Compliance
Compliance Guide: Information Reporting Thresholds Raised & Identifying Income under OBBB
New changes to Form 1099/withholding thresholds and the rules on wagering income and tip-based earnings: what every business and taxpayer must know.
By NomadicTax Research Team • 5-8 min read • June 24, 2026
## Reporting Thresholds Elevated for 2026
Under the One, Big, Beautiful Bill (OBBB), the **threshold for reporting payments under IRC §6041 and §6041A has increased** from **$600** to **$2,000**, effective **for payments made on or after January 1, 2026**. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai)) Additionally, the threshold for backup withholding under §3406 is similarly updated. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
### Wagering Losses Limit Reduced Option
• The deduction for wagering losses (Section 165(d)) is now limited to **90% of wagering losses**, only to the extent of gains during the taxable year. So, you can’t deduct 100% of losses, just 90%, and only up to the income you had gambling. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Tip Income & "No Tax on Tips" Regulations
The OBBB provides that taxpayers receiving tips under certain occupations may now have **“no tax on tips”** for those who receive “qualified tips.” Final regulations published a list of over 70 occupations in which workers customarily and regularly receive tips—including bartenders, servers, and even water taxi operators. These workers may claim a deduction on tip income from these occupations. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
## What Businesses Need to Adjust
- **Payroll / Accounting Systems**: Update systems to recognize “qualified tips” and occupations listed under the final regs. Make sure tip income reporting is accurate, including withholdings. Businesses need to know which occupations are eligible to allow correct deductions.
- **Vendor Payments & Contractors**: If you make payments of at least $2,000 in a year rather than $600, you must file information returns. This affects independent contractors, vendors, and others previously under the lower threshold. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
- **Gaming Enterprises / Casinos**: Must be aware of both elevated reporting thresholds and revised deductions for wagering losses. Players’ deductions will now be constrained to the lesser of gains, and only 90% of losses. Businesses need to train customer service or tax reporting teams accordingly.
## Example Compliance Scenarios
- **Freelancer paid $1,800** by multiple small clients: Previously no 1099-MISC/NEC required per client. Now any client paying over $2,000 triggers reporting. Be proactive in collecting W-9 info and issuing 1099s.
- **Waiter in a restaurant**: If tips for occupation are listed as eligible, qualified tips may be excluded/taxed differently under “no tax on tips” regulations. Keep tips and income documentation precise.
- **Gambler with $10,000 gambling losses and $7,000 winnings**: Under 165(d), you can deduct up to $6,300 (which is 90% of $7,000), since losses capped at extent of gains, and only 90%. Not the full $10,000. Costs can’t exceed winnings. ([irs.gov](https://www.irs.gov/irb/2026-19_IRB?utm_source=openai))
## Action Steps
- Review the final regulations’ occupation list to see which tip-receiving employees you employ or are one. Understand what qualifies as “no tax on tips” in your case.
- Update forms and payroll processing to collect necessary occupancy info for tip treatment.
- Reconfigure your financial systems so that vendors or contractors you pay $2,000+ are properly reported; early in the fiscal year is best.
- Keep gambling records tightly tied to winnings and losses—don’t assume unlimited deductions.
- If you are a taxpayer, track your tip income separately, and be aware of new deduction limits on losses.