Your Best Tax Advantage and How to Protect It

Week 6: February 9-15, 2026

1099-K Reporting Threshhold Returns to $20,000

If you sell goods or services through payment apps or online marketplaces, the reporting rules have changed again. The One Big Beautiful Bill Act, signed in July 2025, restored the original 1099-K reporting threshold to $20,000 in gross payments and more than 200 transactions.

This means most casual sellers and small-volume solopreneurs will not receive a 1099-K for 2025. The lower thresholds that were scheduled to take effect ($2,500 for 2025, then $600 for 2026) have been reverted to the original standard.

Keep in mind that even if you do not receive a 1099-K, you are still required to report all taxable income. The form is an information return, not a determination of what you owe. Keep your own records and report income accurately on Schedule C. Note that payment platforms may still issue a 1099-K for amounts below the federal threshold.

Source: One Big Beautiful Bill Act § 70432; IRC § 6050W; IRS Fact Sheet 2025-08

Retirement Accounts: Your Best Tax Advantage

Retirement accounts are the most powerful tax reduction tool available to solopreneurs. Every dollar you contribute to a pre-tax retirement account reduces your taxable income dollar for dollar, and the money grows tax deferred until retirement.

Your Options

As a self-employed individual, you have choices in regard to retirement plans:

Under SECURE 2.0, individuals aged 60 through 63 qualify for an enhanced catch-up contribution of $11,250 for Solo 401(k) plans, rather than the standard $8,000. This brings the potential total contribution to $83,250 for this age group.

The Tax Math

Consider a solopreneur with $100,000 net profit who contributes $18,500 to a SEP-IRA:

The $18,500 contribution might cost you only $14,000 after tax savings.

Deadline Reminder

You have until your tax filing deadline (including extensions) to make SEP-IRA and Solo 401(k) employer contributions for 2026. For existing Solo 401(k) plans, employee deferrals must be elected by December 31, 2026. However, under SECURE 2.0, sole proprietors establishing their first Solo 401(k) may set up the plan and make retroactive employee deferrals by the tax filing deadline (without extensions).

Source: IRS Publication 560; IRS Notice 2025-67; IRC § 404

The Augusta Ghost Preparer - 22 Months in Federal Prison

In Week 4 of TaxBrief Solo, we explained what a ghost preparer is and why they pose a serious risk. This week, we explain what happens when someone like this gets caught.

Kim Brown operated a tax preparation business out of her residence in Augusta, Georgia. She prepared and filed tax returns for clients but never signed them as the paid preparer, which violates IRS requirements. That fact alone made her a ghost preparer.

Brown went further than this with her fraud. According to court documents, she fabricated income to help clients qualify for tax credits they did not actually earn. She claimed fake deductions to inflate refund amounts. She built returns on information she knew to be false, then charged her clients for the work.

In August 2025, Brown was sentenced to 22 months in federal prison after pleading guilty to two counts of aiding and assisting in the preparation and filing of false income tax returns. U.S. District Court Judge J. Randal Hall also ordered her to pay $541,912 in restitution and to serve one year of supervised release after completing her prison term.

The IRS noted that refusing to sign a return is one of the clearest warning signs of a ghost preparer. Typically, ghost preparers often combine that behavior with other fraud, including inflated deductions, fake credits, and invented business expenses.

Why This Matters to You

When the IRS discovers a fraudulent return, the preparer may face criminal charges. But the taxpayer is still responsible for the accuracy of their own return. That means clients who received inflated refunds based on fabricated information may owe the IRS back taxes, interest, and penalties, even if they had no idea the return was false.

If your preparer refuses to sign your return, that is not a minor red flag. It is a disqualifying one. Seek out reputable, established tax preparers in your area and ask for references if necessary. In this case, the preparer faced prison and a major fine in restitution, while her clients are left holding their bills.

Source: IRS Criminal Investigation, August 21, 2025

Key takeaway: Retirement contributions reduce your taxable income dollar for dollar and grow tax deferred for decades. On another note, the benefits only hold if your return is prepared correctly and your preparer is someone who is legitimate and trustworthy.

In last week’s issue: The home office deduction remains a legitimate tax benefit for self-employed taxpayers who meet the IRS exclusive use and principal place of business requirements. Careful evaluation of both calculation methods helps ensure the deduction reflects actual business use and income limitations.

Next week: The estimated tax penalty is not for owing money. It is for owing it late. If you meet the prior year safe harbor by paying 100 percent of last year's tax (110 percent if your AGI exceeded $150,000) in four quarterly installments, you are protected regardless of what you owe when you file.

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.