IRS Updates Forms 1099-MISC and 1099-NEC
New thresholds and new boxes are coming to the Forms 1099 that businesses will use to report 2026 payments.
If your business works with independent contractors, freelancers, vendors, or outside professionals, there is an IRS update you should know about before preparing your next Forms 1099.
The IRS published the instructions corresponding to the December 2026 revision of Forms 1099-MISC and 1099-NEC, which will be used to report 2026 information in early 2027.
Among the updates is a change that is especially important for Business Owners: the reporting threshold for certain payments increases to $2,000 for tax years beginning after 2025.
The forms also include new boxes for reporting cash tips and overtime compensation, in addition to other adjustments that may change the way some businesses prepare their 1099s.
What changes with the new $2,000 threshold?
For years, many Business Owners have automatically associated Forms 1099 with the well-known $600 rule, for tax years beginning after 2025, the IRS indicates that the minimum amount for reporting certain payments subject to reporting and/or withholding increases to $2,000. This amount may also be adjusted for inflation beginning in calendar year 2027.
However, this does not mean that absolutely all Forms 1099 now have a general $2,000 rule.
There are different categories of payments, exceptions, and specific requirements. For example, the instructions maintain specific rules for royalties, certain payments to attorneys, and other transactions. Therefore, assuming that “less than $2,000 means I don't need a 1099” can lead to errors.
For a business owner, the key will be to identify what type of payment was made, to whom it was made, and which form applies before deciding whether there is a reporting obligation.
1099-NEC vs. 1099-MISC, Which One Does Your Business Use?
Although they are often mentioned together, Form 1099-NEC and Form 1099-MISC do not serve the same purpose.
The 1099-NEC is primarily used to report compensation to individuals who are not employees. In simple terms, this generally includes payments made in the course of a business to individuals who provided services without being employees, as long as the requirements established by the IRS are met.
Think, for example, of a business that hires an independent contractor for certain services. Depending on the amount, the nature of the payment, and how the provider is structured, there may be an obligation to issue a 1099-NEC.
The 1099-MISC, on the other hand, continues to be used for different types of payments, including certain rents, prizes, other income, medical payments, and certain transactions with attorneys, among other categories.
This difference is important because using the wrong form can create inconsistencies for both the reporting business and the person receiving the form.
When Must Forms 1099 Be Filed?
The deadlines are also not the same for both forms.
According to current IRS instructions, Form 1099-NEC must be filed with the IRS no later than January 31, whether on paper or electronically. If the date falls on a Saturday, Sunday, or applicable legal holiday, the deadline moves to the next business day.
Form 1099-MISC has a different schedule and generally must be filed with the IRS by February 28 when filed on paper or March 31 when filed electronically, also subject to weekend and holiday rules.
This means that waiting until the last minute to determine which form each vendor needs can quickly become a problem.
Before Preparing Your 1099s, Review Who You Are Paying
One of the most common mistakes is waiting until January to discover that information from a contractor is missing.
Before issuing a 1099, the business needs to correctly identify the person or entity that received the payment and have the necessary tax information. Form W-9 is a fundamental tool for obtaining information such as the vendor's legal name and Taxpayer Identification Number (TIN).
It is also important to correctly distinguish between independent contractors and employers.
Employee wages are not reported using Form 1099-MISC or 1099-NEC; instead, they are reported using Form W-2. Incorrectly classifying a worker can create a much larger problem than simply using the wrong form.
In addition, IRS instructions clarify that these Forms 1099 are generally used for payments made in the course of a trade or business. Purely personal payments are not reported under these rules.
What Happens If I Don't File My 1099s Correctly?
Failing to file your Forms 1099 correctly or on time can be costly. The IRS can impose penalties ranging from $60 to $680 for each information return that is not filed correctly and, separately, for each statement that is not correctly and timely provided to the contractor.
You should also pay attention to Backup Withholding. In certain situations, such as when a contractor does not correctly provide their TIN or the IRS notifies you that the TIN provided is incorrect, the business may be required to withhold 24% of certain reportable payments and remit that withholding to the IRS.
At Jambrina CPA, we can handle your 1099 process, from reviewing your contractors' information and determining the appropriate forms to preparing and electronically filing the reports with the IRS and managing the delivery of the corresponding copies to your contractors, including physical mailing.
Jambrina CPA Can Prepare Your Business's Forms 1099
The changes for 2026 make it especially important to move away from the idea that preparing a 1099 simply consists of checking whether a payment exceeded a certain amount.
The new reporting threshold on the 1099, the differences between 1099-NEC and 1099-MISC, the rules for Independent Contractors, the new reporting fields, and the e-filing requirements can change what each business needs to do.
At Jambrina CPA, we can review the payments made by your company, determine which Forms 1099 apply, and help you properly prepare and file your 1099-NEC and 1099-MISC with the IRS.
Our team offers accounting and taxes for businesses, tax preparation, payroll, and advisory services with bilingual accountants, for both U.S. companies and foreign owners who operate or do business in the United States.