Blog · 14 October 2026

The 1099-NEC Threshold Rises to $2,000 for 2026 Payments: What CPA Firms Should Change

By Keshav Bansal, CA

For years, $600 was the number everyone in a bookkeeping or tax practice knew without looking it up. Payments for services to a non-employee at or above that amount meant a Form 1099-NEC. For payments made in 2026, that number changes.

According to the IRS's December 2026 revision of the Instructions for Forms 1099-MISC and 1099-NEC (available at irs.gov/instructions/i1099mec), the reporting threshold rises from $600 to $2,000 for payments made in 2026, with inflation adjustment from 2027. The same revision adds new boxes connected to the tips and overtime provisions of P.L. 119-21. The notes we reviewed also record that Form 1099-NEC remains due January 31, and that the Form 1099-K threshold stays at $20,000 and 200 transactions.

Here is what that means in practice for US CPA firms that handle client bookkeeping and year-end information returns.

A reporting rule, not a taxability rule

The first thing to explain to clients, and to their contractors, is that the threshold only decides when the payer must file and furnish a form. It doesn't change whether the income is taxable. A contractor paid $1,500 in 2026 may not receive a 1099-NEC, but that income still belongs on their return. Expect questions from small-business clients who assume "no 1099" means "no tax", and from individual clients who assume the same thing about side income.

What to change in your year-end workflow

1. Update vendor reports and software settings

Many firms rely on a vendor report or a 1099 tracking flag in the client's accounting software to decide who gets a form. Check how each client file is set up. A file configured for the old threshold may flag vendors who no longer need a form. Confirm how your accounting and filing software handles the 2026 threshold rather than assuming it updates automatically.

2. Don't stop collecting W-9s

A higher threshold is not a reason to relax W-9 collection. A vendor paid under the threshold in January can easily cross it by December. CPA Practice Advisor (October 8, 2026) recommended standardizing Form W-9 collection ahead of the Feb. 1, 2027 Form 1099-NEC deadline, using a staged vendor workflow, IRS TIN Matching, and a defined process for name/TIN mismatches.

The backup withholding rules under §3406 still apply. Under those rules, a missing or incorrect TIN, or an IRS CP2100/CP2100A notice, can require the payer to withhold 24% on reportable payments and to send the payee a "B" notice. Collecting the W-9 at onboarding remains the cheapest way to avoid that.

3. Review classification separately

The threshold has nothing to do with whether a worker is an employee or an independent contractor. Classification still depends on the working relationship. A smaller number of 1099s can make misclassification less visible, not less risky.

4. Watch the new boxes

The revised instructions add boxes connected to the tips and overtime provisions of P.L. 119-21. If a client's payments touch those areas, read the box-level instructions carefully before year-end. Don't rely on last year's mapping.

5. Remember the filing system change

Separately, the IRS has announced that the FIRE e-file system retires after November 19 and that 2027 information returns move to IRIS (IR-2026-99). If your firm files information returns in bulk, confirm your filing route well before January.

Talking points for clients

• For payments made in 2026, the 1099-NEC/1099-MISC reporting threshold is $2,000 under the IRS's revised instructions, up from $600.
• Contractors must still report all their income, form or no form.
• Keep collecting a W-9 from every new vendor before the first payment.
• Form 1099-K thresholds are separate and, per the same notes, unchanged at $20,000 and 200 transactions.
• Year-end deadlines still apply. Keep vendor records clean all year, not just in January.

Where this fits in month-end bookkeeping

The firms that handle 1099 season most smoothly treat it as a bookkeeping task, not a January project. Vendors are set up correctly when they're created, payments are coded consistently, and a running year-to-date vendor report is reviewed at each month-end close. When that's in place, the threshold change is a settings update and a client memo, not a scramble.

A short year-end timeline

Working backwards from the January 31 due date for Form 1099-NEC recorded in our notes, a practical sequence looks like this:

• Now through November: update software settings for the 2026 threshold, run a year-to-date vendor report for each client, and request missing W-9s.
• December: run TIN Matching where available, resolve name/TIN mismatches, and confirm your filing route given the move from FIRE to IRIS.
• Early January: close December books, finalize vendor totals and review any payments that may fall under the new boxes.
• Before the deadline: file and furnish forms. Keep a reconciliation of vendor totals to the general ledger in the workpapers.

Keeping that reconciliation also helps when a contractor disputes an amount or a CP2000 mismatch letter arrives later.

If your team needs extra hands on monthly bookkeeping and cleanup before year-end, see how we support US CPA firms.

Check current IRS guidance: this article summarizes sources as of 14 October 2026 and is general information, not tax advice. Rules, dates and figures can change. Confirm them against the cited IRS release or publication and current IRS.gov guidance before acting.