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What Nonprofits Need to Know About the New Form 1099 Reporting Thresholds
The One Big Beautiful Bill Act (OBBBA) includes significant updates to federal Form 1099 reporting requirements that will affect tax-exempt organizations, volunteer organizations, charitable foundations, chambers of commerce, and other nonprofit entities that engage independent contractors and service providers. Beginning with payments made after December 31, 2025, the reporting threshold for Forms 1099-NEC and 1099-MISC increases from $600 to $2,000 per payee annually, with inflation adjustments beginning in 2027.
For many nonprofit organizations, this change will reduce year-end filing requirements and administrative burden. However, organizations should not view the higher threshold as a reason to relax vendor compliance procedures.
Key Changes for Nonprofits – Form 1099-NEC and Form 1099-MISC
Under prior rules, most payments of $600 or more made to independent contractors and certain vendors required the issuance of a Form 1099. Beginning with payments made in 2026, reporting generally will not be required until cumulative annual payments reach $2,000. The threshold will be indexed for inflation beginning in 2027.
This change commonly impacts payments made by nonprofits to:
- Accountants and attorneys
- Consultants and grant professionals
- Fundraising contractors
- Information technology providers
- Marketing and communications consultants
- Speakers and trainers
- Other independent contractors
Organizations should review their accounting systems and accounts payable procedures to ensure reporting thresholds are updated appropriately for their 2026 filings.
What Isn’t Changing?
Although fewer Forms 1099 may be required, several important compliance obligations remain unchanged.
- Continue Collecting Forms W-9: Nonprofits should continue collecting Forms W-9 from vendors before making payments. Organizations often do not know at the outset whether annual payments will exceed $2,000. Obtaining taxpayer information upfront remains a best practice and helps avoid year-end reporting challenges.
- Income Remains Taxable: The change only affects information reporting requirements. A contractor receiving less than $2,000 may no longer receive a Form 1099, but the income remains taxable and reportable by the recipient.
- State Filing Requirements May Differ: The OBBBA applies to federal reporting requirements. Some states may continue to require reporting at lower thresholds. Organizations should review applicable state rules before modifying compliance procedures.
- Form 1099-K Rules Are Separate: The OBBBA also restored the Form 1099-K reporting threshold applicable to third-party settlement organizations and payment processors. Payment platforms generally will only issue Form 1099-K when payments exceed $20,000 and more than 200 transactions occur during the calendar year. These rules are separate from the Form 1099-NEC and Form 1099-MISC reporting requirements.
For nonprofit organizations that use online fundraising platforms, event registration systems or payment processing services, it is important to understand that Form 1099-K and Form 1099-NEC/MISC reporting are governed by different rules and thresholds.
Practical Considerations for Nonprofit Organizations
While the increase in the reporting threshold is expected to reduce administrative work, nonprofit organizations should use this transition as an opportunity to strengthen financial reporting and vendor management processes.
Organizations should consider:
- Updating vendor payment tracking systems
- Reviewing accounts payable procedures
- Confirming Forms W-9 are obtained and maintained
- Evaluating contractor classifications
- Enhancing record retention practices
- Training finance staff, treasurers and bookkeepers on the new requirements
This is particularly important for volunteer fire companies, foundations, chambers of commerce, membership organizations and other nonprofits that rely on volunteers or part-time administrative personnel to manage financial operations.
What Nonprofits Should Do Now
As organizations prepare for calendar year 2026 filing requirements, they should:
- Review vendor onboarding procedures.
- Continue collecting Forms W-9 from all potentially reportable vendors.
- Update accounting software thresholds from $600 to $2,000.
- Confirm any state-specific reporting requirements.
- Train board treasurers, finance committees and accounting personnel on the new rules.
- Monitor future IRS guidance regarding inflation adjustments and information reporting requirements.
The Bottom Line
The increase in the Form 1099-NEC and Form 1099-MISC reporting threshold is a welcome relief for many nonprofit organizations. Fewer forms to prepare can mean less time spent on year-end compliance and more time focused on mission-driven activities. However, strong vendor documentation, accurate recordkeeping and effective internal controls remain just as important as ever.
Organizations that take the time now to update processes and educate staff and volunteers will be best positioned to benefit from the reduced reporting burden while maintaining compliance.
Contact Us
Reach out to our Not-for-Profit and Education Services Team to discuss how these reporting changes may impact your organization and what steps to take before the calendar year 2026 filing season.
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