Most business owners think of December as the moment the books start to matter. By then, you’re closing the year, chasing receipts, and hoping the numbers land where you thought they would.
That instinct is about five months late — and in 2026, it’s more expensive than usual.
This year brought some of the biggest changes to payroll and contractor reporting in decades. Several of them require you to be tracking things right now, in real time, all year long. If you wait until January to find out, there is no clean way to go back and fix seven months of payroll runs.
August is the sweet spot. You’ve got two-thirds of the year behind you to look at, and four months in front of you to correct course. Here’s what to check.
1. QuickBooks Online Payroll now pays your taxes for you whether you like it or not
If you run payroll through QuickBooks Online, something changed under your feet on July 1.
Starting July 1, 2026, QuickBooks Online Payroll automatically pays and files all taxes that have been set up. Manually submitting tax payments or filings in the Payroll Tax Center is no longer an option, and the ability to turn off Automated Taxes has been removed.
For a lot of owners, that’s genuinely good news; fewer missed deposits, fewer penalty notices. But there’s a cash flow wrinkle that catches people off guard: funds are now withdrawn from your linked account the moment payroll runs, rather than on the official due dates.
Read that again if you’ve been floating payroll tax money for a few weeks between the payroll run and the deposit deadline. That float is gone. If your account balance has been running lean between customer payments, August is the month to rebuild your buffer before a big payroll week overdrafts you.
Two things to verify this week:
- Your payroll tax setup is complete and your bank account has room for same-day withdrawals.
- Any unpaid payroll taxes for periods before July 1, 2026 were still your responsibility to pay and file manually. If you assumed the automation swept those up, check.
2. Overtime and tips have to be tracked separately starting with hours worked this year
This is the one that quietly breaks the most books.
Starting with tax year 2026, employers are required to separately report qualified tips and qualified overtime compensation on Form W-2, using two new Box 12 codes: Code TP for total qualified tips and Code TT for total qualified overtime compensation. For 2025, that reporting was optional. It isn’t anymore.
Here’s the trap. Those W-2s aren’t due until January 2027 but they have to reflect wages paid throughout all of 2026. If your payroll system hasn’t been categorizing qualified overtime separately since January, you’re going to be reconstructing it from timesheets in a very unpleasant week next winter.
Two details that trip people up:
- “Qualified overtime” is not all your overtime. It’s the overtime premium portion required under federal law for hours worked over 40 in a workweek; the extra half, not the full time-and-a-half. Most payroll systems don’t split that out unless you tell them to.
- This is a deduction, not an exemption. Qualified tips and overtime remain subject to Social Security and Medicare taxes, and employers must still withhold the employee’s share and pay the matching share. Employees who assumed their overtime would stop being taxed are going to have questions. Better to answer them in August than in a March argument about a surprise tax bill.
If you have crews running overtime through the summer and if you’re in the trades in Georgia, you do. This is the single most valuable thing on this list to fix today.
3. The 1099 threshold jumped from $600 to $2,000
The reporting threshold for Forms 1099-NEC and 1099-MISC rose from $600 to $2,000 for payments made after December 31, 2025. The first 1099s under the new rule cover the 2026 tax year and get filed in early 2027.
That’s real relief if you use a lot of small subcontractors. But before you relax:
- Your accounting software probably still flags contractors at $600. If your bookkeeping or payroll software automatically flags contractors for 1099 issuance at $600, that trigger needs to change to $2,000 for the 2026 tax year.
- Your state may not have followed along. States that wrote $600 into statute remain at $600 until amended. Federal relief doesn’t automatically mean state relief.
- The income is still taxable. Businesses and contractors must still track and report earnings below these amounts. A missing 1099 is not a missing tax obligation and your bookkeeping still needs to show the expense.
- Separately, the 1099-K threshold went back up to $20,000 and more than 200 transactions, which changes what you’ll see from payment processors.
And you still need a signed W-9 on file for every subcontractor, regardless of what they end up getting paid. Collect those in August while the person is still answering your calls; not in January when they’ve moved on to another contractor. Better still, collect them at onboarding before their first payout ever occurs.
