If you pay anyone to help run your reselling business — a freelancer who shoots your listing photos, a virtual assistant who answers buyer messages, someone who comes by to help pack and label boxes before a shipping run — there's a decades-old threshold that decides whether you have to send them a tax form at year-end. It just moved for the first time since 1954. The 1099-K threshold you *receive* got reset back up to $20,000 this year. The same law also reset the 1099-NEC threshold you issue — a separate provision, easy to miss if you only tracked the 1099-K news.
The change, and exactly when it starts
Form 1099-NEC reports nonemployee compensation: money you pay an independent contractor — not an employee — for services. For more than seventy years the threshold requiring you to file one was a flat $600 per payee per calendar year. The One Big Beautiful Bill Act, signed July 4, 2025, raised that to $2,000 per payee, effective for payments made after December 31, 2025. The IRS's updated instructions for Forms 1099-MISC and 1099-NEC confirm the same split the 1099-K reversal used: $600 still governs 2025 payments (the return you may have already filed or will file by early February 2026), and $2,000 governs 2026 payments — the ones you're making right now, reported on the return due in early 2027. Starting in 2027, the $2,000 figure itself gets adjusted for inflation, rounded to the nearest $100.
That timing matters more than usual this year, because this fall is exactly when the two thresholds are both live at once depending on which tax year you're looking at. Don't let last winter's $600 filing season convince you the number is still $600 for what you're paying people today.
Who this actually touches
Any reseller paying for help clears this threshold faster than it sounds:
- A photographer or editor who shoots and retouches your listing photos
- A VA who writes descriptions, answers buyer messages, or manages returns
- Someone paid to help pack, label, or run boxes to the post office during
- a busy stretch
- A cleaner or restorer who preps thrifted or liquidation finds before you
- photograph them
These are payments for services, not payments for goods — buying a lot of inventory from someone doesn't trigger a 1099-NEC regardless of amount, because that's a purchase, not compensation for work. The threshold is also per payee, per calendar year, not a shared pool. Pay three different people $1,800 each over the year and, on the new rule, none of them individually crosses $2,000 — no 1099-NEC required for any of them. Pay one person $2,400 across a dozen small jobs through the year and you've crossed it for that one person, even though no single payment came close to $2,000 on its own.
One line worth drawing clearly: if the person works set hours under your day-to-day direction rather than being paid for a defined task or project, that's an employee classification question, not a 1099-NEC one — a different set of rules (and a W-2, not a 1099-NEC) applies, and it's worth getting a CPA's read before treating regular help as a contractor just because it's simpler on paper.
The carve-out that matters more than the dollar figure: how you paid them
Here's the part that catches people who read the headline number and stop there. Form 1099-NEC's own instructions exclude payments made by credit card, debit card, or a third-party payment network — PayPal, Venmo's business profiles, and similar services. Those payments get reported to the IRS by the payment processor instead, on a 1099-K issued to the person you paid, under a completely different threshold (the $20,000/200-transaction rule, or lower if your contractor's state sets its own number). You don't file anything on that payment at all, regardless of whether it's $200 or $20,000.
Pay the same person the same amount by cash, personal check, or a direct bank transfer — ACH, a wire, or a payment method that isn't a card network or a registered third-party settlement organization — and the exclusion doesn't apply. That payment is yours to report if it crosses the $2,000 threshold for the year, full stop. In practice, a lot of casual reseller-to-contractor payments run through PayPal or Venmo precisely because it's the easiest way to pay someone, which means plenty of resellers who'd technically clear $2,000 in services paid this way never have a 1099-NEC obligation on that money at all — not because of the new threshold, but because of a carve-out that's been on the books for years and has nothing to do with the dollar figure.
Backup withholding tracks the same number
The $2,000 figure isn't only a reporting threshold — it's also the trigger for backup withholding under Section 3406. If a contractor you're required to report crosses $2,000 for the year and never gave you a completed Form W-9 with a valid taxpayer ID, you're obligated to withhold 24% of what you pay them and remit it to the IRS yourself on Form 945. Unlike the 60-day grace period that applies in some "awaiting TIN" situations, nonemployee compensation doesn't get one — the obligation applies to the payment itself once the threshold's in play, not after a waiting period. And if you don't withhold when you were supposed to, the IRS can hold you, the payer, liable for the amount that should have been collected.
The practical fix is the same one that's always applied: get a signed W-9 before you pay someone for services, not after you've already decided whether they'll cross $2,000 for the year. Guessing wrong in either direction costs you — either you're tracking down a TIN after the fact, or you're withholding money a contractor was expecting in full.
What hasn't changed
- Corporations are still generally exempt. You don't typically owe a
- 1099-NEC to an incorporated business you pay for services, with the
- long-standing exception of payments to attorneys.
- The due date is still January 31 (or the next business day if that
- falls on a weekend), to both the contractor and the IRS, with no
- extended e-file grace period the way some other information returns get.
- **E-filing is mandatory once you file 10 or more information returns in
- total across all types in a year** — W-2s and every 1099 you issue count
- together toward that count, not 10 of any one form.
A worked example
A record reseller pays a part-time VA for listing work through the year: $900 in January and February combined, paid by Venmo business profile; then $1,500 more from March through December, paid by direct bank transfer because the VA asked to move off Venmo. Total for the year: $2,400 — over the new $2,000 threshold.
The Venmo portion doesn't factor into a 1099-NEC at all; that's the processor's reporting problem, not the reseller's, regardless of amount. The $1,500 paid by bank transfer is what counts toward the threshold on its own, and at $1,500 it wouldn't cross $2,000 by itself. But if the VA also did occasional cash-paid pickup-and-pack runs totaling $600 over the year, that $600 plus the $1,500 bank-transfer total is $2,100 in non-card, non-network payments to the same person — over the threshold, a 1099-NEC is owed, and if no W-9 was on file before any of those payments, backup withholding should have applied to the portion paid after the obligation kicked in.
What to actually do
- **Track payments to the same person by payment method, not just
- total.** Only cash, check, and bank-transfer-style payments count toward
- the $2,000 threshold; card and third-party-network payments are excluded
- entirely, no matter the amount.
- Get a signed W-9 before the first payment, not once you think
- you're close to $2,000. You can't go back and apply backup withholding
- retroactively to money you already paid out in full.
- Don't confuse this with the 1099-K threshold. One governs what you
- receive as a seller ($20,000 and 200 transactions, [restored this
- year](/blog/1099k-threshold-reversal-20000-2026)); this one governs what
- you issue as a payer of contractors ($2,000, started this year). They
- moved in the same law, for different reasons, on different schedules.
- **If someone works regular hours under your direction, get a CPA's read
- on employee classification before treating them as a 1099 contractor.**
- The threshold change doesn't touch that question at all.
PalmFlow tracks what you pay for help as a cost against your profit numbers the same way it tracks fees and postage, so it shows up in your real margin — but it doesn't collect W-9s, calculate backup withholding, or generate 1099-NEC forms, and that's genuinely outside what an inventory and profit tool should try to do. A payroll-and-contractor service (Gusto, Track1099) or your CPA is the right tool for the filing itself. Free plan, 50 items, no card required.
Disclaimer: this is general information, not tax or legal advice. The $2,000 threshold, the payment-method exclusions, and backup withholding rules depend on the specifics of each payment and payee — confirm your own filing obligations with a CPA or the current IRS instructions for Form 1099-NEC before relying on any of the above.