Staying aware of the upcoming IRS 1099 changes with contractor reporting is important for any tax year. Whether you are a small business with limited accounting and payroll tax resources or an accountant who manages tax filings for multiple clients, it is not unusual to feel overwhelmed. The easy solution to feeling overwhelmed is to find trustworthy and affordable accounting and payroll software.
Advanced Micro Solutions’ base W-2/1099 Forms Filer program is the most affordable solution on the market that keeps small business users compliant with tax changes.
The growing complexity of IRS reporting rules should not impede your business’s tax or payroll management processes. It should also not prevent you from focusing on your small business’s core operations. Get intuitive, menu-driven software like AMS to keep users compliant in:
- All 50 states
- The District of Columbia
- Puerto Rico
The core product comes with six optional add-on modules that you can use to customize your system as you need them.
What Are the Existing 1099 Rules for Tax Year 2025?
Although there are certainly some 1099 changes set to go into effect in the near future, there are specific elements of reporting that have stayed the same compared to recent years.
- The 1099-NEC reporting requirement threshold is $600 for independent contractors
- The filing deadline is Jan. 31 for Form 1099-NEC
- Since tax year 2023, there is mandatory e-filing of 10 or more information returns
- Employers must collect accurate TINs with Form W-9
How you avoid backup withholding issues has continued importance in your reporting process. The best path forward is to make sure that your 1099 filing software is fully integrated. Having software that lets you generate the forms that you need and send any necessary documents directly to the appropriate agencies is a huge time and resource saver.
Upcoming 1099 Tax Changes for Small Businesses
There are changes coming for upcoming tax seasons that even low-tech small businesses need to stay on top of to remain compliant. One of the major changes begins for tax years after 2025 and went into effect on Jan. 1, 2026.
The minimum threshold for reporting certain payments will increase from $600 to $2,000. It applies to payments that employers report on Forms 1099-NEC and 1099-MISC.
The IRS will adjust the threshold beginning in Calendar Year 2027 and base it on inflation. The expected and potential outcomes of these changes when it comes to filing certain returns and backup withholding are:
- Small payments will not require as many 1099 forms
- Small businesses will experience a reduction of their administrative burden
- Possible underreporting during tax season
Other Tax Changes that Influence Contractor Reporting
There are other changes happening with tax filing that are linked to the One, Big, Beautiful Bill. Third-party settlement organizations are only required to file their 1099-K forms if the:
- Gross amount of reportable payment transactions to a payee exceeds $20,000
- Number of transactions exceeds 200
That means there are fewer forms sent to the IRS from platforms like PayPal or Venmo if you worked with them throughout the year. It is also meant to reduce the rate of duplications with similar or identical information provided with Form 1099-NEC reporting.
There is also a continued trend where the IRS pushes small businesses and individuals toward electronically filing rather than providing manual submissions. There are numerous advantages to small businesses making the complete shift to digitization, including:
- Easy automation
- Greater efficiency
- Fewer wasted resources
- Improved accuracy
- Reduced penalties or costly fines
There is a less than 1% error rate for e-filed tax returns versus 21% for paper returns.
When Are IRS Tax Changes Announced?
Monitor IRS notices throughout the year to make sure that nothing slips between the cracks for your business’s compliance needs. Relying on payroll and/or accounting services or providers eliminates some of that responsibility as long as they are trustworthy.
IRS guidance is typically released in December or January before the upcoming filing season. Certain forms like Form 1099-K may also have delays and/or phased rollouts.
How Does AMS Software Support Small Businesses?
Our affordable and customizable system provides small business users with options. Whether you need a full-accounting suite of tools or one add-on product, you can build out your system as far as you want. Modules to potentially pair with our base program are:
- AMS Payroll
- Software Generated Forms
- E-File Direct
- Forms Filer Plus
- Affordable Care Act Filer
- 1042-S Filer
Download our free 1099-etc Demo software today and see how these programs all interact with one another.