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The 2026 tax year includes significant changes to 1099 reporting, affecting which vendors require forms, what data those forms must capture, and how returns are submitted to the IRS electronically.
This guide covers what changed, which organizations are affected, and what steps to take before January 2027 filing season.
Looking for 2025 form changes? Those covered golden parachute payment reporting, new 1099-Q transfer boxes, and QCD codes for 1099-R. See the 2025 changes guide here.
Summary of Changes for Tax Year 2026
| Change | Forms Affected | Impact |
|---|---|---|
| Reporting threshold raised from $600 to $2,000 | 1099-NEC, 1099-MISC | Fewer forms required for vendors and contractors |
| New boxes for cash tips and overtime compensation | 1099-NEC, 1099-MISC | New data fields required for tipped and overtime workers |
| Expanded payer/recipient address fields | 1099-NEC, 1099-MISC | Form layout restructured; software updates required |
| FIRE system retiring December 31, 2026 | All 1099 series | IRIS becomes the required e-filing system for Tax Year 2026 |
| Form 1099-DA: cost basis reporting now required | 1099-DA | Brokers must report cost basis on covered digital asset securities in addition to gross proceeds |
| Digital assets in real estate now reportable | 1099-S | Expanded reporting scope |
Note on timing: These changes apply to Tax Year 2026 — payments made January 1 through December 31, 2026 — which will be filed in early 2027. Process and system changes should be in place before year-end.
The 4 Key Changes:
1. Reporting Threshold Increased to $2,000
What Changed: The reporting threshold for Forms 1099-NEC and 1099-MISC has increased from $600 to $2,000, effective for all payments made on or after January 1, 2026.
The Details:
- Old threshold (Tax Year 2025 and prior): Issue a 1099-NEC or 1099-MISC if you paid a non-employee $600 or more during the year
- New threshold (Tax Year 2026 and forward): Issue these forms only if total payments to that vendor reach $2,000 or more
- Inflation indexing: Starting in 2027, the $2,000 threshold will be adjusted annually for inflation
- Backup withholding: The threshold for 24% backup withholding has also moved to $2,000, consistent with the new reporting threshold
Who This Affects: Any business that pays independent contractors, freelancers, or other non-employees.
Action Required:
- Update your accounting or payroll system to reflect the $2,000 threshold for 1099-NEC and 1099-MISC
- Continue collecting W-9 forms from all vendors — cumulative payments may reach $2,000 by year-end regardless of initial expectations
- Verify state requirements separately — some states, including Massachusetts and Vermont, maintain their own thresholds that may still be $600
- Update vendor payment tracking to flag cumulative payments approaching $2,000
What This Doesn’t Change:
- All business income remains taxable regardless of whether a 1099 is issued — the threshold change affects payer reporting obligations, not recipient tax obligations
- Other 1099 form thresholds are not affected: 1099-INT and 1099-DIV remain at $10, 1099-B covers all transactions, and 1099-S remains at $600
- The 1099-K threshold for third-party payment networks (PayPal, Venmo, etc.) remains at $20,000 and 200 transactions — see our 1099-K requirements guide for 2026 for details
Common Mistake: Do not apply the $2,000 threshold to 2025 payments. The new threshold applies to payments made after December 31, 2025. For 2025 tax year filings, use $600.
For a full breakdown of which thresholds apply to which forms and tax years, see our 1099 Reporting Thresholds 2026 guide.
2. New Reporting Fields for Tips and Overtime
What Changed: Forms 1099-NEC and 1099-MISC have been updated to capture cash tips, Treasury Tipped Occupation Codes (TTOCs), and overtime compensation.
