Your 2026 W-2s and 1099s have new boxes: what TP, TT and 14b mean for your payroll

October 15 came and went last Thursday. That was the extended deadline for 2025 individual returns and calendar-year C-corp returns, and for most of you there is nothing left to file this year. That part of the year is closed.

What’s left is the part we can still change. Ten weeks, give or take, between today and December 31. We’ve been doing this since 2008, and the pattern never varies: clients who call in October get choices, and clients who call in late December get arithmetic.

Four items this month. One of them is a payroll job that has to be finished before your last pay run, which is why it’s first.

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What’s on the calendar

Federal estimated-tax dates come from the 2026 Form 1040-ES and the IRS tax calendars in Publication 509 (2026). Form dates are from the 2026 General Instructions for Forms W-2 and W-3 and the 2026 Instructions for Forms 1099-MISC and 1099-NEC. The qualified charitable distribution cap is from Notice 2025-67. Enrollment dates are from HealthCare.gov. State items are cited in their own section below.

If you’re carrying a 2026 balance, one number is worth knowing: the IRS underpayment interest rate for the quarter that began October 1, 2026 is 7% per year, compounded daily (IRS, interest rates for the fourth quarter of 2026). That is the cost of leaving a shortfall alone until April. Paying part of it now costs less than paying all of it later.

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1. Your 2026 W-2s and 1099s have new boxes, and payroll has to be ready before the last run

If you pay anyone who earns tips or overtime, this is the item with a hard operational deadline attached.

What’s new on the W-2

Quoting the 2026 General Instructions for Forms W-2 and W-3:

• New box 12, code TP — “the total amount of cash tips reported to the employer”
• New box 12, code TT — “the total amount of qualified overtime compensation”
• New box 14b — “the Treasury Tipped Occupation Code(s)”

Box 14 has also been split: 14a carries what the old box 14 “Other” carried, and 14b carries the occupation code.

What’s new on the 1099s

The same reporting landed on the contractor forms, which is easy to miss if you only looked at the W-2. Per the 2026 Instructions for Forms 1099-MISC and 1099-NEC:

• Form 1099-NEC gains box 1b (cash tips included in box 1a), box 1c (Treasury Tipped Occupation Codes, up to two — enter “000” if any tips came from a non-qualifying occupation), and box 1d (qualified overtime compensation included in box 1a, premium portion only).
• Form 1099-MISC gains box 13a, box 13b and box 14 for the same three items against box 3.

If you pay crews, stylists, drivers, session musicians or performers on a 1099, this is your item as much as any employer’s.

A reminder on the 1099 thresholds while we’re here: the general reporting threshold for 2026 payments is $2,000, up from $600, and it may be inflation-adjusted starting in 2027. Royalties stay at $10; attorney gross proceeds stay at $600; consumer product direct sales stay at $5,000. Electronic filing is required at 10 or more information returns counted across all types. All from the same instructions.

Why 2026 is different from 2025

For the 2025 tax year, the IRS let everyone work around the absence of this reporting. Under Notice 2025-69, employees could treat the separate-reporting requirement as satisfied if their tips showed up properly on the W-2 — social security tips in box 7, amounts reported on Forms 4070, an employer-supplied box 14 figure, or line 4 of Form 4137 — and reconstruct the number from there. Non-employees could do the same from 1099-MISC, 1099-NEC or 1099-K totals and their own records.

That was first-year relief. The same notice states that these forms “will be updated for tax year 2026 to separately report qualified tips and qualified overtime,” with employers reporting total cash tips and the employee’s occupation under section 6051(a)(18) and total qualified overtime compensation under section 6051(a)(19). For 2026, the figures come off the form.

The part that catches payroll systems out

Qualified overtime is not the overtime line on the pay stub. It is only the premium portion — the extra half in time-and-a-half. Notice 2025-69 describes the calculation methods explicitly: roughly one-third of an aggregate time-and-a-half amount, or one-fourth of a double-time amount, is the qualifying premium. The 1099 instructions say the same thing in their own words: report “only the premium portion (for example, the ‘half’ in time-and-a-half).”

So if your payroll system drops the full overtime figure into box 12 code TT, that box will be about three times too large. The employee then claims a deduction built on it, on a return we did not prepare, and the error surfaces as either an amended return or an IRS notice. It is a small configuration question with a disproportionate tail.

