New 1099 Rules: What You Need to Know and the Big Shifts Happening
Big 1099 rules changes are here …. Are you ready?
Whether you’re a freelancer, contractor, small business owner, or someone who pays them, this guide breaks down the updated IRS rules for Form 1099-NEC and Form 1099-K:
- who’s impacted,
- how the thresholds work now,
- and the simple steps you can take to stay compliant without the January panic.
👉 Want the quick win? See Jamie’s favorite 1099 tools (including the online e-filing platform she uses).
Table of Contents
- 1099 Basics (Lightning Refresher)
- What Actually Changed for 2025 (NEC & K)
- The 2026 Change Everyone Will Feel (NEC/MISC → $2,000)
- Card, ACH, PayPal, Venmo, Zelle: Who Files What (and Why)
- Real-World Scenarios: Avoiding Double-Reporting
- Penalties & Pitfalls: Why Waiting Until January Hurts
- A No-Stress 1099 Action Plan (Step-by-Step)
- The Tools Jamie Recommends (and How They Save Time)
- Mini-FAQ: Your Most Common 1099 Questions
- A Practical Timeline + Plug-and-Play W-9 Email
- Recap & Next Steps
1) 1099 Basics (Lightning Refresher)
1099-NEC (Nonemployee Compensation)
- You issue this when you pay $600 or more in a tax year for services performed by a contractor, including independent contractors, freelancers, subcontractors, and consultants, and you paid via cash, check, ACH, wire, or Zelle (i.e., non-card methods). They receive 1099 forms rather than W-2s, unlike employees whose taxes are withheld by their employer.
- You file with the IRS and furnish a copy to the contractor. Contractors generally handle their own self employment taxes directly with the IRS.
1099-K (Payment Cards & Third-Party Processors)
- Payment processors (think Stripe, PayPal, Square, etc.) issue this to your payees when they meet the threshold.
- You do not also issue a 1099-NEC for the same card/TPSO payments. That would double-report income.
The whole point: avoid double counting. You report non-card service payments (NEC). Processors report card/TPSO totals (K).
2) What Actually Changed for 2025 (NEC & K)
1099-NEC (2025)
- The threshold stays at $600 for tax year 2025. If you pay a contractor $600+ via non-card methods, plan to issue a 1099-NEC.
1099-K (2025)
- After lots of whiplash in recent years, the classic 1099-K threshold returns: $20,000 AND 200 transactions.
- Many smaller sellers won’t receive a 1099-K unless they cross both numbers—but all income must still be reported even if no form is issued.
New wrinkle: Indexing to inflation
- Certain thresholds are now set to be indexed going forward, which helps keep them relevant over time.
3) The 2026 Change Everyone Will Feel (NEC/MISC → $2,000)
Starting with tax year 2026 (forms due Jan 2027), the threshold to issue a 1099-NEC (and form 1099 misc where applicable, for miscellaneous income such as rents and royalties) is slated to increase to $2,000 and then be indexed thereafter.
What this means for you:
- If you send lots of small 1099s today, you’ll likely send fewer starting in 2026.
- The rules still apply, but the extra buffer reduces admin for tiny engagements.
For 2025, your 1099-NEC trigger is still $600. For 2026, plan for $2,000.
4) Card, ACH, PayPal, Venmo, Zelle: Who Files What (and Why)
Payment method determines who files which form:
- Credit/Debit Card or TPSO (Stripe, PayPal, Square, Venmo “Goods & Services”)
→ Processor handles 1099-K (if thresholds are met).
→ You do not issue 1099-NEC for those same dollars. - Cash / Check / ACH / Wire / Zelle
→ You issue 1099-NEC when the threshold is met.
Special note on Zelle:
Zelle functions more like bank/ACH rather than a TPSO. So if you pay via Zelle, those payments are treated like non-card dollars and fall under your 1099-NEC responsibilities (when the threshold is met).
5) Real-World Scenarios: Avoiding Double-Reporting
- $1,500 via Zelle to a designer (2025):
✔ Likely 1099-NEC (you hit $600 by a non-card method). - $1,500 via Stripe to a videographer:
✘ No 1099-NEC from you.
✔ Processor may issue a 1099-K if the videographer meets both K thresholds. - $550 via ACH to an editor (2025):
✘ No 1099-NEC (under $600 for 2025).
✔ Still income the editor must report. - $2,300 via check to a contractor (2026):
✔ Likely 1099-NEC (meets future $2,000 threshold). - Split payments to one contractor (2025): $400 on card (Stripe) + $300 via ACH
- The $400 card piece is TPSO territory (possible 1099-K by processor).
- The $300 ACH portion alone is under $600, so no 1099-NEC.
