1099-K vs 1099-NEC in 2026: Which Form You Get, Why, and What to Do With It

Open a freelancer's mailbox in late January and you will usually find a stack of small envelopes from the same handful of payers as last year. A few are pink, most are blue or grey, and all are some flavor of "Form 1099." The two that matter most to the typical American gig worker, side-hustler, freelance designer, Etsy seller, Uber driver, or independent consultant are Form 1099-NEC (Nonemployee Compensation) and Form 1099-K (Payment Card and Third-Party Network Transactions). They look superficially similar — both report income that was not subject to W-2 withholding — but they come from completely different statutes, different payer obligations, and (as of 2026) wildly different reporting thresholds.

The 1099-NEC is the direct-payment form. A business that hires a freelance designer, a consultant, a tax preparer, a lawyer, a contract software developer, or any other independent contractor and pays them directly — by check, ACH, wire, or in cash — is the entity issuing the 1099-NEC. The form is required by Internal Revenue Code §6041A, with the §6041 general-information-return rule extending it to all "trade or business" payments of services of $2,000 or more in 2026.^[1] Filing deadline: January 31 to the recipient AND to the IRS (the only 1099 with the same dual deadline).^[2]

The 1099-K is the network-payment form. When a payment card processor, online marketplace, or third-party payment-network operator settles transactions on behalf of a payee — Visa and Mastercard via your acquiring bank, PayPal, Stripe, Square, Venmo (business profile), Etsy, eBay, Amazon, Uber, DoorDash, Airbnb, Vrbo, Patreon, Substack, Shopify — that processor is the entity issuing the 1099-K. The form is required by IRC §6050W, enacted by the Housing Assistance Tax Act of 2008 and refined by every Congress since.^[3] Filing deadline: January 31 to the payee, February 28 (paper) or March 31 (electronic) to the IRS.^[4]

One reports money the payer wrote to you. The other reports money that flowed through a processor on the payer's behalf to you. Same income, different reporting paths — and the IRS has explicit rules to make sure the same dollar is never double-counted on both forms.

What the 1099-NEC and 1099-K actually are — the one-paragraph version

The 1099-NEC has a strange biography. From 1982 through 2019, nonemployee compensation was reported in Box 7 of Form 1099-MISC, alongside rents (Box 1), royalties (Box 2), and miscellaneous payments (Box 3). The Protecting Americans from Tax Hikes (PATH) Act of 2015 split the 1099-MISC deadline calendar — moving the nonemployee-compensation portion to a January 31 deadline while leaving the other boxes at the original February 28 / March 31 paper-vs-electronic schedule. By 2020 the IRS concluded that the split deadline on a single form was confusing payers and creating high error rates, so it pulled nonemployee compensation out of 1099-MISC and gave it its own form, the 1099-NEC, beginning with tax year 2020. The form had originally been used briefly in the 1980s and was revived rather than newly invented.^[1]

The 1099-K is much younger. Section 6050W was added to the Internal Revenue Code by §3091 of the Housing Assistance Tax Act of 2008 to capture the explosion of payment-card and online-marketplace income that was — and still is — under-reported on individual returns. The original §6050W threshold was $20,000 in gross payments AND more than 200 transactions; both conditions had to be met for the processor to be required to issue a 1099-K. The American Rescue Plan Act of 2021 (ARPA) replaced that with a single $600 threshold, with no transaction-count test, effective for 2022. The IRS delayed enforcement multiple times (Notices 2023-10, 2023-74, and 2024-85), with Notice 2024-85 setting a phased ramp: $5,000 for 2024, $2,500 for 2025, $600 for 2026 and beyond.^[5] Then the One Big Beautiful Bill Act (Pub. L. 119-21), signed July 4, 2025, restored the original $20,000/200 threshold retroactively to tax year 2022 via §70432.^[6]

The same OBBBA in §70433 tripled the 1099-NEC reporting threshold — from the $600 floor that had stood since 1954 to $2,000 for payments made on or after January 1, 2026, with inflation indexing starting in 2027.^[7] Same statute, same date of enactment, two opposite movements on two separate forms.

