On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, marking a significant shift in tax reporting requirements for businesses. While the legislation brings welcome administrative relief through higher reporting thresholds, it also creates new imperatives for robust tax identity management that smart businesses cannot ignore.
What Changed Under the OBBBA?
Key tax information reporting changes include:
1099-MISC and 1099-NEC Threshold Raised to $2,000
Effective January 1st, 2026, businesses are only required to file a 1099 for non-employee compensation or miscellaneous income if the total payments to a vendor exceed $2,000.
Previously: $600 threshold
Now: $2,000 threshold, adjusted annually for inflation starting in 2027
Backup Withholding Threshold Also Raised to $2,000
This change means smaller-dollar vendors are no longer subject to automatic backup withholding if their TIN is missing or incorrect—at least not unless the $2,000 threshold is crossed.
1099-K Thresholds Restored to $20,000/200 Transactions
After years of uncertainty, the bill resets third-party payment network reporting back to the pre-2021 threshold.
Why Raising the Threshold Could Lead to a Bigger Tax Gap
On the surface, the increased 1099 threshold reduces paperwork and compliance costs for small businesses. But IRS data over decades shows a clear pattern: income not subject to information reporting is significantly more likely to go unreported.
According to the IRS’s own estimates:
- Income reported on a W-2 has a 99% compliance rate
- Income reported on a 1099 (but without withholding) sees 94% compliance
- Income not reported by a third party has only 55% compliance
The difference? Visibility. The presence of a 1099 form reminds payees to report their income — and gives the IRS something to match against.
Why TIN Management Still Matters — Even If You Aren’t Filing a 1099
The new $2,000 threshold may reduce the number of 1099s you’re required to issue, but it does not reduce your exposure to tax identity errors, fraud, or penalties. Here’s why tax identity management — including name/TIN matching and real-time vendor screening — is still critical:
Incorrect TINs Still Trigger B-Notices
Even if a payment is under $2,000, issuing a 1099 with a mismatched TIN can result in IRS B-Notices, backup withholding requirements, and administrative headaches. Having clean and accurate data is crucial to protecting your business.
Payments Can Accumulate
Multiple payments to the same vendor may still exceed the $2,000 threshold over the course of a year — and you won’t know unless your system is tracking total compensation accurately and tied to a valid TIN to ensure accuracy.
Fraud Risk Remains High
Without identity verification, vendors can exploit weakened reporting thresholds to fly under the radar. Verifying name/TIN combinations upfront helps prevent fraudulent vendors and customers from entering your system.
You Still Have to Report What’s Legally Owed
The law doesn’t change the taxability of the income — it only changes who has to report it. Businesses are still expected to follow best practices to ensure accurate filings and protect themselves from exposure.
What Businesses Should Do Now
To protect your company from risk — even as reporting obligations shift — consider these actions:
- Implement a tax identity verification process at onboarding (real-time name/TIN matching is ideal)
- Centralize vendor and contractor data to catch duplicate records and track cumulative payments
- Maintain audit trails that show when identity checks were performed
- Don’t wait until tax season — validate information as part of your ongoing AP or procurement process
Final Thoughts: Fewer Forms ≠ Less Responsibility
The One Big Beautiful Bill may reduce your 1099 filing workload — but it doesn’t reduce your risk. In fact, less oversight means more opportunity for errors or fraud to slip through the cracks.
Strong tax identity management remains one of the most effective ways to prevent reporting issues, protect your business from penalties, and ensure accurate tax filings — regardless of what the IRS requires you to submit.
As the reporting landscape evolves, proactive TIN management isn’t just smart — it’s essential.