New Tax Law Changes for 2025–2026: What Business Owners Need to Prepare For

As year-end planning approaches, business owners in Washington State are facing a variety of federal and state-level tax and compliance changes that will impact payroll, reporting, budgeting, and day-to-day operations. Below is a clear, business-focused overview of the key updates for 2025–2026 so you can prepare ahead and avoid costly surprises.

Washington State & Federal Tax Changes to Know

Washington State Sales Tax Updates (ESSB 5814)

Washington’s ESSB 5814 introduces adjustments to how sales tax is applied and reported, including changes to exemptions, specific business-sector rules, and sourcing requirements. Businesses should review whether their products or services fall under the updated categories and ensure their point-of-sale systems and accounting software reflect the new rules effective in 2025.

Paid Family & Medical Leave Premium Changes (2026)

Beginning January 1, 2026, the Paid Family & Medical Leave (PFML) premium rate increases to 1.13% of employee gross wages.

Employers will pay 28.57% of the total premium and employees will pay 71.43%.

Businesses with fewer than 50 employees (as classified by the Employment Security Department) will remain exempt from paying the employer portion but must continue withholding employee premiums. Payroll systems must be updated before the first 2026 payroll run.

Mileage Rate Changes

The IRS annually adjusts standard mileage rates used for business, medical, charitable, and moving purposes. Updates for 2026 will affect reimbursement policies, employee expense reporting, and deductible business travel. Business owners should monitor the IRS announcement, typically released in December, and adjust reimbursement policies at the start of the new year.

1099-K Reporting Thresholds

The federal reporting threshold for third-party payment platforms continues to tighten. For 2025 filing, businesses may see more 1099-K forms issued by processors such as PayPal, Square, Stripe, CashApp and Venmo.  Even small or occasional business transactions may trigger reporting once thresholds are met. Business owners should ensure their bookkeeping accurately tracks online sales and confirm whether any personal transfers were misclassified.

SECURE Act Retirement Plan Deadlines

The SECURE Act and SECURE Act 2.0 introduced several phased-in deadlines that take effect in 2025–2026, particularly for employers offering or planning to offer retirement plans. Key items include expanded eligibility for long-term, part-time employees; automatic enrollment requirements for certain new plans; increased tax credits for small businesses; and catch-up contribution rule adjustments. Employers should review their plan documents and coordinate with their payroll provider or plan administrator to remain compliant.

Next Steps for Business Owners

• Update payroll systems by January 2026 for PFML rate changes
• Review point-of-sale and accounting software for ESSB 5814 updates
• Watch for the IRS mileage announcement and adjust reimbursement rates
• Verify online sales records to avoid 1099-K mismatches
• Confirm SECURE Act deadlines with your plan administrator
• Educate staff, update internal policies, and communicate changes to your team

Pivotal Forensic Accounting & Audits
Helping Washington businesses stay compliant, protected, and financially confident.

Questions about these new tax law changes?
If any of the 2025–2026 updates feel unclear or you’re unsure how they affect your business, Pivotal is here to help you navigate every step. From compliance reviews to year-end planning, we support business owners with clarity, accuracy, and forensic-level attention to detail.

Contact Us

Phone: (253) 752-3920
Email: contactus@pivotalaccountant.com

Whether you need guidance, a second opinion, or full support with your books, payroll, or compliance obligations, our team is ready to assist. Let’s keep your business protected and prepared for the year ahead.