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)
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)
- Section 6041A: Thresholds aligned to the same base threshold of $2,000 for services payments. (irs.gov)
- 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)
- 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)
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)
Effective Dates
- These reporting threshold changes apply to payments made after December 31, 2025. (irs.gov)
- For thresholds tied to inflation (after 2026), they adjust annually. (irs.gov)
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.