W-2 season may still feel a few months away, but 2026 is not a year to wait until January to start preparing.
In addition to the usual year-end tasks like verifying employee information, reviewing taxable fringe benefits and reconciling payroll records, employers have new Form W-2 reporting requirements for 2026.
New reporting for qualified overtime and cash tips, a new Box 14b for tipped occupation codes and other Form W-2 changes make early preparation especially important this year.
The good news? Employers still have time to get ahead.
Use this guide, along with CTR Payroll | HR’s 2026 W-2 Readiness Checklist, to identify the information your organization should review before the final payroll of the year.
DOWNLOAD THE 2026 W-2 READINESS CHECKLIST →
Before getting into the year-end checklist, employers should understand what is different this year.
The IRS has updated the 2026 Form W-2 to accommodate new reporting requirements created by the One Big Beautiful Bill Act.
Among the most important changes:
Employers can review the complete changes in the IRS 2026 General Instructions for Forms W-2 and W-3.
CTR has also been following the employer impact of the One Big Beautiful Bill Act throughout 2026. For more background on the overtime changes, read New IRS Guidance on Overtime Deductions and Paid Family Leave: What Employers Need to Know.
These changes make accurate payroll configuration and year-to-date records particularly important heading into the final months of 2026.
Start with the basics.
Employee names and Social Security numbers should match Social Security Administration records. Even small discrepancies can create problems with wage reporting.
Employers should review:
The Social Security Administration offers a free Social Security Number Verification Service that registered employers and third-party submitters can use to verify employee names and Social Security numbers for wage-reporting purposes.
This is also a good time to ask employees to log into employee self-service and verify their personal information rather than waiting until W-2s have already been generated.
An employee's W-2 includes much more than regular wages.
Before the final payroll of the year, review whether all applicable compensation has been recorded, including:
Some of these items may not flow through a normal payroll run, which makes them easier to overlook.
Identifying them before the last payroll of 2026 gives your payroll team time to make the appropriate adjustments.
Fringe benefits are one of the areas employers should pay particular attention to before year-end.
The IRS generally considers a fringe benefit a form of compensation for services unless a specific exclusion applies.
Depending on the benefit, taxable amounts may need to be included in an employee's wages and reported on Form W-2.
Common examples to review include:
The rules vary significantly depending on the benefit, so employers should review the IRS 2026 Employer's Tax Guide to Fringe Benefits, Publication 15-B when determining the appropriate tax treatment.
The key is not to discover these items after the final payroll has already been processed.
Year-end is also a good time to confirm that employee deductions have been categorized and reported correctly.
Review items such as:
Pay particular attention to benefit or deduction codes that were added or changed during 2026.
A configuration issue that affects one payroll may become a much larger reconciliation issue when multiplied across an entire year.
This is one of the biggest W-2 changes employers should have on their radar for 2026.
The One Big Beautiful Bill Act created a federal income tax deduction for certain qualified overtime compensation.
Importantly, "No Tax on Overtime" does not mean all overtime wages are tax-free.
Qualified overtime generally refers to the portion of overtime compensation above an employee's regular rate that is required under Section 7 of the Fair Labor Standards Act. In the common time-and-a-half example, it is generally the additional "half" portion that qualifies.
For 2026 W-2s, employers will use Box 12, Code TT to report the total amount of qualified overtime compensation.
Employers with overtime-eligible employees should make sure their payroll records can accurately distinguish qualified overtime compensation from other earnings.
For a deeper explanation of what counts as qualified overtime, see CTR's New IRS Guidance on Overtime Deductions and Paid Family Leave and the IRS 2026 W-2 instructions.
Employers with tipped employees have another significant change to prepare for.
For 2026, employers must separately report the total amount of cash tips reported to the employer using Box 12, Code TP.
Employers reporting cash tips with Code TP must also report the appropriate Treasury Tipped Occupation Code in the new Box 14b.
Up to two occupation codes may be entered. If an employee received tips in a nonqualifying occupation, special reporting rules may apply.
The IRS provides additional information about tip recordkeeping and reporting.
CTR has also covered what the federal tip and overtime deductions mean for employers in No Tax on Tips and Overtime: What Employers Need to Know for Payroll and Compliance.
For restaurants, hospitality organizations and other employers with tipped employees, this should be a priority well before W-2s are produced.
Another new Box 12 code appears on the 2026 Form W-2.
Code TA is used to report qualifying employer contributions made under a Section 128 Trump account contribution program to a Trump account belonging to an employee or an employee's dependent.
Beginning July 4, 2026, employers may contribute up to $2,500 annually under a qualifying employer program, subject to applicable requirements.
This will not apply to every employer. But organizations that establish these contribution programs should make sure the contributions are properly tracked for W-2 reporting.
Employers considering or offering these contributions should review the IRS 2026 Employer's Supplemental Tax Guide, Publication 15-A for current guidance.
If your organization uses an insurance company or another third party to administer disability or sick pay, don't wait until January to determine how those payments will be reported.
The reporting responsibility can depend on the arrangement between the employer and third party.
