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The 1099 Threshold Is Now $2,000: What Minnesota Businesses Need to Know for 2026

October 7, 2026 | Carl Corneliuson
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    The Quick Answer

    For payments you make to contractors in 2026, you only need to issue a Form 1099-NEC once a contractor’s total for the year reaches $2,000. The old $600 threshold is gone. The change comes from the One Big Beautiful Bill Act, and it’s the first time the threshold has moved since 1954.

    That’s good news for your January paperwork. But it doesn’t apply to every payment, it doesn’t change what your contractors owe in tax, and the timing has already confused plenty of business owners. Here’s what changed, what didn’t, and what to do before year-end.

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    What Changed

    Starting with payments made on or after January 1, 2026, the reporting threshold for Form 1099-NEC (nonemployee compensation) and most Form 1099-MISC categories, such as rent and prizes, rose from $600 to $2,000.

    A few details matter here:

    • The threshold is per recipient, per year. You add up everything you paid the same contractor during the calendar year.
    • Once a contractor crosses $2,000, you report everything. The 1099-NEC shows the full amount you paid that contractor, not just the part above $2,000.
    • It will keep moving. Starting in 2027, the threshold will be adjusted for inflation each year.

    The Timing Trap: $600 or $2,000?

    This is where we see the most confusion. The new threshold applies to payments made in 2026, which you report in January 2027.

    The 1099s you filed earlier this year covered 2025 payments, and those still used the $600 threshold. If you skipped a 1099 last January because you’d heard the threshold went up, that form may still have been required. It’s worth a quick look back.

    What Didn’t Change

    The $2,000 threshold is a floor, not a blanket exemption. Several rules stay the same:

    • Attorneys and medical providers. Payments to corporations are generally exempt from 1099 reporting. Payments for legal services, and medical and health care payments, remain reportable even when the provider is incorporated.
    • Backup withholding. If you withheld backup tax from a vendor who didn’t give you a valid W-9, you still report the payment, even if it’s under $2,000.
    • The deadline. The 1099-NEC is due to both the IRS and your contractor by January 31, with no automatic extension. January 31, 2027 falls on a Sunday, so the deadline moves to Monday, February 1.
    • Why accuracy matters. The IRS still matches the 1099s you file against what your contractors report. If you haven’t read it yet, our post on why the IRS cares more about your 1099s than you think explains how mismatches lead to notices and penalties.

    W-9 vs. 1099: What’s the Difference?

    These two forms work as a pair, not as alternatives.

    A Form W-9 is what you collect from a vendor before you pay them. It gives you their legal name, tax ID number, and business type. You keep it on file and don’t send it to the IRS.

    A Form 1099-NEC is what you send to the vendor and the IRS after the year ends, reporting what you paid them.

    The W-9 is how you know whether a 1099 is required. The business type it shows tells you whether the vendor is a corporation or not, and the tax ID is what goes on the 1099. That’s why collecting W-9s up front, before the first payment, makes January so much easier.

    The 1099-K Reset

    There’s a second change that matters if you take card or app payments. The One Big Beautiful Bill Act also restored the Form 1099-K threshold to $20,000 and 200 transactions, cancelling the planned drop to $600.

    Form 1099-K is filed by payment processors and platforms, not by you. But for our restaurant and retail clients, it means fewer surprise 1099-Ks showing up at tax time. Whether or not a 1099-K arrives, that income still belongs on your return, and your books should account for it either way.

    If You’re the Contractor

    Many of our clients are on both sides of this. A building trades or landscaping business might pay subcontractors and also do work for general contractors who send 1099s.

    If you’re the one getting paid, keep this in mind: a contractor paid $1,800 in 2026 won’t receive a 1099-NEC but still has to report and pay tax on that income. Fewer forms arriving in January doesn’t mean less taxable income. Your own books, not the 1099s you receive, should be the source for your return.

    What About Minnesota?

    Minnesota generally follows the federal reporting threshold, so the $2,000 rule carries over for state purposes. Most businesses meet their Minnesota obligation through the IRS’s Combined Federal/State Filing program, which passes your federal 1099 data to the state.