4. Your Q3 estimated tax payment is due September 15
The Q3 estimated tax deadline is Tuesday, September 15, 2026, covering income earned from June 1 through August 31.
The reason this matters more than the earlier ones: it’s the last payment where you can still meaningfully steer the year. September 15 is also the extended deadline for 2025 S corp and partnership returns.
You cannot calculate an accurate estimated payment from a shoebox. If your books are three months behind and for a lot of small businesses, summer is exactly when they fall behind then you’re guessing. Guessing low means penalties. Guessing high means you handed the IRS an interest-free loan you could have used for equipment or payroll.
Getting caught up in August means the September payment is a calculation instead of a coin flip.
5. Mid-year is when job costing actually earns its keep
If you’re a contractor, plumber, HVAC tech, electrician, or any service business that quotes work by the job, here’s the question your P&L can’t answer: which jobs actually made money?
A profit and loss statement tells you the business made money overall. It won’t tell you that the residential remodels are carrying the whole company while the commercial work is quietly bleeding, or that the crew you added in April costs more than the revenue they generated.
By August, you have enough completed jobs this year to see the pattern clearly. That’s the difference between “we should raise prices” and “we should raise prices 12% on this specific type of job and stop bidding that other type entirely.”
Job costing set up properly in QuickBooks; clean item lists, labor burden allocated correctly, materials coded to the right job; turns your bookkeeping from a compliance chore into the thing that tells you what to bid next year.
Your 30-minute August books checkup
Print this. Work through it. Most of it you can check yourself.
- Payroll tax setup is complete in QuickBooks Online, and the bank account can absorb withdrawals on payroll day.
- Qualified overtime is being tracked separately in payroll, using the FLSA premium portion not lumped into gross wages.
- Tips are tracked separately if you have tipped employees.
- Your 1099 threshold is updated to $2,000 in your accounting software.
- W-9s are on file for every subcontractor you’ve paid this year.
- Bank and credit card accounts are reconciled through July.
- Uncategorized Expenses and Ask My Accountant are cleared out (or at least, you know what’s in there).
- Your Q3 estimate is calculated from real numbers, not last year’s return.
- Owner draws and personal expenses are separated from business spending.
- You’ve looked at profit by job or by service line not just the company total.
If you got stuck on more than three of these, that’s not a character flaw. It’s a signal that the bookkeeping has outgrown the time you have for it.
Frequently asked questions
Do I still need to send a 1099 if I paid a subcontractor $1,200 in 2026? Under the new federal threshold, no. The threshold for payments made after December 31, 2025 is $2,000. But check your state’s rule, keep the W-9 on file, and note that if federal income tax was withheld, the 1099-NEC should be filed regardless of the payment amount. The expense still belongs in your books either way.
Does “no tax on overtime” mean I stop withholding on overtime pay? No. Employers must continue to withhold all federal, FICA, and applicable state taxes on all wages, including overtime and tips. The deduction happens on the employee’s personal return not in your payroll run. The IRS issued a revised 2026 Form W-4 with a worksheet for employees who expect overtime pay or tips, which is worth handing out.
My books are six months behind. Is it too late to fix before year-end? No. Catch-up bookkeeping in August is straightforward work. Catch-up bookkeeping in February, while your tax preparer waits and penalties accrue, is not. The cost difference is significant, and it’s entirely a function of when you start.
Can I just fix the overtime tracking in December? You can reconstruct it, but you’ll be rebuilding the premium portion of every overtime hour from timesheets across the whole year. It’s far cheaper to configure payroll correctly now and let the remaining months record themselves.
Where this leaves you
None of the 2026 changes are catastrophic on their own. Together, they add up to a year where sloppy books cost more than they used to in penalties, in cash flow surprises, and in the pricing decisions you’re making without good information.
You have four months. That’s plenty, if you start now.
Scoville Business Solutions provides QuickBooks cleanup, monthly bookkeeping, payroll, and job costing for small businesses across Middle Georgia and nationwide. If your books need to be current before the September 15 deadline, book a free consultation or call 478-81-BOOKS.