W-2 and 1099 Compliance Under the One Big Beautiful Bill Act: What Employers Must Do and When.

Article | July 31, 2025

W-2 and 1099 Compliance Under the One Big Beautiful Bill Act: What Employers Must Do and When.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces major changes to how employers report wages, tips, and contractor payments. While the new deductions and thresholds benefit workers, they also require timely action from employers to remain compliant. We are still waiting on further guidance from IRS, there are a few things that employers can do now to prepare for the changes. We will keep you posted as we receive more information.

Here is a basic breakdown of what employers need to do, along with key deadlines:

Form W-2: New Reporting for Tips and Overtime
Effective Date: January 1, 2025 (retroactive)

What’s New: Employers must report:

o    Qualified tips received by employees in eligible occupations that customarily and regularly receive tips

o    Qualified Tips are voluntary cash or charged tips received from customers or through tip sharing
o    IRS will publish an official list of eligible occupations by October 2, 2025

o    Qualified overtime pay, specifically the “half” portion of time-and-a-half
o    Qualified overtime includes overtime required by the Fair Labor Standards Act (FLSA)
o    Qualified overtime does not include state or locally mandated overtime that is not already included in the overtime required by FLSA.

o    Employee occupation (for tip deduction eligibility)

What Employers Must Do:
Immediately update payroll systems to track:
o    Tips by occupation
o    Overtime pay breakdowns
Ensure accurate year-end W-2 reporting for the 2025 tax year

Key Deadline:
January 31, 2026: Deadline to furnish 2025 W-2s to employees and file with the SSA

Form 1099-K: Threshold Rollback
Effective Date: Immediately for 2025

What’s New: Reporting threshold restored to $20,000 and 200 transactions Applies to payments via platforms like PayPal, Venmo, and others.

What Employers Must Do:
Review third-party payment processor settings to ensure correct thresholds are applied
Coordinate with accounting teams to avoid unnecessary 1099-K filings

Key Deadline: January 31, 2026:

Deadline to furnish 2025 1099-Ks to recipients and file with the IRS
Forms 1099-MISC and 1099-NEC: Higher Thresholds
Effective Date: January 1, 2026

What’s New: Reporting threshold increases from $600 to $2,000

Applies to payments for services, rents, prizes, and nonemployee compensation

What Employers Must Do:
Update vendor onboarding to track cumulative payments
Adjust backup withholding and reporting procedures

Key Deadlines:
January 1, 2026: New threshold takes effect
January 31, 2027: Deadline to furnish 2026 1099s to recipients and file with the IRS
2027 onward: Thresholds will be adjusted annually for inflation

Summary of Employer Compliance Deadlines

Have Questions About Compliance? Let’s Talk. ??
Navigating these changes can be challenging, but you don’t have to do it alone. Our team is here to help you stay ahead and stay compliant. If you have any questions about how the One Big Beautiful Bill Act impacts your business, give our Client Accounting Services Department a call at 541-342-5161.  We’re happy to walk you through the details and support your transition.

Sincerely, 

Isler CPA
Client Accounting and Advisory Services