IRS Tax Prep Workflow Changes: 5 Essential OBBBA Updates for Small CPA Firms

Why IRS Tax Prep Workflow Changes Matter More This Season

IRS tax prep workflow changes are not abstract policy shifts. They land on your desk as new intake questions, revised depreciation schedules, updated 1099 thresholds, and clients who call asking why their deductions look different this year. At BusAcTa Advisors, we prepare returns behind small and mid-sized CPA firms across the US, and the 2025 One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has generated more workflow questions from our partner firms than any legislation since the TCJA.

This is the practical version. We won't pretend every change is a burden, some of them simplify your clients' books. But each one requires a deliberate adjustment to how your team collects information, prepares returns, and reviews work before it goes out. The firms that update their processes before the crunch are the ones that make it through without scrambling.

This is general information, not tax advice for a specific client situation. Consult the IRS guidance and a qualified tax professional about your firm's specific circumstances.

1. The 1099-NEC and 1099-MISC Threshold Jumped to $2,000

The OBBBA raised the federal reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000, effective for payments made starting January 1, 2026. The $2,000 figure will adjust annually for inflation from 2027 onward. For your clients' books, this means fewer forms to issue for lower-dollar contractor payments. But it does not mean those payments go unreported on income tax returns.

What does this actually change in your workflow? Quite a bit. Your client intake process needs to capture all contractor payments, not just those that hit the old $600 trigger. Some states have not adopted the federal $2,000 threshold and still require reporting at lower levels. If you prepare returns for clients in multiple states, your team needs a state-by-state check built into the intake checklist before a single 1099 is issued or omitted.

The 1099-NEC threshold rising to $2,000 means fewer forms, but does not reduce the income reporting obligation for the recipients. Make sure your clients understand the difference.

The 1099-K threshold has also changed. The OBBBA restored the old $20,000 and 200-transaction threshold for third-party payment platforms, retroactive to 2022. That reversal affects gig-economy clients and small businesses that sell through platforms like PayPal or Venmo. Your intake questions for those clients need to reflect the new threshold so you're not under-reporting or over-querying.

Our offshore tax preparation team builds these threshold checks into the client organiser for every engagement, so your reviewers aren't the first line of defence against a missed state rule.

2. 100% Bonus Depreciation Is Back, and Your Depreciation Schedules Need to Reflect It

One of the biggest workflow changes for small CPA firms this season is the permanent restoration of 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. Under the Tax Cuts and Jobs Act, bonus depreciation was phasing down. In 2025 it would have dropped to 40% and disappeared entirely by 2027. The OBBBA reversed that entirely.

For most tangible property with a recovery period of 20 years or less, including used property, your clients can now deduct the full cost in year one. That means depreciation schedules your team built under the TCJA phase-down assumptions are wrong for any asset placed in service after January 19, 2025.

How does this hit your workflow? Three ways:

• Asset registers need a cut-off date review: property acquired before January 19, 2025 follows the 40% TCJA rule; anything after qualifies for 100%.

• Section 179 limits also changed. The maximum deduction increased from $1,220,000 to $2,500,000 for tax year 2025, with the phaseout beginning at $4,000,000. Your software defaults need updating.

• Bonus depreciation elections interact with Section 163(j) interest deductions. Firms with leveraged clients need to model both together, not in isolation.

Firms that don't update their depreciation defaults before preparing 2025 returns risk understating deductions for clients who placed assets in service mid-year.

Don't expect your clients to flag this themselves. Most small business owners don't track the January 19, 2025 acquisition date as a dividing line. Your intake organiser needs an explicit question about when equipment was purchased and placed in service, with a separate field for assets bought under contracts entered before that date.

3. Section 174 R&D Expensing Is Restored, With Retroactive Catch-Up Options

This one created serious work for small firms. Under the TCJA, domestic research and experimental (R&E) costs under Section 174 had to be capitalised and amortised over five years starting in 2022. The OBBBA restored immediate deductibility for domestic R&E costs, effective for tax years beginning after December 31, 2024. Foreign R&E costs still require 15-year amortisation.

The retroactive element is where small firms need to act. Clients with average gross receipts of less than $31 million over the 2022 through 2024 tax years can amend their 2022, 2023, and 2024 returns to claim the immediate deduction. Larger clients don't get that option but can accelerate the unamortised balance into 2025 or spread it across 2025 and 2026.

What does this mean for your workflow right now? You need a client segmentation list. Pull every client that had R&D costs in 2022 through 2024. Check their three-year average gross receipts. Decide whether amending prior returns makes sense, given the cost of the amendment versus the refund opportunity. The IRS issued Rev. Proc. 2025-28 in August 2025 with updated rules for how small businesses can claim this deduction.

