1099-NEC Is Now $2,000 and 1099-K Is Back at $20,000

Two information reporting thresholds that small businesses deal with every January have changed. The amount that triggers a Form 1099-NEC or most Form 1099-MISC boxes has risen from $600 to $2,000, and the Form 1099-K threshold for payment apps and online marketplaces is back at $20,000 and more than 200 transactions. The details matter, because the two changes apply to different years and California adds withholding rules of its own.

Form 1099-NEC and 1099-MISC: $2,000 Starts With 2026 Payments

According to the IRS Instructions for Forms 1099-MISC and 1099-NEC, for tax years beginning after 2025 the minimum threshold for reporting certain payments, and for backup withholding on those payments, increased to $2,000. The amount may be adjusted for inflation beginning in calendar year 2027.

In practice, that means:

• Payments made during 2025 (reported on forms filed in early 2026) still used the $600 threshold.
• Payments made during 2026 (reported in early 2027 on the December 2026 revision of the forms) use $2,000 for nonemployee compensation in Form 1099-NEC box 1 and for 1099-MISC items such as rents, prizes and awards, other income, and medical and health care payments.

Not every box moved. The same instructions keep the $10 threshold for royalties and list gross proceeds paid to an attorney (1099-MISC box 10) at $600 or more. And if you withheld federal income tax under the backup withholding rules, you must file the form regardless of the amount.

The filing date has not changed. Form 1099-NEC is due to both the IRS and the recipient by January 31. When that date falls on a weekend, the due date is the next business day, so for 2026 payments the deadline is Monday, February 1, 2027.

Form 1099-K: Back to $20,000 and 200 Transactions

Form 1099-K reports payments you received through payment cards and through third party settlement organizations, such as payment apps and online marketplaces. The IRS explains on Understanding Your Form 1099-K that a payment app or marketplace must send you a 1099-K when your payments for goods or services total more than $20,000 in more than 200 transactions. Both tests must be met.

The One Big Beautiful Bill Act retroactively reinstated this threshold, so the phased-in limits that had been announced earlier (such as $2,500 for 2025 and $600 for later years) no longer apply. The $20,000 and 200 test therefore governs both the 2025 forms issued in early 2026 and the 2026 forms you will receive in early 2027.

Three points are easy to miss:

• Card payments have no threshold. If customers pay you directly by credit, debit, or gift card, your processor reports those payments on Form 1099-K no matter how small the total.
• You may still get a form below the threshold. Platforms are allowed to issue 1099-Ks for lower amounts.
• All income is still taxable. Whether or not you receive a 1099-K, the IRS reminds sellers that all income from goods and services must be reported.

Card and App Payments Do Not Go on Your 1099-NEC

If you pay a contractor by credit card or through a payment app, the IRS instructions say those payments are reported on Form 1099-K by the payment settlement entity and are not reported on Form 1099-MISC or 1099-NEC. Separating checks, ACH, and wire payments from card and app payments in your books keeps you from reporting the same dollars twice.

Where California Differs

Form 1099-K. The Franchise Tax Board's 1099 guidance follows the same $20,000 and 200 transaction test for third party settlement organizations.

Backup withholding. Under the FTB's backup withholding rules, a payer required to withhold federal backup withholding on California source income generally must also withhold 7% for California, with no reductions or waivers. Interest and dividends are excluded.

Nonresident contractors. The 2026 Form 592 instructions require 7% withholding on California source payments to nonresident independent contractors once the year's payments exceed $1,500.

What to Do Before January

• Request a Form W-9 from every vendor and contractor you paid in 2026, before you issue the final payment of the year.
• Run a vendor report by payment method and separate card and app payments from checks, ACH, and wires.
• Reconcile any 1099-K you receive to your sales records, including refunds, chargebacks, and platform charges.

For the rest of the year-end list, see our 2026 year-end tax planning checklist for California small business owners.

Key Takeaways

• The 1099-NEC and most 1099-MISC thresholds are $2,000 for payments made in 2026; 2025 payments used $600.
• Royalties stay at $10, and attorney gross proceeds stay at $600.
• The 1099-K threshold for payment apps and marketplaces is more than $20,000 and more than 200 transactions, retroactively.
• California requires 7% backup withholding when federal backup withholding applies, and 7% withholding on California source payments to nonresident contractors above $1,500.

If you want help cleaning up your vendor list and filing your 2026 information returns correctly at both levels, schedule a consultation with SMB CPA Group, or contact us with your questions.

Disclaimer: The information presented on this website or any SMB CPA Group, PC online platform is for general information and illustrative purposes only. It should not be considered tax, legal, financial, or other professional advice, and it is not a substitute for advice from a licensed professional who knows your circumstances.