Tax Changes for Individual Contractors, Charitable Donors
Photo Credit: MMPhoto21 | Adobe Stock
Taxpayers filing 1099 forms with the US Internal Revenue Service (IRS) may see changes for 2026, depending on the situation. Some non-employee compensation (1099-NEC) and miscellaneous payment (1099-MISC) situations demand careful attention from independent contractors or other freelance workers, and from businesses that pay them.
The IRS has also made some charitable-giving changes that could affect some companies.
No Forms Below $2,000
“It all comes down to the nature of the payment,” says Raj Modi, founder and president of the TaxOne accounting service in Anchorage, of the 1099 changes. Notably, several payment situations no longer require IRS forms for amounts less than $2,000. According to the IRS publication on these forms, the new $2,000 thresholds will furthermore adjust for inflation from 2027 onward.
The new threshold only affects those who issue 1099 forms, not those who receive them. Freelancers still must “report all income received,” says Joyce Herr, a certified public accountant in Eagle River.
Both Herr and Modi say the thresholds hadn’t changed in decades. Herr explains that the increase “is meant to reduce administrative burden, modernize outdated rules, and better align reporting with meaningful income levels.” She notes that $600 in 1954 is equivalent to more than $6,000 today, when adjusted for inflation.
The new $2,000 threshold affects three payment types that should be reported on 1099-MISCs: rent payments, prizes, and “awards not for services”; payments for health and medical services (“issued mainly by medical assistance programs or… insurance plans”); and crop insurance proceeds.
Current Issue
November 2026
Modi says that while most renters of, say, an apartment don’t issue their landlords an annual 1099-MISC tabulating what they paid for residential property, these forms are commonly issued for commercial real estate payments.
Two commercial fishing-related miscellaneous payments do not have changes to their payment thresholds since 2025. For one, owners must continue to report all amounts of payments to crew holders not considered employees. “For a fishing boat crew member to be considered an independent contractor, their pay must be based on a share of the proceeds,” Herr says.
Secondly, the threshold to report “fish purchases paid in cash for resale” also remains the same: $600. Unrelated to fishing, but also unchanged: the royalty payment threshold. Publishers and others who pay royalties still must report any payments of $10 or more.
For 1099-NECs, most non-employee payments for services now have a $2,000 threshold for the payer. The threshold for “aggregated direct sales of consumer goods for resale” remains at $5,000.
Herr says that’s not the only change, however: some boxes on the forms have changed. Businesses “will need to update their computer program mapping” accordingly. Needed mapping changes include boxes 2 (the direct sales checkbox) and 4 (federal income tax withheld). Businesses should use box 3 for excess golden parachute payments.
The W-2 form has also added three new boxes: 1b (cash tips), 1c (TTOC or Treasury Tipped Occupation Code) and 1d (qualified overtime compensation). These are related to the “no tax on tips” and “no tax on overtime” policies enacted in the One Big Beautiful Bill Act of 2025, which will sunset at the end of tax year 2028.
No matter how much a business expects to pay a vendor for services in the year, Herr says it should collect a W-9 form from freelancers and gig workers before payment. Failure to complete this step has important implications for both parties. “If a vendor/subcontractor refuses to complete a W-9 or submits an incomplete one,” Herr says the business must “withhold backup taxes of 24 percent, pay the tax through EFTPS [electronic federal tax payment system] and issue a 1099-NEC” even if the payment falls below the $2,000 threshold.
A Gift for Givers
A change that won’t sunset after 2028 affects tax deductions for charitable giving. Individual taxpayers who use the standard deduction (that is, who don’t itemize deductions) can deduct up to $1,000 of charitable giving ($2,000 for married couples who file jointly) starting this year. The policy expands upon a temporary above-the-line deduction for up to $300 that was in effect for 2020 and 2021.
An analysis by the Bipartisan Policy Center says Congress offset the revenue loss from these new deductions by making changes to corporate giving that include new giving floors. These affect both C corporations and individual filers who itemize. Under the new rules, C corporations can only deduct donations that are “more than 1 percent of taxable income and less than 10 percent of the corporation’s adjusted taxable income,” Herr says. They can carry forward excess donations for up to five years.
For individuals who itemize, Congress set a floor of 0.5 percent of adjusted gross income. That is, charitable donations can only be itemized as deductions if they exceed that percentage. For example, a taxpayer with adjusted gross income of $200,000 (who might have itemized deductions greater than the standard deduction) cannot deduct the first $1,000 of charitable gifts, but donations above that threshold can be.
After the above-the-line charitable deduction was enacted in the CARES Act of 2020, the IRS found a modest surge in taxpayers reporting donations at exactly the reporting threshold. According to the Tax Policy Center, the deduction accounted for about a 5 percent increase in charitable giving by non-itemizers. The higher cap of $1,000 is meant to provide a stronger incentive for larger donations.