The 2026 threshold mechanics — and why they moved in opposite directions

The $600 figure had been the floor for general 1099 reporting for so long that most practitioners had stopped thinking of it as recent. It was added by the Revenue Act of 1954 — codified at §6041(a) — and went unadjusted for seven decades while the dollar lost more than 90% of its purchasing power. By the early 2020s, a single trip to a vendor for $600 worth of services represented a fraction of what it had represented in 1954, but the paperwork burden of issuing 1099-NECs on what had become routine small-vendor relationships was widely viewed as disproportionate.^[7]

OBBBA §70433 amended both §6041(a) and §6041A(a)(2) to raise the threshold to $2,000 effective for payments made after December 31, 2025, and added §6041(d) to index that figure for inflation in $100 increments beginning in calendar year 2027. The same section raised the parallel threshold in §3406(b)(6)(A) — the 24% backup-withholding obligation — to $2,000 as well.^[8]

The 1099-K story is the opposite arc. The original 2008 §6050W threshold of $20,000 gross AND more than 200 transactions was paired in a logical-AND test (both conditions required), and was widely seen as missing a substantial share of e-commerce and gig-economy activity. ARPA's 2021 amendment dropped both — to a single $600 gross threshold with no transaction-count test — and Congress directed the IRS to begin enforcement in 2022.^[5] The IRS, anticipating a flood of new 1099-Ks landing on taxpayers who had received personal payments via Venmo or PayPal and would now be receiving an unexplained tax form, issued Notice 2023-10 to delay enforcement for tax year 2022. Notice 2023-74 extended the delay through 2023. Notice 2024-85 set the phased ramp: $5,000 for 2024, $2,500 for 2025, $600 for 2026 and beyond, with the IRS treating 2024 and 2025 as transition years.^[5]

OBBBA §70432 ended the experiment. It restored the original $20,000/200 threshold with retroactive effect to tax year 2022, meaning the $600 / $5,000 / $2,500 phased thresholds never took legal effect for any tax year. The IRS issued updated FAQs on July 17, 2025 confirming the reversion and instructing processors that any 1099-K already issued for 2024 under the $5,000 transition threshold could be left in place or, at the processor's option, corrected to $0.^[9]

Who issues each form and who receives each form

The single most useful diagnostic question when you sit down with a stack of 1099s in February is: who was the entity that paid me, and did they pay me through a processor or directly? That single fact determines whether you should be expecting a 1099-NEC or a 1099-K from the relationship.

The 1099-NEC issuer

A payer that meets all of the following must issue a 1099-NEC:

• Is engaged in a trade or business. Personal payments are never reportable on 1099-NEC. Hiring a babysitter for your own kids is a personal payment. Hiring the same babysitter through your home-based daycare LLC is a trade-or-business payment.
• Paid $2,000 or more in 2026 to a payee for services. "Services" includes professional services (legal, accounting, tax prep, consulting), creative services (design, copywriting, photography), maintenance services (plumbing, HVAC, landscaping), technology services (contract development, IT support), and most other labor-based payments.
• Paid the payee directly (check, ACH, wire, cash). Payments routed through a payment card or third-party network are excluded from 1099-NEC because the network's 1099-K is supposed to capture them.^[1]
• The payee is not a corporation (other than payments to attorneys, which are always reportable regardless of payee form). Most payments to S-corps and C-corps are exempt; payments to sole proprietorships, single-member LLCs, partnerships, multi-member LLCs taxed as partnerships, and unincorporated nonprofits are reportable.

The classic 1099-NEC issuer-recipient relationship is a small business that paid a freelance bookkeeper $3,600 across the year by ACH. The bookkeeper is a sole proprietor. The payer issues a 1099-NEC for $3,600 in Box 1; the bookkeeper reports that on Schedule C Line 1.

