The IRS rolled out new rules in 2025 that have changed how small businesses handle 1099 filing. The shift isn’t about how much you pay, but how many forms you send.
It’s part of a larger push toward digital compliance. The agency now requires businesses that file 10 or more information returns to submit everything electronically. That includes 1099-NEC, 1099-MISC, and other common forms. If you skip the e-file, you could face penalties, even if your actual payment amounts haven’t changed.
Many business owners still believe the 1099 form threshold pertains to vendor income. But this year, the bigger trigger is your total number of filings. Whether you paid a contractor $600 or a landlord $1,000, if your combined returns cross the line, you’re expected to file a 1099 online.
As the year wraps up, this is the moment to double-check who you paid, which forms apply, and whether your process meets the new 1099 requirements. Staying ahead now avoids a crunch in January.
Let’s walk through how it all fits together.
1099-NEC vs. 1099-MISC
When it comes to reporting vendor payments, the IRS typically relies on two forms: Form 1099-NEC for non-employee compensation, such as that of contractors or freelancers, and Form 1099-MISC for a mix of other business payments, including rent, royalties, or legal fees.
Use 1099-NEC when you pay $600 or more to someone who did work for your business but isn’t on payroll, like a freelancer, contractor, or independent service provider. That includes roles such as content writers, designers, IT consultants, or anyone you have paid for a project or task.
The 1099-MISC form covers various types of business payments, including rent, royalties, medical reimbursements, prizes or awards, and certain legal payments. Specifically, if you paid an attorney’s gross proceeds, that goes on the MISC. However, if you paid legal fees, those should be listed on the NEC.
If you are unsure where a certain payment falls, the IRS updates its 1099-MISC instructions each year, providing box-by-box guidance to help you file accurately.
The 2025 Threshold Change: What’s New?
For now, the reporting thresholds for 1099-NEC and 1099-MISC remain at $600, with $10 for royalties. But beginning with payments made in 2026, new legislation will raise that threshold to $2,000.
The bigger shift for 2025, though, is how many forms you file. If you issue 10 or more total information returns, you must e-file 1099 and all other applicable forms. This doesn’t mean 10 of one kind; it means 10 across all types: W-2s, 1099-NEC, 1099-MISC, 1098, and so on.
This regulation was finalized under Treasury Decision 9972 and applies to nearly all employers. Even small businesses that used to print a few forms and mail them now need a secure way to file 1099s electronically.
Breaking Down the 1099-NEC Requirements
The 1099-NEC remains one of the most frequently filed forms for small businesses, especially those that use freelance or contract labor. If you’ve paid someone at least $600 for services (not goods), you’re expected to file this form. That includes services bundled with materials, say, a roofer who invoices you for labor and shingles.
What’s changed is how you file. If your total number of forms (across all return types) is 10 or more, you’re now required to file 1099 online. That means you need a platform like IRS IRIS, Tax1099, or a compliant 1099 service that meets IRS electronic delivery standards.
And before you even get to filing, there’s one step that makes or breaks your process: collecting W-9s. These forms verify Taxpayer Identification Numbers (TINs). If you skip this step, you risk having your filings rejected or incurring costly backup withholding errors.
Deciphering the 1099-MISC Reporting Rules
While the 1099-NEC is primarily used for services, the 1099-MISC encompasses a much broader range of transactions. Here’s how the thresholds break down:
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- Box 1: Rents of $600 or more.
- Box 3: Other income (like prizes or awards) of $600 or more.
- Box 6: Medical or health care payments, even to incorporated providers, of $600 or more.
- Box 10: Gross proceeds paid to attorneys, again, $600 or more.
- Box 2: Royalties, but only if they total $10 or more.
This form tends to cause more confusion due to its variety. For example, attorney fees are listed on the NEC form, while gross proceeds are recorded on the MISC. A small mistake in categorizing the payment can result in IRS notices or backup withholding requirements.
Just like with NEC filings, MISC forms are now subject to the 10-return e-file rule. Even if you’re only issuing two 1099-MISC forms this year, if you’ve also got eight W-2s, you’ll need to e-file 1099 to stay compliant.
Your Action Plan for Compliance
The best time to get your 1099s in order is right now. The earlier you start, the fewer surprises you’ll face when deadlines hit. Here’s a loose framework to help guide the process.
Start by reviewing all vendor payments from the past year. Focus on those who aren’t on payroll, such as freelancers, landlords, and outside consultants. If any of them received $600 or more, they likely fall under the current 1099 requirements.
Next, look at the big picture. Add up every information return you expect to file, such as W-2s, NECs, MISCs, and maybe even 1098s. Once you hit 10 forms in total, the IRS requires you to file 1099 electronically using an approved platform.
If you are still missing paperwork, reach out now for any outstanding W-9s. It’s easier to collect those while vendors are still reachable than to rush through them later under deadline pressure.
From there, confirm your filing schedule. January 31 is the key date. Both 1099-NEC and recipient copies for all forms are due that day. The 1099-MISC has a slightly longer window for filing electronically, until March 31.
Lastly, once forms are submitted, check for confirmation. Filing isn’t complete until you’ve received notice that the IRS accepted your submission.
Ensure Accurate Filing With Our Secure 1099 Service
Handling 1099s doesn’t need to be stressful. At CheckIssuing, we help you stay ahead without the spreadsheets or scrambling. Our system lets you collect W-9s, check data, and file electronically all in one place. You will know what has been done and what still needs to be done. If the new limits make you think twice, get in touch or set up an appointment with us here. We will help you file with confidence and clarity.
Key Takeaways
- The 2025 IRS update shifts compliance focus from payment amounts to total number of forms filed; if you file 10 or more information returns, you must e-file.
- The $600 threshold for 1099-NEC and most 1099-MISC categories stays the same for now (with royalties at $10), but starting in 2026, the general threshold rises to $2,000.
- 1099-NEC continues to apply to non-employee compensation, while 1099-MISC covers rent, royalties, awards, medical payments, and attorney gross proceeds.
- Filing errors—especially incorrect TINs or miscategorized payments—can lead to penalties, rejected filings, and backup withholding risks.
- Businesses now need a streamlined way to verify W-9s, track contractor payments, and e-file using IRS-approved platforms, such as IRIS or a third-party 1099 service.
Citations / Footnotes
- IRS. Instructions for Forms 1099-MISC and 1099-NEC. Retrieved from
https://www.irs.gov/instructions/i1099mec - Federal Register. Electronic Filing Requirements for Specified Returns and Other Documents (TD 9972). Retrieved from
https://www.federalregister.gov/documents/2023/02/23/2023-03710/electronic-filing-requirements-for-specified-returns-and-other-documents - IRS. E-File Information Returns with IRIS. Retrieved from
https://www.irs.gov/filing/e-file-information-returns-with-iris