Taxpayers who receive payments as independent contractors or make payments to contractors are probably familiar with Forms 1099-NEC and 1099-MISC. For as long as any of us can remember, the filing threshold for these forms has been $600. This was the original reporting requirement established in 1954. You read that right. That threshold has not changed since 1954.
There is good news for both recipients and filers of 1099-NECs and 1099-MISC. For the first time, the threshold for filing these forms is increasing. For payments made after December 31st of 2025, the threshold increases from $600 to $2,000 per recipient. But wait, there’s more: that $2,000 is indexed for inflation beginning in 2027. [1]
This increase does not apply to all payments reported on Forms 1099. For the 1099-MISC, payments of royalties, broker payments in lieu of dividends, or tax-exempt interest are still subject to the $10 threshold and, of course, proceeds of any amount from fishing boats are reportable.
Amusingly, the threshold for reporting attorney gross proceeds was not increased, and so that amount stays at $600. However, the $2,000 threshold applies to payments to the attorney for their services.
K-Okay
While the thresholds for the 1099-NEC and 1099-MISC have seemed almost immovable at times, this has not been the case for Form 1099-K, which reports payments made by third-party processors such as credit card companies, PayPal, and Venmo. Over just the last few years, we’ve seen talk of wild fluctuations, and we say talk because none of these changes actually came to fruition.
The threshold started at $20,000 and 200 transactions, which generally means that unless the taxpayer is doing a fair amount of business or a lot of volume, they wouldn’t receive one of these forms.
This reporting threshold was supposed to drop to the same $600 limit as the other 1099s; however, that was delayed and then delayed again. Finally, they decided on $5,000. Then, the One Big Beautiful Bill (OB3) Act came in, wiped everything out, and set the filing threshold back at $20,000 and 200 transactions.
Is this good news? Maybe, maybe not.
The Tipping Point
OB3 didn’t just increase the thresholds for filing forms; it also gave us a handful of new deductions, one of which is the much-discussed deduction for qualified tips. You can read all about the tax deduction in our detailed write-up here but for now we’ll just cover the high-level facts.
This new deduction allows taxpayers who received tips in an occupation that customarily and regularly received tips on or before December 31, 2024, to deduct up to $25,000 per year regardless of filing status. There are also some MAGI phase-outs: $150,000 for a single or head of household and $300,000 for joint tax filers.[2]
While there are many nuances to this new deduction, the important thing for our purposes is that, to claim it, the tips must be reported on either a Form W-2 or a Form 1099. Tipped employees can also file form 4137, Social Security and Medicare Tax on Unreported Tip Income to report tips that didn’t make it onto their W2. The bottom line is: no form, no deduction.
This means that a self-employed taxpayer who doesn’t receive a Form 1099-K, 1099-NEC, or 1099-MISC that includes those tips cannot take the deduction, no matter how much of their income is from tips. For these taxpayers, the increased filing thresholds for these 1099 forms may not be such great news. Tipped contractors who are under the new reporting thresholds should reach out to their payment processors or other payors to request a Form 1099 to ensure they can claim the tips deduction.
Gambling on Information Reporting
1099s aren’t the only forms seeing changes to the filing thresholds. Recent proposed regulations bring W-2G reporting in line with the new amounts, raising the reporting threshold for bingo and slot machine winnings from $1,200 to $2,000, and boosting the reporting requirement for keno winnings from $1,500 to $2,000. The $2,000 base is indexed for inflation beginning in calendar year 2027+.
Any taxpayer who spends time at casinos or racetracks probably knows about the new limitation on wagering losses that takes effect for 2026 returns. Deductible gambling losses will first be limited to 90% of total gambling losses for the year, then limited to gambling winnings. If the taxpayer loses more than they win, they might not notice a difference on their return. Winners, on the other hand, or gamblers who break even, will feel the loss of that 90% limitation.
Don’t lose those losses
Daily netting of gambling activity has always been a powerful tool to reduce the impact of wagering on the return. By netting out gambling activity by session, taxpayers can report only the amounts that they actually won on their Schedule 1, which helps to keep AGI down, maintaining many tax benefits that phase out based on AGI and potentially shielding Social Security benefits from tax. We have a full write-up on daily netting here.
This strategy becomes especially important in light of this new limitation. Net wins and losses are tracked daily, then at the end of the year all win days are totaled and reported on Schedule 1 while loss days are totaled and reported on Schedule A, subject to the 90% limitation.
Taxpayers hoping to utilize daily netting need to be sure to keep careful records to substantiate reporting.
It always comes back to §61(a)
It should go without saying, but very often doesn’t, that all income (unless it is specifically excluded) must be included on the taxpayer’s return, whether or not they receive a form. These increased thresholds may reduce the number of forms issued, but shouldn’t reduce the income reported.
[1] IRC § 6041(a), 6041A(a)(2), 6041(h)
[2] IRC §224(b)