IRS Releases Draft 2026 Form W-2: What Tax Pros Need to Know

The IRS has unveiled a draft version of the 2026 Form W-2, incorporating vital changes tied to the One Big Beautiful Bill Act (OBBBA). These updates will reshape how employers report tipped income, overtime compensation, and employer contributions—impacting both payroll teams and tax preparers.

What’s New on the W-2

Box 12: New OBBBA Codes

• TP: Total amount of qualified tips

• TT: Total amount of qualified overtime compensation

• TA: Employer contributions to a "Trump account" These fields are critical for employees to claim the corresponding deductions on Schedule 1-A (Form 1040).

  
  

Box 14 Split: More Detail, Better Clarity

• Box 14a – Other: Continues to capture miscellaneous items like union dues or insurance premiums.

• Box 14b – Treasury tipped occupation code: Used to designate the employee’s tipped occupation according to IRS-provided Treasury codes.

  
  

Employers must use Box 14b to report employee roles eligible for the tips tax deduction—a crucial reference when preparing 2026 forms or advising clients. The IRS plans to release a list of qualified occupations by October 2, 2025.

What This Means for 2025 Filings

• The 2025 W-2 form remains unchanged—no new codes are required for that year.

• But the tax benefits (for qualified tips and overtime) are effective for 2025 filings. Employers should track these components now to prepare employees for the new deductions.

• Transition relief from the IRS means employers won’t face penalties for lacking new reporting codes in 2025.

  
  

Action Steps for Tax Pros

1. Prepare clients now: Advise businesses to begin tracking qualified tips and overtime—even ahead of the new W-2 codes.

2. Review payroll systems: Ensure they can capture and report TP, TT, TA, and Box 14b values when 2026 arrives.

3. Educate clients on Schedule 1-A: Help them understand how these new deductions flow onto Form 1040 in 2025 and beyond.

4. Stay informed: Monitor IRS updates, especially regarding the qualifying occupations list and W-2 instructions.

   
   

Bottom Line: The draft 2026 W-2 isn't finalized—but it provides a roadmap for upcoming payroll reporting changes tied to OBBBA deductions. By preparing now, tax professionals and firms can guide clients through smooth transitions and accurate deductions.

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Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.