    If you withheld Minnesota income tax on a 1099 payment, you’ll also need to file that 1099 directly with the Minnesota Department of Revenue by January 31. Minnesota can assess its own penalties for missing or incorrect forms in that case.

    Your Year-End 1099 Checklist

    The best time to get 1099s right is now, not the last week of January.

    1. Collect W-9s now. Request one from any vendor you’ve paid this year who isn’t on file. It’s much harder to get one in late January.
    2. Run a vendor payment report. Total each vendor’s 2026 payments and flag anyone at or near $2,000. A contractor at $1,700 in October may cross the line by December.
    3. Update your software. If you use QuickBooks or another tool with 1099 tracking, confirm the threshold reflects $2,000, not the old $600 default.
    4. Sort corporate and non-corporate vendors. Partnerships and most LLCs still get a 1099. Then double-check any attorneys and medical providers, which stay reportable either way.
    5. Keep tracking everyone. Record every vendor payment in your books, whether or not a 1099 is required. Your expense deductions depend on those records, not on the forms.
    6. Check classification. If someone you pay works like an employee, a 1099 may be the wrong form entirely. That’s a payroll question worth asking before year-end.

    Let us handle 1099s as part of your monthly books.

    When we manage your bookkeeping and bill paying, vendor tracking and W-9s are built in, so January is just filing.

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    Frequently Asked Questions

    Is the 1099 threshold $600 or $2,000?

    It depends on when you made the payment. Payments made in 2025 used the $600 threshold, reported in early 2026. Payments made in 2026 use the new $2,000 threshold, reported in January 2027. Starting in 2027, the threshold will be adjusted for inflation each year.

    Do I need to send a 1099 to a contractor I paid $1,500 in 2026?

    Generally, no. If the contractor is paid for services and your total payments for 2026 stay under $2,000, a 1099-NEC isn’t required. The exceptions are payments subject to backup withholding and certain payment types with different rules.

    Do partnerships get a 1099?

    Yes. Payments for services to a partnership are reportable on Form 1099-NEC once they reach $2,000 for the year. The same goes for most LLCs, unless the LLC has elected to be taxed as a corporation. The general corporate exemption covers only C corporations and S corporations. The vendor’s W-9 tells you which category they fall into.

    What’s the difference between a W-9 and a 1099?

    A W-9 is the form you collect from a vendor to get their name, tax ID, and business type. You keep it in your records. A 1099-NEC is the form you file with the IRS and send to the vendor after year-end to report what you paid them. You need the W-9 to prepare an accurate 1099.

    Does the $2,000 threshold apply to attorneys?

    Yes, the $2,000 threshold applies to attorney fees. But unlike most vendors, attorneys stay reportable even if their firm is incorporated. Don’t skip a 1099 for your attorney just because the payment went to a corporation.

    Does a contractor still owe tax on payments under $2,000?

    Yes. The threshold only changes when the payer has to file a form. It doesn’t change what’s taxable. Contractors must report all of their income, whether or not they receive a 1099.

    Does Minnesota have a different 1099 threshold?

    Minnesota generally follows the federal threshold. Most businesses meet the state requirement through the Combined Federal/State Filing program. If you withheld Minnesota income tax on a 1099 payment, you must also file that form directly with the Minnesota Department of Revenue by January 31.

    The Bottom Line

    The $2,000 threshold will mean fewer 1099s for most small businesses, but it doesn’t replace good records. The businesses that have an easy January are the ones that track vendors, collect W-9s, and review payments throughout the year. If you’d like a second set of eyes on your vendor list before year-end, we’d be glad to help. Our tax planning team works with businesses across Hopkins, Minneapolis, and the Twin Cities metro.

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    Carl Corneliuson

    Carl Corneliuson is a small business advisor serving Minneapolis, Hopkins, and the Twin Cities metro. He leads client development and operations at Corneliuson & Associates, working directly with small business owners on building efficient and profitable businesses. A University of Minnesota graduate, Carl is a Lifetime Achievement Award recipient from the Professional Association of Small Business Accountants (PASBA) and a longtime contributor to the Hopkins, MN community.