The Details for Form 1099-MISC:
- Box 13a (new): Reports cash tips — tips received in cash or charged to customers
- Box 13b (new): Reports up to two Treasury Tipped Occupation Codes (TTOCs), which determine whether tips qualify for the deduction in Part II of Schedule 1-A of Form 1040
- Note: If Code 000 is the only code shown in Box 13b, the tips are not qualified tips and do not apply to the deduction
The Details for Form 1099-NEC:
- New boxes capture overtime compensation paid to non-employees
- The placement of standard nonemployee compensation and the exact box assignments for overtime fields are pending finalization of the 2026 Form 1099-NEC — verify current layouts in the final form before filing
- A draft of the 2026 Form 1099-NEC (Rev. December 2026, created May 5, 2026) is available at IRS.gov — final version pending publication
Who This Affects:
- Businesses with tipped workers paid as non-employees
- Businesses that pay overtime to non-employee workers
- Organizations using pre-printed or templated 1099 forms — the layout has changed
Action Required:
- Download the finalized 2026 Form 1099-MISC and the draft 2026 Form 1099-NEC from IRS.gov, or verify your tax software has updated to current form layouts (do not use 2025 versions)
- Review how your payroll or accounting system categorizes tip income and overtime for non-employees
- Establish a process to capture TTOCs for tipped workers at the time of payment
- If you use a third-party filing service, confirm they have updated forms and workflows for 2026
Common Mistake: Do not assume your current system will populate the new boxes automatically. The structural changes to both forms require software updates. Confirm with your software provider or filing service before the first payment of the year.
3. FIRE System Retiring December 31, 2026
What Changed: The IRS is retiring the FIRE (Filing Information Returns Electronically) system at the end of 2026. Beginning with Tax Year 2026 returns filed in early 2027, all electronic information return filings must go through IRIS — the IRS’s Information Returns Intake System.
Technical Comparison:
| FIRE (retiring) | IRIS (replacing) | |
|---|---|---|
| Data format | ASCII flat file (Publication 1220) | XML/JSON schemas |
| Validation | Errors identified after submission | Real-time at submission |
| Corrections | Full file resubmission required | Targeted per-record corrections |
| Name fields | Combined fields accepted | Separate first/last name fields required |
| TCC | FIRE TCC | New IRIS TCC required — does not transfer |
Key Points:
- FIRE TCCs do not transfer to IRIS. Every organization that e-files must apply for a new IRIS Transmitter Control Code (TCC), even with an active FIRE TCC. TCC applications can take up to 45 business days.
- Tax Year 2025 is the last year you can use FIRE. FIRE accepts no new submissions after December 31, 2026.
- IRIS applies stricter validation. Data errors that FIRE would process may cause rejections in IRIS.
- E-filing is required if you file 10 or more aggregate information returns (all types combined).
Who This Affects:
- Organizations that e-file 1099s directly through FIRE
- Software vendors and payroll processors — confirm yours has completed the IRIS transition
- Organizations that outsource 1099 filing — verify your vendor is IRIS-ready
Action Required:
- Apply for an IRIS TCC now if you file electronically and do not already have one
- Review your data for IRIS compatibility, particularly name field structure
- Confirm your software provider or payroll vendor will be IRIS-ready for Tax Year 2026 filings
- If you are evaluating whether to manage the IRIS transition internally or outsource, make that decision before year-end
For a technical breakdown of the FIRE-to-IRIS transition — including TCC applications, filing methods, and XML format requirements — see our FIRE System Retirement 2026 guide.
4. Form 1099-DA: Cost Basis Reporting Begins in 2026
What Changed: Form 1099-DA has been used by brokers to report digital asset proceeds since Tax Year 2025. For Tax Year 2026, the requirements expand: brokers must now also report cost basis on covered securities, in addition to gross proceeds.
The Details:
- Who files it: Brokers — including cryptocurrency exchanges, digital wallet providers, and certain other intermediaries — who facilitate digital asset transactions on behalf of customers
- What’s new for 2026: Brokers must report cost basis on covered digital asset securities for transactions effected on or after January 1, 2026, in addition to gross proceeds (which were required starting in 2025)
- Relationship to 1099-B: Where a digital asset is classified as a security, Form 1099-DA is used instead of Form 1099-B
Also New: Digital Assets in Real Estate Reporting
Beginning in 2026, digital assets used as consideration in the sale or exchange of real estate must be reported on Form 1099-S.
