Navigating the 2026 IRS Reporting Changes for Tips and Overtime Pay

Starting with the 2026 tax year, the IRS is introducing new reporting requirements that affect how tips and overtime pay are reported on tax forms. These changes aim to improve accuracy and simplify the calculation of certain deductions for taxpayers who receive these types of income. Understanding these updates is essential for employees, employers, and tax professionals to ensure compliance and avoid errors.

What Are the New Reporting Requirements?

The IRS has updated Form W-2 and several 1099 forms to reflect more detailed reporting of tips and overtime wages:

• Form W-2, Box 12 will now include:

- Code TP for total reported tips

- Code TT for total overtime wages

• Form 1099-NEC will add new boxes 1b and 1d to separately report tips and overtime pay for non-employee compensation.

• Form 1099-MISC will include new boxes 13 and 14 for similar reporting purposes.

• Form 1099-K will modify box 1c to capture these amounts more clearly.

These changes are designed to help the IRS and taxpayers calculate the 20% deduction allowed under the Other Business-Related Benefits (OBBB) rules more efficiently.