- The contractor still reports all income, regardless of forms received.
6) Penalties & Pitfalls: Why Waiting Until January Hurts
The 1099-NEC recipient copy deadline is January 31. Miss the filing deadlines and penalties stack per form:
- ~$60 per form if you’re only a little late (even a day).
- Up to ~$630 per form for very late or “intentional disregard.”
Most last-minute chaos stems from not having W-9s on file and not separating card vs. non-card payments during the year; missing or invalid TIN details can also trigger backup withholding at 24% and create potential penalties or irs penalties.
Fix those two and January gets boring (in a good way), especially when you pair them with a simple system for estimating your small business taxes throughout the year.
7) A No-Stress 1099 Action Plan (Step-by-Step)
Step 1 — Make W-9s mandatory before payment
Policy it: No W-9, no pay. Collect W-9s upfront, store them securely, and tie them to vendor profiles.
Step 2 — Tag the payment method in your books
Create a clean split between card/TPSO vs. non-card. When you run reports, this is the difference between minutes and hours, especially if you’ve moved from spreadsheets into dedicated accounting software for your small business.
Step 3 — Run a Q4 pre-mortem
In October/November, pull a vendor totals report for non-card payments. Flag anyone approaching $600 for 2025 so you aren’t chasing addresses in late January.
Step 4 — E-file (don’t paper-file unless you love pain)
Use an e-file platform to submit to the IRS and deliver contractor copies.
You’ll get time-stamped proof of filing + a neat audit trail (future you says thanks), especially when paired with strong banking and financial tools for small business owners.
Step 5 — If you receive 1099-Ks
Reconcile processor gross to your books so your revenue reporting lines up. Remember: you report all income whether or not a 1099 shows up.
Step 6 — Calendar the dates
- Jan 31: Furnish 1099-NEC to recipients (and e-file).
- Feb 2: Furnish Form 1099-MISC to recipients; if the date falls on a weekend or holiday, the deadline moves to the next business day.
- Build a buffer. Aim to finish a week early to avoid “one-field-wrong” stress.
8) The Tools Jamie Recommends (and How They Save Time)
Tax1099 (W-9 collection + e-file + delivery)
- Digitally collect and store W-9s.
- Import vendors and totals from your accounting system.
- E-file with the IRS; mail/email copies to recipients.
- Keep tidy records for every filing season.
👉 Grab Jamie’s favorite 1099 tools (including Tax1099)
Your accounting platform (QBO, Xero, FreshBooks)
- Tag vendor payment methods.
- Run filtered totals by vendor to see who crosses thresholds.
- The cleaner your vendor setup, the easier your 1099s, especially if you’re using recommended cloud-based accounting software for small businesses.
Pro tip: If your payroll provider supports contractor payments and 1099 filing, consider centralizing here to reduce the number of places you manage vendor data, or use a dedicated platform that walks you through the easiest way to file 1099 forms in 2026.
9) Mini-FAQ: Your Most Common 1099 Questions
Q: If I pay a contractor via PayPal/Venmo “Goods & Services,” do I still issue a 1099-NEC?A: Generally no. That’s a TPSO payment, which falls under 1099-K rules handled by the processor (if thresholds are met). Don’t double-report with a 1099-NEC.
Q: Is Zelle treated like PayPal for 1099s?A: No. Zelle functions more like bank/ACH. If you paid via Zelle, those dollars roll into your 1099-NEC totals when you hit the threshold.
Q: The contractor never sent a W-9. What do I do?A: This is why we say W-9 before pay. Without a TIN, you may be required to backup withholding, and if the TIN is missing or invalid, that can mean withholding 24%. Use a tool that collects W-9s digitally to avoid the scramble.
Q: I didn’t receive a 1099-K, but I had Stripe sales. Do I still report the income? A:Yes. You report all income, regardless of whether a form arrives, and choosing the best-fit bookkeeping solution for your small business makes it much easier to capture everything even when forms are missing.
Q: Does the 1099-NEC threshold change in 2025? A: No—still $600. It’s slated to increase to $2,000 for 2026 (and then be indexed).
10) A Practical Timeline + Plug-and-Play W-9 Email
October–December (Prep)
- Audit vendor list; collect/refresh W-9s.
- Run non-card payment totals per vendor; flag anyone near $600 (2025).
- Set up your Tax1099 account and test a sample import so January is click-and-go. And make sure you understand how to file taxes as a self-employed person so those 1099s flow cleanly onto your return.
Copy/Paste W-9 Email Template
Subject: Quick action needed: Your W-9 for year-end
Hi [Name],
We’re updating our records for year-end reporting. Please complete your W-9 using this secure link: [your Tax1099/W-9 collection link].
Thank you!
