The 1099 Threshold Jumped to $2,000: A Fall Checklist for Chicago-Area Businesses

If you hire independent contractors, there’s some welcome news. For payments made in 2026, you only need to issue a Form 1099-NEC or 1099-MISC once a contractor is paid $2,000 or more for the year. The old $600 threshold had been in place for decades, and the One Big Beautiful Bill Act finally raised it.

Fewer forms sounds easy. But January 31 comes fast, and the businesses that struggle are usually the ones that don’t look at their books until then. Fall is the time to get ahead of it.

What Changed With the 1099 Threshold

• 2025 payments (filed early 2026): $600
• 2026 payments (filed early 2027): $2,000
• 2027 and beyond: adjusted for inflation each year

One thing hasn’t changed. Contractors still owe tax on everything they earn, whether or not they get a 1099.

Do I Need to Send a 1099 to a Contractor in 2026?

Only if you paid them $2,000 or more during the year. Pay a freelance designer $1,500 and you’re not required to file. Pay them $2,500 across three projects and you are. That’s why current bookkeeping matters: you can’t apply the rule if you don’t know who crossed the line.

Classification Comes Before Forms

Before deciding who gets a 1099, make sure each worker really is a contractor. The IRS looks at behavioral control, financial control, and the overall relationship.

Illinois is stricter:

• It uses an “ABC test” for unemployment insurance.
• Construction companies face an even tougher standard under the Illinois Employee Classification Act. There, workers are presumed to be employees unless you can prove otherwise.

This matters most for home health agencies, construction and trades businesses, and anyone who relies heavily on contractors.

Key Deadlines

• January 31: W-2s and 1099-NECs are due to workers and the government.
• January 31: 1099-MISCs are due to recipients.
• February 28 (paper) or March 31 (e-file): 1099-MISCs are due to the IRS.

Extensions for W-2s and 1099-NECs are rarely granted, so treat January 31 as final.

Your Fall 1099 Checklist

• Set up your books to flag contractors approaching $2,000.
• Collect W-9s now from every contractor, even the small ones.
• Reconcile payroll records with your books.
• Review anyone who might be misclassified, and fix it before year-end.

Frequently Asked Questions

Should I still get a W-9 from a contractor I paid under $2,000?
Yes. Totals can change before December 31, and nobody wants to chase paperwork in January.

Can I reclassify a contractor as an employee mid-year?
Yes, and it’s far better to do it yourself than to have it discovered in an audit. The IRS Voluntary Classification Settlement Program may also help limit back taxes from prior years.

At JIL & Associates, we specialize in payroll, 1099 compliance, and bookkeeping for small businesses in Oak Brook and across the Chicago area. As an Advanced QuickBooks ProAdvisor, we also offer bookkeeping cleanup and catch-up if your records need attention before year-end. We’ll help you apply the new threshold correctly and head into January with confidence.

📞 Call (630) 828-3648 or schedule a free consultation today!