1099 Requirements: Finish January Strong

In partnership with

Good morning!

1. Feature: 1099 Requirements: Finish January Strong (4 min)

2. From the Archive:

   • Protecting Profit When Costs Keep Rising

   • Cyber Insurance for Your Business

   • Bitcoin 101 for SMB Owners

-TCoL

Missed our last feature article? Annual Gifting of Partial LLC Ownership Interests

What Will Your Retirement Look Like?

Planning for retirement raises many questions. Have you considered how much it will cost, and how you’ll generate the income you’ll need to pay for it? For many, these questions can feel overwhelming, but answering them is a crucial step forward for a comfortable future.

Start by understanding your goals, estimating your expenses and identifying potential income streams. The Definitive Guide to Retirement Income can help you navigate these essential questions. If you have $1,000,000 or more saved for retirement, download your free guide today to learn how to build a clear and effective retirement income plan. Discover ways to align your portfolio with your long-term goals, so you can reach the future you deserve.

Get The Guide

For many small business owners, 1099s begin as a January to-do item and quickly become a January problem. Some readers are filing at the last minute. Others already filed but are uneasy about whether they applied the right rules. Still others are trying to understand which forms apply to their business at all, and which thresholds actually matter.

The confusion is understandable. Over the past several years, reporting rules shifted repeatedly, temporary relief blurred long-standing standards, and different 1099 forms were often discussed as if they followed the same rules. They do not. As January closes, what matters most is understanding which 1099 forms apply to your business, what each one reports, and where the thresholds actually sit today.

The three 1099 forms most small businesses see

Most small businesses regularly deal with three information returns.

• Form 1099-NEC reports payments to independent contractors and service providers.

• Form 1099-MISC covers certain other payments, including rent, prizes, awards, royalties, and some legal settlements.

• Form 1099-K reports payments processed through payment cards and third-party payment networks.

Each form serves a different purpose, follows different rules, and creates different risks when misunderstood.

1099-NEC and 1099-MISC: the $600 threshold still governs

For the 2025 tax year (with forms filed in early 2026), the basic federal thresholds for Forms 1099-NEC and 1099-MISC remain unchanged. If your business pays $600 or more to a non-employee for services during the year, Form 1099-NEC is generally required. This includes payments to freelancers, consultants, and other independent contractors.

Form 1099-MISC also generally uses a $600 threshold for reportable categories such as rent, prizes, awards, and certain legal payments. One important exception is royalties, which are generally reportable once payments reach $10.

The identity of the payee also matters. Most payments to corporations are not reportable on Forms 1099-NEC or 1099-MISC, though there are notable exceptions, particularly for certain attorney-related payments. Confirming vendor status before year-end remains one of the simplest ways to avoid corrections later.

How you pay determines who reports

How you paid matters just as much as how much you pay.

Payments made by credit card, debit card, or third-party payment networks are generally not reported by the payer on Forms 1099-NEC or 1099-MISC. Those transactions are instead reported by the payment processor on Form 1099-K.

By contrast, payments made by check, ACH, wire transfer, or cash usually remain the payer’s reporting responsibility when thresholds are met.

This division of responsibility is a common source of confusion and duplicate reporting. Understanding it prevents both.

1099-K: the federal threshold is stable again

Form 1099-K follows a different rule set.

In October 2025, the IRS confirmed that the long-standing federal reporting threshold for third-party settlement organizations is back in effect. Under current guidance, a 1099-K is generally required only when payments for goods or services exceed $20,000 and more than 200 transactions during the calendar year.

That clarification appears in IRS News Release IR-2025-107 and Fact Sheet FS-2025-08. For many businesses, it restores the same federal standard that applied for years before the pandemic. This threshold applies only to third-party payment networks such as online marketplaces and business-use payment apps; it does not apply to payment-card transactions.

Payment-card transactions have no minimum threshold

Payment-card processors report transactions without regard to dollar amount or transaction count. A single card transaction is reportable. This distinction explains why many businesses receive reporting forms from card processors even when they fall below the 1099-K threshold for third-party payment networks. The rules are different, and they always have been.

State rules can also differ, and those differences may affect whether a form is issued.

What these forms report

Information returns report gross amounts, not taxable income.

A 1099-K reports gross payments processed through a platform or card network. It does not subtract processing fees, refunds, chargebacks, shipping costs, or cost of goods sold. Taxpayers are expected to rely on their own records to compute net income. The same principle applies to 1099-NEC and 1099-MISC. The forms report what was paid, not whether that amount represents profit.

Forms summarize activity. Your books determine tax liability.

Income rules that never changed

Receiving a 1099 does not create taxable income. Not receiving one does not eliminate it.

The IRS has been consistent on this point in Publication 525 and throughout its Gig Economy Tax Center. Payments for goods or services are generally taxable whether or not a form is issued. Personal reimbursements, gifts, and transfers between your own accounts are not. The distinction is established by records, not by forms.

Information returns are increasingly electronic

Under current rules, anyone filing ten or more information returns in aggregate must file electronically. The IRS’s Information Returns Intake System, known as IRIS, is the agency’s free electronic filing platform and does not require paid software.

As more reporting moves online, matching occurs faster and discrepancies surface sooner. The 2025 General Instructions for Certain Information Returns also introduce new reporting forms, including Form 1099-DA for certain digital asset transactions. While not relevant to every business, the direction is clear: accuracy matters more than ever.

Common January mistakes

Several mistakes show up every January.

• Treating a 1099 total as taxable income rather than gross receipts.

• Assuming income is non-taxable because no 1099 form was received.

• Mixing business and personal transactions in the same account, which often causes personal transfers to appear as business income and complicates reconciliation.

• Relying on outdated guidance that reflects temporary thresholds from prior years, including now-expired 1099-K rules, which can lead to unnecessary corrections.

Records still do the heavy lifting

Publication 583 remains the IRS’s practical guide to small-business recordkeeping. Dedicated business accounts, saved processor statements, refund logs, and expense receipts provide the support your return depends on.

Monthly reconciliation of gross receipts keeps year-end reporting manageable. At year-end, 1099 totals should align with gross receipts before expenses. From there, Schedule C filers can rely on Publication 334 to report income and deductions accurately. Good bookkeeping remains the simplest form of insurance available to a small business.

Beneath it all

As January closes, the thresholds are known and the systems to file are faster than ever. If your accounts are separate and your records reconciled, filing season becomes procedural rather than stressful, even at the end of the month.

Editor’s note (January 2026):
This article summarizes federal IRS guidance as of publication. State rules may differ, and individual circumstances vary. For questions specific to your business, consult your CPA or tax professional.

IRS Resources for Further Reference:

• IRS News Release IR-2025-107 (Oct. 23, 2025)

• IRS Fact Sheet FS-2025-08 (Oct. 2025)

• Instructions for Forms 1099-MISC and 1099-NEC (2025)

• Understanding Your Form 1099-K, IRS.gov

• General Instructions for Certain Information Returns (2025)

• IRS Topic No. 801, Who Must File Electronically

• Publication 525, Taxable and Nontaxable Income

• Publication 583, Starting a Business and Keeping Records

• Publication 334, Tax Guide for Small Business

• IRS Gig Economy Tax Center

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!