Two further limits are worth knowing. Notice 2025-69 confirms that overtime paid to employees who are not eligible for FLSA overtime does not qualify at all. And whether an occupation is a tipped occupation turns on whether it “customarily and regularly” received tips on or before December 31, 2024 — a backward-looking test, not a question about your own practice today.

What’s at stake for the person being paid

Per Notice 2025-69, for tax years beginning after December 31, 2024 and ending before January 1, 2029:

• Tips: deduction of up to $25,000 per taxable year
• Overtime: deduction of up to $12,500 per return, $25,000 on a joint return
• Both phase out above $150,000 of modified AGI, $300,000 for joint filers

What to do in October

Pull a sample pay stub and a draft W-2 out of your payroll system and check three things: that TP, TT and 14b populate at all; that TT carries the premium half only; and that the occupation codes assigned to your tipped staff are the ones you would have chosen. If you issue 1099s, ask your accounts payable system or your bookkeeper the same questions about boxes 1b, 1c and 1d.

Fixing this before your last 2026 pay run is housekeeping. Fixing it after February 1, 2027 means corrected forms going out to everyone affected.

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2. Equipment ordered in December often doesn’t count for 2026

We’ve been asked more than once this month whether the equipment write-off is still around, so let’s settle it plainly. It is — and the catch isn’t the dollar limit, it’s the calendar.

It’s still available, and now it’s permanent

Treasury and the IRS issued Notice 2026-11 on January 14, 2026 (IR-2026-06), confirming a permanent 100% additional first-year depreciation deduction for qualified property acquired after January 19, 2025. It is no longer a shrinking benefit you have to use before it phases down.

Section 179 expensing sits alongside it. For 2026, per Revenue Procedure 2025-32:

• Maximum Section 179 deduction: $2,560,000
• Phase-out begins once property placed in service during the year exceeds $4,090,000
• Sport utility vehicle cap: $32,000

For almost all of you, those ceilings never come into play. Which is the point: the limit is not the constraint this year. The date is.

What “placed in service” actually means

Publication 946 puts it in one sentence: “You place property in service when it is ready and available for a specific use.” And then the part people miss: “Even if you are not using the property, it is in service when it is ready and available for its specific use.”

Read that the other way round and you have the whole problem. Ordered is not placed in service. Paid for is not placed in service. Delivered and sitting in a crate is not placed in service. The clock starts when the thing is ready to do its job.

Which is why this is an October question, not a December one

Between the purchase order and “ready and available” sits a lead time that varies enormously by what you’re buying:

• Usually fine in December. A truck or van you can drive off the lot. Tools and small equipment bought off the shelf. A laptop fleet.
• Needs watching. Anything with a delivery window, especially if it ships from a manufacturer rather than a distributor. Furniture and fixtures that arrive flat-packed.
• Frequently misses. Anything needing a licensed install, electrical or plumbing work, a permit or an inspection. Practice and imaging equipment with a vendor commissioning visit. Machinery requiring a technician to calibrate. Tenant buildouts. Capitalized software that needs configuration and testing before anyone can use it.

A November order on something in that third group can easily end up ready in the second week of January, which moves a 2026 deduction into 2027 by a matter of days. That is not a rule anyone bends — it is just a date, and the date is either met or it isn’t.

Two related points worth knowing. First, where the equipment is financed, the deduction follows the placed-in-service date, not your payment schedule. Second, Section 179 is limited by your business’s taxable income, so a very large purchase in a thin year may not deduct the way you expect, and the bonus depreciation route behaves differently. That is engagement territory rather than newsletter territory — but it is exactly why the conversation is worth having before the purchase order rather than after.

What to do

If a purchase is happening anyway, tell us what’s in the pipeline and roughly when the vendor says it will be running. We will tell you which items can realistically make December 31, which should be pulled forward into November to be safe, and which are better bought in January so the deduction lands cleanly in 2027 instead of being argued about.

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3. The state and local tax deduction steps up to $40,400 — and is scheduled to end after 2029

Let’s be precise about what changed and when, because the headlines last year blurred it and we still get asked.

The large change happened for the 2025 tax year, not 2026. From 2018 through 2024 the cap on state and local income, sales and property taxes was a flat $10,000. For tax years beginning in 2025 it rose to $40,000, with a phase-down starting at $500,000 of modified adjusted gross income — figures you’ll still see on IRS Topic no. 503 and in the 2026 Form 1040-ES, both of which carry the 2025 amounts at the time of writing.