The 1099-K issuer

A processor that meets all of the following must issue a 1099-K:

• Is a payment settlement entity as defined in §6050W(b)(1) — either a "merchant acquiring entity" (your card-processing bank, for in-person and e-commerce card transactions) or a "third-party settlement organization" (Venmo, PayPal, Etsy, eBay, Stripe, Square, Amazon, Uber, etc.).
• Settled transactions for the payee aggregating more than $20,000 AND more than 200 transactions in 2026. Both prongs are required — a payee with $50,000 in gross payments across 180 transactions receives no 1099-K from that processor.
• The payments were for goods or services. Personal payments — splitting a dinner check, paying a friend back, sending rent to a roommate — are not reportable under §6050W(c)(1). The processor is responsible for distinguishing personal from business transactions.

The classic 1099-K issuer-recipient relationship is an Etsy seller who grossed $24,000 across 612 transactions in 2026. Etsy is the third-party settlement organization. Etsy issues the seller a 1099-K showing $24,000 in Box 1a, broken down by month in Boxes 5a-5l. The seller reports the gross on Schedule C Line 1 and deducts platform fees, shipping costs, and cost of goods sold on the appropriate Schedule C lines.

Reading a 1099-NEC, box by box

Form 1099-NEC is a single-page form with seven information fields and a recipient TIN block. Once you understand the layout it takes about 90 seconds per form to verify.

Why Box 4 matters disproportionately

If you ever fail to furnish a valid Form W-9 (Taxpayer Identification Number and Certification) to a payer, the IRS will issue the payer a CP2100 or CP2100A notice listing your TIN as unmatched against IRS records. The payer is then required to send you a "B notice" (Backup Withholding Notice) and start withholding 24% from subsequent payments under IRC §3406. That withheld amount appears in Box 4 of the 1099-NEC at year-end and is credited against your tax liability when you file. From a cash-flow perspective, backup withholding is identical to W-2 withholding — the payer keeps 24 cents of every dollar and remits it to the IRS in your name. The fix is to submit a corrected W-9 to the payer; once accepted, backup withholding stops on subsequent payments.

Reading a 1099-K, box by box

Form 1099-K is more elaborate than the 1099-NEC because it captures the month-by-month breakdown of payments alongside the aggregate. The form has Box 1a (gross), Box 1b (card-not-present), Box 2 (merchant category code), Box 3 (number of transactions), Box 4 (federal tax withheld), Boxes 5a-5l (monthly breakdowns), and Boxes 6-8 (state allocations).

The "gross" trap on Box 1a

Box 1a is gross — it shows every dollar that flowed through the processor on your behalf, including processor fees the processor kept, refunds you issued to customers, chargebacks against your account, sales tax you collected and remitted, and shipping costs you charged customers. The IRS receives the same Box 1a figure. If you report only your net profit on Schedule C without first showing the gross-to-net reconciliation, the IRS computer-matching system flags your return for under-reporting.

The mechanical fix on Schedule C: report Box 1a in full on Line 1 (gross receipts). Then on Line 2 (returns and allowances), enter refunds and chargebacks. On Line 4 (cost of goods sold), enter your COGS. Operating expenses go on Lines 8 through 27 — including processor fees on Line 17 (legal and professional services) or Line 27 (other expenses) clearly labeled. The result on Line 31 (net profit or loss) flows through to Schedule 1 Line 3 of Form 1040 and to Schedule SE for self-employment tax.

What changed in 2026 — the OBBBA provisions in detail

The One Big Beautiful Bill Act passed Congress on a party-line vote in late June 2025 and was signed by the President on July 4, 2025. Title VII of the Act contained the information-return provisions. Two sections directly affect the 1099 landscape covered in this guide:

OBBBA §70432 — 1099-K threshold restoration

This section amended IRC §6050W(e) to restore the pre-ARPA threshold: "any payment settlement entity required to make a return … shall not be required to make such return with respect to third party network transactions … unless the aggregate value of such transactions exceeds $20,000, and the aggregate number of such transactions exceeds 200." Both prongs must be satisfied. The change is retroactive to "returns for calendar years beginning after December 31, 2021" — meaning the new threshold governs every tax year from 2022 forward.^[6]

