What’s new for the 2026 Tax Season?

Present Law

Information Reporting Requirements Present law requires persons to file an information return concerning certain transactions with other persons. The person filing an information return (the “payor”) is also required to provide the person for whom the information return is being filed (the “payee”) with a written statement showing the information that was reported to the Internal Revenue Service (“IRS”), which generally includes aggregate payments made, and the contact information for the payor. These returns are intended to assist taxpayers in preparing their income tax returns and to help the IRS determine whether those returns are correct and complete.

For example, every person engaged in a trade or business who makes certain payments aggregating $600 or more in any taxable year to a single payee in the course of such trade or business must report those payments to the IRS. This requirement applies to fixed or determinable payments of income as well as nonemployee compensation, generally reported on either Form 1099-MISC, Miscellaneous Information, or Form 1099-NEC, Nonemployee Compensation. In addition, any service recipient engaged in a trade or business and paying for services is required to make a return according to regulations when aggregate payments equal $600 or more. Governmental entities are specifically required to make an information return, and in the case of payments by Federal executive agencies, that extends to reporting payments to corporations as well as individuals. However, these provisions discussed above do not cover payments for goods or certain enumerated types of payments that are subject to other specific reporting requirements, such as provisions covering dividends, interest, and royalties. Treasury regulations generally provide further exceptions from the reporting of payments to corporations, exempt organizations, governmental entities, international organizations, and retirement plans. A person who is required to file information returns but who fails to do so by the due date for the returns, includes on the returns incorrect information, or files incomplete returns generally is subject to a penalty of $250 for each return with respect to which such a failure occurs, up to a maximum of $3,000,000 in any calendar year, adjusted for inflation. Similar penalties apply to failures to furnish correct written statements to recipients of payments for which information reporting is required. The failure-to-file and failure-to-furnish penalties are reduced for small businesses and increased for failures due to intentional disregard. Backup Withholding Generally, a payor is not required to withhold taxes from payments to the payee. However, a payor may be required to deduct and withhold income tax on certain “reportable payments” at a rate equal to 24 percent if: (1) The payee fails to furnish his or her taxpayer identification number (“TIN”) to the payor; (2) The IRS notifies the payor that the payee’s TIN is incorrect; (3) A notified payee underreporting of 29 •

Tax Changes in the Big Beautiful Bill reportable payments have occurred; or (4) A payee certification failure with respect to reportable payments has occurred. The requirement to deduct and withhold in the case of a notified payee underreporting or a payee certification failure applies solely to reportable interest or dividend payments. These deduction and withholding requirements are referred to as backup withholding. Reportable payments are defined as any reportable interest or dividend payment and any other reportable payment. A reportable interest or dividend payment means any payment of a kind, and to a payee, required to be shown on an information return required under any of the following sections: (i) 6049(a), relating to payments of interest, (ii) 6042(a), relating to payments of dividends, or (iii) 6044, relating to payments of patronage dividends, but only to the extent such payment is in money and only if 50 percent or more of such payment is in money. Any other reportable payment means any payment of a kind, and to a payee, required to be shown on a return required under any of the following sections: (i) 6041, relating to certain information at source, (ii) 6041A(a), relating to payments of remuneration for services, (iii) 6045, relating to returns of brokers, (iv) 6050A, relating to reporting requirements of certain fishing boat operators, but only to the extent such payment is in money and represents a share of the proceeds of the catch, (v) 6050N, relating to payments of royalties, or (vi) 6050W, relating to payments made in settlement of payment card and third party settlement transactions. Examples of payments that may be subject to backup withholding include interest, dividends, rents, royalties, commissions, nonemployee compensation, and broker payments. In general, a payment is determined to be a reportable payment, and therefore subject to backup withholding, without regard to any minimum amount which must be paid before an information return is required under the applicable information reporting statute. For payments required to be shown on a return under section 6041(a) or 6041A(a), relating to certain information at the source and payments of remuneration for services, a minimum amount generally must be paid before the payment is subject to backup withholding. Such payments are treated as reportable payments, and therefore subject to backup withholding, only if: (i) The aggregate amount of such payment and all previous payments described in section 6041(a) or 6041A(a) by the payor to the payee during such calendar year equals or exceeds $600, (ii) The payor was required under section 6041(a) or 6041A(a) to file an information return for the preceding calendar year with respect to payments to the payee, or (iii) During the preceding calendar year, the payor made reportable payments to the payee with respect to which amounts were required to be deducted and withheld under the backup withholding requirements. Backup withholding generally applies only to payments made to U.S. persons who have failed to provide the payor with a valid IRS Form W-9, Request for Taxpayer Identification Number and Certification; however, it may also apply to certain payments made to persons in the absence of valid documentation of foreign status. Backup withholding does not apply to payments made to exempt recipients, including tax-exempt organizations, government entities, and certain other entities. Thus, a payor of reportable payments generally must request that a U.S. payee (other than certain exempt recipients) furnish a Form W-9 providing that person’s name and TIN.

30 • Tax Changes in the Big Beautiful Bill

New Law

The law changes the information reporting threshold for certain payments

Years after 2026. No change is made to the information reporting threshold for direct sales. The law also makes a conforming change to the backup withholding dollar threshold to align with the new $2,000 reporting threshold. Under the law, both the information reporting thresholds and the backup withholding thresholds are for transactions that equal or exceed $2,000 (indexed for inflation for calendar years after 2026). Effective for payments made after December 31, 2025