1099s in Dynamics GP for Tax Year 2026: Applying the $2,000 Threshold

For many years, the figure of $600 decided which vendors received a Form 1099 from your company. That changed for payments made from January 1, 2026. For most types of payment, the reporting threshold is now $2,000, and the 1099s you prepare in January 2027 will be the first to use it.

The new rule is simple to state, but it does not apply to every box, and Dynamics GP will keep using $600 until someone changes the setting. In this article, our GP consultants explain what the IRS changed, where the threshold sits in Microsoft Dynamics GP, and how to prepare your 2026 forms without missing anyone. Please confirm individual tax questions with your accountant.

What Changed for Tax Year 2026

The federal tax law passed in 2025 raised the minimum reporting amount for most payments reported on Forms 1099-NEC and 1099-MISC. According to the IRS instructions for these forms, the new minimum applies to tax years beginning after 2025, and it may be adjusted for inflation from 2027 onward.

The higher amount also applies to the backup withholding rules, which the IRS changed at the same time.

In practical terms, a cleaning contractor paid $1,800 during 2026 no longer needs a form, while one paid $2,400 still does. For companies that work with many small suppliers, the number of 1099s can fall noticeably.

What Has Not Changed

Several familiar rules remain in place, and they matter just as much in GP.

• Payments made in 2025: These were reported on forms filed in early 2026 using the $600 threshold. If you issue a corrected 2025 form, the old figure still applies.
• Backup withholding: A vendor from whom you withheld federal income tax must receive a 1099, whatever the amount.
• Attorneys: Fees paid to an attorney for legal services are reported on Form 1099-NEC at $2,000, while gross proceeds paid to an attorney stay on Form 1099-MISC at $600.
• Form W-9: You still need the vendor’s tax identification number before the first payment, because you cannot know in advance whether a vendor will pass $2,000 during the year.
• Electronic filing: The obligation to file electronically still begins at ten information returns, counted across all form types.

How Dynamics GP Applies the Threshold

Dynamics GP does not read the threshold from the tax law. It uses minimum amounts that are stored in your company setup, one for each 1099 type and box. You find them under Tools > Setup > Purchasing > Payables, by choosing the 1099 Setup button. When you print 1099s, GP compares each vendor’s total for the year with the minimum for that box and prints a form only when the total reaches it, as Microsoft explains in its 1099 troubleshooting article.

Three details are worth knowing.

1. Totals are based on payment dates. An invoice dated December 2025 and paid in January 2026 counts toward 2026, so it falls under the $2,000 rule.
2. The minimums are not linked to a year. They are a single setting for the company, which means a change you make now also affects any 2025 form you reprint later.
3. Backup withholding needs a manual check. If tax was withheld from a vendor whose payments stay below the minimum, confirm that GP still produces the form, and prepare it separately if it does not.

Preparing Your 2026 1099s in GP, Step by Step

We suggest the following order, starting in December and finishing in the first weeks of January.

1. Install Microsoft’s year-end update when it is released, because it carries the current 1099 form layouts. Older versions may not accept it, so check your build early and plan a Dynamics GP upgrade if needed. If your 1099 form contains a customization, test it after the update.
2. Post and pay all 2026 vendor invoices that belong in the year, and void or correct any check that should not count.
3. Review vendor setup. Every vendor who should receive a 1099 needs a tax type, a default box and a tax ID in the Vendor Maintenance Options window.
4. Run the 1099 Edit List or a SmartList of 1099 amounts, and compare the totals with the general ledger.
5. Change the minimum amounts in 1099 Setup to $2,000 for the boxes listed above, and leave royalties, attorney gross proceeds and fish purchases at their existing values.
6. Correct individual amounts in the Edit 1099 Transaction Information window rather than in the 1099 Details card, because a reconcile can overwrite manual changes made in the card.
7. Print the 1099s for year 2026 and the correct 1099 type, and compare a sample with the vendor history.
8. File electronically with the IRS and send recipient copies by the deadline.

Vendors Close to the Threshold

The higher threshold reduces the number of forms for most companies, but it also creates new borderline cases. Our consultants pay attention to four situations when analyzing a vendor list.

• One supplier with several vendor IDs: Dynamics GP compares each vendor ID with the minimum separately. If the same business is set up twice, two payments of $1,500 may need to appear on one combined form of $3,000.
• Mixed payment types: A vendor may receive rent and service fees in the same year. Each box is compared with its own minimum.
• Credit memos and voided checks: These reduce the reportable amount and can move a vendor below $2,000.
• Payments made by card or through a payment platform: These are usually reported by the card company on Form 1099-K, so they should not be marked as 1099 amounts in Dynamics GP.

Filing Electronically and the 2027 Deadlines

This filing season brings a second change. The IRS is retiring its long-standing FIRE system: the last day to file through FIRE is November 19, 2026, and from January 1, 2027, the Information Returns Intake System, known as IRIS, is the only electronic channel. Tax year 2026 forms must therefore be filed through IRIS, which requires its own transmitter control code application. A code used for FIRE in earlier years does not carry over to IRIS.

Dynamics GP prints Payables 1099s but does not file them electronically, so you will need either the IRS online portal or a filing service that accepts data from GP. Arrange this in November, not in late January.

The usual January 31 and February 28 dates move to the next business day, because both fall on a Sunday in 2027.

Mistakes to Avoid

• Leaving the minimum at $600, so that many unnecessary forms are printed and filed.
• Raising every box to $2,000, including royalties and attorney gross proceeds.
• Editing amounts in the 1099 Details card and then running a reconcile, which removes the edits.
• Assuming that Dynamics GP can file 1099s electronically.
• Forgetting the 2025 setting when reprinting a corrected 2025 form.
• Marking card payments as 1099 amounts, which reports the same income twice.

Most accounts payable (AP) teams will recognize at least one of these from previous years. A short checklist, signed off by the controller, prevents most of them.

How Nevas Technologies Helps

Nevas Technologies has supported Dynamics GP customers for more than 20 years. Our Dynamics GP support team updates 1099 setup, reviews vendor records, installs the year-end update and helps reconcile 1099 totals to the ledger before forms go out. For accounts payable staff who handle 1099s only once a year, a short Dynamics GP training session in December is often the most useful preparation.

If your organization is also planning beyond 2029, when Microsoft’s tax updates for GP end, we can explain how 1099 reporting works in Dynamics 365 Business Central as part of a Dynamics GP to Business Central migration.

Frequently Asked Questions

Do we still need a W-9 from vendors who will probably stay under $2,000?
Yes. Collect it before the first payment. Without a valid tax ID you may have to apply backup withholding, and you cannot predict every vendor’s total in advance.

Does the 1099 update cost anything?
Microsoft’s year-end update is included with an active enhancement plan as part of your Dynamics GP license. Only the time to install and test it is charged.

What if a vendor’s total is exactly $2,000?
The form is required. The rule covers payments of $2,000 or more, so a total of exactly $2,000 must be reported.

Will the threshold stay at $2,000?
For 2026 payments, yes. From 2027 the amount may be adjusted for inflation, so check the figure each year before printing.

Conclusion

Summarizing the change for GP users: raise the minimum amounts to $2,000 for the boxes the law covers, keep the exceptions where they are, check the vendors near the line, and arrange IRIS filing early. We emphasize the last point because it is new for every company this season. With those steps completed, the 2026 season should take less time than earlier years, simply because there are fewer forms to produce.

If you would like help preparing your 1099s, contact our team or request a quote.