With the passage of the One Big Beautiful Bill Act on July 4, 2025, Congress made long-awaited and significant updates to the federal Form 1099 information reporting rules. These changes adjust long-standing reporting thresholds and reduce paperwork for businesses. Here’s what’s new, how it compares to the old rules and why it’s a win for your business.
Previous 1099 Reporting Rules vs. New Rules in The OBBBA
1. Form 1099-NEC / 1099-MISC for Reporting for Contractors and Freelancers
- Old rule: Most payments made to an independent contractor, freelancer or vendor of $600 or more in a year required sending a Form 1099.
- New rule (starting 2026): The threshold is now $2,000, and it will be indexed for inflation beginning in 2027.
2. Form 1099-K for Third-Party Payment Transactions
- Old (but never fully implemented) rule: Starting in 2023, platforms like PayPal, Venmo and Etsy would have had to issue Form 1099-K for anyone receiving over $600, even for personal sales or reimbursements.
- New rule: The OBBBA permanently restores the original Form 1099-K thresholds, meaning that payment processors only need to issue a Form 1099-K if payments total over $20,000 and result from more than 200 transactions in a calendar year. This change was made retroactive to 2022.
What Does This Means?
These changes substantially reduce paperwork and compliance tasks associated with year-end 1099 filings. The OBBBA changes are expected to significantly reduce the number of 1099s issued and received. These changes may seem like a small tweak, but the impact is big.
What’s Not Changing
- Deadlines: No changes are made to the existing deadlines.
- Form W-9 collection is still important: Even if a payment ends up being less than the threshold, collecting tax ID information upfront remains a best practice for businesses.
- State rules may differ: The OBBBA applies only to federal reporting. Some states have their own 1099 rules and may still require forms at lower thresholds.
The Bottom Line for Most Businesses
- Fewer forms to issue.
- Less time spent on year-end reporting.
- A clearer, more modern standard.
Do you need help reviewing vendor payments or updating your accounting systems for the new rules? Let us know — we’re happy to help.
Get the Latest Tax and Legislative Developments
Withum’s National Tax Policy and Legislative Updates Resource Center is your go-to source for timely updates on tax law and legislative changes. Our team is closely monitoring sweeping tax reform changes, shifting tariffs and tax industry updates, delivering in-depth analysis and actionable insights.
Contact Us
For more information on this topic, please contact a member of Withum’s Business Tax Services Team.
