The New 1099 Rules for 2025: Why Your Reporting May Look Different

Imagine this:
You run a small consulting business and pay a contractor $1,200 in 2025. Or maybe you sell crafts online and take $10,000 through PayPal.

Do you (or the platforms you use) need to send the IRS a 1099?
The answer just changed - again.

The One Big Beautiful Bill Act (OBBBA) rewrote parts of the tax code that govern 1099-NEC (for contractors) and 1099-K (for payment apps). The goal: fewer forms flying around, less confusion, but the same responsibility to report your income.

Here’s what’s new and how it might hit your business.

1099-NEC: The $600 Rule Lives (For Now)

Then (1954–2025):

  • File a 1099-NEC if you pay an unincorporated contractor $600 or more in a year.

  • Lawyers and doctors count even if they’re incorporated.

  • Penalties for skipping: up to $310 per form, double if intentional.

Now (Starting 2026):

  • The threshold rises to $2,000.

  • It will adjust for inflation in $100 steps after that.

Translation: For 2025, nothing changes - stick with the $600 rule. From 2026 forward, you’ll file fewer NECs, but sloppy recordkeeping will still cost you.

1099-K: Platforms Step Back

Then (2024 plans):

  • Congress tried lowering the threshold to $600 with no transaction minimum.

  • Pushback was fierce: taxpayers feared personal transfers would trigger forms, and the IRS worried it couldn’t process billions of new filings.

Now (2025 forward):

  • Back to the old rule: 1099-K only if you earn over $20,000 AND have 200+ transactions on a platform.

  • Applies to PayPal, Venmo, eBay, Airbnb, Uber, Etsy, even some crypto processors.

  • Retroactive to 2022 - meaning the $2,500 threshold for 2025 is gone.

Translation: Occasional sellers and freelancers won’t see a 1099-K. But don’t mistake fewer forms for fewer taxes - the income is still taxable.

The State Wildcard

Ten states (plus D.C.) didn’t follow federal rules and set their own thresholds - some as low as $600.

Translation: Even if you dodge a federal 1099-K, your state might still send one. Check your state’s rules or you could be caught off guard.

Why This Matters

Reporting gap: When there’s no 1099, the IRS estimates 55% of income goes unreported. With a 1099? Only 6%.

  • Cash flow risk: If you don’t have a W-9 from your contractor, you may be forced to withhold 24% of payments.

  • Audit risk: Misclassify an employee as a contractor and the penalties double.

The Bottom Line

Fewer 1099s will be filed starting in 2026. But for 2025, the old $600 NEC rule and $20,000/200 K rule still apply - and penalties for missing them are steep.

Confused about which 1099s apply to you?
We’ll help you sort it out now - before the IRS (or your state) comes asking.