractor paid $600 or more in a calendar year for services. The OBBBA 1099 update amends Section 6041(a) to raise that threshold to $2,000 starting with tax year 2026, with annual inflation indexing (rounded to the nearest $100) beginning in calendar year 2027. The same $2,000 floor now applies to Form 1099-MISC for qualifying payments.

What this looks like in practice: a freelance designer paid $1,500 for a project in 2026 no longer requires filing. A bookkeeper paid $800 over several months equals the same result. The 1099 threshold 2026 change meaningfully reduces paperwork for S-Corp owners with multiple low-volume contractors. It eliminates a compliance burden that many small businesses were inconsistently meeting at the $600 level anyway.

What S-Corp Contractor Reporting Rules Did Not Change

Several important aspects of S-Corp contractor reporting are unchanged. The $2,000 threshold applies only to payments for services made to individuals and unincorporated entities. Payments to corporations — including other S-Corps — still do not require a Form 1099-NEC 2026 filing. A few categories follow their own thresholds under the 2026 instructions for Forms 1099-MISC and 1099-NEC: gross proceeds paid to an attorney in connection with legal services (Form 1099-MISC, Box 10) are still reportable at $600, and royalties are still reportable at just $10 — while attorney fees for services and medical and health care payments now follow the $2,000 floor.

Your obligation to collect Form W-9 from contractors before or at the time of first payment also remains unchanged. The W-9 captures the contractor’s taxpayer identification number and helps confirm whether a 1099 will ultimately be required. Because you often do not know in January whether a contractor will reach $2,000 by year-end, collecting W-9s upfront remains the right practice regardless of the new 1099-MISC threshold.

Backup withholding rules are also intact. If a contractor refuses to provide a W-9 or provides an incorrect TIN, you are still required to withhold 24% of reportable payments — and the backup withholding trigger now tracks the same $2,000 threshold, so the two rules stay in sync.

Two related rules are worth keeping straight. OBBBA also restored the Form 1099-K threshold for third-party payment platforms to more than $20,000 and more than 200 transactions, retroactively reversing the $600 phase-in — so payments you make to contractors through card processors or platforms like PayPal are the platform’s reporting problem, not yours. And the e-file mandate did not move: if you file 10 or more information returns in aggregate, you must file them electronically.

How to Update Your Contractor Tracking System

For practical S-Corp contractor reporting in 2026, the $2,000 threshold simplifies your year-end process for lower-spend vendors without creating compliance risk. Update your accounts payable or accounting system to flag contractors who are approaching — but have not yet crossed — the $2,000 mark so nothing falls through at year-end.

If you were previously issuing 1099-MISC or Form 1099-NEC 2026 forms for sub-$2,000 contractors out of caution, you no longer need to. The OBBBA 1099 change gives you a clean, legally supported threshold to work from — and eliminates the guesswork that the $600 floor created for contractors paid in that gray zone. For a look at how the IRS matches these filings against returns, see our article on S-Corp audit risk in 2026.