Wondering what tax reporting might look like under the One Big Beautiful Bill Act (OBBBA)? The IRS has released drafts of some 2026 tax forms, including a draft of Form W-2. The changes are intended to address tax reporting updates, particularly for tipped and overtime workers.
Key Updates For Form W-2
It’s worth noting that the draft Form W-2 is for the 2026 tax year (for the tax return that you’ll file in early 2027).
There will be no changes to Form W-2 for the tax year 2025, even though some of the new provisions, including those new, temporary deductions, take effect in 2025. The IRS has previously said that the omissions are “intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.”
A first look at Form W-2 isn’t remarkable:
It hasn’t been drastically redesigned for 2026. Instead, as many tax practitioners predicted, the IRS is relying on new box codes. The specific changes to note are found at Boxes 12 and 14.
Box 12 is the kitchen sink of form W-2 reporting. Here, you’ll see all kinds of codes: if there are more than four items to be reported in Box 12, your employer may use a separate Form W-2 to report the additional items. Not all income coded in Box 12 is taxable.
The new draft Form W-2 includes three new Box 12 codes:
- TA – Employer contributions to a “Trump account”
- TP – Total amount of qualified tips (for figuring the new “no tax on tips” deduction)
- TT – Total amount of qualified overtime compensation (for figuring the “no tax on overtime” deduction)
Box 14 is a catch-all box. Your employer reports anything here that doesn’t fit anywhere else. Examples include state disability insurance taxes withheld, union dues, health insurance premiums deducted, and nontaxable income. That information will now be reported in Box 14a.
A new Box 14b will be used to report the Treasury occupation code for an employee’s tipped occupation. Remember, the tips deduction is only available to taxpayers with occupations on a list that will be provided by the IRS as “customarily and regularly receiving tips on or before December 31, 2024.” If you qualify, the code for your occupation will go here.
New Tax Provisions
The changes are intended to simplify reporting for the new, temporary deductions under OBBBA. Here’s a refresher on those that you’ll see mentioned on the draft Form W-2:
Trump Accounts are new tax-advantaged accounts designed to help children under age eight. The accounts can receive contributions of up to $5,000 annually to the account, adjusted for inflation, with withdrawals not allowed before the beneficiary turns 18. After that, funds can be used for college, a first-time home purchase, or starting a business—with withdrawals taxed at favorable capital gains rates.
Employers can only contribute up to $2,500 of the $5,000 total. For federal income tax purposes, any employer contributions (up to $2,500) are not considered gross income and aren’t subject to tax.
Additionally, the government intends to deposit $1,000 into accounts for qualifying children born between December 31, 2024, and January 1, 2029. To qualify, the child must be a U.S. citizen at birth. There are no income limits or phaseouts.
Under OBBBA, there’s a new deduction for taxpayers who receive qualified tips—which include voluntary cash or charged tips—in customarily tipped occupations. The deduction is effective for the tax years 2025 through 2028 and can be claimed whether or not you itemize your deductions.
The maximum annual deduction is $25,000, and the deduction for self-employed taxpayers may not exceed your net income before the deduction from the trade or business in which the tips were earned. The deduction phases out with modified adjusted gross income over $150,000 ($300,000 for joint filers).
The deduction applies to employees and self-employed individuals. Importantly, qualified tips must be reported on Form W-2, Form 1099, or other specified statement furnished to the taxpayer.
Since this is a federal income tax deduction, not an exclusion, tips are still reportable—and taxable at the state and local level.
There’s also a new, temporary deduction for taxpayers who receive qualified overtime compensation—it can also be claimed regardless of whether you itemize your deductions through 2028. The deductible amount is the bit that exceeds your regular rate of pay—the “half” portion of “time-and-a-half” compensation. As with tips, to qualify, the overtime pay must be reported on a Form W-2, Form 1099, or other specified statement furnished to the taxpayer.