What 2026 does is index it. Per IRS Publication 505 (2026), marked “For use in 2026”:

• Combined limit: $40,400 ($20,200 if married filing separately)
• Reduced where modified adjusted gross income exceeds $505,000 ($252,500 if married filing separately)
• Never reduced below $10,000 ($5,000 if married filing separately)
• The reduction runs at 30 cents per dollar above the threshold — the Schedule A State and Local Tax Deduction Worksheet instructs you to “Multiply line 6 by 30% (0.30)”

So the year-over-year move is $400 on the cap and $5,000 on the threshold. Useful to know, not news.

The news is the end date

This is the part that actually changes planning, and it is in the statute rather than in any IRS release. Under the applicable-limitation-amount rules at 26 U.S.C. § 164(b)(7):

We are deliberately not publishing computed dollar figures for 2027 through 2029. The statute sets them at 101% of the prior year and does not specify rounding, so the official amounts will come from the IRS in due course. The shape is what matters: about 1% a year, four more years, then back to $10,000.

That reframes the whole item. This is not a new baseline you can plan around indefinitely. It is a four-year window — 2026, 2027, 2028, 2029 — with a known close.

What follows from that

The deduction follows the year you pay, not the year the tax is for. A fourth-quarter state estimate or a property tax installment that could reasonably be paid in late December or in January is a genuine choice. With a closing window, that choice is worth looking at across several years rather than decided each December in isolation — because a dollar of deduction is worth considerably more inside the window than after it. (Accelerating has limits: a prepayment has to be a payment of a tax actually owed, not a deposit against a future one. Run it past us rather than deciding at the bank.)

Income inside the taper costs more than its own tax. Above $505,000, an extra dollar of modified AGI is both taxed and shaves 30 cents off the deduction, until the deduction reaches its $10,000 floor. The marginal cost of late-December income in that band is higher than your bracket alone suggests, which makes the timing of a bonus, a distribution or a December invoice a real question rather than a formality.

Under $505,000, none of this needs managing. You have a substantially larger deduction than you had before 2025, and nothing to do about it. That is the right answer for most people reading this, and we would rather say so than manufacture a planning problem.

If you pay tax to more than one state

A fair number of our clients pay income tax to more than one state — employees working remotely across lines, a business operating in several, a move partway through a year, a property somewhere other than where you live. All of those state taxes pool into a single figure sitting under one federal cap, which means your states interact with each other on your federal return even though they never talk to each other anywhere else.

This is also the ground where the entity-level elections below do their work. A client with employees in three states or income in two has a planning problem rather than a filing problem, and it is the kind of problem that gets cheaper the earlier we look at it.

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4. The entity-level election, and what it means wherever you file

A number of states let a pass-through entity pay state income tax at the entity level instead of passing it through to the owners’ personal returns — which can take that tax out from under the federal cap in section 3. The names differ, the mechanics differ, and the deadlines differ a great deal.

Below are the three with dates falling inside this issue’s window, each verified against that state’s own revenue authority, followed by a note for everyone else. Nothing here is a federal rule, and nothing in the federal sections above is state-specific.

New Jersey: the BAIT election and the January 15 payment

Per the New Jersey Division of Taxation’s BAIT/PTE page:

• The election is made annually, by all owners or by a designated officer or member, on or before the original due date of the entity’s return, on forms prescribed by the Division.
• Estimated payments are due April 15, June 15 and September 15 of the tax year, and on or before January 15 of the following year. So the fourth 2026 payment is due January 15, 2027.
• The entity return is due the 15th day of the third month after the close of the tax year — March 15 for a calendar-year entity.

Two things follow. First, the election is not a set-and-forget item; it has to be made for each year. Second, because the election rides on the return’s original due date, a late or missed entity filing is not only a filing problem — it can put the election itself at issue. If your 2026 BAIT election is something you have been assuming rather than confirming, now is a sensible time to confirm it.

The Division’s rate table was last updated in April 2025 and does not state a tax year, so we are deliberately not quoting BAIT rates here. If you need the 2026 rates for a projection, ask us and we will pull the current year’s forms and instructions.

