Compliance
How One Big Beautiful Bill Is Changing Withholding & Reporting in 2025
Several new IRS guidance pieces under OBBB are changing thresholds and reporting rules—affecting everything from Form 1099-K to tip reporting and withholding.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## Key Reporting Rules Under OBBB in Effect Now
The **One, Big, Beautiful Bill (OBBB)** passed earlier in 2025 made sweeping changes. Here are recent IRS developments impacting compliance now.
### Form 1099-K Threshold Reversion
- Under ARPA, third-party settlement organizations had to issue Form 1099-K when either payments exceeded **$600** or number of transactions exceeded the threshold, irrespective of number. OBBB reverses that for years prior to 2026: the threshold is back to **$20,000 and more than 200 transactions**. ([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai))
### Reporting of Tips & Qualified Overtime—Penalty Relief
- Employers and payors get **penalty relief** for tax year 2025 for reporting requirements under OBBB related to **cash tips and qualified overtime compensation**. This gives more time and flexibility for compliance. ([irs.gov](https://www.irs.gov/newsroom/topics-in-the-news?utm_source=openai))
### Inflation Adjustments that Affect Withholding Tables & Standard Deduction
- Standard deductions increase for 2026: $16,100 (single), $24,150 (head of household), $32,200 (married filing jointly). Marginal brackets shift in some ranges. These changes affect tax liability estimates and decisions about withholding now. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Practical Impacts & What Taxpayers Need to Do
- **Freelancers and gig workers** should watch the 1099-K threshold adjustments. Transactions that were close to the lower ARPA standard may no longer trigger reporting, reducing reporting burdens.
- **Employers** need to plan for how to track and report tips and overtime under OBBB, especially when applying for relief. Ensure your payroll system captures qualifying overtime separately and tip income as required.
- **Individuals** should run a withholding estimator—higher standard deductions and changed rates might mean you’re over-withheld and losing cash flow each month.
## Examples to Illustrate
- *Carol*, a rideshare driver who receives lots of small payments, now only receives 1099-K if they exceed both $20,000 **and** 200 transactions. She’ll avoid receiving dozens of reports for small gigs.
- *Danielle*, whose employer pays overtime regularly and whose staff receives cash tips, may have less penalty risk for misreporting or late reporting under newly clarified penalty relief for tax year 2025.
## Compliance Checklist for End-of-Year
- Ensure your systems are updated for **Form 1099-K** threshold rules.
- Request payroll/accounting verification that qualifying overtime and tip reporting is set up properly.
- Consult tax professionals if you anticipate hitting the limits or exposures under these rules.
## Bottom Line
OBBB has restored some familiar rules (1099-K), added relief for employers, and pushed several parameters upward. These changes require attention now—even before 2026 begins—to avoid surprises and ensure compliance.