The maximum annual deduction is $12,500 ($25,000 for joint filers). You must include your Social Security Number on the return and file jointly if married to claim the deduction. The deduction phases out for taxpayers with modified adjusted gross income (MAGI) over $150,000 ($300,000 for joint filers).
What Do You Need To Know About Form W-2?
You’re likely familiar with Form W-2. An employer will issue a Form W-2 to you if you are an employee. You’ll receive something different—Form 1099—if you’re an independent contractor. The form you receive at tax time should not be a surprise.
Reporting Criteria
An employer must issue you a Form W-2 if you were paid at least $600 in cash or cash equivalent during the year, including taxable benefits. It doesn’t matter how many hours you worked or how long you were employed. If you are an employee (part-time or full-time, seasonal or permanent), and you’ve received at least $600, your employer has a reporting obligation.
There are two exceptions to the $600 rule:
- If any taxes are withheld, including those for Social Security or Medicare, your employer must issue you a Form W-2, no matter how much you were paid.
- If you would have been subject to withholding if you had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, your employer must issue you a Form W-2, no matter how much you were paid.
Due Date
Employers must generally furnish you a Form W-2 by January 31 of the year following the tax year (so, for the 2025 tax year, you will receive Form W-2 by January 31, 2026). For purposes of the rule, your employer will meet the “furnish” requirement if it’s appropriately addressed and mailed on or before the due date.
Copies For The IRS And Employees
Your employer is required to prepare several copies of Forms W-2. Three of those copies will land in your mailbox:
- Copy B is used to report your federal income taxes and is generally filed with your federal income tax return unless you file electronically. In that case, you must provide your preparer with Copy B, but you don’t typically need to forward it to the IRS.
- Copy 2 is used to report your state, city, or local income tax and is filed with the relevant tax authorities.
- Copy C is for your records.
Yes, it’s a lot of paper. If you want less paper and your employer has an appropriate system, you can receive your forms electronically. To do this, you must expressly consent—your employer may not send Form W-2 electronically to any employee who doesn’t agree or has revoked consent.
Reporting Year
Your Form W-2 reflects wages paid during the calendar year. For example, if you worked from December 18, 2024, through January 3, 2025, and were paid on December 25, 2024, and January 10, 2025, respectively, you will receive two Forms W-2: one for the days you were paid in 2024 and one for the days you were paid in 2025.
What if you worked from December 18, 2024, through December 31, 2024, but were paid on January 3, 2025? Those wages will be reported on your 2025 Form W-2.
The reporting year matters every year, but especially now, thanks to OBBBA. Many of the tax provisions—including those new provisions—are retroactive to the beginning of 2025. You can find that guidance and quick summaries about no tax on tips, no tax on overtime, and no tax on Social Security (all of which are actually new, temporary deductions) here.
What About 2025?
The draft Form W-2 will impact payroll reporting—particularly for tipped and overtime workers. But remember: none of these changes apply to the 2025 Form W-2.
The IRS says it will provide transition relief for the tax year 2025 to taxpayers claiming the deduction, as well as to employers and payors subject to the new reporting requirements—this means more guidance is yet to come.
More From The IRS
Of course, the IRS tacked on its familiar warning (well, with a few new tweaks) about drafts to Form W-2:
This is an early release draft of an IRS tax form, instructions, or publication, which the IRS is providing for your information. Do not file draft forms. We incorporate all significant changes to forms posted with this coversheet.
However, unexpected issues occasionally arise, or legislation is passed—in this case, we will post a new draft of the form to alert users that changes were made to the previously posted draft. Thus, there are no changes to the last posted draft of a form or the final revision of the form. Forms and instructions are subject to OMB approval before they can be officially released, so we post drafts of them until they are approved. Drafts of instructions and pubs usually have some additional changes before their final release.
If you have thoughts to share, the IRS will accept comments online at IRS.gov/FormsComments. Include “NTF” followed by the form number (in this case, it would be “NTFW2”) in the body of the message to route your message properly.
For more updates, you can check out the IRS website. You can also check back for our Forbes tax team coverage.