[Your Name / Company]
[Contact info]
Early January (Finalize)
- Reconcile non-card totals, verify addresses/TINs.
- E-file 1099-NEC and furnish copies by Jan 31. If you’re paying people in multiple states, make sure your process lines up with remote hiring and compliance rules for small businesses.
After Filing (Clean Wrap)
- Save filing receipts and PDFs in a Tax Year folder.
- Update vendor notes with any address or TIN corrections for next year.
11) Recap & Next Steps
- 2025
- 1099-NEC stays at $600.
- 1099-K is $20,000 & 200 transactions (classic rules restored).
- Thresholds are indexed going forward.
- 2026
- 1099-NEC/MISC threshold rises to $2,000, which should reduce low-dollar filings for many small businesses.
- Payment method is everything:
- Card/TPSO → Processor handles 1099-K.
- Cash/check/ACH/Zelle → You handle 1099-NEC (when threshold is met).
- Avoid penalties with a simple system: W-9s before payment, track payment methods, and e-file on time.
👉 Ready to make 1099s painless? Check out Jamie’s go-to 1099 tools (including Tax1099)!
Disclaimer
This article is for educational purposes only and is not tax, legal, or accounting advice. Consult your CPA or qualified advisor for guidance tailored to your situation, especially if you pay foreign contractors, reimburse expenses, or sell via multiple marketplaces/payment platforms.
Some links in this post are affiliate/partner links. If you purchase through them, Jamie may earn a commission at no additional cost to you. Jamie only recommends tools she personally uses or trusts.
Youtube video:
Youtube transcript: This transcript was generated from the video for your convenience, but it may contain typos or slight errors due to the transcription process. For the most accurate and complete information, we recommend watching the full YouTube video.
1099 Forms, Tax Forms, and Non Employee Compensation
Did you know the 10 99 rules just changed? Again, thanks to the one big beautiful bill that was passed in July of this year. The rules and thresholds around both 10 99 Ks and 10 99 next are changing. So whether you typically send 10 90 nines or you receive them, or maybe both, this is going to affect you.
Now let's break down what you need to know about what's changing. But before we get into all the nitty gritty, let's do a little bit of a refresher. As a reminder, a 10 99 neck NEC, that's non-employee compensation is something that you would create and send if you have paid over $600 to a contractor or someone who is doing work for your business that is not an employee during the year.
Now remember, if you paid them on something like a credit card, this wouldn't count. However, if you're paying them cash or if you're paying them on a debit card or an a CH transfer or some of these other platforms like Zelle, you may be responsible to send a 10 99. And just in case you're wondering if you use something like PayPal or Venmo, those are actual third party payment processors and they would actually be responsible for sending the 10 99 not.
You. It just so happens that Zelle actually isn't officially a third party payment processor. It works more like a regular bank and a CH transfer. So therefore it is one that if you use, you would still be responsible for sending that 10 99. I know it can get a little bit confusing, so I just wanted to clarify that.
Third Party Network Transactions and Gross Proceeds Paid
So that's a 10 99 neck, but what is a 10 99? Okay, so let's say for example, you do pay your contractors with your credit card. Likely that's because they're invoicing you and giving you options for payment, and you're able to pay via credit card because they're using a payment processor on their side like Stripe.
Now in that case, you as the person who is paying the contractor, actually doesn't have the responsibility to send the 10 99 neck, and that's because that payment provider is actually the one who is responsible for sending that 10 99 K instead. And if you send to 10 99 neck and stripe sent to 10 99 k, all of a sudden that person might be in a situation where they could accidentally double count their income for tax purposes.
And we don't want that to happen. So that's why these rules exist. Now, you also, on the flip side, might be somebody who is receiving a 10 99 K. If you process, let's say credit card payments, you're using something like Stripe or Square, those payment processors are then responsible to send you a 10 99 K if you hit certain transaction thresholds.
So today we're gonna talk about both the changes to the 10 99 neck and to the 10 99. Ks. So if you're running a business hiring help or selling something online, chances are that at least one of these two forms applies to you, if not both.
Internal Revenue Service Reporting Requirements and Income Reported
Now let's get to those changes I mentioned that happened this year with the passage of the one big, beautiful.
Bill, so let's start by talking about the 10 99 next. Now, these are the most common type of 10 99 cents, and like I said, it's for non-employee compensation. So if you are hiring a contractor, let's say, to do some work for you, and in the course of a full year, you pay them over $600, then it's likely that you need to file a 10 99 to report the income that you paid them to the IRS.
And not only would you file that with the IRS, you're also going to send that 10 99 N to them. Now for 2025, nothing is changing. That threshold is going to continue to be $600 in total payments. However, starting in 2026, that threshold for when you actually need to send a 10 99 N to a contractor is going to increase to $2,000.
