The One Big Beautiful Bill & 1099s: What Every Small Business Should Know Before Year-End

If you pay contractors, freelancers, or gig workers, you’ve probably heard the buzz:

“They raised the 1099 limit — I don’t have to send 1099s for $600 anymore!”

Yes… but not yet. And not for 2025.

The One Big Beautiful Bill Act (OBBBA) did change the 1099 rules, but most of those changes start in 2026, not right now. H&R Block Tax preparation company+1

Let’s break it down in plain English so you know exactly what to do with your contractors and payment apps.

1. The Big Change: 1099-NEC & 1099-MISC Threshold Goes Up (But Later)

Right now, most small businesses have the $600 number burned into their brain:

• Pay a contractor $600 or more in a year → issue Form 1099-NEC

• Pay certain rents, prizes, legal settlements, etc. $600 or more → Form 1099-MISC

The One Big Beautiful Bill Act keeps that rule for 2025, but raises the threshold starting with 2026 payments. OnPay+1

Here’s the timeline for 1099-NEC & 1099-MISC

Starting in 2027, that $2,000 threshold will be indexed for inflation, so it can gradually increase over time. Jackson Hewitt+1

Important:
The higher threshold is about reporting, not about whether income is taxable. Your contractors still have to report all their income — even if they never get a 1099 from you.

2. What About 1099-K (Venmo, PayPal, Stripe, etc.)?

There’s been a whole soap opera around Form 1099-K, especially for side hustlers and people getting paid through apps.

The One Big Beautiful Bill Act essentially hits the reset button and goes back to the old standard: OnPay+1

• The 1099-K threshold is now $20,000 in payments AND more than 200 transactions in a year.

• This replaces the planned super-low $600 threshold that was causing panic.

So if you’re a small business getting paid through Stripe, Square, PayPal, Venmo, etc., those platforms will generally only issue a 1099-K if both:

1. You processed over $20,000, and

2. You had more than 200 transactions.

Again, this is just about when a form is sent — the IRS still expects all business income to be reported, with or without a 1099-K.

3. What Hasn’t Changed (And Still Gets Businesses in Trouble)

Even with the new law, some basics do not change — and this is where many small business owners get burned:

a) You still need W-9s from your contractors

Before you pay a contractor, you should be collecting a Form W-9 so you know:

• Legal name / business name

• Address

• Tax ID (SSN or EIN)

• Entity type (individual/sole prop, LLC, corporation, etc.)

This is how you know whether a 1099 is required and how to issue it correctly.

b) Corporations are still treated differently

The new $2,000 threshold (starting 2026) doesn’t change who gets a 1099, only from what amount.

In general (with exceptions like attorneys), you don’t issue 1099-NEC/1099-MISC to:

• C-corporations

• S-corporations

But you do look at:

• Individuals / sole proprietors

• Partnerships

• LLCs taxed as either of those

c) No 1099 ≠ no tax

This is the big misunderstanding.

Just because your contractor doesn’t get a 1099 (for example, you paid them $1,500 in 2026 when the threshold is $2,000), that does not make the money tax-free.

The IRS expects all income to be reported, whether it shows up on a form or not. H&R Block Tax preparation company+1

4. What This Means for You Right Now (2025)

For the year you’re in right now:

• If you pay any contractor $600 or more in 2025, you should still plan to issue a 1099-NEC in January 2026. OnPay

• The new $2,000 threshold doesn’t kick in until payments made in 2026 (filed in early 2027).

So your action items this year:

1. Keep tracking all contractor payments, same as before.

2. Collect W-9s from anyone you pay for services (non-employee).

3. Clean up your bookkeeping so you can easily see who crossed the $600 mark for 2025.

4. Educate your contractors – some will read a headline and think they’re “off the hook.” They’re not.

5. How to Prep for the New Rules (2026 and Beyond)

Once we get to 2026, the new $2,000 threshold could be a nice reduction in paperwork for you — if your systems are set up right.

Here’s how to be ready:

a) Tighten your contractor onboarding

• Make the W-9 part of your onboarding (no W-9 = no payment).

• Decide how you’ll track who’s a corporation vs. who isn’t.

b) Make your accounting software work for you

• Use vendor types / tags (e.g., “1099-eligible”).

• Run year-to-date vendor totals regularly so you’re not scrambling in January.

c) Still track everything, even under $2,000

Even if you won’t have to file a 1099, you still need good records to:

• Back up your deductions

• Explain payments in an audit

• Give contractors accurate info if they ask what you paid them

d) Don’t ignore state rules

Some states may not match the federal threshold right away or at all. Multi-state businesses should confirm their state 1099 rules once guidance comes out. Avalara+1

6. Final Thoughts: Less Paperwork ≠ Less Strategy

The One Big Beautiful Bill Act is giving small businesses some relief from 1099 paperwork, especially starting in 2026 with the higher $2,000 threshold and the restored 1099-K limits. TINCheck+1

But it does not change these core truths:

• Income is still taxable, with or without a form.

• Good bookkeeping beats panic in January.

• Having clear systems for contractors saves you money, time, and IRS headaches.