New York: December 15 and the March 15 election window

Per the New York State Department of Taxation and Finance PTET page:

• Estimated PTET payments are due March 15, June 15, September 15 and December 15. The final 2026 payment is therefore due December 15, 2026.
• The annual election window runs January 1 to March 15: “An eligible entity may opt in on or after January 1, but no later than March 15.” So the 2027 election must be made by March 15, 2027.

The March 15 window is the one that costs people money, because it does not roll over and it closes before most calendar-year work is finished. A 2027 election is a January or February decision, not something to settle when the return gets prepared.

California: alive through 2030, and a softer landing on a missed June payment

Per the California Franchise Tax Board’s pass-through entity elective tax page:

• The election is available for taxable years beginning on or after January 1, 2021 and before January 1, 2031 — so it is available for 2026, and 2030 is the last eligible year.
• The tax is 9.3% of the qualified entity’s qualified net income.
• For election years 2022 through 2030, payment 1 is due on or before June 15 of the election year, in the amount of “$1,000 or 50% of the PTE elective tax paid for the prior taxable year, whichever is greater.” Payment 2 is due by the original due date of the return, without regard to extensions.
• For 2026 through 2030, missing or underpaying that June 15 installment no longer voids the election. Instead, qualified taxpayers “must reduce their credit by 12.5% of their pro rata share of the unpaid” June 15 amount.

That last point is a genuine improvement over how this used to work, and it is the kind of detail worth knowing before it matters. It is not a reason to miss June 15 — a 12.5% credit haircut is real money — but a missed payment is no longer fatal to the election.

Pennsylvania: nothing material this cycle

We checked the Pennsylvania Department of Revenue and found no rate change, new filing requirement or entity-level election development that materially affects our Pennsylvania clients this quarter. The one date worth noting for individuals: the Property Tax/Rent Rebate application deadline is December 31, 2026, following an extension.

Everywhere else: tell us your states and we’ll check yours

Our core is New Jersey, New York and Pennsylvania, but we work with clients across the country — California, Washington, Texas, Georgia and a long tail of others — and the entity-level picture varies enormously from one to the next. Some states have a well-established election with hard deadlines. Some set the election at the return, some require it months earlier. Some have no election at all. A few have rules that changed in the last two years, which means advice you were given in 2023 may simply be out of date.

We are deliberately not listing other states’ rules here, because a state rule stated loosely is worse than no state rule at all, and we verify each one against that state’s own revenue authority before we act on it.

So the practical step is short: tell us which states you file in — the business and personally — and we’ll check each one. Where you have employees in several states, or income in two, or a business operating across lines, that is a planning problem rather than a filing chore, and it is one of the first things we look at on a multi-state return.

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5. January 15 is the last lever on 2026, and withholding is the quieter one

Your fourth-quarter estimate for the 2026 tax year is due Friday, January 15, 2027 (2026 Form 1040-ES). Two things about it matter more than the date.

The target

The 1040-ES sets out the test plainly. You generally need to make estimated payments if you expect to owe at least $1,000 for 2026 after withholding and refundable credits, and your withholding and credits are less than the smaller of:

• 90% of your 2026 tax, or
• 100% of your 2025 tax (the 2025 return must cover all twelve months)

If your 2025 adjusted gross income was more than $150,000 — $75,000 if you are married filing separately for 2026 — the prior-year figure becomes 110% of your 2025 tax. Farmers and fishers who draw at least two-thirds of gross income from farming or fishing substitute 66⅔% for the 90% figure, and the 110% rule doesn’t apply to them.

Most people reach for last year’s number because it is knowable. That is the right instinct, but it is not automatically the cheaper one. If 2026 was a bigger year than 2025, paying 100% or 110% of 2025 is usually less cash out the door than 90% of a larger 2026. If 2026 was a smaller year, the 90%-of-2026 route is often the one that frees up cash. Worth a few minutes of arithmetic rather than habit.

The quieter lever

Estimated payments are credited when you make them. A payment on January 15 does nothing about a shortfall that opened up in April. Withholding is different — it is generally treated as paid evenly across the year, which means a change made in November can repair an underpayment that an estimate cannot reach.

Practically: if you or your spouse draw a W-2, raising withholding on the last few pay periods of 2026 is often the cleanest fix available in October. It is one form rather than a check, and it lands retroactively in a way an estimate does not.

