Compliance
Compliance Changes Under OBBBA: What Businesses Must Do for Forms 1099, 1099-KB, & Backup Withholding
New threshold changes and information-reporting rules under the One, Big, Beautiful Bill mean many payors must understand when to issue 1099s or apply backup withholding for third-party payments.
By NomadicTax Research Team • 5-8 min read • June 17, 2026
## Overview of OBBBA Reporting Thresholds
The One, Big, Beautiful Bill Act (OBBBA), signed July 4, 2025, made sweeping changes to thresholds and rules for information reporting, particularly affecting Forms 1099-MISC, 1099-NEC, W-2, and backup withholding under § 3406. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
### Key Thresholds & Changes
- **Section 6041(a)**: Reporting threshold for payments in trade or business raised from **$600 to $2,000** for payments made after December 31, 2025. Indexation to inflation applies after 2026. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- **Section 6041A**: Thresholds aligned to the same base threshold of $2,000 for services payments. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- **Section 6050W(e)**: De minimis reporting of third-party network transactions by TPSOs changed so that only payees receiving **gross payments exceeding $20,000 AND more than 200 transactions** require reporting. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- **Wagering losses deduction** under section 165(d): Can now deduct losses up to **90% of wagering losses**, but still only to the extent of gains. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Backup Withholding Changes
Backup withholding rules now reference the updated reporting thresholds. Under § 3406(b)(6), backup withholding for payments subject to sections 6041 and 6041A only applies when payments exceed the **new threshold** of $2,000. That means fewer payees will trigger withholding, reducing burdens for payors. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Effective Dates
- These reporting threshold changes apply to payments made **after December 31, 2025**. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- For thresholds tied to inflation (after 2026), they adjust annually. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## What Businesses Need to Do Practically
- **Review payees**: Any vendor, contractor, or service provider who receives payments around or above $2,000 in a calendar year may now require Form 1099-MISC, NEC, or W-2G.
- **Update payroll & AP systems**: Ensure vendor tracking reflects the new thresholds. Automatic workflows for issuing 1099s should be adjusted.
- **Train staff**: Make sure people managing payables understand that “wages,” “non-employee compensation,” third-party payments, and gambling winnings all may be involved.
- **Watch backup withholding**: If payees no longer exceed thresholds, withholding may not be needed—update logic and reduce unnecessary withholding.
- **Document policies and exceptions**: In case of audits, having clear justification for not issuing a 1099 or applying withholding helps.
## Examples
- If a graphic designer (as a contractor) earns **$1,500 in one year**, previously, no 1099-NEC required—but now still under $2,000, so no requirement this year—but if reach $2,100, now must issue.
- A food truck that pays a third-party network $25,000 in total transactions over 220 rides to a vendor will now **need to report** under the TPSO rules.
- For gambling-venue payouts: only winnings of **$2,000 or more** (or whichever amount prescribed by regulations) now require reporting.
## Impact & Risks
- **Lower compliance costs** for many small payors who were below $2,000.
- **Risk of noncompliance and penalties** if businesses and financial institutions continue using the old $600 threshold.
- **Software vendors and accountants** must roll out updates quickly to avoid errors during filing season.
Staying on top of these changes will help businesses reduce risk, avoid unnecessary filings, and manage administrative burdens better.