According to IRS Publication 15-A, special employment tax and reporting rules apply to third-party sick pay, including rules determining whether the employer or third party prepares the applicable W-2.
Confirm now:
That can prevent a last-minute scramble when W-2s are being finalized.
One of the most important year-end steps is reconciliation.
Before W-2s are produced, compare year-to-date payroll totals against quarterly tax filings and other payroll records.
Review:
Discrepancies should be investigated before W-2s are issued.
Finding an error in November or December gives you considerably more options than discovering it after employees have already received their forms.
Employers operating in multiple states or local jurisdictions should also review employee work and residence locations before year-end.
Pay particular attention to employees who:
For Pennsylvania employers, local payroll taxes add another layer to this review.
Pennsylvania employers with worksites in the state generally have responsibilities for withholding and remitting local Earned Income Tax (EIT) and Local Services Tax (LST) for employees working in Pennsylvania.
The Pennsylvania Department of Community & Economic Development provides an employer guide to Pennsylvania local income tax requirements, including information about PSD codes and applicable tax rates.
Employers with remote or multi-state employees may also want to review CTR's Multi-State Payroll Compliance 2026: Remote Employee Tax Rules Employers Must Know.
Don't overlook the employee experience.
Make sure employees know:
This is particularly important for employees receiving paper forms.
A simple reminder before year-end can prevent a flood of "Where is my W-2?" questions in January.
Employees who left your organization during 2026 still need their W-2s.
And they are often the employees most likely to have an outdated mailing address.
Review terminated employee records before year-end and make sure you have current contact information whenever possible.
The standard deadline for furnishing Forms W-2 to employees and filing Forms W-2 with the Social Security Administration is January 31.
When January 31 falls on a Saturday, Sunday or legal holiday, the deadline moves to the next business day.
Because January 31, 2027 falls on a Sunday, employers should plan around the applicable next-business-day deadline of February 1, 2027.
Employers can review current filing requirements through the Social Security Administration's W-2 filing deadline guidance.
But the filing deadline shouldn't be the date that drives your year-end preparation.
Your real deadline is the final payroll of 2026.
By then, you want employee information, taxable benefits, qualified overtime, tipped wages, deductions and other year-end adjustments to be as complete and accurate as possible.
There is more to review this year than there has been in a typical W-2 season.
Use CTR Payroll | HR's 2026 W-2 Readiness Checklist to work through the key items before year-end, including:
✓ Employee information
✓ Taxable fringe benefits
✓ Qualified overtime reporting
✓ Tip reporting
✓ Third-party sick pay
✓ Pre-tax and after-tax deductions
✓ State and local taxes
✓ Payroll reconciliation
✓ W-2 distribution
✓ Former employee information
DOWNLOAD THE 2026 W-2 READINESS CHECKLIST →
The 2026 Form W-2 includes several reporting changes. New Box 12 codes include Code TT for qualified overtime compensation, Code TP for cash tips reported to the employer and Code TA for qualifying employer contributions to Trump accounts. Box 14 has also been divided into Box 14a and a new Box 14b for Treasury Tipped Occupation Codes.
Code TT reports an employee's total qualified overtime compensation. Qualified overtime generally includes the portion of FLSA-required overtime compensation that exceeds the employee's regular rate, rather than the employee's entire overtime payment.
Code TP reports the total amount of cash tips an employee reported to the employer. Employers reporting cash tips under Code TP must also report the appropriate Treasury Tipped Occupation Code or codes in Box 14b.
Box 14b is new for 2026 and is used to report Treasury Tipped Occupation Codes for employees whose cash tips are reported using Box 12, Code TP.
Code TA is used to report qualifying employer contributions made under a Section 128 Trump account contribution program to the Trump account of an employee or an employee's dependent.
January 31 is normally the deadline to furnish W-2s to employees and file them with the Social Security Administration. Because January 31, 2027 falls on a Sunday, the applicable deadline moves to the next business day, February 1, 2027.
Before the final payroll of the year. Starting in the fall gives employers time to verify employee information, identify taxable benefits, review new 2026 reporting requirements, reconcile payroll records and correct problems before W-2s are generated.
Potentially overlooked items include taxable fringe benefits, personal use of company vehicles, third-party sick pay, group-term life insurance over $50,000, bonuses, imputed income and other taxable non-cash compensation.
W-2 preparation doesn't have to begin in January.
And with new reporting requirements taking effect for 2026, getting ahead is especially important this year.
Review employee information. Identify year-end adjustments. Make sure qualified overtime and tips are being tracked correctly. Reconcile payroll. And address discrepancies before the final payroll rather than after W-2s have already been issued.
CTR Payroll | HR's year-end resources can help you stay ahead of deadlines and prepare for a smoother year-end.
VISIT CTR'S YEAR-END RESOURCE CENTER
DOWNLOAD THE 2026 W-2 READINESS CHECKLIST →
This information is provided for general informational purposes only and is not intended as legal advice. Employers should consult qualified legal counsel regarding their specific compliance obligations.
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