TAX SEASON SUPPORT WHEN YOU NEED IT MOST, ONLY FROM ADP.

Qualified Overtime Reporting

What’s changed

For tax years 2026 through 2028, employers and payors are expected to report qualified overtime amounts on year-end informational tax returns. While overtime information will be accumulated throughout the year, this is an annual requirement to report qualified amounts to employees.

Detailed guidance on qualified overtime reporting, as outlined by the One Big Beautiful Bill Act, can be found here.

How ADP can help

• For payrolls processed with a check date of 1/1/26 or later, hours reported in the existing overtime and double time earnings codes will be used to calculate the premium portion of qualified overtime compensation and reported in box 12 of the employee’s Form W-2.
• New "NQ" (non-qualified) overtime earnings codes have been added to track overtime and double time hours that do not qualify for the federal deduction. These amounts will not be reported in box 12 of the employee’s W-2.
• Clients with ADP Timekeeping solutions will automatically classify overtime and double time as qualified and non-qualified overtime for weekly and bi-weekly payrolls.
• A new payroll report, Qualified Overtime Compensation Summary, will be available for qualified overtime/double time earnings per payroll to show the qualified premium portion of these earnings that will print on the employee's W-2 and may qualify for the tax deduction.

Qualified Tips Reporting

What’s changed

For tax years 2026 through 2028, employers and payors are expected to report qualified tip amounts on year-end informational tax returns. While tip information will be accumulated throughout the year, this is an annual requirement to report qualified amounts to employees.

Detailed guidance on qualified tip reporting, as outlined by the One Big Beautiful Bill Act, can be found here.

How ADP can help

• For payrolls processed with a check date of 1/1/26 or later, tip amounts reported in the existing tips earnings codes, which may qualify for the tax deduction as outlined by H.R.1, will be reported in box 12 on the employee’s Form W-2.
• New "NQ" (non-qualified) tip earnings codes have been added to track tips that do not qualify for the tax deduction as outlined by H.R.1 (e.g. service charges or mandatory gratuity). These amounts will not be reported in box 12.
• For tipped employees, employers will need to log in to their ADP payroll solution and select a Treasury Tipped Occupation Code (TTOC) for each employee that works in an occupation that customarily and regularly receives qualified tips. Employers will be reminded to make these selections in their ADP solution if qualified tips are reported for an employee with no TTOC selected.

R&D Tax Credits

What’s changed

Section 174A, under The One Big Beautiful Bill Act, allows taxpayers to now immediately deduct domestic research & development (R&D) expenditures after December 31, 2024. Previously, taxpayers would have required five-year (domestic) and 15-year (foreign) periods for amortization. The immediate deduction option opens greater flexibility.

With the additional guidance from IRS Revenue Procedure 2025-28, there are opportunities for your clients to amend their tax returns for the years 2022, 2023, and 2024 to benefit from the immediate expensing provisions of Section 174A. Qualifying businesses, particularly those with average annual gross receipts of $31 million or less, must file any amended returns by the earlier deadline of July 6, 2026, or the expiration of the refund statute.

How ADP can help

We provide you and your clients with a more efficient and effective R&D process. Our focus is to help maximize R&D tax credit incentives, while also saving administrative time and effort.

ADP’s tax professionals will work with you and your clients to:

• Assess your client’s qualified research activities and expenses.
• Review their payroll, tax documents and other systems of record data.
• Communicate impacts and timelines from The One Big Beautiful Bill Act.
• Execute your R&D tax strategy, including documenting and capturing eligible R&D tax credits.
• Protect and support, with audit defense, on ADP-captured R&D tax credits.

ADP’s dedicated R&D Tax Credit experts have helped accountants and their clients secure tax credits and incentives for decades, with over $6 Billion in tax credits calculated, captured and claimed since 2017.

HR Outsourcing & PEO

What’s changed

• Healthcare changes are impacting millions of people, with the expiration of enhanced premium tax credits that lowered Affordable Care Act (ACA) plan costs, while employer-sponsored healthcare costs are projected to increase by 8.5%¹ in 2026.
• 23 states amended labor laws, including expanded protections for gig workers and new rules governing employment contracts, data privacy, and more.
• 20 states and 40 jurisdictions increased their minimum wages, mostly through scheduled increases and tax changes to tips and overtime.

How ADP can help

• ADP’s full-service HR solution, ADP TotalSource®, manages payroll, benefits and compliance so your clients can stay focused on growth. Companies using a PEO grow twice as fast with 12% lower employee turnover².
• Offer your top clients a complimentary benchmark report showing them how they stack up on turnover, wages, talent sourcing, benefits contributions and more, giving you a platform to add your insights.
• For clients not ready for a PEO, ADP® Comprehensive Services helps by outsourcing essential HR tasks to manage compliance, so clients can focus on growth.
• Review your clients’ analytics on Accountant Connect^SM and uncover new advisory opportunities.

1. PWC Medical cost trend: Behind the numbers 2026
2. NAPEO Industry Research

Health & Benefits

What’s changed

Health insurance premiums are projected to soar in 2026. This increase is driven by the expiration of enhanced federal premium tax credits, which have been essential in lowering costs for millions, as well as by escalating healthcare expenses and new federal regulations.

On the business insurance side, new qualified overtime rules could impact the way businesses calculate workers’ compensation.

Both of these changes could have your clients seeking insurance guidance more than ever before.

How Automatic Data Processing Insurance Agency, Inc. (ADPIA®), an ADP affiliate, can help

• Clients will receive a comprehensive evaluation of their current business and group health insurance selections
• A licensed agent will provide alternative business and group health insurance plan options that may better suit your clients’ needs
• Clients will have access to seamless administration solutions that integrate directly with ADP payroll systems:
  • Benefits Connector* allows clients to connect their employee health insurance and a benefits administration solution that helps simplify open enrollment and streamline deduction management.
  • ADP’s Pay-by-Pay^® Premium Payment Program** integrates your clients’ workers’ compensation premium payments with their payroll to help improve cash flow and have their premium payments calculated more accurately including overtime.

Retirement Planning

What’s changed

• SECURE 2.0 Act provisions increase access to employer-sponsored retirement benefits and expand retirement readiness for American workers. One potential benefit for companies when starting a retirement plan is the enhanced startup tax credit.
• New guidance is available on SECURE 2.0 features, including automatic enrollment, Roth Catch-up Contributions, student loan matching contributions and the new paper statement provisions.
• More than 25 states now mandate employer participation in a state-sponsored retirement program unless a qualifying plan is already offered, with a potential penalty for noncompliance.

How ADP can help

• Help your clients identify the startup tax credits for which they may be eligible with the ADP SECURE 2.0 Act Tax Credit Calculator, located under Calculators in Accountant Connect. And with the new Retirement Plan Tax Credit Report in Accountant Connect, you can access your eligible clients’ complimentary Retirement Plan Startup Tax Credit Package directly, helping you work more efficiently.
• To comply with these legislative requirements, your clients need a retirement plan provider like ADP Retirement Services that can deliver real-time, embedded integration between ADP payroll and an ADP retirement plan. ADP proactively manages plan administration complexities, saving hours of administrative work.
• ADP offers a variety of low-cost, flexible retirement plan options that fit the needs of any size business. These plans offer several advantages over state-run plans, which often have limited contribution potential, few investment choices, and require an administrative commitment from the business owner.

Unless otherwise agreed in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisor or firm for the provision of advice; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. M-870600-2026-01-21