Week 2 · January 12-18, 2026
DON’T MISS
1099 Season Has Begun
Your 1099 forms should start arriving this week. Keep an eye out for:
1099-NEC - Client payments of $600+ (Note: threshold increases to $2,000 for tax year 2026)
1099-K - Payment processor income (PayPal, Stripe, Venmo, etc.)
1099-INT - Bank interest
1099-DIV - Investment dividends
Create a folder (physical or digital) to collect these as they arrive. The IRS receives copies too, and they'll notice if your reported income doesn't match.
Key Deadlines:
February 2, 2026 - Payers must furnish 1099-NEC forms (January 31 falls on Saturday)
February 17, 2026 - Brokerages may take until this date for Consolidated 1099 statements
Don't panic if your brokerage forms haven't arrived by early February-many have an extended deadline for consolidated statements.
Sources: IRS General Instructions for Certain Information Returns (2025); One Big Beautiful Bill Act Section 70433
THE SOLOPRENEUR’S BRIEF
The Tax Refund Problem: Why Owing a Little Is Actually Better
Getting a big tax refund feels like winning. But here's the uncomfortable truth: a large refund means you gave the government an interest-free loan all year.
Every dollar in that refund check was money you could have kept in your pocket, earning interest, paying down debt, or investing in your business.
The Math That Matters
If you received a $6,000 refund, that's $500 per month you overpaid. At even a modest 4% interest, you lost about $120 in potential earnings. At higher rates or invested in your business, the opportunity cost grows.
In Plain English: A large tax refund means you overpaid throughout the year. That money could have stayed in your business or savings instead of sitting with the IRS.
The Sweet Spot
The ideal situation is to owe a small amount (under $1,000) or receive a small refund. This means your money worked for you all year, and you're square with the IRS.
The worst situation is owing a large amount with penalties. This happens when estimated payments are too low.
Important: Even if owing a little is "ideal," you still want to avoid underpayment penalties by meeting safe harbor rules during the year.
Why Solopreneurs Get Big Refunds
Common causes of over-withholding:
Estimated payments are too high based on your prior year's income
Spouse's W-2 withholding covers more than their share
Conservative approach after one year of underpayment
What to Do If You're Over-Refunding
If after filing taxes for 2025, you receive a large refund, consider reducing your 2026 estimated payments. Use the prior-year safe harbor (pay 100% or 110% of your 2025 tax liability) and pocket the difference.
In Plain English: If you consistently receive large refunds, you can usually reduce estimated payments to the safe harbor amount without penalties. The difference stays available to you during the year.
Sources: IRS Publication 505
UNDER THE HOOD
The 1099-K Reporting Threshold Explained
If you accept payments through PayPal, Venmo, Stripe, Square, or similar platforms, you may receive a Form 1099-K reporting that income.
Under the One Big Beautiful Bill Act (OBBBA) signed in July 2025, the reporting threshold reverted to $20,000 AND more than 200 transactions which reflects the standard prior to 2022. This restored the original threshold after years of proposed changes and IRS delays.
In Plain English: This form doesn't mean you owe MORE tax. It just means the IRS knows about income you should have been reporting anyway. If you've always reported your PayPal income, nothing changes for you.
Sources: IRS Fact Sheet 2025-08; One Big Beautiful Bill Act Section 70432
KEY TAKEAWAY, LAST WEEK’S BRIEF & COMING NEXT WEEK
Key takeaway: Start a folder now to collect your 1099 forms as they arrive. If you consistently over-refund, reduce your estimated payments to the safe harbor amount (100% of last year's tax, or 110% if AGI exceeded $150K) and keep the difference working for you.
In Last Week’s Brief: The January 15th Q4 estimated tax payment for 2025 deadline is your first priority. If you miss it, penalties will start accruing. Also, the One Big Beautiful Bill Act permanently restored 100% bonus depreciation, so any business equipment you purchased in 2025 can likely be deducted in full this year.
Next week: The vehicle deduction is one of the most valuable write-offs for solopreneurs and one of the most frequently denied in audits. We'll cover exactly what the IRS requires to protect your mileage deduction.
Disclaimer: This publication is provided for general informational and educational purposes only and does not constitute personalized tax, legal, or accounting advice. Tax laws are complex and subject to change, and their application depends on individual circumstances. Readers should consult qualified professionals regarding their specific situations.
Circular 230 Disclosure: To ensure compliance with U.S. Treasury Department regulations, we inform you that any U.S. federal tax discussion contained in this publication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing, or recommending any transaction or matter addressed herein.