The 2026 Publication 15-T, Federal Income Tax Withholding Methods, provides employers with essential guidance on calculating federal income tax withholding. It outlines both the percentage method and the wage bracket method, while also detailing alternative approaches to ensure compliance.
This latest edition incorporates updates from H.R. 1, the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, reflecting the most current legislative changes.
Publication 15-T offers clear instructions for withholding based on both pre-2020 Forms W-4 and 2020 or later Forms W-4, helping businesses manage payroll across different employee filing formats. Additionally, it specifies the required adjustments employers must make when calculating withholding for nonresident alien employees working in the United States.
OBBBA Updates
The 2026 Publication 15-T has been updated to incorporate guidance on withholding for qualified tips and qualified overtime compensation, reflecting the new tax deductions introduced under OBBBA. While these categories of income may qualify for deductions, they remain subject to both the employer and employee share of Social Security and Medicare taxes.
Employers must use an employee’s updated Form W-4, Employee’s Withholding Certificate, when submitted, and follow the federal income tax withholding procedures outlined in Publication 15-T. This ensures employees can account for their anticipated deductions and benefit from increased take-home pay throughout the year, rather than waiting until filing their annual tax return to realize the full value of the new provisions.
To assist with accurate withholding, employees and payees may use the IRS Tax Withholding Estimator when completing their 2026 Form W-4 or Form W-4P. These forms have already been revised to reflect OBBBA-related changes, including the increased standard deduction and child tax credit amounts for tax year 2025. However, as of Dec. 12, 2025, the estimator had not yet been updated to incorporate certain OBBBA provisions, such as deductions for qualified tips and qualified overtime compensation. Employees should verify whether further updates have been made before relying on the estimator for final calculations.
Here to Help
Employers should begin tracking qualified tip income and qualified overtime income immediately and establish procedures to retroactively capture amounts paid prior to July 4, 2025, when the OBBBA took effect. The IRS is expected to issue transition relief for tax year 2025 and release updated forms for 2026, but proactive preparation now will help minimize compliance risks.
As tax regulations continue to evolve, staying ahead of finalized IRS guidance and new reporting requirements is essential. Missteps can be costly, but with the right partner, compliance doesn’t have to be complicated.
That’s where we come in. We keep you up to date on all important law changes, so you can stay in compliance while focusing on running your business. Contact us today to learn more.
