The Internal Revenue Service (IRS) recently released a revised Form W-2 and draft instructions to accommodate the tax implications of the One Big Beautiful Bill Act (OBBBA) passed in 2025. For employers, the OBBBA provisions create additional reporting requirements starting in 2026 that are reflected in the revised Form W-2.
No tax on qualified tips
The OBBBA provides tax relief up to $25,000 for workers receiving qualified tips in identified occupations. Qualified tips are only immune from federal income tax, not Medicare or Social Security taxes. Under the updated form, the tip code TP (total amount of cash tips reported to the employer) can be recorded in one of the four box 12 options followed by the corresponding tip amount. If there is box 12 tip detail, then the occupation-specific Treasury Tipped Occupation Code will be reported in box 14.
Exemption for overtime compensation
Box 12 also will record an employee’s eligible overtime compensation under code TT (total qualified overtime compensation). Employees earning less than $150,00 annually who receive overtime pay will be eligible to deduct up to $12,500 in overtime pay from federal income tax.
Trump account employer contributions
Employer contributions to a Trump Account for an employee’s dependent are to be noted in box 12 using code TA (Trump Account contribution). Starting July 5, 2026, these new tax-advantaged individual retirement accounts can be established for anyone with a valid Social Security number under age 18. Employer contributions are capped at $2,500. Collectively, contributions by parents, grandparents and other sources cannot exceed $5,000 annually.
The new W-2 form signifies how the IRS expects the new OBBBA data to be reported. Employers should review payroll processes to ensure eligible overtime pay and tipped compensation are accurately tracked throughout the year and reported to the IRS.