Compliance
Backup Withholding & Information Reporting: What $2,000 Threshold Means Post-OBBBA
The One, Big, Beautiful Bill raised the reporting threshold for certain payments from $600 to $2,000—learn what changed, who is affected, and how to stay compliant under the new rules.
By NomadicTax Research Team • 5-8 min read • May 19, 2026
## The New $2,000 Threshold: What Changed?
Under section 70433(a) of P.L. 119-21 (the OBBB), the amount requiring reporting to the IRS for certain payments was **raised from $600 to $2,000** for payments made **after December 31, 2025**. This affects:
- Payments **under section 6041(a)**—those fixed or determinable payments by trades or businesses. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- Gambling winnings reporting, including for **slot machines, keno, bingo**, etc. Former lower thresholds in regulations needed to be updated to reflect this statutory increase. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Who Is Affected
- **Businesses and payors** that issue Forms 1099-MISC, 1099-NEC, and similar: less to report on smaller-value payments, potentially easing administrative burden.
- **Gamblers and persons receiving gambling income**: fewer small win amounts will trigger reporting or withholding.
- **Financial platforms and TPSOs**: those paying clients or contractors may need to adjust systems.
## Practical Numbers & Scenarios
| Situation | Before (≤ Dec 31, 2025) | After (≥ Jan 1, 2026) |
|---|---|---|
| Payor pays freelancer $1,500 in non-employee compensation | **Must** issue Form 1099-NEC, report to IRS | **No reporting required** under §6041 unless other thresholds met |
| Gambling winnings of $1,000 from slot machine | Nassau | After change, under §6041, threshold is $2,000—the win **not required** to be reported |
## Compliance Tips
- Update reporting systems to use **$2,000 threshold** instead of $600 for affected payments.
- Review **past processes** to catch over-reporting or unnecessary withholding being done under old thresholds.
- Train your accounting or payroll staff on the new requirements to avoid missed reports or penalties.
- Keep detailed evidence, including transaction amounts, payee details, and dates to support non-reporting when payments fall under $2,000.
## Effective Date vs. Proposed Regulation
- **Effective** now: the statutory change is in place, so for payments **after December 31, 2025**, the threshold is **$2,000**. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- **Proposed Regulations**: The IRS is updating regulatory text to align existing regulations with the new threshold—these clarify reporting requirements for payors. These updates are proposed but not yet finalized as of early May 2026. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Impact for Various Stakeholders
- **Small businesses**: Less paperwork & fewer forms when making lower payments; more streamlined information returns.
- **Contractors & freelancers**: Means lower chance of receiving 1099s for smaller gigs, but still report income under self-employment rules.
- **Gamblers**: fewer small wins reported to IRS; but if itemizing deductions, beware of limitations (see next section).
## Related Change on Wagering Losses
In alignment with reporting thresholds, OBBB also **limits deductions for wagering losses to 90 % of your gains**, instead of allowing full matching up to winnings. This adjustment can affect taxpayers who itemize deductions and gamble. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## How to Stay In Compliance
1. Review all payments in past periods: ensure forms issued match revised thresholds.
2. Update corporate policies and payroll policies to reflect $2,000 threshold.
3. If using third-party service providers or accounting software, confirm updates have been made.
4. Document payments even if not reporting to IRS, in case of audit.
## Final Notes
This change under OBBB reduces burden of low-value reporting and aligns rules with practical modern transaction amounts. However, taxpayers should not assume payments under $2,000 are automatically “safe” without maintaining records and understanding all legal requirements.