How a $2,000 Threshold Applies to 1099-NEC Payments for Tax Years After 2025
The IRS instructions for Forms 1099-NEC and 1099-MISC raise the minimum threshold for reporting certain payments to $2,000 for tax years beginning after 2025. Here is what payers need to track now.
Startups that pay contractors for services report those payments to the IRS on Form 1099-NEC. The IRS instructions for that form and for Form 1099-MISC now set a higher reporting threshold. For tax years beginning after 2025, the minimum threshold for reporting certain payments rose to $2,000, and the instructions say it may be adjusted for inflation beginning in calendar year 2027. The general instructions for information returns also cover the filing and furnishing dates for these forms.
For a company that pays a handful of freelancers, designers or developers, the threshold helps decide which payments need reporting.
What the Threshold Now Says
The instructions for Forms 1099-MISC and 1099-NEC state that the minimum threshold for reporting certain payments increased to $2,000 for tax years beginning after 2025. The same instructions cover both forms, so a payer that files either one works from the same general figure.
The $2,000 figure is a minimum. Payments that fall under the general rule are tested against it, while royalties and certain attorney and fish payments are tested against lower figures, as the next section explains.
The IRS describes Form 1099-NEC as the form for reporting nonemployee compensation, meaning payments to people who are not employees.
The instructions say the threshold may be adjusted for inflation beginning in calendar year 2027. Until then, the $2,000 figure applies to tax years beginning after 2025.
Payments That Keep Lower Thresholds
The $2,000 figure does not apply to every payment type. Royalties are reportable at $10 or more. Gross proceeds paid to an attorney in connection with legal services are reportable at $600 or more. Cash payments for fish purchased for resale are reportable at $600 or more when they total that amount during the year.
The royalty rule tests gross royalty payments, or similar amounts, against $10. Royalty totals are measured against that figure rather than $2,000.
These categories sit alongside the general rule rather than inside it. A payer that makes royalty or attorney payments may need a separate running total for each category.
Payers may report direct sales of consumer products for resale totaling $5,000 or more.
Filing Dates and E-Filing for the 2025 Cycle
The IRS general instructions set the dates for information returns covering 2025 payments. Form 1099-NEC was due to be filed with the IRS and furnished to recipients by 2 February 2026, on paper or electronically.
Other forms in the same cycle had later dates. Forms 1097, 1098, 1099 other than NEC, 3921, 3922 and W-2G were due on paper by 2 March 2026 and electronically by 31 March 2026. Form 1099-SB is generally due on the same dates, but see Regulations section 1.6050Y-3(c) for a special exception. Forms 5498, 5498-ESA, 5498-QA and 5498-SA were due 1 June 2026.
Recipient statements for Forms 1099-B, 1099-DA and 1099-S, and for Form 1099-MISC when boxes 8 or 10 are used, were due 17 February 2026. Because the deadlines differ by form, a payer that files several information returns should check each form's date separately.
For Forms W-2 and 1099-NEC, no automatic extension is available. See Form 8809. When a due date falls on a weekend or legal holiday, the deadline moves to the next business day.
The e-file threshold is 10 information returns, counted across all information return types. The instructions say that threshold has been 10 since 2024. Failing to e-file when required carries a penalty of up to $340 per return, applied only to returns beyond the first 10, and reasonable cause can excuse it.
Taxpayer Numbers, Backup Withholding and Records
Forms 1099-MISC call for the name and TIN of the payment recipient. A TIN can be a social security number (SSN), an individual taxpayer identification number (ITIN), an adoption taxpayer identification number (ATIN) or an employer identification number (EIN).
If a recipient does not provide a TIN, the TIN box is left blank and backup withholding may apply. Backup withholding requires filing the appropriate form and giving the recipient a statement showing the payment and the amount withheld, even when the payment is below the normal reporting threshold.
The instructions also describe an IRS notice about an incorrect name/TIN combination, after which the payer must promptly furnish a "B" notice to the payee.
A payer that receives a Form 1099 for amounts that belong to someone else is a nominee and must file one for each actual owner.
Payers should keep copies of filed returns, or be able to reconstruct the data, for at least three years from the due date. The period is four years when backup withholding was imposed.
“Royalties, attorney payments and fish purchases keep lower thresholds.”
Inflation Adjustments From 2027
The $2,000 threshold may be adjusted for inflation beginning in calendar year 2027.
The $2,000 figure applies to tax years beginning after 2025. For a calendar-year taxpayer, that is the 2026 tax year.
Because the adjustment can begin in 2027, the threshold should be checked each year against the figure in force for that tax year.
Keeping the Payment Log Ready
Total what each contractor was paid in each tax year, split by category. The payment log determines which vendors reach the threshold and which amounts fall under a lower one.
The same records support the backup withholding statement, which shows the payment and the amount withheld for each payment. Payers that use both forms can keep one set of vendor records, since the instructions cover Forms 1099-MISC and 1099-NEC together.
A monthly check of vendor totals shows early which contractors are approaching the threshold for the year. The check does not change the rule. It shows the position earlier in the year.
