Tax Tip Tuesday: What Business Owners Need to Know About 1099 Reporting in 2026

As the new year begins, businesses should review their reporting and compliance obligations, with Form 1099 requirements often at the forefront. Managing high-volume vendor payments, contractor fees, and expense tracking is challenging enough, but new IRS thresholds in 2026 make compliance even more critical.

Why 2026 Matters

The One Big Beautiful Bill Act (OBBBA) introduces significant changes to 1099 reporting thresholds starting this year. If your business pays contractors, rents office space, or works with freelancers, it is vital to understand both your current obligations and the upcoming changes. Our 1099 guide breaks down everything business owners need to know about Forms 1099-NEC and 1099-MISC, with clear, actionable steps you can implement right away.

Form 1099-NEC: Non-Employee Compensation

The 1099-NEC is used to report payments for services performed by non-employees, such as contractors or freelancers.

Rule	Requirement
Purpose	Contractor fees, commissions, professional services
Threshold	2025: $600 or more 2026: $2,000 or more
Recipients	Individuals, Partnerships, LLCs (taxed as sole proprietors or partnerships)
Filing Deadlines	IRS Copy: January 31 (no extensions) Recipient Copy: January 31

Form 1099-MISC: Miscellaneous Income

The 1099-MISC is used to report business payments not tied to services, such as rent, royalties, or certain other types of income.

Category	Threshold
Rent (office, equipment, land)	2025: $600 or more 2026: $2,000 or more
Medical & Healthcare Payments	2025 & 2026: $600 or more
Gross Proceeds to Attorneys	2025: $600 or more 2026: $2,000 or more
Royalties	2025 & 2026: $10 or more
Direct Sales (for resale)	2025 & 2026: $5,000 or more
Filing Deadlines	Recipient Copy: January 31 IRS Copy: March 31

Action Item: Make sure you have a completed Form W-9 on file for all non-corporate vendors before making any payments. This step is critical for meeting the strict filing deadlines for Forms 1099-MISC.

Rent Payment Rules (1099-MISC, Box 1)

Rent payments have their own reporting rules under 1099-MISC. This includes payments for office space, equipment rentals, storage, or land/pasture.

Rule	Details
What to Report	Commercial real estate, office space, equipment rentals, storage, or land/pasture
Reportable Amount	2025: $600 or more 2026: $2,000 or more
Mixed Payments	If a payment includes both rent and labor (e.g., machine rental with operator), prorate: Rent portion goes on 1099-MISC, labor portion goes on 1099-NEC
Exemptions	Payments to corporations, or to property management companies/real estate agents, are not reported

Key Compliance Mandates

Beyond knowing which payments to report, business owners must follow critical compliance steps to avoid penalties.

Mandate	Requirement
W-9 Form	Required from every vendor to ensure correct name, address, and Taxpayer Identification Number (TIN) for filing.
Backup Withholding	If a vendor’s W-9 or TIN is missing or incorrect, you must withhold 24% of future payments and remit it to the IRS.
Payments to Corporations	Generally exempt from 1099 reporting, except for payments to attorneys (legal services) or healthcare providers.
Electronic Payments	Payments processed by third-party platforms (PayPal, Square, etc.) are reported via 1099-K, not by your business.
Penalties	Late or incorrect filings can result in IRS penalties. Aggregate multiple payments to a single vendor to determine reporting requirements.

Simplifying 1099 Reporting

While the rules may seem complex, compliance can be managed efficiently with proper preparation. Begin by collecting W-9 forms from all vendors early in the year, track vendor payments consistently throughout the year, and stay up to date on current IRS thresholds and reporting rules. These steps help reduce risk, ensure timely filings, and simplify the overall 1099 reporting process.

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