What Changed in Reporting Thresholds
Under the One, Big, Beautiful Bill (OBBB), payments made in trade or business subject to reporting under section 6041(a) (e.g. payments on Form 1099-MISC or 1099-NEC) now have a threshold of $2,000 annually per payee, up from the previous $600. This also applies to gambling winnings on Form W-2G. Payments below $2,000 need not be reported, effective for payments made after December 31, 2025. (irs.gov)
The statutory change requires updates to regulations: proposed amendments will align regulatory thresholds with the new law. (irs.gov)
Who’s Most Affected
- Freelancers, gig workers, side hustlers receiving many small payments—these payments may now fall below reporting thresholds.
- Businesses, platforms, or clients that issue Forms 1099-NEC, 1099-MISC, W-2G—they may no longer need to file forms for payees with payments between $600 and $2,000, reducing reporting obligations.
- Payers (e.g., gambling entities) who issued many small reward-payments between $600 and $2,000: now many of those are exempt from reporting and withholding rules.
Strategies for Tax Planning & Compliance
- Keep accurate records even if reporting isn’t required. The income is still taxable—even if payers don’t issue forms—and payees must report it on their federal returns.
- Platforms or gig-economy businesses should audit their payment flows to identify payees near or above the new threshold. If previously they reported many small amounts (like $600-$1,800), these may now avoid reporting obligations, but withholding obligations remain for applicable payers.
- Revisit your contracts or payment schedules: splitting payments across payees or entities cannot be used to evade thresholds. Synthetic packaging of payments could draw IRS scrutiny under anti-avoidance rules.
Examples
Example 1 – Freelancer: Jane, a photographer, contracts with several clients and earns $1,800 from Client A in 2026. Under the old $600 threshold, Client A would have issued her a Form 1099-MISC. Now, because $1,800 is less than the new $2,000 threshold, Client A is not required to issue a 1099. Jane still reports the income in full on her Schedule C.
Example 2 – Gambling Entity: A small casino issues many W-2Gs for slot machine winnings of between $700 and $1,800. Now they only need to issue W-2Gs for payees who win more than $2,000 in a calendar year. But the casino should confirm if winnings hit that threshold.
Compliance Tips for Businesses and Payers
- Modify your expense/payment tracking systems to flag payees crossing the $2,000 threshold; even if forms aren’t issued, income remains taxable.
- Update internal policies for backup withholding, which may still apply in certain cases regardless of reporting thresholds.
- Monitor the final regulations: the proposed regulations under OBBB are expected to update regulations explicitly to reflect statutory thresholds and provide clarity on ambiguous cases. (irs.gov)
Implications & Risks
- Missed reporting by payers could lead to IRS notices, but failure to issue a 1099 when not required is less risky than issuing when required.
- Payees may forget to report income that is not backed by information returns; consistent self-monitoring of bank deposits and 1099s from other sources is important.
Actionable Steps You Should Take Now
- For individuals/self-employed: review all 2026 payments—even those without 1099s—and include them in your gross receipts.
- For businesses/payors: implement updated tracking, revise accounting or payroll software settings.
- For tax practitioners: educate clients in the gig economy and small vendors about the change, keep them from underreporting.
- Stay aware of proposed regulations for more clarity—comments on the proposed regulations due by June 12, 2026. (irs.gov)
By understanding and adapting to the higher $2,000 threshold, both payers and payees can reduce administrative burdens while maintaining compliance and avoiding pitfalls.