On July 4, 2025, the “One Big Beautiful Bill Act” became law, bringing two notable changes to federal tax reporting rules that affect employers.

1099 Reporting Threshold Increased to $2,000 and Indexed for Inflation

Currently, businesses must file an “information return” — typically Form 1099-NEC — for payments of $600 or more made to non-employees for services during a calendar year. Non-wage payments are also generally reportable on Form 1099-MISC when they reach the same $600 threshold.

Under Section 70433 of the new law, this threshold will rise to $2,000 beginning in 2026. Starting in 2027, the $2,000 limit will be automatically adjusted for inflation. The same increases and indexing will apply to backup withholding requirements, which come into play when a payee does not provide a valid taxpayer identification number on Form W-4 or Form W-9.

Practical Impact on Employers

Although payments below the new threshold will still be taxable to recipients, employers will no longer have to issue 1099s or withhold backup taxes on amounts under $2,000. This change could significantly reduce the volume of 1099 forms that businesses must prepare and file each year.