Schedule1ADesk / 2026 Tax & Payroll Guides / Illinois 2026 1099-NEC Threshold ($2,000 vs $600) & Overtime/Tip Tax Conformity (IL)
Illinois 2026 1099-NEC Threshold ($2,000 vs $600) & Overtime/Tip Tax Conformity (IL)
What are the 2026 1099-NEC and overtime tax rules in Illinois?
In Illinois (IL) for the 2026 tax year, the state 1099-NEC reporting rule is: Follows $2,000 Federal Threshold (Unless IL Withholding). State income tax conformity on Schedule 1-A overtime and tips: Conforms to Federal AGI Starting Point. Overtime wage calculation rule: Follows Federal FLSA 40-Hour Rule.
Starting January 1, 2026, the federal reporting threshold for Form 1099-NEC increased from $600 to $2,000 (submitted electronically via the IRS IRIS portal, replacing FIRE). However, employers and bookkeepers paying contractors in Illinois (IL) must verify both state-level 1099-NEC thresholds and state W-2 overtime/tip tax rules.
Open Illinois (IL) Employer W-2 Code TT/TP & 1099-NEC Reconciler
2026 Illinois (IL) Payroll & 1099-NEC Compliance Matrix
| 2026 Compliance Area | Illinois (IL) Statutory Rule |
|---|---|
| Federal 2026 Form 1099-NEC Threshold | $2,000 (Filed via IRS IRIS Portal; legacy FIRE system retired) |
| Illinois State 1099-NEC Threshold | Follows $2,000 Federal Threshold (Unless IL Withholding) |
| Illinois Income Tax on Overtime (Code TT) & Tips (Code TP) | Conforms to Federal AGI Starting Point |
| Illinois Overtime Hours Rule vs. Federal FLSA | Follows Federal FLSA 40-Hour Rule |
| Missing W-9 Backup Withholding Rate | 24% federal backup withholding under IRC Section 3406 |
Frequently Asked Questions
Did Illinois raise its state 1099-NEC threshold to $2,000 for 2026?
In Illinois (IL), the state 1099-NEC rule is: Follows $2,000 Federal Threshold (Unless IL Withholding). Always keep collecting signed W-9 forms from every vendor before issuing payment.
Are overtime and tips exempt from Illinois state income tax in 2026?
Federal Schedule 1-A deducts qualified overtime (Code TT) and tips (Code TP) from federal income tax. For Illinois state income tax: Conforms to Federal AGI Starting Point.