IRS proposes higher reporting threshold, tighter wagering-loss limits for 2026

A small wording change in the tax code is set to send a bigger workload through tax departments, payroll shops and finance teams that keep the reporting engines running. The IRS and Treasury proposed regulations, REG-113229-25, would raise the information-reporting threshold from $600 to $2,000, indexed for inflation, for payments made after Dec. 31, 2025, and would tighten wagering-loss deductions to 90% of wagering gains for tax years beginning after that date.

For KPMG advisers, the operational issue is not the headline number itself but the systems logic behind it. The proposal touches sections 165, 6041, 6041A and 3406 of the Internal Revenue Code, which means companies will have to line up vendor-payment controls, third-party settlement reporting and backup-withholding rules so they all change on the same timetable. The IRS had already signaled in January that third-party settlement organizations generally do not have to backup withhold unless gross reportable payment transactions to a payee exceed $20,000 and the number of transactions exceeds 200. The new proposal broadens that policy shift across the wider information-reporting stack.

The timetable is tight. The proposed rules were published in the Federal Register on April 17, 2026, and public comments and hearing requests are due by June 16, 2026 at 11:59 PM EDT. William Prater is listed as the contact for the proposal, while the Publications and Regulations Section is the contact for comments and hearing requests. That leaves tax technology teams, especially those supporting accounts payable, payer reporting and backup-withholding workflows, with little room to wait for final rules before mapping system changes.

The wagering-loss piece carries its own compliance burden. Treasury and the IRS estimated that about 2.3 million taxpayers reported wagering gains on individual returns in tax year 2022, and roughly 670,000 claimed an itemized deduction for wagering losses. That scale makes the change relevant not only to gamblers, but to casino, gaming, sports-betting and entertainment clients whose year-end reporting and customer communications will have to be rewritten. A limit that sounds narrow on paper can turn into a flood of questions for client teams once taxpayers see their deductions capped below 100%.

The broader backdrop is the One Big Beautiful Bill Act, signed into law on July 4, 2025, which set the reporting-threshold change and the wagering-loss revision in motion. For firms like KPMG, the real work now is not policy explanation alone. It is helping clients update forms, controls, documentation and implementation timelines before the 2026 filing season turns a technical rule change into a practical scramble.