2026 Payroll Preparation - Webinar Recap

Preparing for 2026 payroll isn’t just about updating a few numbers in January and moving on. This session walked through the most important system, compliance, and reporting changes payroll teams need to review now—while there’s still time to make adjustments before small misconfigurations turn into major year-end problems.

Using a five-phase readiness framework, the discussion focused on the areas most likely to create surprises in the new year: federal wage base changes, state-level compliance complexity, new reporting requirements tied to overtime and tip tracking, and the operational system details that keep payroll running smoothly all year long.

This recap includes:

• 2026 Payroll Readiness Checklist

• Webinar Replay

• Phase 1-5 Recap

• Q&A

⚠️Note: This information is for informational purposes only and does not constitute formal tax, legal, or compliance advice. Always consult with qualified tax advisors, legal counsel, and your organization’s internal teams for guidance specific to your situation. Additional regulations may apply. For the most accurate and up-to-date information, refer to official government resources and regulatory agencies.  

2026 Payroll Readiness Checklist

This checklist includes the full list of updated thresholds, limits, and resources covered in the session. Download the 2026 Payroll Readiness Checklist here:

Watch the full session here:

Phase 1: Federal Foundations

Payroll calculations for 2026 rely on a handful of core federal values that drive withholding, benefit limits, and tax reporting across the board. Even when systems update these automatically, it’s essential to confirm they are applied correctly, because errors at the federal level flow through every paycheck.

Several high-impact areas require particular attention:

• Social Security wage base updates should be confirmed in-system, including proper enforcement of maximum limits.
• Federal tax bracket adjustments affect withholding accuracy for the entire workforce.
• FUTA settings may appear unchanged on the surface, but credit reduction states can create unexpected employer liability if rates are assumed instead of verified.

The key takeaway: federal updates are foundational, and payroll teams should treat them as “lock in the math first” before moving into more complex state and earnings logic.

Retirement and Savings Limits

Contribution limits increase across many retirement and savings plans each year, but the operational risk goes beyond knowing the new numbers. Payroll systems must be able to:

• Distinguish employee vs employer contributions
• Handle age-based catch-up scenarios correctly
• Prevent contributions from stopping too early—or continuing past allowable limits

Missteps here often surface first through employee questions, and unresolved issues can quickly escalate into correction work later in the year.

A major compliance nuance for 2026 involves Secure Act 2.0 Roth catch-up requirements: High earners who qualify for catch-up contributions must have those catch-up amounts routed as Roth contributions rather than pre-tax, while still allowing standard contributions up to the normal limit.

This may require additional payroll configuration and proactive planning now rather than waiting until year-end enforcement becomes urgent.

HSAs vs FSAs

Health savings and flexible spending accounts are often grouped together, but they function differently in ways payroll systems must reflect.

Important distinctions include:

• HSAs are employee-owned, portable, and can roll over year to year
• FSAs are employer-sponsored, typically reset annually, and may be subject to use-it-or-lose-it rules

Payroll teams should confirm limits, catch-up eligibility, carryover rules, and plan-year resets are configured correctly.

Errors in this area tend to appear quickly as employee-facing deduction concerns, making early review especially valuable.

Phase 2: State Compliance Checks

Once federal values are confirmed, state compliance becomes the next major pressure point. State rules are rarely uniform, and updates often require manual review rather than relying on last year’s settings.

Key areas of focus include:

SUTA and State Unemployment Complexity

State unemployment rates vary widely and can depend on wage thresholds, turnover experience, and state-specific employer programs. Rates should be verified directly with state agencies each year.

Paid Leave Programs and Pickup Taxation

With more states implementing PFML requirements, payroll teams must review taxability, contribution splits, and new pickup taxation rules. In some jurisdictions, paying more than the required amount can create additional taxable wages for employees—an unexpected compliance consequence.

Minimum Wage Updates at the Local Level

Many states and localities adjust minimum wage annually or mid-year, and tipped employee rules add another layer of complexity. Systems should be reviewed to ensure employees are never paid below the applicable jurisdictional rate.

Phase 3: Earnings, Deductions, and Reporting Logic

Even with correct federal and state values, payroll can fall out of compliance if earning and deduction codes are not configured properly.

This phase emphasized the importance of reviewing:

• Overtime earnings setup
• Tip and bonus taxability
• Retirement inclusion rules
• FUTA/SUTA applicability
• Local reporting alignment

Small configuration errors in earning codes often create large downstream corrections, especially when discovered late in the year.

Major 2026 Reporting Changes: Overtime and Tip Tracking Requirements

New IRS reporting requirements tied to the One Big Beautiful Bill Act introduce structural changes to W-2 and 1099 forms.

A key operational shift for 2026 is that overtime reporting requires tracking only the premium portion of overtime pay under FLSA rules—not the full overtime amount.

This means payroll systems may need to:

• Store overtime premium separately from base wages
• Confirm calculation logic aligns with federal definitions
• Account for state overtime rules that differ from the FLSA standard

Tip reporting requirements also expand, increasing the need for accurate employee-level tracking, pay-period attribution, and integration with POS or timekeeping workflows.

Phase 4: Systems and Workflow Readiness

Beyond configuration, payroll teams must ensure systems can execute correctly throughout the year.

Important operational reviews include:

• Confirming W-4 calculation logic reflects the expanded form and updated child tax credit
• Encouraging employees to review and update withholding elections where needed
• Auditing I-9 workflows to ensure the correct form edition is being used for 2026 hires
• Reviewing payroll calendars, holiday adjustments, and check-date timing to prevent avoidable disruptions

These details may seem small, but they have an outsized impact on employee trust and payroll stability.

Phase 5: Clean Data and Updated Policies

Accurate payroll outcomes depend on accurate workforce data.

Payroll teams should verify:

• Legal names, SSNs, and addresses
• Contractor documentation and current W-9s
• Correct exempt vs non-exempt classifications
• Internal policies with outdated dates or compliance gaps

Policy updates, pay transparency requirements, and workforce governance increasingly intersect with payroll reporting and should be part of annual readiness planning.

Final Takeaway: Readiness Is Ongoing, Not One-Time

The goal coming out of this session is not to tackle every change immediately, but to build a realistic action plan for the coming weeks and months.

With the checklist providing the specific thresholds, limits, and resources, this recap reinforces the broader priorities:

• Validate foundational federal and state setup
• Review earning and deduction logic before problems surface
• Prepare now for overtime and tip reporting changes
• Confirm workflows, forms, and payroll calendars support execution
• Keep data and policies current to reduce compliance risk all year long

Q&A