Who This Affects:
- Cryptocurrency exchanges and digital asset brokers
- Real estate settlement agents, closing attorneys, and mortgage companies where digital assets are involved in transactions
- Businesses that pay contractors in cryptocurrency are generally not affected by Form 1099-DA, but should verify their obligations under 1099-NEC or 1099-MISC for those payments
Steps to Prepare for Tax Year 2026
Step 1: Update Your Forms and Systems
- Download the finalized 2026 Form 1099-MISC and the draft 2026 Form 1099-NEC from IRS.gov, or confirm your tax software has been updated with the new layouts
- Verify your accounting or payroll software reflects the $2,000 threshold, the new tips and overtime boxes, and restructured address fields
- If you use a full-service vendor, confirm they have updated forms and workflows for 2026
Step 2: Update Vendor Tracking
- Set tracking alerts in accounts payable to flag vendors when cumulative payments approach $2,000
- Continue collecting W-9s from all vendors regardless of expected payment size
- Verify state reporting requirements for each state where you have payees
Step 3: Prepare for the IRIS Transition
- Apply for an IRIS TCC if you do not already have one (allow 45 business days)
- Confirm your software or payroll provider will be IRIS-ready for Tax Year 2026 filings
- If you outsource, verify your vendor has completed the transition
- Review your data for IRIS format requirements, particularly name field structure
Step 4: Capture New Data Points Throughout the Year
- Establish a process to track and categorize cash tips for non-employees at the time of payment
- Capture TTOC codes for tipped workers when establishing payment categories
- Confirm your system codes non-employee overtime payments correctly
Step 5: Review Prior Year Filings for Reference
- Note which vendors received forms for payments between $600 and $2,000 — those vendors will not require forms in 2026 unless payments reach the new threshold
- If you filed through FIRE for 2025, begin IRIS preparation now
- If you have tipped non-employee workers, verify your data capture process covers the new fields
Key Deadlines for Tax Year 2026 (Filed in Early 2027)
- January 31, 2027: Deadline to furnish copies to recipients for most forms, including 1099-NEC
- February 28, 2027: Paper filing deadline with the IRS for most other 1099 forms
- March 31, 2027: Electronic filing deadline with the IRS for most other 1099 forms
E-filing requirement: Organizations filing 10 or more aggregate information returns must file electronically.
Penalties for incorrect or late filing:
| Timing | Penalty Per Form |
|---|---|
| Filed within 30 days of deadline | $60 |
| Filed more than 30 days late but before August 1 | $130 |
| Filed after August 1, or not filed | $340 |
| Intentional disregard | $680 minimum (or 10% of amounts required to be reported) |
Lower maximum penalties apply to businesses with average annual gross receipts of $5 million or less. The IRS may waive penalties for reasonable cause.
Background on These Changes
The 2026 updates reflect two distinct policy and infrastructure developments:
The $2,000 threshold was set by the One Big Beautiful Bill Act to reduce reporting requirements for smaller payments. Payer reporting obligations are reduced, but all business income remains taxable regardless of whether a form is issued.
The tips and overtime fields support new federal tax benefits for workers. The data captured on these forms is used in deduction calculations on individual tax returns. Errors in payer filings may affect the deductions available to payees.
The FIRE-to-IRIS transition is an infrastructure modernization. IRIS uses current data formats and performs real-time validation. Submissions that do not meet IRIS formatting requirements will be rejected at the time of filing.
Need Help With 2026 Filings?
Tab Service Company has managed 1099 compliance for businesses since 1960. TAB1099 is a cloud-based, full-service platform that handles data validation, TIN verification, IRS e-filing through IRIS, state filing, recipient printing and mailing, and post-filing corrections.
Contact us to discuss your 2026 filing needs, or call 312-527-4306.
Published: June 2026 | For current IRS guidance, visit IRS.gov. This article is for informational purposes only and does not constitute tax, legal, or financial advice.
