The change
The $600 reporting threshold for Forms 1099-NEC and 1099-MISC has been in place since 1954. Under the One Big Beautiful Bill Act, signed in July 2025, it rose to $2,000 for payments made on or after January 1, 2026, and it will be adjusted for inflation starting in 2027. The first filings under the new rule are due in January 2027.
If you are a contractor who pays subcontractors, this is the most consequential compliance change to hit your paperwork in a long time, and it is one where getting the timing wrong is easy.
Watch the year. Payments made during 2025 still fall under the old $600 threshold and are reported on the forms filed in early 2026. The $2,000 threshold applies to payments made during 2026, reported in early 2027. Applying the new number to the wrong year is the mistake to avoid this filing season.
What it does not change
It is tempting to read a higher threshold as permission to track less. That reading will cost you money, for four reasons.
The rule that actually protects you
The single habit that eliminates almost all 1099 pain is refusing to issue the first payment to a subcontractor until a completed, signed Form W-9 is on file. Not the second payment. The first.
The reason is simple leverage. Before you have paid a sub, getting a W-9 takes one text message. After you have paid them, and particularly after the job has gone badly or the relationship has ended, it can take months and sometimes never happens at all. A January scramble for W-9s almost always ends with at least one vendor nobody can reach.
What you need from the W-9: legal name, business name if different, federal tax classification, address, and taxpayer identification number. Note that an LLC's tax classification determines whether a 1099 is required at all — a single-member LLC is generally reportable, while an LLC taxed as a corporation generally is not. That box on the W-9 is doing real work.
Where the money hides
Two contractors can pay the same sub the same amount and have different reporting obligations, because how you paid matters.
| How you paid | Generally reportable by you? |
|---|---|
| Check, ACH, cash, or bank transfer | Yes, if the vendor and amount meet the criteria. |
| Credit or debit card, or a third-party payment network | Generally no. These are reported by the payment settlement entity on Form 1099-K, and issuing your own 1099-NEC on top of it duplicates the reporting. |
| Payments to a corporation | Generally no, with specific exceptions such as attorney fees. |
| Payments for materials only | Not reportable as nonemployee compensation. Only the services portion counts. |
That last row causes more errors than any other. A sub who invoices $9,000 with $6,500 in materials and $2,500 in labor is not a $9,000 reportable vendor. Splitting labor from materials on the way in — rather than reconstructing it in January — is the difference between a five-minute year-end and a bad week.
What good looks like
Subcontractor spend is heaviest for general contractors and roofing companies running crews, but any trade that hires help on a busy month has this obligation. We track it through the year for every client rather than treating January as a fire drill.
Flow Bookkeeping Services is not a CPA firm and does not provide tax advice. This is a summary of a reporting rule as we understand it in July 2026 — confirm the details with your tax preparer before filing, particularly around worker classification and any state-level filing requirement, which can differ from the federal threshold.
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