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Forms 1099-NEC and 1099-MISC include new boxes for tax year 2026. The changes are driven by the No Tax on Tips and No Tax on Overtime provisions of the One Big Beautiful Bill Act (OBBBA), which allow eligible recipients to deduct qualified tips and overtime compensation. To support those deductions, payers are required to separately report tip and overtime amounts on information returns starting with payments made in 2026.
This post covers what’s changing, which box reports what, and what payers need to know before filing season 2027.
Are you an individual trying to understand your own tip or overtime deduction? This post is written for businesses that issue 1099s. For guidance on claiming the deduction on your own return, see the IRS’s No Tax on Tips and No Tax on Overtime overviews.
This is part of our 2026 1099 form changes series, covering all the IRS and OBBBA-driven updates affecting 1099 filings for tax year 2026.
Form 1099-NEC: What’s New for 2026
The IRS published the final Form 1099-NEC (Rev. December 2026) on June 9, 2026. The existing Box 1 for non-employee compensation becomes Box 1a. New boxes 1b, 1c, and 1d report cash tips, a Treasury Tipped Occupation Code, and qualified overtime compensation.
| Box | What It Reports |
|---|---|
| 1a | Total nonemployee compensation (the same figure previously reported in Box 1) |
| 1b | Cash tips — included in Box 1a; used by recipient to calculate the qualified tip deduction |
| 1c | Treasury Tipped Occupation Code (TTOC) — up to two codes identifying the recipient’s tipped occupation(s) |
| 1d | Qualified overtime compensation — included in Box 1a; used by recipient to calculate the qualified overtime deduction on Schedule 1-A |
The amounts in Boxes 1b and 1d are not additional compensation. They are subsets of Box 1a already included in the total.
If occupation code 000 is the only code shown in Box 1c, the cash tips are not qualified tips and the Box 1b amount should not be used for the deduction.
Link to the new IRS Form 1099-NEC: IRS Form 1099-NEC Rev. 12-2026
Form 1099-MISC: What’s New for 2026
The IRS published the final Form 1099-MISC (Rev. December 2026) on May 26, 2026.
The new tip and overtime boxes occupy Boxes 13a, 13b, and 14, with the remaining boxes renumbered accordingly.
| Box | What It Reports |
|---|---|
| 13a | Cash tips — included in Box 3 (other income); used by recipient to calculate the qualified tip deduction |
| 13b | Treasury Tipped Occupation Code (TTOC) — up to two codes identifying the recipient’s tipped occupation(s) |
| 14 | Qualified overtime compensation — included in Box 3; used by recipient to calculate the qualified overtime deduction on Schedule 1-A |
The amounts in Boxes 13a and 14 are not additional income — they are subsets of Box 3 already included in the total. If occupation code 000 is the only code shown in Box 13b, the cash tips are not qualified tips and the Box 13a amount should not be used for the deduction.
Link to the new IRS 1099-MISC form: IRS Form 1099-MISC Rev. 12-2026
What Payers Need to Do
Identify which payees receive tips or overtime. Not every contractor will have tip or overtime amounts to report. This applies to payments to workers in tipped occupations — wait staff, delivery workers, beauty and personal care workers, personal trainers, and similar roles — and payments that include amounts designated as overtime.
Determine the correct TTOC. The Treasury Tipped Occupation Code is required for tip reporting. An incorrect or placeholder code (000) affects the recipient’s ability to claim the deduction. The list of qualifying occupations was proposed under REG-110032-25, published in the Federal Register on September 22, 2025 (90 FR 45340), and was finalized without substantive change by Treasury Decision 10044 on April 13, 2026. The final regulations identify more than 70 qualifying occupations. (Treasury Decision 10044; Federal Register — REG-110032-25)
Track tip and overtime amounts separately throughout 2026. The new boxes require knowing how much of a payment was tips and how much was overtime compensation. This needs to be tracked during the year to be reported accurately at year-end.
Confirm your payroll or 1099 software supports the new boxes. Both Form 1099-NEC and Form 1099-MISC have been finalized for 2026 with the box layouts described above. Confirm with your provider that your software has been updated to match the final forms before the January 2027 filing season.
