2026 Year-End Payroll & HR Checklist: 10 Things Employers Should Review Before 2027

Updated November 4, 2026

Year-end payroll preparation is about more than issuing W-2s. It's an opportunity to verify payroll accuracy, address compliance changes, review employee benefits, and prepare your organization for the year ahead.

For employers closing out 2026, several important changes deserve attention, including new Form W-2 reporting requirements for qualified overtime and tips, an increased Social Security wage base for 2027, and updated federal information-reporting thresholds.

What should employers do before the end of 2026?

Employers should reconcile payroll and tax records, confirm employee information, prepare required year-end filings, review benefit deductions and leave balances, and verify payroll settings for 2027. Addressing these items before the final payroll can help reduce errors, avoid unnecessary corrections, and make the transition into the new year smoother.

Use this 10-step checklist to identify what your payroll, HR, and finance teams should review.

1. Review 2026 Payroll Tax and Reporting Deadlines

Start with your year-end reporting calendar.

Several important federal filing deadlines fall on February 1, 2027, because January 31 falls on a Sunday.

Certain Form 940 and Form 941 filers may qualify for additional filing time when required deposits were made on schedule. Other information returns, including ACA forms, have separate deadlines.

An important change for 2026: The federal reporting threshold for many nonemployee compensation payments increased from $600 to $2,000.

Businesses generally must issue Form 1099-NEC for qualifying payments of $2,000 or more made to a nonemployee during 2026. Special reporting rules and exceptions may apply, including when backup withholding occurs.

What employers should do: Confirm applicable filing deadlines, review contractor payments, and identify any missing information before preparing year-end forms.

For additional guidance, see the IRS Employment Tax Due Dates and IRS Form 1099 Reporting Requirements.

2. Reconcile Payroll Before Your Final Pay Run

One of the most effective ways to prevent year-end payroll problems is to identify discrepancies before W-2 processing begins.

Review year-to-date payroll information, including:

• Gross wages, taxable wages, and net pay.
• Federal, state, and local taxes withheld.
• Bonuses, commissions, and supplemental wages.
• Employee deductions and employer contributions.
• Manual checks, voids, and payroll adjustments.
• Taxable fringe benefits and third-party sick pay, where applicable.
• Quarterly payroll tax filings and year-to-date totals.

Employers with employees working in multiple states or local jurisdictions should also verify work locations and withholding information.

What employers should do: Run year-to-date payroll and tax reports, investigate discrepancies, and resolve outstanding adjustments before the final payroll whenever possible.

For Pennsylvania employers, this is particularly important given the complexity of state and local payroll tax requirements.

3. Prepare for New 2026 W-2 Reporting Requirements Under the OBBBA

One of the biggest changes to 2026 year-end reporting comes from the One Big Beautiful Bill Act (OBBBA).

For tax year 2026, employers have new Form W-2 reporting requirements involving qualified overtime compensation, reported cash tips, and certain employer contributions to Trump accounts.

Qualified overtime compensation

Employers must separately report qualified overtime compensation using Form W-2, Box 12, Code TT.

Qualified overtime generally refers to the premium portion of overtime compensation required under the federal Fair Labor Standards Act (FLSA).

For example, if an eligible employee earns $20 per hour and receives $30 per hour for FLSA-required overtime, the additional $10 premium is generally the qualifying overtime amount, not the full $30 payment.

Not all overtime payments necessarily qualify for the federal deduction.

Reported cash tips

Employers must use Box 12, Code TP to report applicable cash tips reported to the employer. Cash tips include certain charged tips received from customers.

A new Box 14b identifies the employee's Treasury Tipped Occupation Code or codes.

Certain employer contributions to Trump accounts

Employers participating in qualifying Trump account contribution programs must report applicable contributions using Box 12, Code TA.

This requirement is relevant only when the employer makes qualifying contributions.

Does the OBBBA eliminate payroll taxes on tips and overtime?

No. The new federal income tax deductions do not generally eliminate Social Security and Medicare tax obligations or ordinary payroll withholding requirements.

