Compliance
US Inflation Adjustments, 401(k), and Form 1099-K: What Shareholders, Side Hustlers, and Small Employers Must Know for 2026
Several US tax changes affecting 401(k) limits, inflation adjustments, Form 1099-K thresholds, and guidance under the One, Big, Beautiful Bill are in effect—crucial for personal, self-employed, and employer tax planning.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Key US Policy Updates for 2025-2026
### 1. 401(k) & IRA Contribution Limits Rise
The IRS has increased the annual contribution limit for 401(k) plans from **$23,500 to $24,500** and for Individual Retirement Accounts (IRAs) from **$6,500 to $7,500** for the 2026 tax year. These adjustments reflect inflation indexing under recent tax law changes.([stayexempt.irs.gov](https://www.stayexempt.irs.gov/newsroom?utm_source=openai))
### 2. Tax Year 2026 Inflation Adjusted Amounts Fixed by OBBBA
Under the **One, Big, Beautiful Bill Act**, more than 60 tax provisions (including standard deductions, tax brackets, credits) have been adjusted for inflation as of 2026. For example, the standard deductions have been permanently increased.([irs.gov](https://www.irs.gov/irb/2025-45_IRB?utm_source=openai))
### 3. Form 1099-K Filing Threshold Reverts to $20,000
The threshold at which payment processors must issue Form 1099-K to payees has reverted to **$20,000**, under the One, Big, Beautiful Bill. This is particularly relevant for small online sellers, gig economy workers, and those receiving payments through digital platforms.([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
## Who Needs To Take Action
- **Self-employed individuals** or side hustlers receiving payments via apps or platforms: ensure income over $20,000 from transactions via third parties is being captured and reported correctly.
- **Retirement savers**: adjust contributions if you can afford more — increasing IRA/401(k) contributions may reduce taxable income.
- **Employers & payroll providers**: understand changes in thresholds, credits, and ensure systems comply with new reporting rules.
## Practical Scenarios & Planning Tips
| Scenario | Action Plan |
|---|---|
| Jane runs an Etsy shop with $25,000 in brisk sales | Under the $20,000 threshold, Jane will receive a 1099-K and must reconcile those amounts on her Schedule C. Keep clean records of any fees or refunds to avoid overstatement. |
| Mike contributes to IRA and 401(k) | Mike can now contribute up to $24,500 to 401(k) and $7,500 to IRA for 2026. Maximize employer matches. Review catch-up options if age qualifies. |
## Compliance Concerns & Tips
- *Documentation*: Keep records of digital payments, refunds, sales platforms, software tools that separate personal vs business.
- *Retirement limitations*: If company plans have special catch-up rules (SECURE 2.0), ensure compliance, especially with new income caps.
- *Use IRS tools and fact sheets*: For example, the IRS issued Fact Sheet 2025-08 on Form 1099-K changes; though thresholds revert, platforms/reporting may lag.([irs.gov](https://www.irs.gov/newsroom/news-releases-for-october-2025?utm_source=openai))
## Actionable Steps Before Dec 2025
- Update accounting/software to capture 1099-K income properly.
- Review retirement account contribution levels with employer/payroll teams.
- Consult with tax professional if multiple taxable income sources exist.
- Begin tracking expenses and income for any side businesses to ensure proper deductions.
- Stay alert for final IRS guidance (for example on tipped occupations) to comply correctly.