December 11, 2025

By Newburg | CPA Staff

This updated brief reflects the latest IRS guidance and legislative changes affecting information returns for tax years 2025 and 2026, including the One Big Beautiful Bill Act (OBBBA).

Form 1099-NEC — Non-employee Compensation

  • Form 1099-NEC is used to report payments of $600 or more to non-employees for services in the course of business during the year.
    • Non-employee compensation (Box 1) – Examples of non-employees include self-employed independent contractors such as freelancers, real estate agents completing real estate transactions, rideshare drivers, food delivery people, etc.
    • Payments to attorneys (Box 1) – The term “attorney” includes a law firm or other provider of legal services. Attorney fees of $600 or more paid in the course of your trade or business are reportable in Box 1 of Form 1099-NEC, under section 6041A(a)(1).
    • Payments to corporations for legal services – The exemption from reporting payments made to corporations does not apply to payments for legal services. Therefore, you must report attorneys’ fees (in Box 1of Form 1099-NEC) or gross proceeds (in Box 10 of Form 1099-MISC).
    • Direct sales of $5,000 or more of consumer products to a buyer for resale anywhere other than a permanent retail establishment (Box 2).
      • Note, this can also be filed in Form 1099-MISC under Box 7.
  • Due date: 1099-NEC due by Monday, February 2nd, 2026, to both recipients and the IRS (January 31st falls on Saturday). No later e-file window applies.

Form 1099-MISC — Miscellaneous Information

  • Form 1099-MISC is used to report miscellaneous payments of $600 or more made in the course of business during the year. Business taxpayers use this form to report any miscellaneous payments made, such as rent, royalties, medical and health care payments, cash payments, and more.
    • Rent paid ($600 or more) (Box 1).
    • Royalties paid of at least $10 or more (Box 2).
    • Prizes and awards and certain other payments ($600 or more, see instructions for Form 1099-MISC, Box 3 for more information).
    • Backup withholding or federal income tax withheld (any amount) (Box 4).
    • Any fishing boat proceeds (Box 5).
    • Direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (Box 7).
      • Note, this can also be filed in Form 1099-NEC under Box 2.

Reportable Payments Made to Corporations

  • Amounts paid specifically to physicians, physicians’ corporations, or other suppliers of health and medical services ($600 or more) (Box 6).
  • Substitute dividends or tax-exempt interest payments when you are a broker (Box 8).
  • Includes any reporting under section 6050R, regarding cash payments for the purchase of fish for resale purposes, from an individual or corporation who is engaged in catching fish (Box 11).
  • Gross proceeds paid to an attorney ($600 or more whether or not incorporated) (Box 10). Payments made to an attorney in the course of your trade or business in connection with legal services, but not for the attorney’s services, for example, as in a settlement agreement.
  • Exceptions: Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. For example, generally, payments to a corporation (including a limited liability company [LLC] that is treated as a C or S corporation). However, see Reportable payments to corporations.
  • Due dates: 1099-MISC is due to recipients by Monday, February 2nd, 2026; to IRS by February 28th, 2026 (paper) or March 31st, 2026 (e-file).

What’s New for 2025

  • Excess golden parachute payments: now reported on Form 1099-NEC Box 3 (certain large payments made to executives – usually upon a change in control of a company, like a merger or acquisition) (Form 1099-MISC Box 14 is reserved for future use).
  • NEW Form 1099-DA (Digital Asset Proceeds): Final regulations require custodial digital asset brokers to report gross proceeds for transactions effected on or after January 1st, 2025. Basis reporting phases in for certain transactions beginning January 1st, 2026; real estate reporting persons must include the FMV of digital assets used in closings on/after January 1st, 2026. Decentralized/non-custodial brokers are out of scope pending future rulemaking.
  • Mandatory e-file threshold: If you file 10 or more information returns in aggregate during the calendar year, you must e-file (aggregation across types applies).

