In case you missed it, or are lost trying to make sense of it, here are some items from the “One Big Beautiful Bill Act” that businesses should be aware of. Plus we’re throwing in some info on Paid Family Medical Leave updates for a few states (shout out to our peeps in Colorado, Washington, and on the East Coast!).
What you need to know about No Tax on Tips and No Tax on Overtime
Effective retroactively to January 1, 2025 and running through December 31, 2028, the new law exempts two types of employee income from federal income tax:
- Tipped Wages — Up to $25,000 annually in qualified tips can be excluded from taxable income.
- Overtime Premiums — Up to $12,500 annually (or $25,000 for joint filers) in overtime “premium” pay is also tax-exempt.
To qualify, employees must meet income thresholds and work in occupations that customarily receive tips or are eligible for overtime under federal wage laws.
Here’s a helpful article to learn more about qualifications and cautions.
What you need to know about 1099 Reporting Threshold Changes
Effective for payments made in 2026 and beyond, the following changes apply:
1099-NEC Threshold: The reporting threshold for Form 1099-NEC will increase from $600 to $2,000.
- Employers and payers will only need to issue a 1099-NEC if they pay a contractor $2,000 or more in a calendar year.
- The threshold will be adjusted annually for inflation beginning in 2027.
1099-K Threshold: The prior American Rescue Plan Act (ARPA) lowered the 1099-K threshold to $600, but this change has been reversed.
- Retroactive to 2022, the threshold for third-party settlement organizations (e.g., PayPal, Venmo) returns to $20,000 in payments and 200 transactions per year.
These changes are designed to reduce the reporting burden for small businesses, contractors, gig workers, and payment platforms. However, it’s important to note that contractor income is still taxable, even if a 1099 is not required.
Read this article to learn more.
What you need to know about Mid-Year Paid Family Medial Leave (PFML) Updates
Several state Paid Family and Medical Leave (PFML) programs have released updates. In some states, a new State Average Weekly Wage (SAWW) has also been announced, which directly impacts the maximum weekly benefit employees can receive. Some of these changes are already in effect, while others are set to begin on January 1, 2026.
If you operate in Colorado, Washington, Oregon, Maine, Rhode Island, or the District of Columbia (D.C.), these updates apply to you. Read more here.
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As always, if you want help navigating these changes or updating your payroll and HR policies, don’t hesitate to reach out. Email us at team@copperquailconsulting.com or schedule a quick call.