What Small Businesses and Subcontractors Need to Know About 1099 Changes in 2026

With the passage of the One, Big Beautiful Bill Act (“OBBBA”), significant changes to 1099 reporting thresholds are set to take effect for payments made in calendar year 2026 (i.e., the forms you file in early 2027).

Here’s what you should know:

🔍 Key changes

• The current threshold for issuing forms like Form 1099‑NEC (nonemployee compensation) and Form 1099‑MISC is $600. That threshold will increase to $2,000 for payments made in 2026. Landmark CPAs+3Avalara+3CPA Practice Advisor+3

• Beginning in 2027 and beyond, that $2,000 threshold for 1099-NEC and 1099-MISC will be adjusted for inflation. CPA Practice Advisor+1

• For the third-party payment platform reporting form, Form 1099‑K, the threshold issue is more complex. The IRS previously announced a phase-in toward a $600 threshold, but under OBBBA the threshold for 1099-K reverts to the older standard of over $20,000 AND more than 200 transactions for many platforms (for tax year 2025 +). TaxAct Blog+2OnPay+2

• Importantly: Even if a form isn’t issued based on the new thresholds, all income must still be reported — business owners, contractors and subcontractors cannot simply skip reporting just because they didn’t receive a 1099. IRS+1

✅ What this means for your business & your clients

• Reduced filing burden: Many small vendors and subcontractors who received 1099-NEC/MISC forms for payments between $600 and $2,000 in prior years may no longer require forms in 2026, which simplifies vendor onboarding and year-end reporting.

• Vendor policy updates: Your vendor onboarding/tracking templates should reflect the new $2,000 threshold effective 2026: e.g., you may choose to still request W-9s from all vendors (best practice), but understand that forms may not be required unless that higher threshold is met.

• Communication with CPAs and clients: As you manage year-end and tax prep with your clients (construction contractors, subs) make sure your deliverables reflect the upcoming threshold change — and set expectations (e.g., “If you paid this vendor $1,800 in 2026, under the new rule you may not need to issue a 1099-NEC”).

• Record-keeping remains critical: Even though the threshold goes up, the requirement to capture and report all business income hasn’t changed. Keep documentation of payments, services, W-9s, etc.

• Planning for year-end 2026 now: Since your business caters to subcontractors and small construction firms, start adjusting your year-end checklists (vendor 1099 listing, cost coding, etc.) to incorporate the new thresholds. Consider an internal memo, client alert, or updated year-end deliverable for 2026.

⚠️ Caveats & things to watch

• The threshold change is for “payments made in 2026” (forms filed in early 2027) — so for the 2025 calendar year (forms filed in early 2026), the $600 threshold remains in place. OnPay+1

• The 1099-K threshold story remains unsettled for many taxpayers and platforms — if your clients use payment apps, online marketplaces, etc., they should monitor developments, but the safe assumption under current guidance is the older $20,000/200 transaction rule for 1099-K.

• Always coordinate with the client’s CPA/tax advisor — the change in threshold doesn’t change what income is taxable, only when forms need to be issued.

• Because construction firms often deal with many small subs/vendors and cost-codes, early preparation and internal communication (e.g., identifying vendors paid under the threshold, tracking multiple entities) will reduce surprises in the 2026 year-end process.

📋 Quick checklist you can use or send to clients

• Update vendor onboarding checklist: note new $2,000 threshold for 1099-NEC/MISC for year 2026.

• Inform all active vendors of your year-end reporting process and how threshold changes may affect them.

• Maintain W-9s for all vendors — even if no form is required, best practice.

• At year-end 2026, run payment reports across all entities: flag vendors paid ≥ $2,000 for potential 1099-NEC/MISC.

• If using payment apps/marketplaces, check whether any 1099-K applies (watch developments).

• Archive year-end vendor list, payments, and form issuance decision matrix for audit/compliance purposes.

• Coordinate with CPA/bookkeeper early in 2027 to review which forms are required for payments made in 2026.

At Moulton Office Management Corporation we’ll adjust our client year-end deliverables accordingly — making sure your vendor and subcontractor reporting is smooth, compliant, and tailored for the construction/back-office workflow.

Have questions or need help with your year-end planning and reporting? Give us a call!