The Internal Revenue Service (IRS) has issued a draft version of the 2026 Form W-2, offering insights into the future reporting requirements for employers concerning the qualified tips deduction under IRC §224 and the qualified overtime deduction under IRC §225. Additionally, the draft references a new IRS form, presumably intended for the reporting of these and potentially other items deductible under §63.

While the deductions for qualified tips and qualified wages are effective starting in 2025, the IRS has previously stated that the 2025 Form W-2, already finalized, will not be modified. However, employer reporting obligations for these payroll-related items will be incorporated into the 2026 Form W-2.

The draft Form 2026 W-2 released on August 15 is shown below:

New box 14b will be added to Form W-2 in which the employer will provide the “Treasury tipped occupation code.” Presumably these codes will be provided as part of the list of occupations which had customarily received tips as of December 31, 2024 that are eligible to receive qualified tips, a list expected to be released later in 2025.

Significant modifications are evident in the employee instructions for Form W-2, specifically through the inclusion of three new codes in box 12:

TA—Employer contributions to your Trump account.
TP—Total amount of qualified tips.
TT—Total amount of qualified overtime compensation.

References to a presently non-existent IRS Schedule 1-A (Form 1040) are found in the instructions for the Treasury Occupation Code (box 14b) and the amounts provided to the employee in Box 12 under codes TP and TT.

Schedule 1-A (Form 1040) is anticipated to be the designated form for reporting the various deductions recently added to the previously concise list of items that are not deducted by an individual in the calculation of adjusted gross income, nor as an itemized deduction, but rather as an additional deduction utilized in computing taxable income under IRC §63.

Under the Tax Cuts and Jobs Act (TCJA), the qualified business income (QBI) deduction, codified at IRC §199A, represented the sole additional deduction appended to this specific class. However, the OBBBA has substantially broadened this list, effective beginning in 2025, to encompass, in addition to the QBI deduction:

Non-itemizer deduction for charitable contributions
Deduction for qualified tips
Deduction for qualified overtime compensation
Deduction for car loan interest
Additional deduction for individuals over age 65

The mention of Schedule 1-A suggests that all these deductions will be reported on a new schedule, with the aggregate of such deductions subsequently carried forward to Form 1040. Given that the Draft 2025 Form 1040 has not yet been released, it is highly probable that this new form will debut with the 2025 Form 1040 filings.