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Important updates to 1099 requirements in 2026

The One Big Beautiful Bill Act (OBBBA) included some changes in the federal law affecting payroll and tax reporting. This affects all employers including churches and non-profits. It also affects any church or non-profit who use contractors. Changes include:

Overtime

Overtime paid out in accordance with FLSA is now deductible up to $12,500/year (or $25,000 if married and filing jointly). Employees need to fill out a new W-4 and pay attention to line 4b if they want to take advantage of this during the tax year. Otherwise, when they file their taxes they can receive a return based on their income and tax situation.

HSAs and FSAs

There were a few changes to HSAs and FSAs in the OBBBA. The main one that might affect churches is the cap on FSAs has been increased to $7500 (from $5000). This is the first increase in 40+ years!

1099 Reporting Limits

While in the past a 1099-NEC or 1099-MISC was required for vendors who were paid $600 or more, the limit has been increased to $2,000. Reporting for vendors who earned less than $2,000 is optional. This $2,000 minimum may go up again in future years as well. This change greatly reduces the administrative burden for many churches and non-profits. And don’t forget that 1099s need to be e-filed with the IRS.

These are the changes that are most likely to affect churches and non-profits but feel free to look at the articles below for a complete list of the changes in the OBBB that affect employers, employees, and contractors.

Resources for further reading:

What Employers and Employees Need to Know About The One Big Beautiful Bill Act (Gusto)

The One Big Beautiful Bill (OBBB or OB3) Act (Gusto)

**This blog post is for informational purposes only and is not payroll or tax advice. Please check with your payroll and benefits advisor and consult official IRS documents for more information**