In our view, this is the update most likely to fall through the cracks at small firms. R&D clients tend to be tech, life sciences, or manufacturing businesses, a smaller slice of a typical CPA practice. It's easy to skip the retroactive analysis when tax season is in full swing. A pre-season review of which clients had capitalised Section 174 costs is the only way to catch this before the opportunity closes.

Our bookkeeping services team can pull historical R&E cost data for your clients as part of the pre-season review, so your CPAs spend their time on the analysis, not the data gathering.

4. Overtime and Tips Deductions Create New Documentation Requirements

The OBBBA introduced temporary deductions for overtime pay and tip income, both effective for tax year 2025. These deductions are capped: the overtime deduction phases out above certain income levels, and the tip deduction applies to certain industries and income types. Both are new, both require documentation your clients probably haven't been tracking the way you need them to.

For 2025 W-2s and payroll records, the IRS announced it will not update withholding tables or W-2 forms to reflect these deductions, so reporting relies on supplementary documentation. That means you need to collect it through your intake process, not from a revised form.

What should your intake checklist include? A few specific items:

• Total overtime pay received by the taxpayer in 2025, by quarter if possible

• Employer documentation confirming which pay was classified as overtime

• For tip-eligible clients: tip logs, point-of-sale records, and payroll reconciliations

• Confirmation of the taxpayer's industry, since tip deductions are not universal

The IRS has signalled that algorithmic enforcement will flag returns where tip income or overtime deductions change dramatically year over year. A restaurant client that suddenly reports triple the tip volume, or none at all, can expect scrutiny. Accurate documentation from the start is your best protection.

How many of your clients run restaurants, hospitality businesses, or shift-work operations? Those are the ones that need a specific conversation before February, not in April when you're already deep in a filing crunch. Our payroll processing team works directly with your clients' payroll systems to pull this data accurately before the season starts.

5. IRS Digital Identity Requirements Are Changing Your Intake Process

This change gets less attention than the OBBBA provisions, but it affects every return your firm prepares. Starting in 2026, the IRS requires more robust identity authentication for both professionals and taxpayers accessing IRS systems. Online account access, transcript retrieval, and portal-based correspondence now depend on verified digital identity, and delays in identity verification create workflow bottlenecks your firm has to absorb.

What does this mean in practice? A few specific things your team needs to handle before filing season peaks:

• Verify that clients have active IRS Online Accounts set up and can access transcripts independently

• Build identity verification steps into your intake process, not as a last-minute check but as a gate before preparation begins

• Update your client communication templates to explain why the process may feel different, particularly for clients who relied on IRS Direct File (now discontinued) or older paper-based correspondence

• Add buffer time to your delivery schedules for any client whose identity verification is delayed

The IRS also discontinued its Direct File program for the 2026 tax season. Clients who previously used that government platform now need to use a professional preparer or commercial software. For small CPA firms, that shift can mean an uptick in new clients who are unfamiliar with your intake process, and who may not have their documentation organised the way your existing clients do.

Identity verification delays are now a real workflow bottleneck. Build the check into intake, not into the review stage when a stalled transcript request can hold up an entire return.

What All 5 Changes Mean for Small Firm Capacity

Each of the five changes above adds preparation time. More intake questions, more client conversations, more retroactive analysis, and more documentation collection. For a small CPA firm with a lean team, that extra time has to come from somewhere.

What's your plan for absorbing it? Firms that handled tax season well in recent years built capacity ahead of time, not in March. That means either adding headcount, which is hard and expensive in a tight labour market, or shifting routine preparation work to a qualified offshore team that already knows your clients' files.

We've seen the math clearly across hundreds of engagements. Small firms that move routine 1040 and 1120 preparation offshore free up their senior staff for the analysis work these new provisions require: the Section 174 retroactive review, the bonus depreciation modelling, the overtime documentation conversations. That's where a licensed CPA's time actually pays off. Data entry and workpaper preparation don't require that same level of judgement.

If you want to see how we structure those engagements, the how it works page walks through the onboarding process and review structure in detail.

What Small Firms Should Do Before the Next Filing Season

The IRS tax prep workflow changes from the OBBBA are not going away, and they don't get easier to manage mid-season. The firms that adjust their intake checklists, update their depreciation software defaults, identify Section 174 retroactive opportunities, and build identity verification into their intake process now will have a measurably calmer season than the ones that don't. Every one of these changes is manageable. None of them are manageable if you wait until April to address them.

If your firm is carrying more preparation load than your team can handle without quality suffering, we'd like to help. Schedule a scoping call with BusAcTa Advisors and we'll show you exactly how our offshore tax preparation team integrates with your review process, before you commit to anything.