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IRS Update: 2026 W-2 Draft Changes under the One Big Beautiful Bill Act (OBBBA)

IRS releases draft of W-2 for 2026 TY

The IRS posted draft 2026 Forms W‑2 and W‑2c in mid‑August 2025, reflecting OBBBA provisions. These proposed changes affect how employers report tips, overtime premiums, and contributions to newly created children’s savings accounts, often referred to as “Trump Accounts.

Key Updates on 2026 W-2 Draft

Addition of New Box 12 Codes

The draft form introduces three new codes that employers must track and report:

  • TP – Total qualified tips (per OBBBA rules).

  • TT – Total qualified overtime premium (the “half” portion above the regular rate in time-and-a-half).

  • TA – Employer contributions to “Trump Accounts” (for eligible children born on or after January 1, 2025).

Box 14 Split and Renumbered
  • 14a – “Other” (as before).

  • 14b – Treasury tipped-occupation code (to identify employees in occupations qualifying for the new tip deduction).

Note: The W-2c (correction form) mirrors these changes.

W-2 draft 2026 changes

Action Checklist for Employers

1. Payroll Data Capture- Start Now

Configure payroll and HRIS systems to capture qualified tips, overtime premium, and Trump Account contributions in line with the draft codes.

2. Occupation Coding for Tipped Employees- October 2025

A new Treasury-issued tipped occupation list is expected by early October 2025. Employers will need to assign a Treasury code to each tipped employee and report it in Box 14b.

3. Layout & Template Updates- Before Year-End 2025

Ensure W-2 and W-2c templates reflect the new Box 12 and Box 14 structure.

4. Employee Communications- Draft Now

Prepare plain-English explanations to help employees understand:

  • Why tips (TP) and overtime (TT) appear separately.

  • How new deductions (up to $25,000 for tips; up to $12,500/$25,000 for overtime) may apply.

  • What are Trump accounts, and how will employer contributions be reported?

5. Testing & Validation – Q4 2025

Run parallel payroll/W-2 tests to confirm reporting accuracy for new codes and fields. Coordinate with payroll providers and HRIS vendors for software updates.

Key Deadlines for Form W-2

For income earned in 2025, employers must meet the following deadlines:

  • February 02, 2026: Furnish Form W-2 to employees and file with the SSA.
  • February 02, 2026: Submit Form W-3 (transmittal form) to the SSA along with the W-2s.

Note: The original deadline to submit the W-2 form to the IRS and furnish the recipient copies is January 31. However, it falls on a Saturday, so the next working day is considered as the new deadline.

Missing these deadlines can result in penalties ranging from $60 to $310 per form, with a maximum of $3.78 million annually for large businesses.

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