Congress approves new thresholds for 1099 forms

The reporting threshold for Form 1099-K has been in flux since it was lowered by the American Rescue Plan of 2021. Read on for details.

A 1099 form is an IRS tax form documenting payments made to a business, individual, or entity that isn’t an employee. They’re top of mind at the start of every year because payers are generally required to send the appropriate 1099 form to the payee by January 31, though some 1099 forms are due after that. All 1099 forms must also be filed with the IRS.

There are currently more than 20 different 1099 forms, including Form 1099-K, Form 1099-NEC, and Form 1099-MISC.

Form 1099-K reports non-W-2 income received during the year from the following:

• Payment card transactions (credit, debit, or stored value cards, such as gift cards) 

• Third-party network transactions (payment apps or online marketplaces, including third-party payment settlement organizations)

Form 1099-NEC reports nonemployee compensation — income received for work as a consultant, freelancer, or independent contractor.

Form 1099-MISC reports income from miscellaneous sources not covered by another 1099 form, such as awards and prizes, fishing boat proceeds, and rents. 

Form 1099-MISC and Form 1099-NEC both have more than one reporting threshold.

The reporting threshold for the 1099-NEC is $600. However, Form 1099-NEC can also be used to “report sales totaling $5,000 or more of consumer products to a person on a buy-sell, a deposit-commission, or other commission basis for resale.”

A Form 1099-MISC must be filed for each person a business paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest, or for each person a business paid at least $600 health care payments, prizes, rents, and certain other payments.

One can also file a Form 1099-MISC to “report sales totaling $5,000 or more of consumer products to a person on a buy-sell, a deposit-commission, or other commission basis for resale.”

A Form 1099-K reports payments by an online marketplace, payment app, or payment card company. For 2023, the 1099-K reporting threshold was $20,000 in aggregate payments and 200 transactions. For 2024, the reporting threshold dropped to $5,000 (with no transaction threshold).

The American Rescue Plan Act of 2021 slashed the 1099-K reporting threshold significantly, lowering it from $20,000 and 200 transactions to $600, period. It didn’t alter the $600 reporting threshold for the 1099-MISC or 1099-NEC.

The 1099-K $600 threshold was scheduled to take effect for the 2022 tax year, meaning most forms reporting the new thresholds would have been due by January 31, 2023. However, on December 23, 2022, the IRS announced the threshold would apply to transactions occurring after calendar year 2022 instead. In effect, the IRS gave affected taxpayers an extra year to get their proverbial ducks in a row.

On November 21, 2023, the IRS delayed the threshold change again, making 2023 another transition year. Why? To “reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation.”

In the notice dated November 21, 2023, the IRS said it was “planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan.” 

On November 26, 2024, the IRS announced that third-party settlement organizations (TPSOs) must report transactions when the amount of total payments for those transactions is:

• More than $5,000 for 2024
• More than $2,500 for 2025
• More than $600 for calendar year 2026 and beyond

The One Big Beautiful Bill Act (OBBBA), which became law on July 4, 2025, returns the reporting threshold for Form 1099-K to $20,000 and 200 transactions. Per the legislation, this takes effect “as if included in section 9674 of the American Rescue Plan Act.” 

The OBBBA also changes the reporting threshold for Form 1099-MISC and Form 1099-NEC. Currently $600, the threshold will increase to $2,000 for tax year 2026. For 2027 and subsequent years, the threshold for both forms will be adjusted for inflation.

Read One Big Beautiful Bill Act changes 1099 thresholds for more details.

Form 1099 thresholds are not top of mind for many businesses and individuals. In January 2025, 74% of gig economy workers surveyed by Censuswide couldn’t identify the payment threshold above which they’d be required to report income to the IRS in 2025. 

Streamlining management of 1099 and W-9 forms can help ease the burden of compliance for businesses. Avalara 1099 & W-9 stores vendor and freelancer information, imports 1099 payee data, and transfers vendor details quickly, all while automatically checking for errors. It also checks for valid TINs/SSNs when W-9s are collected and checks for valid TINs when 1099s are filed, preventing errors and minimizing B-notices, corrections, and manual effort.

Learn more about Avalara 1099 & W-9.

This blog post has been updated; it was originally written in February 2024.