OBBBA §70433 — 1099-NEC and 1099-MISC threshold increase

This section amended IRC §6041(a) (the general information-return rule), §6041A(a)(2) (the nonemployee compensation rule that drives the 1099-NEC), and §3406(b)(6)(A) (the backup-withholding threshold) to replace each "$600" reference with "$2,000." The change is effective for "payments made after December 31, 2025" — meaning 2025 payments still follow the $600 threshold, 2026 payments follow the $2,000 threshold. The Act also added §6041(d), directing the Treasury Secretary to adjust the $2,000 figure annually for inflation in $100 increments beginning in calendar year 2027.^[8]

What did NOT change

• Royalties on 1099-MISC Box 2 remain at the $10 threshold. §70433 changed only §6041(a) and the parallel §6041A(a)(2); the §6050N royalty-reporting rule was not amended.
• Attorney payments remain reportable regardless of payee form. The §6045(f) special rule for attorney payments was not amended. Payments of $600 or more — yes, the old threshold — to an attorney for legal services in the course of a trade or business remain reportable on 1099-NEC (or 1099-MISC Box 10 for settlement payments).
• Personal-payment carve-out for 1099-K remains. The §6050W(c)(1) limitation to "payments in settlement of reportable payment transactions" was not amended; personal Venmo/PayPal/Cash App transfers continue to be excluded from 1099-K reporting.
• The recipient's income-reporting obligation under §61 was not touched. All income remains taxable, irrespective of whether a 1099 was issued.

Penalties on both sides — payer and recipient

The 1099 universe carries two distinct penalty regimes: one for the payer that fails to issue, and one for the recipient that fails to report. Both can apply to the same dollar.

Payer-side penalties (the bigger of the two)

Penalties for failing to file an information return or for filing an incorrect or incomplete one are governed by IRC §6721. The 2026 schedule, inflation-adjusted from the 2024 base by the Federal Civil Penalties Inflation Adjustment Act Improvements Act:^[10]

Parallel penalties under §6722 apply for failure to furnish the form to the recipient (as distinct from failing to file it with the IRS). Both can be assessed for the same form — so a payer who never sent the recipient a 1099-NEC AND never filed one with the IRS faces double exposure. For a small business with three forgotten 1099-NECs, that translates to $680 × 2 = $1,360 per form × 3 = $4,080 if assessed after August 1; for intentional disregard, $4,080 per form × 3 = $12,240.

Recipient-side penalties (the smaller but more common)

The recipient does not face a "missed 1099" penalty directly. The IRS does not punish you for failing to receive a form the payer was supposed to send. The recipient faces tax-return penalties if they fail to report income that should have been reported, regardless of whether a 1099 was received:

• Accuracy-related penalty under IRC §6662 — 20% of the underpayment if the under-reporting is substantial (the lesser of 10% of correct tax or $5,000) and not protected by reasonable cause.
• Civil fraud penalty under IRC §6663 — 75% of the underpayment if the under-reporting is intentional. Reserved for clear fraud, not routine errors.
• Underpayment penalty under IRC §6654 — for failing to pay enough estimated tax during the year on income that was not subject to withholding. Currently around 8% annualized for 2026.
• Failure-to-file under IRC §6651(a)(1) and failure-to-pay under §6651(a)(2) — flat percentages of unpaid tax accruing monthly.

The most common 1099-related IRS contact is the automated CP2000 notice. The IRS computer-matches every 1099 issued against the recipient's return; if the return shows less income than the matched 1099s, a CP2000 is generated proposing additional tax plus interest and penalties. CP2000 volume runs in the millions per year; the agency has industrialized the matching process.^[11]

Backup withholding — when 24% comes off the top

Backup withholding under IRC §3406 is the IRS's mechanism for forcing tax collection from non-W-2 income when the recipient has not provided a valid TIN. The withholding rate has been 24% since the Tax Cuts and Jobs Act of 2017. The trigger conditions:

• No TIN provided. The recipient never gave the payer a Form W-9.
• Incorrect TIN provided. The IRS sends the payer a CP2100/CP2100A notice listing TINs that don't match SSA or IRS records. The payer must send a "B notice" to the recipient and start backup withholding if no corrected W-9 arrives within 30 days.
• IRS notification. The IRS has notified the payer that the recipient has under-reported interest or dividend income on previous returns.
• Recipient certification failure. On the W-9 itself, the recipient failed to certify that they are not subject to backup withholding.

