Year-End Tax

On January 30, 2026, the Internal Revenue Service released the final General Instructions for Forms W-2 and W-3 for the 2026 tax year. While much of the guidance builds on prior years, the final instructions reflect several important updates tied primarily to Public Law 119-21, the One Big Beautiful Bill Act (OBBBA), along with refinements from the draft instructions issued earlier in January. For employers, payroll providers, and HR teams, the 2026 instructions introduce new reporting codes, expanded data elements, and clearer explanations around how certain types of compensation must be reported, even where the underlying tax treatment has not changed. As always, organizations should evaluate how these updates apply to their specific circumstances. Below is a high-level summary of the most notable changes in the final 2026 instructions. This overview is for informational purposes only. Big picture: more granular reporting, not less responsibility Many of the 2026 updates focus on how information is reported, rather than whether it is taxable. In several areas, particularly tips and overtime, the IRS makes clear that while new deductions may be available at the individual level, employer reporting and payroll tax treatment largely remain the same. The result is more detailed W-2 reporting and a greater emphasis on accurate classification and data capture. Expanded reporting for tips The 2026 instructions introduce new reporting requirements related to tipped wages. A new Box 12 code, TP, must be used to report the total amount of cash tips reported to the employer. Box 14 has been split into Box 14a (Other) and Box 14b, with Box 14b dedicated to reporting Treasury Tipped Occupation Code(s) when tips are reported using code TP. Despite the new deduction for qualified tips under OBBBA, the final instructions reiterate that tips are generally subject to federal income tax withholding and both the employer and employee share of Social Security and Medicare taxes when the twenty-dollar-per-month threshold is met. This distinction underscores that deductions available on an individual’s tax return do not change employer withholding and reporting obligations. New reporting code for qualified overtime The final instructions introduce Box 12 code TT for reporting qualified overtime compensation. The IRS added clearer language than what appeared in the draft instructions. Only overtime compensation required under the Fair Labor Standards Act qualifies, and only the premium portion of overtime pay is reported. For example, in a time-and-a-half scenario, only the additional half of the overtime rate is reported using code TT. As with tips, the IRS clarifies that overtime compensation is still generally subject to federal income tax withholding and payroll taxes, even though certain deductions may apply at the individual level. Wage reporting threshold increase For wages paid after calendar year 2025, the wage reporting threshold increases from six hundred dollars to two thousand dollars when no federal income tax, Social Security tax, or Medicare tax is withheld. The threshold will be indexed for inflation beginning after 2026. This change may reduce reporting in limited situations, but it does not eliminate W-2 filing requirements where withholding occurs. Box 14 structural changes To accommodate new reporting needs, Box 14 has been split into Box 14a (Other) and Box 14b (Treasury Tipped Occupation Code[s]). Box 9 was reduced in size to allow for additional Box 14a entries. These layout changes may require payroll system updates to ensure accurate formatting and data placement. Trump account reporting Public Law 119-21 introduces Trump accounts, a new type of individual retirement account for children under age eighteen. For 2026 reporting, employers must use new Box 12 code TA to report employer contributions made under a Section 128 Trump account contribution program. Employer contributions may begin July 4, 2026, subject to annual limits and income exclusion rules. The final instructions provide less detail than the draft and direct employers to Publication 15-A for additional guidance. What changed from the draft instructions Compared to the draft issued earlier in January, the final instructions shortened and streamlined the discussion of Trump accounts, clarified that tips and overtime remain subject to payroll taxes, and added a concrete example explaining how only the premium portion of overtime pay qualifies for reporting under code TT. A note on interpretation This overview is intended for informational purposes only. Employers and individuals should review the full IRS guidance and verify how the rules apply to their specific facts and circumstances. Looking ahead The 2026 W-2 and W-3 instructions reflect a broader trend toward more detailed wage reporting, particularly for compensation types that may be subject to special deductions or increased scrutiny. For organizations, the focus will be on ensuring systems, data flows, and classifications align with updated requirements well before year-end reporting. Experian continues to monitor regulatory developments to help organizations stay informed as reporting requirements evolve. Connect today to learn how you can streamline your year-end tax compliance tasks to save time and improve your workflow.

