One Big Beautiful Bill Act changes 1099 thresholds

• There are roughly 21 different IRS 1099 forms, each of which documents some type of payment to businesses, individuals, or entities that aren’t W-2 employees. 
• The One Big Beautiful Bill Act returns the 1099-K reporting threshold to $20,000 and 200 transactions.
• The One Big Beautiful Bill Act raises the 1099-MISC and 1099-NEC reporting thresholds to $2,000.

Form 1099-K is used to report payments received for goods or services from payment apps (e.g., Apple Pay, PayPal, Venmo, or Zelle), online marketplaces, and payments from credit, debit, or payment cards.  

The reporting threshold for Form 1099-K was $20,000 and 200 transactions from its inception in 2011 through 2023. However, the American Rescue Plan Act of 2021 eliminated the transactions requirement and reduced the threshold to $600.

This lower threshold for Form 1099-K was set to take effect for tax year 2023, but the IRS delayed its adoption. In November 2024, the IRS announced a plan to phase in the 1099-K reporting threshold change as follows:

• More than $5,000 for 2024 
• More than $2,500 for 2025
• More than $600 for calendar year 2026 and beyond

But under Section 70432 of the One Big Beautiful Bill Act (OBBBA), the reporting threshold for Form 1099-K returns to $20,000 and 200 transactions. Per the legislation, this takes effect “as if included in section 9674 of the American Rescue Plan Act.” 

Section 70433 of the OBBBA changes the reporting thresholds for Form 1099-MISC and Form 1099-NEC. 

Form 1099-MISC is used to report nonwage income not covered by another 1099 form. Examples of 1099-MISC income include legal settlements, prizes, and rent.

Form 1099-NEC is used to report nonemployee compensation, such as vendor/supplier payments to a consultant, contractor, or freelancer.

The reporting threshold for the 1099-MISC and 1099-NEC is currently $600. For tax year 2026, it will increase to $2,000. For 2027 and subsequent years, the threshold for both forms will be adjusted for inflation.  

The new law also amends backup withholding requirements. Effective for 2027, payors are required to issue 1099-MISC and 1099-NEC forms only where the aggregate for the calendar year exceeds the threshold for that year.

The new reporting thresholds for Form 1099-K, Form 1099-MISC, and Form 1099-NEC should reduce administrative burdens for many individuals and businesses — especially for online marketplaces and third-party payment organizations with a high volume of small payments. In fact, the House Ways and Means Committee predicts increasing these thresholds will remove the need for more than one third of all 1099-MISC paperwork.

Of course, gig workers still need to keep track of their income because they’re required to file a tax return with the IRS if they have net earnings of $400 or more from gig work.

And gig workers need a way to keep informed: More than 60% of gig economy workers surveyed by Censuswide in January 2025 did not know the 1099-K reporting threshold had been lowered. And 74% of those surveyed could not identify the payment threshold above which they would be required to report income to the IRS in 2025. 

Censuswide also found that to avoid crossing the $2,500 threshold in 2025, over 20% of surveyed respondents were quitting one or more of their gig economy jobs, 19% were changing their earnings strategy, and 20% planned to take on more under-the-table work. With the 1099-K threshold returning to $20,000 and 200 transactions, gig economy workers may be able to maintain their current employment status if desired. 

Yet the higher 1099 thresholds also introduce new compliance variables for businesses and gig economy workers. For example, the 1099-MISC and 1099-NEC thresholds will need to be closely monitored since they’ll be adjusted annually for inflation starting in 2027. Businesses will need to keep track of which thresholds apply to which tax year and ensure they issue the forms as required. (Note that payors may issue a Form 1099 for lower amounts, as the IRS explains for the Form 1099-K.)

Tax software can help businesses and workers stay in compliance, and indeed 15% of the gig workers surveyed by Censuswide planned to use tax software for the first time due to the changing 1099 thresholds.

Avalara automates 1099 reporting, reducing the risk of errors and keeping business systems aligned with evolving IRS requirements. Our solutions help businesses streamline form preparation, manage vendor data, and store forms in a secure and accessible way.

If you’d like to learn more about how Avalara 1099 & W9 can help you collect, manage, and file IRS forms, give us a call.