OBBBA §70433 raised the §3406(b)(6)(A) backup-withholding threshold in parallel with the 1099-NEC threshold — from $600 to $2,000 for payments made after December 31, 2025. Below the $2,000 threshold, backup withholding is not required even if the W-9 is missing or incorrect.^[8]

Three case studies — how this plays out in practice

Case 1 — Jessica, freelance graphic designer with three direct-pay clients

Jessica is a 31-year-old freelance graphic designer based in Denver. She operates as a sole proprietor under her own name (no LLC). In 2026 she had three retainer clients who paid her by ACH:

• An ad agency: $24,000 total for the year ($2,000/month for 12 months).
• A consumer brand: $3,800 total for two one-off projects.
• A nonprofit arts organization: $1,800 total for a logo refresh.

The ad agency and the consumer brand will each issue Jessica a 1099-NEC in January 2027 — both paid her $2,000 or more in 2026, by direct ACH (no third-party processor). The nonprofit will NOT issue a 1099-NEC because $1,800 is below the new $2,000 threshold; that change alone removed paperwork that would have been required under the old $600 rule. Jessica's tax return: she reports all $29,600 on Schedule C Line 1 (gross receipts) regardless of which clients sent 1099s, deducts her business expenses (software subscriptions, office portion of rent, a portion of her phone bill, contractor payments to her one subcontractor who she paid $1,200 across the year — no 1099-NEC required to that subcontractor under the new threshold), and computes self-employment tax on the net profit. The IRS receives 1099-NECs totaling $27,800; her return shows $29,600; the difference is normal and not a CP2000 trigger — under-reporting triggers a CP2000, over-reporting does not.

Case 2 — Marcus, Etsy seller with $42,000 in gross sales across 1,100 transactions

Marcus is a 27-year-old part-time Etsy seller of handmade leather goods in Portland. In 2026 he had $42,000 in gross Etsy sales across 1,118 transactions. Etsy is a third-party settlement organization under §6050W and will issue Marcus a 1099-K in January 2027. Both prongs of the $20,000/200 threshold are met (well above on both).

Marcus's 1099-K shows $42,000 in Box 1a, the monthly breakdown across Boxes 5a-5l, 1,118 in Box 3 (transaction count), and $0 in Box 4 (no backup withholding — he verified his TIN at signup). On his Schedule C: $42,000 on Line 1 (gross receipts), then $1,840 on Line 2 (returns and allowances for the 4.4% of orders he refunded), and his cost of goods sold (leather hides, hardware, packaging) on Line 4. Operating expenses include Etsy's listing and transaction fees (around $2,940 for the year, plus a flat 6.5% of gross), advertising costs, shipping supplies, and the business-use portion of his home workshop. Net profit after all deductions: about $14,200, on which he owes self-employment tax (15.3% × 0.9235 × $14,200 = $2,007) and federal income tax. The IRS receives the 1099-K showing $42,000; his return shows $42,000 on Schedule C Line 1; no CP2000 risk.

Case 3 — Aisha, dual-platform consultant whose two 1099s overlap

Aisha is a 38-year-old freelance management consultant in Atlanta whose clients pay her two ways. Some clients send her direct ACH payments after she invoices them; others pay through a third-party platform (Upwork or a similar professional-services marketplace) that takes its fee and forwards the net to her. In 2026:

• Direct-ACH client A: $28,000 — will issue Aisha a 1099-NEC for $28,000.
• Direct-ACH client B: $14,500 — will issue Aisha a 1099-NEC for $14,500.
• Upwork platform: $33,000 gross across 8 client engagements via the platform; Upwork takes a 10% fee. Aisha received $29,700 net. Upwork issues Aisha a 1099-K for $33,000 (above the $20K/200 threshold on both prongs — she had 247 hourly billing transactions).

