New W-2 boxes for tips and overtime. Why September matters.

Does your payroll system know which of last December's overtime hours were premium hours?

If not, you have about three months to fix it. The W-2s you issue in January 2027 have to carry data most payroll systems were never set up to capture.

Why it matters: the tips and overtime deductions from the 2025 tax law were written up as employee benefits. For you they are a payroll compliance project. 2025 was a grace year with penalty relief. The 2026 tax year is not.

What changes on the form:

• Box 12, code TT. Qualified overtime compensation, reported separately.
• Box 12, code TP. Qualified tips, reported separately.
• Box 14b. A Treasury Tipped Occupation Code for each tipped employee. A server, a bartender, a barber and a delivery driver are different codes. Report code 000 and the IRS treats those tips as ineligible.
• Penalties run per form. Roughly $60 to $680 for each incomplete W-2, under the information-return rules. Multiply that by your headcount before you decide this can wait.

The detail that catches people: qualified overtime is only the premium portion, not the whole overtime check. If someone earns $20 an hour and $30 for overtime, the reportable amount is the $10 premium, not the $30.

You cannot reconstruct this in January. Whether a given hour was FLSA-required overtime is a fact about the week it was worked, and it has to be captured while the year is still running. This lands hardest on restaurants, hotels, salons, healthcare, manufacturing, logistics and construction.

One call with your payroll provider settles whether they are ready. That call costs you nothing and the answer is worth knowing before Thanksgiving.

How many W-2s would you be issuing if this were wrong?

Sources: https://www.jacksonlewis.com/insights/obbba-2026-immediate-action-required-employers https://www.paymasterpro.com/2026-w2-changes-employers/