What’s New for 2026 and Beyond

  • The One Big Beautiful Bill Act (OBBBA) raises the 1099-NEC and 1099-MISC reporting threshold from $600 to $2,000 for payments made after December 31st, 2025 (forms filed in 2027 for Tax year 2026). Starting in 2027, the $2,000 threshold will be indexed for inflation.
  • Payors should update their tracking and reporting for Form 1099-NEC and 1099-MISC, based on the significantly higher threshold for issuing those forms for 2026 and beyond.

Form 1099-K — Payment Card and Third-Party Settlement Organization (TPSO)

  • For 2025, The One Big Beautiful Bill Act (OBBBA) retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021 (ARPA) so that third party settlement organizations (TPSO) is not required to file Forms 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200 per year.
  • This reverses the American Rescue Plan Act of 2021 where the $600 threshold applies to TPSOs – Payment apps or online marketplaces like PayPal, Venmo, Etsy, etc.
  • For clarification: Payments from friends and family should generally not be reported on a Form 1099-K. Form 1099-K reports payments for goods or services and should not report personal payments like dinner, travel, rent, and gifts, regardless of the amount. Generally, in payment apps, the default is “personal payments” unless the sender designates and codes that the transaction is for purchasing goods or services.
  • Massachusetts: Each state may have a lower reporting threshold for TPSOs. MA requires 1099-K issuance at $600 to payees with a Massachusetts address, even if the total gross payments and transactions did not exceed the federal reporting threshold. https://www.mass.gov/info-details/ma-reporting-requirements-for-third-party-settlement-orgs-1099-k

Other Possible Reporting Situations

If, as part of your trade or business, you were subject to any of the following situations, the following may also need to be filed:

  • Form 1099-DIV – Dividends or other distributions from a current or former C-Corporation to a shareholder
  • Form 1099-INT – Interest on a business debt to someone, excluding interest on an obligation issued by an individual
  • Form 1099-R – Distribution from a retirement plan, profit sharing plan, IRA, or insurance contract to a plan beneficiary
  • Form 1098 – Payment of mortgage interest, including points, or reimbursements of overpaid interest from individuals
  • Form 1099-A/Form 1099-C – You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)
  • Form 1099-B – You are a broker and you sold a covered security belonging to your customer
  • Form 1099-S – The sale or exchange of real estate
  • Form 8937 – You are an issuer of a security taking a specified corporate action that affects the cost basis of the securities held by others

Combined Federal/State Filing (CF/SF) Program — State Filings

Participants and direct-file requirements change annually. Verify current CF/SF participation and any mandatory direct state reporting in IRS Publication 1220 and your state DOR sites. Some participating states still require direct filing even when CF/SF applies.

Cost-Effective Filing Options

  • Tax1099 – https://www.tax1099.com
    • IRS-Authorized eFiling Platform (Integrate with QuickBooks, Xero, Bill.com, and more)
    • Transmit to IRS/state and furnish recipient copies
  • QuickBooks Online (QBO):
    • QuickBooks Online can help you prepare and file your 1099s seamlessly, using the information from your QBO account
    • Prepare and e-file 1099s; furnish recipient copies electronically or by mail

Form W-9 and TIN Matching

  • Note that Form W-9 is required from vendors to collect tax information such as the vendor’s business name, address, and Tax Identification Number. This information is needed to file 1099s at year end. If you obtain the completed Form W-9 from each vendor before you issue them a payment, you will ensure that you have collected the required information for 1099 reporting.
  • Use IRS TIN Matching via e-Services to validate name/TIN combinations and reduce mismatch notices and penalties.

Information Return Penalties and Exposure

If your business fails to issue a Form 1099-NEC or Form 1099-MISC by the deadline, the penalty varies as follows:

  • Penalties range from $60 to $340 per Form 1099 (tax year 2025), depending on the timeframe past the filing deadline
  • Minimum penalty of $680 per Form 1099 (2025 filings due in 2026), with no maximum limitation, if your business intentionally disregards the requirement to provide a correct Form 1099-NEC or Form 1099-MISC

Visit the IRS website for detailed instructions for 1099 filings: Instructions for Forms 1099 (04/2025)

As a reminder, please note Newburg | CPA is not responsible for filing these forms on your behalf.

Please feel free to contact us directly with any questions.