Reporting and Compliance: What Businesses Need to Know for 2026 and Beyond

Business Reporting and Compliance Changes: Key Updates for 2026 and Beyond

Beginning in 2026, the One Big Beautiful Bill Act (OBBBA) introduces new reporting thresholds and enhances enforcement of pandemic-era credits, significantly altering the landscape of business tax compliance. It is essential for business owners and financial managers to understand these changes, as they will impact the processes for issuing 1099s, managing payroll, and claiming various tax credits. Staying informed and compliant with these updates is crucial for effective financial management.

Overview

OBBBA introduces sweeping changes to business compliance and reporting rules, aiming to modernize tax administration, reduce fraud, and improve transparency. These updates affect small businesses, corporations, nonprofits, and third-party platforms alike. The scope of these changes is broad, addressing both the details of routine information returns and larger compliance themes that impact day-to-day operations and long-term planning.

A central element of OBBBA is the adjustment of information reporting thresholds, which determines when businesses must report payments to nonemployees and contractors. Revised backup withholding requirements are also included, ensuring that proper tax amounts are collected and remitted for payments reported via 1099s and other forms. For third-party payment networks and gig platform operators, new reporting exemptions and requirements clarify when and how to report transactions, providing much-needed guidance as these platforms continue to grow in economic influence.

In addition, the Act sharpens IRS enforcement tools regarding pandemic-era programs, especially the Employee Retention Credit (ERC). Stricter penalties and audit windows are established for ERC promoters and claimants, sending a clear signal about the need for due diligence and accuracy.

Tax-exempt organizations also see reforms, particularly in the area of executive compensation. Provisions now extend excise taxes to a broader range of high-earning employees and regulate excessive parachute payments, promoting more equitable compensation practices.

Cross-border transactions and foreign reporting receive more scrutiny as well, with new standards designed to close loopholes, reduce illicit financial flows, and enhance transparency for multinational entities.

Collectively, these reforms require organizations to reassess and update their payroll processes, recordkeeping practices, executive compensation policies, and reporting protocols. Staying vigilant and responsive to these evolving compliance standards will be essential for successfully navigating the new regulatory environment.

New 1099 Reporting and Backup Withholding Thresholds

• Starting in 2026, the threshold for reporting payments to nonemployees and other business-related payees increases to $2,000.

• This applies to payments made in the course of a trade or business and remuneration to nonemployee workers.

• The same threshold applies to backup withholding, and both thresholds will be adjusted for inflation after 2026.

De Minimis Exception for Third-Party Settlement Organizations

• Third-party platforms (e.g., PayPal, Venmo) must report transactions only if both of the following are true:

  • Gross payments to a payee exceed $20,000

  • The total number of transactions exceeds 200

• Backup withholding rules follow this exception unless the payor made reportable payments in the previous year.

ERC Enforcement and Penalties

• • $1,000 penalty per failure for ERC promoters lacking due diligence

• Six-year statute of limitations for IRS assessments

• 20% penalty on erroneous employment tax refund claims

• ERC claims are disallowed after enactment of these provisions

Excess Compensation in Tax-Exempt Organizations

• The excise tax, payable by exempt organizations on remuneration in excess of $1 million and any excess parachute payments, will no longer be limited to the five most highly-compensated current and former employees in the tax year.
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Corporate Charitable Contributions

• • Deductions allowed only if contributions exceed 1% of taxable income

• Capped at 10% of taxable income

• Excess contributions may be carried forward for five years

Meals and Fringe Benefits

• Beginning in 2026, business expense deductions are disallowed for employer-provided meals that are excludable from an employee’s income or are de minimis fringe benefits. However, employers may deduct these expenses if the meals are sold or provided to employees on certain vessels, oil or gas platforms, or drilling rigs and their support camps. In addition, the exception to the 50-percent deduction limit for meals is expanded to apply to crew members of commercial fishing vessels.
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REIT Asset Test Adjustment

• The percentage of the value of the total assets of a real estate investment trust
  (REIT) that can be represented by securities of one or more taxable REIT subsidiaries is increased from 20% to 25% for tax years beginning after 2025.
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CAMT Adjustments for Corporations

• For tax years beginning after 2025, a corporation‘s adjusted financial statement
  income (AFSI) for corporate alternative minimum tax (CAMT) purposes is reduced
  by any deductions for intangible drilling and development costs (IDCs) allowed in
  computing the corporation‘s taxable income. In addition, the AFSI is adjusted to
  disregard any depletion expenses for property that are taken into account on the
  corporation's applicable financial statement with respect to the IDCs of that property.
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What This Means for Businesses

• Review and update reporting systems for 1099s and backup withholding.

• Prepare for extended audit windows and penalties related to ERC.

• Reassess compensation structures and charitable giving strategies.

• Adjust deductions for meals and fringe benefits.

• Monitor REIT and CAMT changes for tax planning.