Highlights
- 2025-2026 brings unprecedented state tax reporting changes from OBBBA threshold shifts and Form 1099-DA expansion.
- Most states have not yet aligned to OBBBA-driven updates affecting Form 1099-NEC and Form 1099-MISC for TY2026.
- Direct state filing requirements expand as CF/SF Program coverage remains inconsistent for new forms.
The 2025 and 2026 tax filing seasons are on track to have the most state tax information reporting changes we have seen in more than 10 years: state conformity responses to the federal One, Big, Beautiful Bill Act (OBBBA) threshold shifts, expanded state Form 1099-DA requirements, Combined Federal/State Filing (CF/SF) Program participant adjustments, and a continuous flow of state file format updates. Tax information reporting is the mandatory process where businesses report payments made to individuals or entities to the local, state, and federal jurisdictions. State tax information reporting has always required jurisdiction-by-jurisdiction attention. What follows covers the major 2025 and 2026 changes announced so far as well as any unannounced changes to be looking for on the horizon.
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The breadth of state reporting
Form specific threshold changes and state conformity
Direct state filing requirements continue to expand
What to verify before the 2026 tax filing season
Staying current through the 2026 tax filing season
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The breadth of state reporting
States set their own 1099 rules that typically mirror federal, with variations in thresholds, timing, sourcing, and extensions.
For any payer with meaningful multistate activity, state reporting is steady-state work. The highest-volume forms, Form 1099-MISC, 1099-NEC, W-2, 1099-R, and 1099-K, each carry direct or CF/SF Program state reporting obligations in more than 40 U.S. jurisdictions, and many additional forms carry obligations across a similarly broad set of jurisdictions.
Form specific threshold changes and state conformity
Form 1099-K
OBBBA retroactively restored the $20,000 and 200-transaction threshold, repealing the American Rescue Plan Act (ARPA) $600 no-minimum transaction count rule. North Carolina and California have both confirmed conformance with the federal standard; however, California retains a continuing $600 threshold for third-party network payments to app-based drivers.
Non-conforming 1099-K thresholds include Arkansas ($2,500 when no state tax is withheld), Illinois (four or more transactions exceeding $1,000), and New Jersey ($1,000). Lower state third party settlement organization (TPSO) thresholds predating OBBBA also remain: Maryland, Virginia, and Massachusetts each at $600.
Form 1099-DA
Form 1099-DA was not accepted through the CF/SF Program for tax year 2025, and future treatment is uncertain.
State positions sort into several groups: direct filing is always required, direct filing is only required when state tax is withheld, and no filing is required. Direct filing is required regardless of withholding status in the District of Columbia, Kansas, Massachusetts, Michigan, Montana (beginning 2026), and Rhode Island. Filing is required only when state withholding is reported in Alabama, Arizona, Arkansas (with a $2,500 threshold), Minnesota, Utah, West Virginia, and Wisconsin. North Carolina is conditional, triggered only where North Carolina tax was withheld or proceeds were not reported to the IRS. All other jurisdictions have not announced state filing requirements for tax year 2025.
Kansas was first to publish electronic filing specifications for 1099-DA, which defines a custom CSV, similar to their handling of other forms. Rhode Island requires IRS IRIS XML starting in tax year 2025. Massachusetts added 1099-DA to required state filings; the Massachusetts Department of Revenue asks payors to coordinate submissions via phone with its Business Contact Center. Most states requiring 1099-DA for tax year 2025 have mandated paper filing due to limited state e-filing capabilities.
Paper submissions are not a viable long-term solution for payers or states. 1099-DA counts are driven by distinct digital asset disposals, not by recipients. A single recipient can generate very high form volumes, which creates real operational challenges on both sides, for filers preparing and mailing paper returns at scale, and for states receiving large paper submissions through limited intake channels.
Forms 1099-MISC and 1099-NEC
OBBBA raised the federal reporting threshold from $600 to $2,000, effective for payments made on or after January 1, 2026. Beginning in calendar year 2027, the federal threshold is adjusted annually for inflation, with adjustments rounded to the nearest $100. The inflation adjustment matters for state conformity: states that tie their threshold to federal will move with the annual adjustment, while states that codify a static $2,000 without an inflation clause will diverge from the federal threshold again within a few years.
States whose rules follow federal align automatically. California has adopted the $2,000 threshold for 1099-NEC and 1099-MISC beginning with tax year 2026. States that codify $600 in statute or in non-tracking guidance remain at $600 until amended: Mississippi and Wisconsin are current examples.
State-specific thresholds predating OBBBA still apply: Arkansas at $2,500 when no state income tax is withheld, and Missouri at $1,200.
Direct state filing requirements continue to expand
Several states have issued or refreshed direct filing specifications this past year, and some obligations apply independently of withholding. Maryland has moved most 1099 filings from SFTP to the MTC portal while continuing to accept 1099-K via SFTP for tax year 2025.
Michigan participates in CF/SF Program but has confirmed it does not currently receive copies of filings submitted through federal IRIS. IRIS filers therefore need to submit directly through the Michigan Treasury Online portal when they are filing 10 or more income record forms.
Under recent Rhode Island guidance, payors must file forms reporting Rhode Island–sourced income for tax year 2025 even when no Rhode Island withholding is reported.
Effective January 1, 2026, applicable to tax year 2025, Washington now requires brokers and barter exchanges to submit Form 1099-B. This is required when the long-term capital gain from a sale or exchange of long-term capital assets is allocated to Washington, notable because Washington imposes no state income tax.
What to verify before the 2026 tax filing season
A few practical items to take back to your team:
- For Forms 1099-MISC, 1099-NEC, and 1099-K, focus threshold verification on states with codified state-specific thresholds.
- For the same forms, watch for states that split from federal rules. Watch for states that adopt $2,000 without an inflation clause. Seek explicit confirmation when state rules follow federal, even though OBBBA conformity is automatic.
- Review Form 1099-DA requirements by state, form, and format. Plan for paper filing where state e-filing is not yet available.
- Track three additional federally introduced forms: 1098-VLI (Vehicle Loan Interest Statement), 1099-LPS (Long-Term Care Premiums Paid Statement), and 5498-TA (Trump Account Contribution Information). Watch for state announcements that expand reporting obligations to cover them.
- Verify CF/SF Program participation state by state and identify forms that require direct state submission regardless of CF/SF Program status.
Staying current through the 2026 tax filing season
If your tax reporting solution is struggling to keep pace with shifting thresholds, new state forms, and growing state divergence, reach out to learn how Thomson Reuters ONESOURCE Tax Information Reporting supports every state change, so your team stays ahead of the next tax filing season rather than reacting to it.