Why This Is Changing
The new boxes support two deductions created by the OBBBA: No Tax on Tips and No Tax on Overtime, both available for tax years 2025 through 2028. The maximum annual deduction for qualified tips is $25,000. The maximum annual deduction for qualified overtime is $12,500 ($25,000 for joint filers). Both phase out above $150,000 in modified adjusted gross income ($300,000 for joint filers). In order for recipients to claim these deductions, payers need to separately report tip and overtime amounts on the 1099 forms they issue, which is what the new boxes are for. (IRS Notice 2025-69, Section II)
Tax Year 2025: No Action Required
Separate reporting of tips and overtime was not required for tax year 2025 returns filed in early 2026. IRS Notice 2025-62 provided penalty relief from the new information reporting requirements for cash tips and qualified overtime compensation for taxable year 2025 only. Relief covered both the failure to file correct information returns (Section 6721) and the failure to furnish correct payee statements (Section 6722).
For 2025, workers who received qualified tips or overtime and want to claim the deduction must calculate the amounts themselves using Schedule 1-A instructions if their payer did not separately report them.
The penalty relief does not extend beyond 2025. Tax year 2026 is when separate reporting becomes mandatory. (IRS Notice 2025-62)
Other 2026 Form Changes
Two other updates affect payers:
Address fields are now separated. For forms revised in 2026, the IRS separated address fields into individual entry boxes. That means separate fields for street address, city, state, and ZIP rather than combined. This affects data preparation for organizations generating forms from accounting or ERP systems.
Form 1099-H can no longer be filed. The Health Coverage Tax Credit expired December 31, 2021. Starting in 2026, Form 1099-H can no longer be filed.
For the full picture of all 2026 form and filing changes — including the new $2,000 reporting threshold and the transition from FIRE to IRIS — see IRS 1099 Form Changes for 2026: What’s Different and What You Need to Do.
Frequently Asked Questions
Do I need to report tips and overtime separately on 2025 1099s? No. IRS Notice 2025-62 provides penalty relief for tax year 2025, and the 2025 versions of Form 1099-NEC and Form 1099-MISC were not updated for this requirement. Separate reporting becomes mandatory starting with tax year 2026 returns, filed in early 2027.
What is a Treasury Tipped Occupation Code (TTOC)? A TTOC is a code identifying a recipient’s tipped occupation for purposes of the qualified tips deduction. Up to two codes can be reported per recipient. The list of qualifying occupations was finalized by Treasury Decision 10044 on April 13, 2026, and identifies more than 70 occupations.
What happens if TTOC code 000 is used? If occupation code 000 is the only code reported, the recipient’s cash tips are not treated as qualified tips, and the amount reported as cash tips should not be used to calculate the qualified tips deduction.
Has the final Form 1099-NEC been released? Yes. The IRS published the final Form 1099-NEC (Rev. December 2026) on June 9, 2026, following the final Form 1099-MISC (Rev. December 2026) on May 26, 2026. Both forms reflect the new tip and overtime reporting boxes described above.
Is the tips and overtime deduction permanent? No. Both the qualified tips deduction and the qualified overtime deduction apply to tax years 2025 through 2028 and expire after December 31, 2028, unless extended by future legislation.
How TAB1099 Handles These Changes
For tax year 2026 filings, TAB1099 will support the new box structure on Form 1099-NEC and Form 1099-MISC, including the cash tip, TTOC, and overtime fields, as part of standard filing. Organizations using TAB1099 do not need to update their own forms or software to accommodate these changes.
The new requirements depend on data that has to be tracked throughout the year — separating cash tips and overtime compensation from total payments as they’re made, not reconstructed at year-end. Organizations that pay contractors in tipped or overtime-eligible occupations should set up that tracking now, well ahead of the January 2027 filing deadline.
If you’re evaluating whether your current systems or vendor are ready for these changes, contact Tab Service — we can review your current setup and outline what, if anything, needs to change before filing season.
Sources: IRS Publication 1099 (2026); IRS Form 1099-NEC (Rev. 12-2026 — final); IRS Form 1099-MISC (Rev. 12-2026 — final); IRS Notice 2025-62; IRS Notice 2025-69; Treasury Decision 10044 (April 13, 2026); Federal Register — REG-110032-25 (90 FR 45340, September 22, 2025).
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional for guidance specific to your situation.
