The IRS released the 2026 Publication 15-T, Federal Income Tax Withholding Methods, which describes how to figure federal income tax withholding using the percentage method and the wage bracket method and describes alternative methods for figuring withholding. The publication has been updated to account for changes made by H.R. 1, known as the One Big Beautiful Bill Act (OBBBA; Pub. L. 119-21), which was enacted in July.
Publication 15-T explains how to withhold income tax based on pre-2020 Forms W-4 and 2020 or later Forms W-4. The publication also provides the amounts that employers should add to the wages paid to nonresident alien employees working in the United States when figuring their income tax withholding.
Includes OBBBA Information
Publication 15-T was updated to include information about withholding on qualified tips and qualified overtime compensation to account for the new tax deductions under the OBBBA. Qualified tips and qualified overtime compensation are still generally subject to both the employer and employee share of social security and Medicare tax.
Employers must use an employee’s updated Form W-4, Employee’s Withholding Certificate, if one is submitted by the employee, and the federal income tax withholding procedures in Publication 15-T to allow the employee to account for their expected deduction and receive more money in each paycheck instead of waiting until filing their income tax return to receive the full benefit of the new deductions.
Employees and payees may use the IRS's tax withholding estimator when completing their 2026 Form W-4 and Form W-4P, which were previously released with updates to account for changes made by the OBBBA. The estimator has been updated to account for the increased standard deduction and child tax credit amounts for tax year 2025. However, as of December 12, the estimator had not been updated to account for certain provisions of the OBBBA, such as the deduction for qualified tips and qualified overtime compensation. Employees should check to see if the estimator has been updated further.
For More Information
For more information, see the PAYO Compliance Update, IRS Releases 2026 Publication 15-T and Forms W-4, W-4P. Compliance updates are emailed to PayrollOrg members and are also available on the Compliance Updates webpage.
Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.
