The Ledger: Year-End Payroll Reporting – Key Reminders for 2026
Becky Hanssen, CPP
Payroll Director
As we approach the end of 2026, now is the perfect time to review important payroll and tax reporting requirements. Taking care of these items before year-end helps ensure accurate W-2s, 1099s, and tax filings while minimizing last-minute surprises.
Verify Employee Information
Please encourage employees to review their W-4 information and confirm that their name, Social Security number, and address are correct. Accurate employee records are essential for year-end tax reporting and can help avoid costly corrections later.
Holiday Gifts and Year-End Bonuses
If you plan to provide holiday gifts, gift cards, or year-end bonuses, please let us know as soon as possible. If we process your payroll, we can issue bonus checks during the week you specify. If bonuses or gift cards have already been distributed, please provide that information as soon as possible, but no later than your final payroll of 2026, so the appropriate taxes can be calculated and reported.
New IRS Mileage Rate Effective July 1, 2026
The IRS recently announced a mid-year increase to the standard mileage rates due to rising fuel costs. Effective for miles driven on or after July 1, 2026, the business mileage rate increased from 72.5 cents per mile to 76 cents per mile. The medical and moving expense rates also increased from 20.5 cents per mile to 23.5 cents per mile, while the charitable mileage rate remains unchanged at 14 cents per mile. Employers that reimburse employees for business mileage should verify that reimbursement rates and expense reporting procedures reflect these changes.
Don’t Forget Non-Cash Fringe Benefits
Many employee benefits do not flow through payroll but still must be reported on Form W-2. Common examples include:
- Personal use of a company vehicle
- Employer contributions to Health Savings Accounts (HSAs)
- Group term life insurance coverage exceeding $50,000
- Employer-paid whole life insurance premiums
- Certain education assistance benefits
- Employer-paid moving expenses
For S corporations, health insurance premiums paid on behalf of shareholders owning more than 2% of the company, and their spouses, generally must also be reported on Form W-2.
Third-Party Sick Pay and Other Benefits
If employees received disability payments from a third-party insurer, additional reporting may be required. Other taxable fringe benefits may include payments made on an employee’s behalf, forgiven employee loans, or employer contributions to an employee’s Roth IRA.
If you’re unsure whether a benefit is taxable or reportable, please contact our office. We are happy to review your situation and help determine any reporting requirements.
Don’t Wait Until the Last Payroll
Timely reporting of fringe benefits is critical. We need your fringe benefit information before processing your final payroll of 2026 so payroll taxes and required deposits can be calculated accurately and submitted on time.
When exact amounts are not yet available, reasonable estimates are generally acceptable for year-end reporting purposes. In many cases, fringe benefits can be calculated using the IRS Special Accounting Rule, which allows employers to use a measurement period other than the calendar year, such as November 2025 through October 2026. We recommend using the Special Accounting Rule whenever possible to simplify year-end reporting.
For additional information on employee fringe benefits, visit the IRS Fringe Benefit Guide (Publication 15-B).