If you pay subcontractors or freelancers, the 1099 rules changed this year. The threshold went from $600 to $2,000, which means fewer forms. It also means fewer safety nets, and more of the burden lands on your own records.

What you do between now and December decides whether January is simple or a scramble.

What actually changed

Starting with money you pay during 2026, you only issue a 1099 to someone if you paid them $2,000 or more over the year. It used to be $600, a number that had been sitting there since 1954 without ever adjusting for inflation.

So the subcontractor you paid $1,500 this year? Probably no form for them next January.

Whatever you paid during 2025 still follows the old rule. Those forms already went out. This affects the ones you send in early 2027.

California follows the federal number too, so you are not tracking two different thresholds.

Here is the part that catches people

Fewer forms sounds like less work. In one narrow sense it is. In every other sense, it puts more weight on you.

Less paper does not mean less income to report. If you are self-employed and some of your clients paid you between $600 and $2,000, they will not be sending you forms anymore. That income is still fully taxable. If you have been using the 1099s that arrive in your mailbox as a way to remember what you earned, that system just stopped working.

Less paper does not mean fewer records. If you are the one paying, every payment you deducted as a business expense still has to be backed up. That $1,400 you paid a subcontractor is still a deduction you might have to prove. Only now there is no 1099 sitting in a file helping you prove it. Your books and invoices are carrying it alone.

Missing a W-9 got more expensive. It is tempting to skip the W-9 on a small job. But if you never collect a valid tax ID, you can end up owing something called backup withholding, where you are supposed to hold back part of their payment and send it to the IRS. And in that situation you have to issue a 1099 no matter how small the payment was. The $2,000 floor does not protect you.

Collect the W-9 before the first payment, every time, even for a two-hour job. It takes two minutes and it is the cheapest insurance in this article.

Your five-month checklist

Pull a list of every contractor you have paid this year, with a running total for each person. Not a lump “contractors” expense line. Per person. Anyone getting close to $2,000 needs watching, because one more invoice changes your obligation.

Check that you have a signed W-9 for every one of them. Chase the missing ones now, while you are still working together and their phone number still works. In February, half of them will have moved on.

Fix the tracking if you cannot answer the simple question. If you cannot tell me in under a minute how much you have paid a specific person this year, that is the real gap. It matters far beyond 1099 season, because that same blind spot shows up in your job costing and your cash flow.

If tips or overtime run through any of your contractor payments, flag it. The IRS added new reporting requirements for both this year, so those amounts need to be tracked separately as they happen.

If you are self-employed, track your own income by client as you invoice. Do not wait for forms that may never come. Then January is just confirming what you already know.

What this really tells you

Here is the thing about a rule change like this. It is genuinely small. A number moved.

But if a number moving from $600 to $2,000 creates a mess in your business, the number was never the problem. The problem was that everything depended on outside paperwork arriving to tell you what happened in your own company.

Businesses with clean monthly books barely notice this change. Businesses that treat bookkeeping as a January project feel it hard. That is the process work we do long before anyone opens a tax form.

One honest disclaimer

This is general information, not tax advice. What is right for your business depends on your entity type, your industry, and how your workers are classified.

That last one deserves a flag. Whether someone is truly an independent contractor or actually an employee is its own question, separate from any of this, and it carries real consequences in California. If you have someone working full time hours on your schedule with your tools, that is worth a conversation before it becomes a problem.

We prepare individual and business tax returns backed by books we manage all year, for businesses across Concord, Walnut Creek, Oakland, Berkeley, Richmond, and the greater East Bay. In English y en español.

If you pay subcontractors and you are not confident your records would hold up, book a free 30-minute Fit-Check Call. Five months is plenty of time. January is not.

Source: IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), and IRS guidance on the increased threshold for information return filing and backup withholding. California conformity per Franchise Tax Board guidance.

Neat Ledger · Bookkeeping with clarity