February 2026 Compliance Updates: New State Taxes, Federal Updates, & More

New Tax Updates

Maryland - Paid Family Leave

DELAYED: Contributions have been delayed until January 1, 2027 with benefits to begin January 1, 2028. This was confirmed through an agency newsletter received 4/08/2025 that confirmed the final bill passed to delay the start of this tax.

Paid Family and Medical Leave

Federal Updates

W2 Reporting Updates for 2026

Box 12—Codes:

Tip: On Copy A (Form W-2), do not enter more than four items in box 12. If more than four items need to be reported in box 12, use a separate Form W-2 to report the additional items (but enter no more than four items on each Copy A (Form W-2)).

See the FormW-2 Reference Guide for Box 12 Codes.

Code TA—Employer contributions under a section 128 Trump account contribution program paid to a Trump account of an employee or a dependent of an employee. Beginning July 4, 2026, employers may contribute up to $2,500 a year, toward the $5,000 contribution limit to the Trump account of an employee or of a dependent of an employee, and the amount will be excluded from the gross income of the employee if paid pursuant to a Trump account contribution program. For more information about employer contributions to Trump accounts, see Pub. 15-A.

Code TP—Total amount of cash tips reported to the employer. Report the total amount of cash tips reported to the employer. Tips are still generally subject to federal income tax withholding and both the employer share and employee share of social security tax and Medicare tax if the tips received are $20 or more per month. You must also list an occupation code in box 14b — Treasury Tipped Occupation Code(s).

Code TT—Total amount of qualified overtime compensation. Qualified overtime is compensation that is paid to an individual required under section 7 of the Fair Labor Standards Act (FLSA) of 1938 that is more than the regular rate at which the individual is employed. For example, only the “half” portion of “time-and-a-half” compensation would be reported using code TT. Overtime compensation is still generally subject to federal income tax withholding and both the employer share and employee share of social security tax and Medicare tax. For more information about overtime compensation, go to dol.gov/agencies/whd/overtime.

GeneralInstructions for Forms W-2 and W-3 (2026) | Internal Revenue Service

Trump Accounts

This is a new type of Individual Retirement Account (IRA) for eligible minor dependents. Children born between January 1, 2025 – December 31, 2028, will receive a $1,000 government seed contribution to start the account. Parents, relatives, employers, and charitable organizations can contribute to the account. There is an annual contribution limit of $5,000, regardless where the funds are deposited from. The annual contribution limits are indexed to inflation and will adjust starting after 2027.

Employers can contribute up to $2,500 per child, which counts towards the $5,000 limit, and the amount will be excluded from the gross income of the employee if paid pursuant to a Trump account contribution program. This would be listed in Box 12 of the employees’ W-2 using code TA.

Contributions can begin on July 5^th, 2026, however parents of their minor dependent(s) can pre-register using IRS Form 4547. Contributions are post-tax, and the funds are not taxed when withdrawn by the individual when they are eligible. The account will be locked until the child turns 18, and then functions like a traditional IRA.

For more information about employer contributions to Trump accounts, see Pub. 15-A and the below resources.

Treasury,IRS issue guidance on Trump Accounts established under the Working Families TaxCuts; notice announces upcoming regulations | Internal Revenue Service

Notice of intent to issue regulations with respect to section 530A Trump accounts

Trump Accounts -Jumpstarting the American Dream

Tip Reporting Update

The IRS has released final instructions for the 2026 Form W-2. There will be space available for two occupational codes relating to the tipped wage reporting. We anticipate for any individual with more than two occupational codes, the qualified wages would be reported as one lump sum under a main or primary occupational code. We are pending clarification from the IRS on how to report this and will provide additional updates as they are received. If any tips were received in a non-qualifying occupation, then “000” must be input as one of the occupation code(s).

ProLiant will be reviewing the tipped wage requirements and occupational codes to implement this reporting and ongoing tracking in our system. Please be on the look out for additional information and potential setup requirements. We will communicate these updates as soon as we are able.

See IRS.gov/TippedOccupations for the applicable code(s).

State Updates

California

New Legislation - Workplace Know Your Rights Act

Under the state’s Workplace Know Your Rights Act (S.B. 294), employers are required to provide a standalone written notice to current employees annually, as well as to new employees upon hire, and give the opportunity for employees to provide emergency contacts for notification purposes.

A template notice is available and will be updated by the state annually, along with a Spanish version. A link to the pre-drafted notice is below. All Employers with California employees must provide a copy of this notice to their employees.

Employers are encouraged to:

• Determine distribution method of this notice to current employees as well as all new hires going forward and ensure a record keeping process is in place.
• By March 30, 2026, allow employees to designate emergency contacts and opt in to notifications in the event of an arrest or detention.
• Update on boarding processes to allow new hires to designate emergency contacts and indicate whether they should be notified of the employee’s arrest or detention.
• Train supervisors and managers on requirements regarding emergency contact notification in the event of an employee’s arrest or detainment.

The Workplace Know Your Rights Act also requires employers to provide employees with the opportunity to name emergency contacts and to indicate whether the emergency contact should be notified if the employee is arrested or detained. If so indicated, employers must notify the employee's designated emergency contact if

1. The employee is arrested or detained at the worksite; or
2. Arrest or detention occurs during work hours or while the employee is performing job duties offsite, but only if the employer has actual knowledge of the arrest or detention.

The opportunity to name an emergency contact must be provided to existing employees no later than March 30, 2026, and to new employees hired after March 30, 2026. Employers must also allow employees to provide updated emergency contact information through the duration of their employment.

SB294Know Your Right Notice

Michigan

Withholding – to follow OBBB

Michigan Income Tax Act to allow deductions for qualified overtime compensation and qualified tips, aligning state law with certain federal deductions introduced by the One Big Beautiful Bill Act. These deductions are only available for the 2026, 2027, and 2028 tax years.

Importantly, the One Big Beautiful Bill made the deductions available at the federal level beginning in tax year 2025. For the 2025 tax year, deductions for qualifying overtime compensation and qualified tips will not be available in Michigan. Under current law, the 2028 tax year will be the final tax year that these deductions are available at both the federal and state level.

Notice Regarding New Deductions for Qualified Overtime Compensation and Qualified Tips

Texas

SUI – AST rate active for2026 at 0.01%

Resolution of the Texas Workforce Commission Setting the Unemployment Obligation Assessment Rate and Adjusting the Deficit Tax Rate for Calendar Year 2026