What compliance changes to watch in 2025-2026
Several compliance tools and rules have changed with the introduction of the One, Big, Beautiful Bill (OBBB) Act.
- Updated Forms W-4 and W-4P: New versions for 2026 have changes to reflect OBBB deductions, and a checkbox for claiming exemption or no withholding added below Step 4(c). (irs.gov)
- Pub 15-T withholding tables updated: Reflect the permanent extension of tax rates, standard deduction, and no personal exemptions. Employers should use updated tables for payroll computations. (irs.gov)
- Tax Withholding Estimator enhancements: Now reflects new deductions (tips, overtime, car loan interest, senior deduction) and changes to family credits, homeownership, charitable contributions. Encourage employees to reevaluate withholding. (irs.gov)
- Income reporting thresholds restored: For payment apps/marketplaces, Form 1099-K reporting criteria are back to “$20,000 and more than 200 transactions” vs new lower thresholds. Even when statements aren’t received, taxpayers must report all gross income. (irs.gov)
Practical compliance steps for employers & payroll pros
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Review and distribute updated W-4/W-4P forms:
- Ensure employees know about the new deductions and checkboxes.
- Seek updated forms if they had large refunds or liabilities in 2025.
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Train HR/payroll on new withholding tables:
- Pub 15-T has numeric thresholds and rate schedules updated for 2026.
- Payroll systems must incorporate no tax on tips and overtime when computing withholding where applicable.
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Track all tip/overtime data:
- Even if tips are bundled in total income or payroll systems don’t break them out, employees and employers should keep backup records.
- Establish policies for voluntary tip-sharing and ensure cash and equivalent payments are documented.
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Ensure accurate 1099-K reporting & income capture:
- For digital marketplaces, check when platform triggers are met under the revised threshold.
- Remind gig workers, rental hosts, etc. to record all income, even when platforms don’t issue statements.
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Audit reporting tools:
- Use IRS Tax Withholding Estimator to assess whether employees are under/over withheld.
- Confirm that forms reflect new law changes accurately in your tools or tax software.
Common pitfalls & how to avoid them
- Relying on outdated forms: Using pre-2026 Forms W-4 without updating might omit eligibility for new deductions.
- Misclassifying tip income: Tips must be “qualified” by occupation list and type of tip or pay. Make sure roles are eligible.
- Neglecting income even if no 1099 received: Missing income by assuming lack of reporting equals lack of obligation—incorrect. All gross income is reportable.
- Ignoring phase-outs: Deductions for tips/overtime/car loan interest, etc., diminish once you cross MAGI thresholds.
Example checklist
| Task | Who | Done? |
|---|---|---|
| Distribute updated W-4/W-4P for 2026 | Employer | [] |
| Update payroll software to include new Pub 15-T withholding tables | Payroll / IT | [] |
| Establish logs or policy for tip recordings | Employee / Employer | [] |
| Evaluate digital income and 1099-K thresholds | Gig worker / Tax professional | [] |
| Use Tax Withholding Estimator early in the year | Individual taxpayers | [] |
Author: NomadicTax Research Team
Category: Compliance
TaxHome: US
ReadTime: 5-8 min
Published: true