Small businesses are preparing for the 2026 filing season as changes enacted in the One Big Beautiful Bill last July take effect. H&R Block tax experts said the legislation reversed several scheduled tax increases and made permanent provisions that had been set to expire.
The changes affect payment reporting, depreciation, and payroll reporting requirements, including updates tied to deductions for tips and overtime.
Payment Reporting Threshold Jumps To $20,000
The threshold for receiving a Form 1099-K, which reports income from online marketplaces and third party payment networks, has been set at $20,000 and 200 transactions. The prior threshold referenced for last year was $5,000.
Brittany Benson, manager of the tax content team at Block Advisors, said during an online briefing that businesses must report taxable revenue even when a Form 1099-K is not issued.
The threshold change follows earlier efforts to expand reporting. The American Rescue Plan Act of 2021 lowered the threshold to $600, but implementation was delayed multiple times before the One Big Beautiful Bill set the $20,000 and 200 transaction standard.
Equipment Deductions Return To Full Value
The legislation restored 100% bonus depreciation for qualifying assets placed in service after January 19, 2025. Bonus depreciation allows businesses to deduct eligible equipment and other qualifying property costs in the year the assets are placed in service.
The change reverses a scheduled phase down under the 2017 Tax Cuts and Jobs Act. Under that law, 100% bonus depreciation applied through 2022, then declined to 60% for 2023 and was scheduled to fall to 40% for the 2026 tax year before the new legislation changed the schedule.
Assets placed in service before January 19, 2025 remain subject to the 40% limitation referenced in the briefing.
Section 179 expensing limits also increased. The maximum deduction rose from $1.22 million to $2.5 million, and the total asset value limitation increased from $3 million to $4 million, expanding the amount of qualifying purchases that can be expensed rather than depreciated over time.
Pass Through Business Deduction Made Permanent
The Qualified Business Income deduction, which allows eligible owners of pass through entities to deduct 20% of qualified business income, was made permanent. The provision had been scheduled to expire at the end of 2025.
Pass through entities include LLCs, partnerships, and sole proprietorships, where business income and losses are reported on an owner’s individual return. For the 2026 tax season, the legislation also established a $400 minimum deduction. The deduction phases out at higher income levels and includes limitations for certain service businesses.
New Reporting Requirements For Tips And Overtime
Starting with the 2026 tax year and continuing through 2028, employers must separately report employee tips and overtime on W-2 and 1099 forms. The reporting requirement is tied to new deductions available to workers for qualified tips and overtime income.
The tip deduction allows qualifying employees to deduct up to $25,000 of tip income. Phaseouts begin at modified adjusted gross income above $150,000 for single filers and $300,000 for married couples filing jointly. The overtime deduction is capped at $12,500 for individual filers and $25,000 for joint filers, with similar income phaseouts.
Benson said the IRS is expected to update forms to accommodate the separate reporting categories.
Broader Context Of Tax Code Changes
The One Big Beautiful Bill also made permanent several individual tax provisions from the 2017 Tax Cuts and Jobs Act that had been scheduled to expire. Standard deductions were set at $31,500 for married couples filing jointly, $23,625 for heads of household, and $15,750 for single filers and married individuals filing separately.
The IRS has said taxpayers will use Schedule 1-A when claiming new deductions related to tips, overtime, and certain other categories. The agency said additional guidance will be released as forms are finalized for the 2026 filing season.
The 2026 tax filing season opens next Monday, with returns generally due in April.
Source
Changes to the Tax Code that Small Business Owners Need to Know | San Fernando Sun