IRS 1099 Reporting Changes After H.R. 1: What Businesses Need to Know for 2026

Whether you’re a small business owner, freelancer, or, consultant, 1099 forms are a pivotal part of tax compliance. The IRS requires payers to issue various 1099 forms to report income paid to non-employees and third-party transactions. These forms help the IRS match income reported on tax returns and ensure everyone pays the tax they owe.

The IRS 1099 reporting rules have undergone significant changes following the passage of H.R. 1 (the “One Big Beautiful Bill Act”). These updates aim to simplify compliance and reduce administrative burdens for businesses and individuals. Here’s what you need to know:

What Are 1099 Forms & Who Needs Them?

Here are the principal 1099 forms most people deal with:

• 1099-NEC — Reports nonemployee compensation (e.g., payments to independent contractors or freelancers).
• 1099-MISC — For miscellaneous income (rent, legal settlements, prizes, royalties, etc.).
• 1099-K — Reports payment card & third-party network transactions (e.g., PayPal, Venmo, online marketplaces).

Note: Even if a transaction doesn’t trigger a 1099-K, all taxable income must still be reported on your tax return.

HR-1 / One Big Beautiful Bill (OBBBA) Updates — What’s Changed?

1. Reporting Thresholds Increased for 1099-NEC & 1099-MISC

Old rule:
You had to issue a 1099-NEC or 1099-MISC if you paid a non-employee $600 or more in a year.

New under HR-1/OBBBA:
These thresholds will increase from $600 to $2,000, starting with payments made after December 31, 2025 (i.e., tax year 2026). The threshold will also be indexed for inflation beginning in 2027.

What this means:
Fewer forms will need to be issued for small-pay payments — reducing reporting burden for many small businesses and independent contractors.

These forms are used for payments made to individuals and non-incorporated entities (Partnerships, LLCs, LLPs, PLLCs) via cash, check, Zelle or bank transfer, and does not include payments made via PayPal, Venmo or credit cards.

2. 1099-K Threshold Reverts to Original Standard

Background:
Under the American Rescue Plan Act (ARPA), the reporting threshold for Form 1099-K was lowered dramatically — creating requirements for third-party payment apps (like PayPal, Venmo, and marketplaces) to issue forms when income exceeded $600 regardless of transaction count.

HR-1 change:
The reportable threshold is restored to the original rule:

• $20,000 in payments and at least 200 transactions before a 1099-K must be issued.

This reinstates the pre-2021 standard, effectively ending the planned low-threshold reporting for gig workers and small sellers on payment apps.

3. Backup Withholding Threshold Matches Reporting Threshold

Backup withholding — the IRS’s mechanism for withholding tax if payee identification information is missing or incorrect — will also change.
Under HR-1, the backup withholding threshold will increase from $600 to $2,000 and will be similarly indexed for inflation from 2027.

What This Means for Businesses & Freelancers

For Small Businesses:

• Fewer 1099 forms to issue for modest payments — especially if you pay many small-value independent contractors.
• Backup withholding kicks in at a higher level, easing compliance burdens.

For Freelancers & Gig Workers:

• You may still owe taxes on all income — even if no 1099 is issued — so track income carefully!
• Sellers on platforms like eBay or Mercari may not receive a 1099-K unless sales meet the restoration threshold. However, you still must report all income on your tax return.

For Gig Platforms & Payment Apps:

• These companies may issue fewer 1099-K forms, bringing relief to casual sellers but also placing more responsibility on taxpayers to report income correctly.

Bottom Line

The evolving landscape of 1099 requirements reflects a shift toward reducing paperwork for small-scale transactions while retaining overall tax compliance. As with any tax law changes, this creates opportunities and responsibilities — especially for businesses that work frequently with independent contractors or process many small payments.

If you’re unsure how these changes affect your particular situation, it’s wise to consult a tax professional or CPA who can interpret how these evolving rules apply to your business or freelance work.