Total gross 1099 income reported to the IRS in Aisha's name: $28,000 + $14,500 + $33,000 = $75,500. Total Aisha actually received in cash: $28,000 + $14,500 + $29,700 = $72,200. The difference ($3,300) is the Upwork fee, which is a deductible business expense on Schedule C Line 17 or 27. Schedule C Line 1: $75,500 (full gross from all three sources). Schedule C operating expenses include the $3,300 Upwork fee separately listed.

Now consider the IRS computer-matching: it sees the sum of 1099 issuance against Aisha's TIN at $75,500. Her Schedule C Line 1 reports $75,500. Match. No CP2000. Had she instead reported only the net ($72,200), the matching algorithm would have flagged the $3,300 gap and generated a CP2000.

When you receive both a 1099-NEC and a 1099-K for the same money — the overlap problem

The IRS instructions for Form 1099-NEC explicitly direct payers not to issue a 1099-NEC for amounts that were settled through a payment card or third-party network — those are supposed to be captured exclusively by the 1099-K from the processor. The relevant IRS guidance: "Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity… and are not subject to reporting on Form 1099-NEC."^[1]

In practice, the rule is broken with some regularity. A consulting client whose accounting team is using outdated procedures may pay you through Stripe (which generates the 1099-K) and also issue a 1099-NEC for the same dollars at year-end. The IRS receives both forms and matches them against your return as a sum — your $30,000 in actual consulting income gets reported to the IRS as $60,000.

The recommended fix when this happens:

1. Identify the duplicate. Compare the gross totals on the 1099-K and the 1099-NEC against your own records of which payments came from which payer. If a payer is on both, the duplicate is real.
2. Contact the payer. Ask the payer to issue a corrected 1099-NEC showing $0 in Box 1, with the "CORRECTED" box checked. This is the cleanest path. Most payers will cooperate once the error is explained.
3. If the payer won't correct, report the actual gross income on Schedule C Line 1 and attach a statement to your return explaining that the IRS records show duplicate reporting. Many tax-software packages support this. Alternatively, report the full sum on Line 1 and back out the duplicate on Line 2 (returns and allowances) or as an "Other" expense, with a clearly labeled description. The goal is to make the return tie out to the IRS records while also showing the correct net.
4. Keep documentation. Retain both 1099s, any payer correspondence, and your reconciliation worksheet for at least four years (the §6501 normal limitations period) or six years if the duplicate gap exceeds 25% of your gross income.

State-level 1099 obligations

The federal threshold changes do not automatically propagate to state-level information-return rules. Most states piggyback on the federal 1099 by requiring a copy be filed with the state revenue department when the recipient is a state resident, but each state can set its own threshold, deadline, and electronic-filing requirements.

States with significant 2026 divergence from the federal threshold:

• Massachusetts has historically required 1099-K issuance at $600 in gross payments regardless of transaction count, predating federal ARPA changes. Whether Massachusetts will retain its lower threshold now that the federal threshold has reverted is an open question; the Massachusetts DOR has not issued definitive guidance as of mid-2026.
• Virginia, Vermont, Maryland, and Illinois have similar low-threshold state-level 1099-K rules that did not depend on the federal ARPA threshold.
• California, New York, New Jersey, and Pennsylvania generally follow the federal threshold but require copies of federal 1099s for state-resident recipients to be filed with the state tax agency.

Tax-software packages with state-aware 1099 modules handle this automatically. Payers operating in multiple states should consult a multistate-aware CPA before assuming the federal threshold satisfies state obligations.

