What Your Business Needs To Know For 2025 & 2026 Tax Years
The One Big Beautiful Bill Act (OBBBA) introduces several important updates to federal informational reporting requirements beginning with the 2025 and 2026 tax years. These updates affect familiar forms such as Forms W-2, 1099-MISC, 1099-NEC, and 1099-K. While some forms remain unchanged, others include meaningful adjustments to income-reporting thresholds and the way certain types of income are categorized and reported.
Updates To Form W-2
Form W-2 will see no changes to the form itself in 2025, but there are several structural changes beginning with the 2026 tax year, primarily to accommodate new deductions and income categories introduced under the OBBBA.
For 2025, employers are encouraged to provide separate accounting of qualified tips and overtime compensation to employees, but there is penalty relief for not separately reporting this information.
Starting in 2026, Form W-2 will have updated box 12 codes requiring employers to report qualified tips, qualified overtime compensation, and employer contributions to a Trump account*.
Read Also: IRS Issues Transitional Guidance On Reporting Interest From Specified Passenger Vehicle Loans
Changes To Form 1099-MISC & 1099-NEC
Form 1099-MISC is used to report miscellaneous income such as rents, prizes, and awards, while Form 1099-NEC is used to report non-employee compensation. Starting tax year 2026, the reporting threshold for payments to independent contractors will increase from $600 to $2,000. This means that if you pay a contractor less than $2,000 in a calendar year, you generally will not be required to issue a Form 1099-NEC starting in 2026.
New Standards For Form 1099-K
Another important tax reporting update relates to third-party network transactions on Form 1099-K.
Starting with tax year 2025, the rules for Form 1099-K revert to the pre-2022 standard, requiring a 1099-K to be issued only if total payments to a payee exceed $20,000 and there are more than 200 transactions in a calendar year. This is much more lenient compared to the $600 threshold of the past few years. It is important to remember that this threshold applies only to third-party settlement organizations (like PayPal, Venmo, and similar platforms).
Please note, however, that payment card transactions (such as credit card payments) are reportable regardless of the amount or number of transactions.
Reach Out For Personal Assistance
Do you have questions about how these changes will affect your business? Contact GBQ for expert guidance and personalized assistance.
By Mark Silvaggio, JD, CPA, Tax and Business Advisory
*A Trump account is a tax-advantaged investment account for children under age 18, allowing annual after-tax contributions up to $5,000 (indexed for inflation) and employer contributions up to $2,500. Children born between 2025 and 2028 who are U.S. citizens with Social Security numbers receive a $1,000 government-funded initial deposit, and account funds grow tax-deferred until withdrawal, which is generally permitted after age 18 and taxed as ordinary income, with certain penalty exceptions for early withdrawals.
Looking For More Insight Into The OBBBA? Check Out These Resources.
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OBBBA Provisions To Impact Real Estate, High-Net-Worth Property Owners
