For decades, any business that paid an independent contractor $600 or more in a year had to issue a Form 1099-NEC. In 2026, that federal threshold jumped to $2,000 — the first change to this number since 1954. On the surface, that sounds like less paperwork for everyone. In practice, it's more complicated than it looks.
What actually changed
The $2,000 threshold applies to the federal filing requirement. If you paid a contractor less than that in the year, you're no longer required to send them a federal 1099-NEC. That's a genuine simplification for a lot of small businesses working with contractors on smaller jobs.
The part that catches people off guard
Most states did not raise their own reporting thresholds to match. A number of states still require a 1099 filing at a lower dollar amount than the new federal number — meaning a contractor payment that no longer triggers a federal filing can still trigger a state one. A business that simply stops filing anything under $2,000 can end up out of compliance with a state that never changed its own rule.
Who this affects most
This matters most for businesses that work with a lot of contractors on small, one-off jobs — a bookkeeper who does a handful of $800 engagements a year, a business that hires several freelancers for sub-$2,000 projects. The businesses most likely to get this wrong are the ones assuming the federal number is the only number that matters.
What to actually track
The practical fix is tracking both thresholds separately for every contractor — federal and state — rather than relying on a single number. A contractor who's under the federal bar but over a state's threshold still needs a filing; the only way to catch that reliably is checking both, not assuming one number covers everything.