What employers should do: Review overtime earnings codes, tip reporting, and applicable benefit arrangements to ensure the information needed for 2026 W-2 reporting is accurately captured.

For additional information, visit CTR's OBBBA Resource Center and the IRS 2026 Form W-2 Instructions.

4. Prepare for the 2027 Social Security Wage Base Increase

The Social Security Administration has confirmed that the 2027 Social Security taxable wage base will increase to $192,300, compared with $184,500 in 2026.

The Social Security tax rate remains 6.2% for employees and 6.2% for employers.

For an employee whose Social Security taxable wages reach the maximum in both years, the employer's annual Social Security tax increases by $483.60.

Medicare taxes continue without an annual wage base limit.

What employers should do: Confirm that payroll tax settings will reflect the new wage base beginning with wages paid in 2027. Employers should also account for the increase when preparing payroll budgets.

Read CTR's 2027 Social Security Wage Base Employer Guide for a detailed breakdown.

5. Verify Retirement Contributions and Employee Benefit Deductions

Year-end is an important time to reconcile benefit elections, employee deductions, and employer contributions.

Review:

• 401(k), 403(b), and other retirement plan contributions.
• Applicable annual contribution and catch-up limits.
• Health savings account (HSA) contributions.
• Flexible spending account (FSA) elections.
• Employer benefit contributions.
• Open enrollment changes effective in 2027.
• Benefit deductions scheduled for the first payroll of the new year.

Employers should also coordinate with their retirement plan administrators regarding applicable 2027 contribution limits and special catch-up requirements.

What employers should do: Compare payroll deductions with benefit elections and plan administrator records. Confirm that new elections and contribution limits will be reflected accurately in 2027.

This is also an opportunity to identify missed deductions, incorrect contribution amounts, or enrollment discrepancies before they carry into another plan year.

For official information, visit the IRS Retirement Plans Resource Center.

6. Check Your 2027 Payroll Calendar for an Extra Pay Period

Depending on your organization's pay schedule, 2027 may include an additional payroll date.

Some weekly schedules may have 53 pay dates instead of 52, while some biweekly schedules may have 27 instead of 26.

This depends on the actual dates employees are paid.

An extra pay period can affect annual payroll budgets, recurring benefit deductions, employee communications, and how annual salaries are administered.

For example, if an employer normally spreads certain benefit deductions across 26 biweekly pay dates but has 27 pay dates in 2027, the employer needs to determine how those deductions will be handled.

What employers should do: Review the actual 2027 payroll calendar, identify the number of scheduled pay dates, and confirm how recurring deductions and annual salary payments will be administered.

Not every weekly or biweekly employer will have an extra pay period.

7. Review PTO, Paid Sick Leave, and Employee Handbook Policies

Before year-end, review employee leave balances and verify that policies reflect applicable requirements.

Key areas include:

• PTO and vacation balances.
• Carryover and forfeiture provisions.
• Paid sick leave accruals.
• Leave payout obligations, where applicable.
• Employee eligibility and leave tracking.
• Changes requiring employee handbook updates.

Pennsylvania employers: Watch upcoming Allegheny County requirements

In October 2026, Allegheny County enacted legislation establishing new paid parental leave requirements and expanding its paid sick leave ordinance.

The changes are expected to become operative in 2027 and may affect employers differently based on their size and employee eligibility.

Smaller employers should pay particular attention to the expanded sick leave provisions, even when the paid parental leave mandate does not apply to them.

What employers should do: Review current policies, confirm leave accrual and tracking procedures, and monitor implementation guidance before making changes.

Read CTR's Allegheny County Paid Parental Leave Employer Update and Pennsylvania Paid Sick Leave Employer Guide.

8. Audit Employee Records and ACA Reporting Information

Accurate employee information is essential for payroll processing, tax reporting, and benefits administration.

Before W-2 preparation, verify employee records for:

• Legal names and Social Security numbers.
• Mailing addresses.
• Work locations and applicable tax jurisdictions.
• Pay rates and employee classifications.
• Federal and state withholding elections.
• Benefit enrollment information.
• Coverage effective dates and terminations.

