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The Latest 1099 NEC/MISC Rules

Navigating the 2025 Tax Year: Understanding the Latest 1099-NEC and 1099-K Rules


For businesses and independent contractors alike, staying on top of tax reporting requirements can be a challenge, especially with recent legislative changes. The 2025 tax year is a transitional period, with new rules affecting Forms 1099-NEC and 1099-K that you'll need to understand when filing in 2026.


Here’s a breakdown of the key reporting rules for payments made in the 2025 tax year.


Form 1099-NEC: A Year of Transition


Form 1099-NEC is the IRS document used to report nonemployee compensation, which includes payments to independent contractors, freelancers, and other service providers.


  • The 2025 Threshold: For payments made during the 2025 tax year, the reporting threshold remains at $600 or more. This means any business that paid a nonemployee $600 or more for services must issue a Form 1099-NEC to that individual and the IRS.

  • The New Rule on the Horizon: A major change is coming. The "One Big Beautiful Bill Act," passed in 2025, is set to increase the 1099-NEC reporting threshold to $2,000. However, this new, higher threshold will not take effect until the 2026 tax year.


This creates a clear timeline for reporting:

  • Payments in 2025 (filed in 2026): The $600 threshold applies.

  • Payments in 2026 (filed in 2027): The $2,000 threshold begins.

  • Payments in 2027 and Beyond: The $2,000 threshold will be adjusted annually for inflation.


Electronic Filing is Now the Standard


The IRS has significantly lowered the electronic filing threshold for information returns. For all returns filed after January 1, 2024, the electronic filing requirement was reduced from 250 forms to just 10. This applies to Forms 1099-NEC and many other tax documents. If your business is required to file a total of 10 or more forms (including W-2s, 1099s, etc.), they must be submitted electronically to the IRS.


When to File, No Matter the Amount


Even with the $600 threshold, there is a key exception to be aware of: backup withholding. If you were required to withhold federal income tax from a nonemployee's payment due to them not providing a valid Taxpayer Identification Number (TIN), you must still file a Form 1099-NEC, regardless of the payment amount. The backup withholding rate is 24% of the payment.


Don't Confuse 1099-NEC with 1099-K


While both forms are part of the "1099 economy," they serve different purposes. The recent legislative changes for each form are also distinct.


  • Form 1099-NEC is used by businesses to report direct payments to contractors for services.

  • Form 1099-K is used by third-party payment networks (like Venmo, PayPal, and online marketplaces) to report transactions from goods and services.


The "One Big Beautiful Bill Act" also impacted Form 1099-K, but in a different way. It reverted the reporting threshold back to its original, higher limit of more than $20,000 in gross payments and more than 200 transactions. This retroactively eliminated the planned lower thresholds that had created a great deal of confusion for gig workers and online sellers.


Understanding these reporting requirements is crucial for compliance. By staying informed about the different forms and their specific thresholds, both businesses and contractors can ensure they are in compliance with IRS regulations and avoid any unwanted notices!


Click below to get your copy of my easy to read 1099 Decision Tree flowchart to help you decide which of your Vendors should receive a 1099 form!


Contact me today to find out how I can help you breeze through this year's filings!



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