The IRS has announced that, starting in 2026, churches, ministries, and clergy-related organizations will see the Form 1099-NEC reporting threshold rise from $600 to $2,000 under the One Big Beautiful Bill (OBBB) Act.

Understanding Form 1099-NEC
Form 1099-NEC is used to report payments to independent contractors and other nonemployees, including consultants, guest speakers, and musicians. Churches must issue this form when payments to a single individual exceed the IRS threshold within a calendar year.

What’s New in 2026

• Only payments of $2,000 or more to a nonemployee require a 1099-NEC.
• Applies to payments made after December 31, 2025.
• The threshold and backup withholding rules will be adjusted for inflation beginning in 2027.

Why This Matters

• Simplifies reporting: Smaller payments that previously required 1099s may no longer need them.
• Reduces risk of penalties: Fewer forms reduce the chance of errors or late filings.
• Allows focus on significant payments: Finance teams can spend less time on paperwork and more on larger financial matters.

Key Considerations

• All income is taxable—even if no 1099 is issued, recipients must report it.
• Maintain proper records for audit and reporting purposes.
• W-9 forms are still required from all vendors, regardless of payment amounts.

Now is a good time to review vendor management processes, update accounting systems, and ensure internal policies reflect the new reporting threshold. Proper preparation will make the transition to the $2,000 threshold smooth and maintain IRS compliance.

Additional Note on Form 1099-MISC: Certain payments that are not reported on Form 1099-NEC—such as rent, prizes or awards, and attorney fees—are reported on Form 1099-MISC. Starting in 2026, the $2,000 threshold also applies to these payments, meaning that amounts below $2,000 may no longer require a 1099-MISC. Regardless, all income is still taxable, and proper recordkeeping is required.

PAM PALMER
DIRECTOR, TAX AND COMPLIANCE
ACCOUNTING AND FINANCE