And yes. This applies to 10 99 mys as well. If you send those on the plus side, that means that starting in 2026, you'll probably have less 10 90 nines to send. Now, of course, you still need to stay on top of it. It's still going to be required in a lot of cases, but especially if you had a lot of. Small, 10 90 nines that you were sending out for work that was done.
This might help free up some extra time and administrative effort.
Payment Card Transactions, Reporting Threshold, and Taxable Income
Now, what's changing with the 10 99 K threshold? Well, if you remember, there has been some drama around this one, and to reiterate, this is the 10 99 that is sent out from payment processors that typically would only go out. If you had more than $20,000 or so, that would be paid to you through that payment processor.
So a lot of smaller businesses might not actually be getting those 10 99 Ks. Now, if you recall, this threshold was under fire. This threshold actually with the American Rescue Plan Act was going to be changing already and was going to be going down. IE you are gonna be more likely to get a 10 99. K. Now starting with payments that took place during 2024, that threshold went down to 5,000 from 20,000.
So that was a big step down, meaning more payment providers would have to send more 10 99 Ks because more people would qualify for them. And the goal over the next couple of years was to actually continue. Step down that threshold to hit that same $600 threshold that exists for 10 99 next, and the purpose of this really was to close the tax loophole where there was a gap between when you might actually earn income and when you would receive that 10 99.
So they wanted to make sure that more people were reporting their income. 10 90 nines help ensure that income is getting reported.
Tax Return, Income Tax Return, and Pay Taxes
And so that was really the reasoning for it. However, that has all been wiped away with this one big, beautiful bill, and we're going back to our previous $20,000 limit or 200 transactions.
So we've had a little bit of whipsawing round and round and ended up in the exact same place we started. I am so glad that I spent so much time making. Previous videos all about the changes we thought were gonna happen. And not only that, these new thresholds for both the 10 99 neck and the 10 99 K are going to be indexed to inflation, meaning that they are going to likely increase over time, which has not previously been the case.
They've just been a static dollar amount. So I'm a fan of indexing over time. It makes a heck of a lot more sense to do that because it's gonna keep those dollar amounts from getting. Super outdated. So what does all this mean for you? Generally, not all that much because you still need to make sure that whether you receive a 10 99 K or not, you're claiming all of your income.
The best thing you'll probably get from this is maybe just having a few less 10 90 nines to send.
Tax Documents, Taxpayer Identification Number, and Critical Deadlines
So here are the things that I recommend thinking about. When it comes to 10 90 nines, do you have a good process in place for tracking those contractor payments? Are you collecting w nines before you actually pay someone?
Now I'm gonna tell you, no shame on this. Most of us are not doing it, but the earlier you can get that W nine, the better. You do not want to be chasing those at the end of the year, or definitely not in January. Before that, January 31st, 10 99. Deadline and are you ready to send accurate 10 90 nines at the beginning of the year?
Please don't leave all of this to the last minute penalties on unfiled. 10 90 nines can really add up. People don't realize that late filing can mean a lot of penalties and interest. Even if you file right after the deadline, like the day after the deadline, it's gonna be an additional $60 per form. Plus if you wait even longer.
You could face penalties up to $630 per form, especially if you're intentionally disregarding the deadline.
IRS Forms, Paper Forms, and Accurate Data
Now, if you're curious, what I recommend to use to file your 10 99 next, well, there are lots of different options. I would first check within your accounting software to see if that's something that they offer, whether you use QuickBooks online.
Zero FreshBooks. You can check and see if you have the ability to file 10 90 nines through that, or you may even potentially have the ability to file them through your payroll company. Alternatively, there are standalone companies that will file these 10 90 nines and they are actually pretty affordable, and I definitely recommend using one of those services because they can also help you collect those W nines, get everything you need in order and file really seamlessly.
So if you wanna know what tools I recommend when it comes to filing 10 90 nines, just go to jamie troll.com/ ten nine nine. Now to recap the one big, beautiful bill brings some new thresholds, but it doesn't really change anything regarding compliance. You still gotta report your income and you gotta send out those 10 90 nines.
Tax Season, Calendar Year, and Due Date
I'm recording. In October, as you can probably tell from the bats on my wall, so if you're watching this sometime in the fall into the winter and you haven't sent those W nines, that's what I want you to go do right now. Make sure you're collecting that information. Again, you can do that through a 10 99 software, or you may be able to do that through your accounting software or payroll provider, and if you're still concerned about when or who you need to send a 10 99 to, then definitely check out this video that I previously did, going over all the ins and outs.
Thanks for joining me. If you found this helpful, please make sure to like and subscribe and I'll see you next time.
