The IRS raised the 1099-NEC reporting threshold to $2,000 for payments made in 2026 and beyond, up from $600. Businesses must now issue this form only when paying a contractor $2,000 or more. The change comes from the One Big Beautiful Bill Act and takes effect for income reported on forms sent in January 2027. The threshold will adjust for inflation starting in 2027.
Fewer freelancers will receive 1099 forms under the new rule. A client who pays you $1,800 will not need to send one. But the absence of a form does not erase your tax obligation. You owe tax on every dollar of self-employment income whether or not a client documents it on paper.
Many freelancers mistakenly assume no 1099 means no taxes owed. That assumption is wrong. The IRS still expects you to track and report all self-employment income yourself. A missing form is not a loophole.
You must report the income on your tax return. The $400 threshold for owing self-employment tax has not changed. If you expect to owe $1,000 or more for the year, you must make quarterly estimated tax payments. For 2026 income, payments are due April 15, June 15, September 15, 2026, and January 15, 2027.
Keep a log of invoices and bank deposits as you receive payments. Set aside 25-30% of each payment for taxes in a separate account before spending the money. The IRS can spot unreported income through bank records even without a 1099. Underpaying triggers an accuracy-related penalty of up to 20 percent of what you owe, plus interest.
The 1099-K threshold is different. That applies to payment apps like Venmo, PayPal, and Cash App and reverted to $20,000 and 200 transactions. It covers a separate category of transactions and operates independently from the 1099-NEC threshold.