One Big Beautiful Bill (OBBB) Act: Increased Threshold for Information Reporting

April 27, 2026

We are sure many of you have already completed 2025 form 1099 issuance. The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, brings a significant update to federal information‑reporting rules in upcoming year. These changes affect when businesses must issue Form 1099‑MISC, Form 1099‑NEC, and apply backup withholding. The new law is designed to reduce administrative burdens for small and mid‑sized businesses while modernizing long‑standing reporting thresholds. 

Current Law: The $600 Reporting Threshold 

Under existing rules, businesses must file an information return with the IRS—and furnish a copy to the payee—when they make $600 or more in reportable payments during the year. 

Form 1099‑MISC 

Commonly reported items include: 

• Rents 

• Compensations 

• Insurance premiums 

• Prizes and awards (not tied to services) 

• Annuities 

• Other fixed or determinable income 

  
  

Form 1099‑NEC 

This form is used to report: 

• Payments of $600 or more to non‑employees for services, such as independent contractors, freelancers, consultants, and similar service providers 

  
  

Backup Withholding 

In certain situations—such as when a payee fails to provide a valid taxpayer identification number—businesses must withhold federal income tax at a flat 24% rate. 

What’s Changing Under the OBBBA 

Beginning with payments made after December 31, 2025, the OBBBA raises the reporting threshold for: 

• Form 1099‑MISC 

• Form 1099‑NEC 

• Backup withholding applicability 

  
  

New Threshold: $2,000 

The threshold increases from $600 to $2,000, meaning businesses will no longer need to issue a Form 1099 unless total payments to a payee reach or exceed this new amount. 

Inflation Adjustments 

Starting in 2027, the $2,000 threshold will be indexed annually for inflation, ensuring the reporting requirement keeps pace with economic changes. 

What This Means for Businesses 

• Reduced filing volume: Fewer 1099s will be required for lower‑dollar payments. 

• Simplified vendor management: Businesses may see fewer administrative tasks related to collecting W‑9s and issuing forms. 

• Backup withholding triggers shift: The higher threshold also applies when determining whether backup withholding rules come into play. 

Businesses should review their payment processes and update internal systems before the 2026 filing season to ensure compliance with the new thresholds. 

Important Note for Payees 

Even if a payee does not receive a Form 1099, all income is still taxable unless specifically excluded by law. 

• If total payments from a business are below $2,000, the payor is not required to issue a Form 1099. 

• However, the payee must still report all income on their tax return. 

• The absence of a Form 1099 does not make the income nontaxable. 

This distinction is crucial for independent contractors, platform-based workers, and small service providers who may rely on Forms 1099 to track their income. 

Key Takeaway 

The OBBBA’s increase of the information‑reporting threshold from $600 to $2,000 marks the most significant update to Form 1099 rules in decades. While the change reduces administrative burdens for businesses, payees must remain diligent in tracking and reporting all taxable income.