Editorial · December 16, 2025
1099 Reporting Threshold: What Changes for Payments After 2025
The 1099 reporting threshold for payments to contractors is going up. A new federal law raises it from $600 to $2,000 for payments made after December 31, 2025. If you hire freelancers, you will file fewer forms. But the old rule still applies to everything you pay before then.
What the new rule says
Congress passed the law now known as Public Law 119-21, and it was signed on July 4, 2025. Section 70433 changes section 6041(a) of the tax code. That section sets the dollar amount that triggers an information return, such as Form 1099-NEC.
The law strikes "$600" and puts in "$2,000." It applies to payments made after December 31, 2025. It also covers Form 1099-MISC, which reports other business payments like rent. The same section changes the rule for backup withholding, so the two limits stay matched.
Today, the IRS instructions still say $600. For example, they say attorney fees of $600 or more must go in box 1 of Form 1099-NEC. That wording is for payments you make in 2025. The change starts with the next payment year.
What stays the same for 2025 payments
Nothing changes for the payments you made this year. If you paid a contractor $600 or more in 2025 for services in your trade or business, you still file Form 1099-NEC. The IRS instructions say that form is due on January 31. You also send a copy to the contractor by that date.
Do not skip a form because you read that the limit is going up. The $2,000 limit is for payments made after 2025. Your January filing covers payments made in 2025, so the $600 rule governs it.
Other limits are not part of this change. The 1099-NEC has a separate $5,000 rule for direct sales of consumer goods for resale, and the IRS instructions list it. Keep reading your form instructions for each type of payment.
Who gains the most from the higher limit
Small businesses gain the most. Many pay a designer, a cleaner, a bookkeeper or a handyman a few hundred dollars a year. Under the old rule, each of those payees needed a form once the total hit $600. That limit was set long ago and did not move with prices.
At $2,000, payments that once triggered a form will not. A business that pays one contractor $1,500 in a year would no longer file for that person. Payors who spend more than the new limit on a contractor still file as before.
The law also adds a yearly inflation adjustment to the dollar amount. It starts after the first year of the new rule. Each adjustment is rounded to the nearest $100. So the number will not stay at $2,000 forever, and you should look it up each year.
A note on payment apps and cards
Do not mix this up with Form 1099-K. That form is for payment cards and apps, and it has its own limit. The same law moves the 1099-K limit back to $20,000 and 200 transactions. It is a separate change, and it does not touch the contractor rules above.
Payments you make by credit card or a payment app are usually reported by the card company or the app on Form 1099-K. They are not reported by you on Form 1099-NEC. That rule is already in the IRS instructions, and the new law does not change it.
What to do now
You do not need to rebuild your process. A few simple steps will keep you safe.
- File for this year as usual. Use the $600 rule for all payments made in 2025, and file Form 1099-NEC by January 31.
- Collect Form W-9 now. Ask every new contractor for a Form W-9 before the first payment. It gives you the name and tax ID you need if a form is due later.
- Update your tracking. Change the alert in your books or payroll tool from $600 to $2,000 for payments after December 31, 2025. Keep a running total for each payee.
- Watch the date of each payment. The rule turns on when you pay, not when the work was done. A bill for work done in December but paid in January falls under the new limit.
- Keep records anyway. A form may not be due, but the income is still income for the contractor, and the cost is still a business expense for you. Keep invoices and proof of payment.
- Check the IRS for updates. The agency is expected to revise its forms and instructions. Read the new ones before you file next time.
If you are unsure how the rule applies to a certain payment, ask a tax professional. This article is general information, not tax advice for your case.
The bottom line
The 1099 reporting threshold is moving from $600 to $2,000 for payments made after 2025. Your filing for this year does not change. From the new payment year on, fewer small payments will need a form, and the dollar amount will rise with inflation. Plan your records now so the switch is easy.