On January 9, 2026, the Internal Revenue Service finalized the 2026 Form W-2, Wage and Tax Statement, formally implementing reporting changes required under Public Law 119-21, also known as the One Big Beautiful Bill Act (OBBBA). The final form largely reflects changes previewed in earlier drafts, with one important clarification related to tipped occupation reporting. While the final instructions have not yet been released, a draft version is available, and the form itself is now official. Employers should begin preparing systems and processes to support these updates ahead of the 2026 filing season. Key Changes in the Final 2026 Form W-2 New Box 12 Codes The finalized 2026 Form W-2 introduces three new Box 12 codes tied directly to OBBBA provisions: TA – Employer contributions under a section 128 Trump account contribution program paid to a Trump account of an employee or a dependent of an employeeTP – Total amount of cash tips reported to the employer that may be eligible for the OBBBA deductionTT – Total amount of qualified overtime compensation These codes support new above-the-line deductions that employees will calculate as part of their individual income tax filings. Box 14 Is Now Split Into 14a and 14b Box 14a – Other: Employers may continue to report miscellaneous informational items such as state disability insurance taxes, union dues, uniform payments, health insurance premiums, educational assistance, or other non-taxable income. Box 14b – Treasury Tipped Occupation Code(s): Employers will report up to two Treasury-issued tipped occupation codes that identify whether an employee’s role qualifies for the deduction for qualified tips. These occupation codes are used in combination with Box 12 code TP to determine tip deduction eligibility. Clarification on Code “000” in Box 14b One notable clarification was added in the final W-2 employee instructions. Only when Box 14b reports code “000” by itself does it indicate that an employee’s tips are not eligible for the OBBBA tip deduction. This distinction is important for employees with multiple tipped roles or occupation codes, ensuring that eligibility is not incorrectly disallowed due to partial or mixed reporting. Distinguishing Deductible vs. Non-Deductible Tips Earlier drafts introduced new reporting mechanics that are now reflected in the final form. Code TP is used to report cash tips when the employer is not a specified service trade or business (SSTB), and those tips may qualify for the deduction. Code TS applies to tips that do not qualify for the deduction when the employer is an SSTB, as defined under Internal Revenue Code sections 199A and 1202. Employers must correctly classify their business type and tip eligibility to ensure accurate reporting. Territorial Forms The IRS also released finalized versions of Form W-2AS (American Samoa) and Form W-2GU (Guam) on January 12, 2026. The finalized Form W-2VI (U.S. Virgin Islands) was not immediately available at the time of release. What This Means for Employers With the 2026 Form W-2 now finalized, employers should begin reviewing payroll systems, tip reporting processes, and occupation coding practices to ensure alignment with the new requirements. While the form itself is final, the final instructions have not yet been issued, and employers should continue monitoring IRS guidance for additional clarification. Looking Ahead The finalized 2026 Form W-2 represents a significant shift in wage reporting, particularly for tipped and overtime compensation. These changes increase reporting precision and reinforce the connection between payroll data and employee tax benefits under OBBBA. Employers that prepare early by validating data flows, updating payroll logic, and educating internal teams will be best positioned for a smooth 2026 filing season. View the final 2026 Form W-2: https://www.irs.gov/pub/irs-pdf/fw2.pdf Learn how Experian Employer Services can help with your year-end tax process and more:

As employers close out another year and prepare to adjust for another year of regulatory updates, we are reminded of some items that loom large for this year and next: Changes to this year’s Affordable Care Act (ACA) reporting requirements and a new Form W-2 for next year. Below is a closer look at the changes and what your organization can do to stay ahead of the regulatory curve. Changes to ACA and 1095-C Requirements Late 2024, Congress passed an act designed to allow applicable large employers some flexibility in how they furnish forms 1095-C to their employees. Employers are no longer required to automatically send 1095-C forms to all full-time employees. Employers wishing to take advantage of the new process must instead follow the specific alternative notice methodology enacted under the 2024 laws. Essentially, employers are considered compliant if they have posted a “clear, conspicuous and accessible” notice on their benefits website informing employees that they may request a copy of the form and how they may do so. If such a copy is requested, the employer must provide the copy by either January 31 or within 30 days of the request, whichever is later. The deadline for furnishing the 1095-C or posting the notice as to how to obtain the form is March 2, 2026. Employers opting for the alternative methodology must post the “how-to” notice by that time and leave it posted through October 15, 2026. It is important to note that employers wishing to use the alternative furnishment methodology ensure they adhere to the guidance provided in IRS Notice 2025-15, which states that employers wishing to provide the requested form in electronic format, first obtain electronic consent from the employee, much as they would prior to providing an electronic W-2. New Form W-2 for 2026 In addition to changes to ACA reporting, the IRS recently released a draft Form W-2 for Tax Year 2026. The new form, which has already been edited three times, introduces new codes for Box 12, and a new box 14b to account for items introduced in the One Big Beautiful Act. The new codes are TA, for newly created “Trump Accounts”, TP, for reporting qualified tips, and TT, for reporting qualified overtime.While no changes were made to the W-2 for this tax year, employers can take some solace in the IRS announcement that no penalties will be levied regarding OBBA reporting for the current tax year. Compliance minded employers should review these items and adjust their processes accordingly. At a minimum, preparation should include a) updating employee communications regarding requesting Form 1095-C, b) coordinating with payroll providers/vendors to prepare for 2026 W-2 changes, and c) ensure they are monitoring the IRS website for any changes or updates.

Discover key 2026 draft W-2 and W-2C changes—from new Box 12 codes to critical filing deadlines, along with compliance tips to succeed.

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