1099 Reporting Changes for 2026: New Thresholds and California Conformity
Overview
Congress significantly changed federal information reporting rules as part of the One Big Beautiful Bill Act, enacted July 4, 2025 as Public Law 119-21. These changes raise the long standing 1099 reporting thresholds, reverse the widely criticized 1099-K expansion, and reset how payments are measured for reporting purposes beginning in 2026. California generally conforms to these federal changes, which materially reduces over reporting for businesses, independent contractors, and individuals using payment platforms.
The new rules apply to payments made after December 31, 2025 and will first affect information returns filed in 2027 for the 2026 calendar year.
1099-NEC and 1099-MISC Threshold Increase
Prior to OBBBA, businesses were required to issue Forms 1099-NEC and 1099-MISC when total payments to a recipient reached or exceeded $600 during the taxable year. That threshold had remained unchanged for decades and was widely viewed as outdated.
OBBBA amends Internal Revenue Code section 6041(a) to increase the reporting threshold from $600 to $2,000. At the same time, Congress replaced the term taxable year with calendar year, standardizing measurement across payors.
- New threshold: $2,000
- Measurement period: calendar year
- Applies to Forms 1099-NEC and 1099-MISC
- Effective for payments made after December 31, 2025
Section 6041A(a)(2), which governs service compensation reporting and drives Form 1099-NEC mechanics, is expressly tied to whatever dollar threshold applies under section 6041(a). As a result, the higher $2,000 threshold automatically applies to nonemployee compensation.
Beginning with calendar years after 2026, the $2,000 amount is indexed for inflation, subject to statutory rounding rules.
Restoration of the 1099-K Rules
OBBBA also resolves years of uncertainty surrounding Form 1099-K reporting by statutorily reversing the American Rescue Plan Act expansion that lowered the threshold to $600. Although that ARPA rule technically took effect in 2022, the IRS repeatedly delayed enforcement due to widespread compliance concerns.
Under OBBBA, Internal Revenue Code section 6050W is amended to permanently restore the original reporting standard for third party settlement organizations.
- Threshold restored to more than $20,000
- More than 200 transactions required
- Measurement period is the calendar year
- Effective for payments made after December 31, 2025
This change eliminates the so called $600 1099-K rule as a matter of statute, not merely administrative relief. For 2026 and later years, Forms 1099-K will again be limited to higher volume commercial activity.
Interaction of 1099-NEC and 1099-K After OBBBA
OBBBA intentionally separates reporting regimes that had become blurred under prior law. Direct payments for services remain reportable on Form 1099-NEC when the $2,000 calendar year threshold is met. Payments processed through third party platforms are reportable on Form 1099-K only if the $20,000 and 200 transaction test is satisfied.
This distinction reduces duplicative reporting, lowers the volume of unnecessary information returns, and improves the accuracy of IRS and state matching programs.
California Conformity
California generally conforms to federal information reporting provisions through Revenue and Taxation Code section 18631. Because OBBBA amended the underlying federal statutes, California automatically follows the restored thresholds for Forms 1099-NEC, 1099-MISC, and 1099-K.
California did not enact a separate $600 reporting rule for third party network transactions and did not decouple from either the ARPA changes or the OBBBA reversal. As a result, for payments made after December 31, 2025, California will expect information returns only when a federal filing obligation exists.
The Franchise Tax Board will continue to match income where information returns are issued, but the volume of low dollar and personal transaction reporting will be significantly reduced.
See current federal rates on the Economic Dashboard.