The skip option

The 1040-ES also notes that the January 15, 2027 payment is not required if you file your 2026 return by February 1, 2027 and pay the entire balance with it. For a small number of clients every year — usually people whose records are already clean and whose fourth quarter was unusual — that is the better plan. It just requires being genuinely ready to file in January.

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Depending on who you are

If you own an S-corp or partnership. Your last payroll run of the year is the one that matters. Owner wages, any bonus you intend to take, and the new tips and overtime boxes for your staff all have to be settled in it — and once it is processed, your 2026 W-2 figures are set. If you file in New Jersey, New York or California, section 4 has your dates.

If you run a medical or dental practice. You know your overtime exposure better than we do; the point here is narrower. Box 12 code TT has to carry the premium half of time-and-a-half for your non-exempt clinical and front-desk staff, not the full overtime figure. Most practice payroll platforms handle this correctly out of the box; the ones that don’t will produce dozens of wrong W-2s at once. Separately, practice equipment is the classic placed-in-service trap — a vendor commissioning visit scheduled for the first week of January moves the whole deduction into 2027.

If you run a nonprofit. Your extended Form 990 is due Monday, November 16, 2026. If anything in the schedules is still open — a grant classification, a related-party question, board-designated versus donor-restricted — raise it now rather than in the second week of November. And if you pay overtime to program staff, the reporting item in section 1 applies to you exactly as it does to a business.

If you are in construction. Overtime is a large share of your payroll rather than an edge case, so the box 12 code TT question is most of section 1 for you. Section 2 is the other half: equipment and vehicles have to be ready and available, not on order, and a machine awaiting a licensed install is not in service however large the deposit was.

If you are in tech. If people work in several states you have one payroll system producing W-2s under multiple state regimes, and the new federal boxes have to be right in all of them. Capitalized software and buildouts live or die on the same placed-in-service date — software that nobody can use until it is configured and tested is not ready and available. Employees in more than one state is a planning conversation rather than a filing chore.

If you are a performer, creative, or wedding vendor. Section 5 is yours: the January 15 estimate is where a strong autumn either gets dealt with or turns into a surprise. If you took tips this year, the new box 12 code TP on a W-2, or box 1b on a 1099-NEC, is where they will show up. And one more, specific to buying your own coverage — see below.

If you buy your own health coverage

When you buy marketplace coverage, you give the exchange an income estimate and it pays part of your premium in advance on the strength of it. At tax time the advance is reconciled against what you actually earned. For years, if the advance turned out too generous, there was a ceiling on how much you had to repay.

That ceiling is gone starting with the 2026 tax year. The IRS puts it directly: “Beginning with tax year 2026, the taxpayer must repay the full amount,” and “if the APTC is more than their PTC, the taxpayer has excess APTC and must repay the entire amount” (IRS, Repayment caps eliminated for excess advance payments of the Premium Tax Credit). The change comes through the premium tax credit sections summarized on the IRS’s provisions page, which notes the removal of the limits on repaying excess advance payments for tax years beginning after December 31, 2025.

For anyone whose income is uneven — performers and working musicians, photographers and planners in the wedding trades, independent consultants, anyone early in a business where the fourth quarter decides the year — the mechanics are unchanged but the downside of a low estimate is no longer capped.

Open enrollment for 2027 coverage opens November 1, 2026. December 15 is the last day to enroll for coverage starting January 1, and enrollment closes January 15, 2027 (HealthCare.gov). If your state runs its own marketplace, check its dates — several differ. Two things worth doing before you enroll: put a realistic 2027 income number on paper rather than carrying last year’s estimate forward, and check whether your 2026 estimate is still close. There are ten weeks left in the year, and a meaningful gap may still be addressable on the income side.

We should say plainly what we are not: we are not insurance advisors, and which plan to buy is not our call. What your income is likely to be, and what the reconciliation looks like if it comes in higher, is squarely our work.

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One next step

If something here made you think “I should probably deal with that,” trust that instinct. Call us at (732) 769-4005 or email info@shahaccounting.com, and tell us which item it was. We’ll work out what is actually worth your attention and build a plan from there. Ten weeks is plenty of time to act on a plan. Two is not, and two is what late December gives us.

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This is general information, not tax advice for your specific situation. Reach out and we’ll look at your facts.