Employers subject to Affordable Care Act reporting requirements should also review applicable employee eligibility, coverage, and reporting information.

What employers should do: Encourage employees to review their information through employee self-service and resolve discrepancies before year-end forms are prepared.

For organizations managing multiple locations, this is also an opportunity to verify that employee records reflect where work is actually performed.

9. Review Wage-and-Hour and State Compliance Changes

Federal requirements are only part of the year-end compliance picture.

Employers should also review applicable state and local developments, particularly when employees work across multiple jurisdictions.

Important areas include:

• Minimum wage changes.
• Overtime and regular-rate calculations.
• Exempt and nonexempt classifications.
• Employee timekeeping.
• Meal-break practices.
• Required workplace notices.
• State and local payroll tax changes.

Pennsylvania construction and manufacturing employers

Pennsylvania Act 101 of 2026 expands prevailing wage requirements to certain off-site custom fabrication work for covered public construction projects, beginning December 21, 2026.

Affected employers should evaluate wage classifications, project-based time tracking, and applicable payroll reporting requirements.

Read CTR's Pennsylvania Prevailing Wage Law Update.

Ohio employers

Employers with employees working in Ohio should review applicable 2027 minimum wage rates and related payroll requirements before January 1.

What employers should do: Identify the jurisdictions where employees work, confirm applicable changes, and review payroll settings and employee policies before the first pay date of 2027.

10. Finalize Your 2027 Payroll and HR Action Plan

Once the individual reviews are complete, bring everything together into a year-end action plan.

Confirm that your organization has:

• Reconciled 2026 payroll and tax information.
• Reviewed applicable W-2 and 1099 reporting requirements.
• Verified employee and benefits information.
• Updated payroll calendars and scheduled pay dates.
• Identified 2027 tax and wage changes.
• Reviewed leave policies and employee handbook updates.
• Assigned responsibility for outstanding corrections.
• Communicated important deadlines to employees.

What employers should do: Schedule a final review with payroll, HR, finance, and benefits stakeholders. Confirm who owns each remaining task and when it needs to be completed.

A little preparation before the last payroll of 2026 can help prevent a much larger administrative burden in January.

2026 Year-End Payroll & HR Checklist: Quick Reference

Frequently Asked Questions About 2026 Year-End Payroll

When are 2026 W-2 forms due?

Employers generally must furnish 2026 Forms W-2 to employees and file them with the Social Security Administration by February 1, 2027.

What is changing for employers on 2026 W-2 forms?

The 2026 Form W-2 includes new reporting requirements for qualified overtime compensation, reported cash tips, and certain employer contributions to Trump accounts. Which requirements apply depends on the employer's compensation and benefit arrangements.

What is the Form 1099-NEC threshold for 2026?

The federal reporting threshold for many qualifying nonemployee compensation payments increased to $2,000 for payments made in 2026. Exceptions and special reporting rules may apply.

What is the Social Security wage base for 2027?

The 2027 Social Security taxable wage base is $192,300, up from $184,500 in 2026. The employer and employee Social Security tax rates remain 6.2% each.

Does every employer have 27 biweekly pay periods in 2027?

No. The number of pay periods depends on the employer's actual payroll schedule and pay dates.

What should employers review before their first payroll of 2027?

Employers should confirm updated tax settings, pay rates, benefit deductions, employee records, payroll calendars, and applicable state and local compliance changes.

Start 2027 with Confidence

Year-end payroll and HR preparation can involve a lot of moving parts, but employers shouldn't have to navigate every change on their own.

At CTR Payroll | HR, we combine award-winning workforce technology with the personalized service of a dedicated support representative.

Our team understands that accurate payroll, reliable employee information, and responsive support matter throughout the year, especially when requirements are changing.

From payroll and tax administration to time and labor, benefits administration, and HR solutions, we're dedicated to helping employers simplify the work behind their workforce.

Connect with CTR Payroll | HR to learn how we can help your organization prepare for 2027.

This article is intended for general informational purposes and does not constitute legal or tax advice. Employers should consult appropriate advisors regarding their specific obligations.