If you get 1099 forms for income you earn as an independent contractor and/or from third-party settlement organizations (TPSOs), then the One Big Beautiful Bill (OBBB) Act has some good news for you.
When the OBBB was signed into law on July 4, among the provisions that took affect are those related to earnings thresholds applied to 1099 forms. These are the third-party statements that earners, and the Internal Revenue Service, use to track taxable income.
The amounts paid that trigger the issuance of forms 1099-NEC, 1099-MISC, and 1099-K will increase significantly.
The biggest change is to the Form 1099-K, officially titled Payment Card and Third Party Network Transactions, reporting threshold. The OBBB reverts for the 2025 tax year to the prior tax law earnings threshold of $20,000 received as part of 200 transactions. Both the dollar and transaction amounts apply before the 1099-K is sent to the recipient and copied to the IRS.
Forms 1099-NEC, Nonemployee Compensation, and 1099-MISC, Miscellaneous Information, changes take effect next year. The 2026 reporting documents in these cases will be issued for payments of $2,000 instead of the current $600 trigger.
Then, beginning Jan. 1, 2027, the reporting amounts will be increased annually based on inflation.
1099-K form’s up and down history: The OBBB basically returns the original 1099-K issuance requirement to the $20,000 in earnings and more than 200 transactions levels that were set when the form was introduced in 2011
Since 2022, however, a much lower earnings trigger of $600 regardless of the number of transactions technically has been in the tax code, if not in actual effect.
That dramatically lower 1099-K threshold was created as part of the American Rescue Plan Act (ARPA) of 2021. It was designed to get more people to report their gig income, which had increased during the economic turmoil of the COVID-19 pandemic, on their tax returns, since it’s harder to “overlook” the money when the IRS also is notified of the amount.
The lower 1099-K trigger level was met almost immediately with confusion about the new rules and complaints from taxpayers, form issuers, tax professionals, and even some Capitol Hill lawmakers. In response, the IRS decided to delay implementation of the change, leaving the $20,000/200 transactions rule in place.
In late 2024, the IRS announced that it finally would require TPSOs — think Venmo, PayPal, CashApp, Apple Pay, Zelle, eBay, Etsy, Uber, Lyft, Airbnb, and even TicketMaster resellers — to issue 1099-Ks for lower amounts.
For the 2024 tax year, that was payments of more than $5,000.
The tax agency also had planned to lower the 1099-K reporting level incrementally over the next two years. This year, it was to have dropped, per IRS Notice 2024-85, to $2,500. The ARPA-mandated $600 earnings trigger would have finally taken effect in 2026 and subsequent tax years.
As noted, OBBB ended that reporting trigger phase-down. Now 1099-Ks will again go out, effective immediately upon the bill’s July 4, 2025, enactment, only when a recipient earns $20,000 from more than 200 transactions. It also makes the return to the prior higher levels retroactive to 2022.
1099-NEC and MISC increases: Currently, these forms are sent to affected taxpayers, and copied to the IRS, when the amounts paid are at least $600.
For tax year 2026, the reporting trigger for both the NEC and MISC 1099 forms will increase to $2,000.
In 2027 and subsequent years, the threshold for both forms will be adjusted for inflation.
Form 1099-NEC, as its name indicates, goes to those who receive non-wage income. Recipients of this form include contractors, consultants, freelancers, and vendors.
Form 1099-MISC reports, as its name says, miscellaneous nonwage income. This covers, per the IRS instructions, a wide variety of payments, including —
- Rents
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney
- Any fishing boat proceeds
Increases help and hinder: Next year’s increase in the 1099 forms’ issuance amounts will make things easier for businesses.
While payors still will have to track all their 1099 payments, they won’t have to send as many tax statements to their contract employees or users of their payment services. That will ease these companies’ compliance burdens.
Fewer 1099s to taxpayers also means the IRS won’t be getting its copies of the income statements. That likely will increase the amount of earnings that will escape collection.
It also means the individuals who used to get 1099s will on their own. They’ll need to keep good records of all their earnings, since they won’t be getting reminders of amounts they might have overlooked.
Earners also need to remember that a lack of a 1099 does not mean the money they received is tax-free. All earnings, even those amount not large enough to trigger issuance of a 1099, are taxable income and must be reported when tax returns are filed.
These considerations are why the forms affected by new trigger amounts in the OBBB — 1099-K, 1099-MISC, and 1099-NEC — are this weekend’s By the Numbers figures.
You also might find these items of interest:
- Tax responsibilities of gig workers
- The many versions of IRS Form 1099
- Employee or contractor? The IRS has some guidelines on when each work status applies
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