IRS Unveils "What's New" for 2026 Forms W-2 and W-3
The Internal Revenue Service has published the 2026 General Instructions for Forms W-2 and W-3, and the "What's New" section outlines several critical updates that will affect employers. Driven largely by the enactment of Public Law 119-21, these changes introduce new reporting thresholds, form layout adjustments, and specific tracking requirements for tips and overtime.
1. Wage Reporting Threshold Increased to $2,000
One of the most notable changes for the upcoming tax year is a significant increase to the baseline wage reporting threshold. For wages paid after calendar year 2025, P.L. 119-21 increases the wage reporting threshold from $600 to $2,000 if no federal income, social security, or Medicare tax was withheld. Moving forward, this new threshold will be adjusted for inflation each calendar year after 2026.
2. Structural Changes to Box 9 and Box 14
Employers will notice physical layout changes on the 2026 Forms W-2, W-2AS, W-2GU, W-2VI, and W-2c to accommodate new data:
- Box 14 Split: Box 14 has been officially revised and split into box 14a and box 14b. Information that was traditionally reported in box 14—Other will now be reported in box 14a—Other.
- Box 9 Reduced: Box 9 was reduced in size so that an additional entry can be input into box 14a.
3. Reporting Qualified Tips (New Box 12 Code TP & Box 14b)
Under P.L. 119-21, eligible individuals can now deduct up to $25,000 of qualified tips received in customarily tipped occupations. To facilitate this deduction at tax time, employers have new reporting obligations:
- Box 12, Code TP: Employers must use the new box 12, code TP, to report the total amount of cash tips reported to the employer.
- Box 14b: The new box 14b was created specifically to report the Treasury Tipped Occupation Code(s) associated with the tip recipient.
4. Reporting Qualified Overtime (New Box 12 Code TT)
P.L. 119-21 also introduces a new deduction for qualified overtime. Individuals can deduct up to $12,500 ($25,000 if married filing jointly) in qualified overtime compensation from their income subject to federal income tax. Qualified overtime is compensation that exceeds the regular rate of pay that is paid to an individual required under section 7 of the Fair Labor Standards Act.
To ensure employees can claim this deduction, employers must furnish statements showing the qualified overtime compensation paid during the year. Employers must use the new box 12, code TT to report the total amount of qualified overtime compensation.
Streamline Your 2026 Year-End Reporting: Small businesses and tax professionals can utilize W2 Mate software to easily navigate these new compliance rules. W2 Mate supports the updated 2026 changes, including the new reporting requirements for tips and overtime on the W-2 form. Using W2 Mate, employers can choose to print their W-2 forms directly onto blank paper or create properly formatted EFW2 files. These EFW2 files can then be uploaded directly to the Social Security Administration’s Business Services Online (BSO) portal for seamless electronic filing.