Six mistakes that cost real money

1. Assuming "no 1099" means "no tax owed." The single most expensive 1099 mistake. The new $2,000 / $20,000-200 thresholds mean fewer forms — not less taxable income. The IRS treats receipt of self-employment income exactly the same whether a 1099 was issued or not. Bank deposits, app records, customer invoices, and contemporaneous bookkeeping all serve as evidence in an audit.
2. Reporting Box 1a of a 1099-K as your net income. Box 1a is gross — fees, refunds, chargebacks, sales tax, and shipping are all included in the figure. The IRS receives the same Box 1a number and expects to see it on Schedule C Line 1, with the gross-to-net reconciliation done in subsequent lines of Schedule C.
3. Skipping the W-9 collection step. A payer that pays a contractor before collecting a W-9 is on the hook for backup withholding (24% of every payment) and for §6721/§6722 penalties if the year-end 1099 has an incorrect TIN. The W-9 takes the contractor about three minutes to complete and prevents both problems.
4. Failing to issue 1099-NECs to non-corporate payees of $2,000+. Payments to S-corps and C-corps are generally exempt, but payments to sole proprietors, single-member LLCs, partnerships, multi-member LLCs taxed as partnerships, and attorneys (regardless of entity form) are reportable. A payer who doesn't bother with 1099-NECs at all faces both the failure-to-file penalty AND the loss of the deduction if the IRS disallows the expense for lack of substantiation.
5. Treating personal Venmo/PayPal transactions as business. If you and a roommate split rent through Venmo, those transactions are personal under §6050W(c)(1) and not reportable. But if you mark them as "Goods and Services" on PayPal or use Venmo's business profile, they enter the 1099-K stream and may be reported to the IRS as business income. Most platforms now require the transaction-type designation at the time of the transfer; pay attention to which toggle you're hitting.
6. Forgetting that attorney payments remain reportable at $600. OBBBA §70433 did not amend the §6045(f) special rule for attorney payments. Payments of $600 or more (the old threshold) to an attorney for legal services in the course of a trade or business remain reportable on 1099-NEC (or 1099-MISC Box 10 for settlement payments to claimants). This is a foot-fault many small-business payers will commit in 2026 thinking the new $2,000 floor applies universally.

Action checklist — what to do this week

1. If you receive 1099 income, set up bookkeeping that does not depend on 1099s being issued. Treat every dollar of self-employment income as taxable whether or not it appears on a year-end form. The OBBBA thresholds reduce paperwork but do not reduce your obligation.
2. If you are a small-business payer, audit your contractor list now. For each contractor you paid in 2026, check: do you have a current W-9 on file? Will you cross the $2,000 threshold by year-end? Send unmissed W-9s today.
3. If you sell through Etsy, eBay, Amazon, PayPal, Stripe, Square, Uber, or any other platform, verify your TIN with each platform. Backup withholding at 24% activates within weeks of a TIN-verification failure. Most sellers have multiple platforms; missing the verification on any one of them creates a 24% withhold that ties up cash for 6 to 18 months.
4. If your 1099 income exceeds about $5,000 net, file quarterly estimated taxes. The §6654 underpayment penalty (8% annualized in 2026) on a 1099-heavy income year can easily exceed $500 if you wait until April. Our quarterly estimated-tax calculator sizes the four quarterly payments.
5. When January 2027 arrives, reconcile every 1099 you receive against your own books before filing. A 1099-K that overstates your gross by $4,000 because PayPal misclassified some personal transfers as business is a fixable problem — but only if you catch it before filing.
6. Treat 1099-K Box 1a as the IRS's number, not yours. Always start Schedule C with Box 1a, then reconcile to net through the legitimate gross-to-net adjustments (refunds, COGS, operating expenses, processor fees). Mismatches between Schedule C Line 1 and the sum of your 1099s are the dominant trigger for CP2000 notices.
7. If you receive both a 1099-NEC and a 1099-K for the same income, request a corrected 1099-NEC showing $0. The IRS instructions specifically prohibit duplicate reporting. Most payers will issue the correction once asked.
8. For 2026 attorney payments in the course of business, remember the threshold is still $600. §70433 did not change the §6045(f) attorney-payment rule. Make sure your accounting workflow does not raise the threshold for attorneys based on the new general $2,000 rule.

FAQ — the questions people actually ask