Year-End Tax Updates
October 14, 2026
The end of the year always brings a few tax updates. Here are the changes to be aware of as we head into 2026.
FICA Cost-of-Living Adjustments
As announced by the Social Security Administration, the maximum amount of earnings subject to Social Security tax will increase to $192,300 in 2027 (up from $184,500 in 2026). The Social Security tax withholding rate will remain at 6.2%. With the new wage cap, the maximum withholding for Social Security will be $11,922.60 . [Pretty sure, but it’s never a bad idea to check my math. My ability to do math, even with a calculator, is about the same as Justin Timberlake’s in this scene from Friends with Benefits.)
Medicare tax rates also remain the same and are not subject to a maximum (the threshold at which the additional Medicare tax applies is likewise unchanged—this threshold is not tied to inflation).
How Do This Year’s Adjustments Compare to Prior Years?
This year’s wage base is 4.23% higher than last year’s, which is a slightly smaller increase than last year but still significant in comparison to past wage base increases. The median increase since 1998 is 3.61% (the average is 3.65%). Thus, this year’s increase is higher than normal, but not anywhere near the highest since 1998 (which was the 8.98% increase in 2023).
Why Is the Wage Base Increase Different Than the Benefit Increase?
The increase in the Social Security wage base is considerably higher (4.23%, as noted above) than the increase in benefits (3.6%). Why the difference?
Well, the two amounts are calculated differently. Social Security benefits are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Social Security wage base is tied to the National Average Wage Index. In addition, the wage base calculation uses data from the prior year, not the current year. The 2027 wage base increase is tied to 2025 data on wages. The benefits calculation, however, compares the CPI-W for Q3 of the current year to Q3 of the prior year.
Forms 3921 and 3922 Must Be Filed on IRIS
Just a reminder that Forms 3921 and 3922 for 2026 will need to be filed on the IRS’s new Information Returns Intake System (IRIS). The FIRE system, which is what you probably used for last year’s forms, will be permanently shut down on November 19, 2026, at 3:00 PM Eastern.
IRIS is designed to modernize electronic IRS filings and introduces several upgrades, including:
- A web portal for filings of no more than 250 returns. Returns can be entered manually or uploaded via CSV file.
- Real-time error detection for TINs and file formats and the ability to correct individual returns without having to resubmit the filing.
- Year-round testing (a huge improvement over FIRE’s limited test window).
- Modern XML-based architecture with XML/JSON files and improved security and APIs for application-to-application filings (instead of manual uploads).
Now is a good time to start talking to your providers about how they will support IRIS filings and what you’ll be responsible for. Here are some questions to ask:
- Will they provide an export that includes all the data necessary to create a CSV file that can be uploaded to IRIS? Will it be in the format required by IRIS, or will you need to reformat it using the IRIS template?
- Will they provide the ability to submit app-to-app filings via IRIS?
- If yes, will you need to file under your company’s TCC, or will the filings be transmitted under the provider’s TCC?
- If no, will they provide an export that you can use to upload the data to another third-party solution that provides this service? Do they have any preferred partners that they recommend?
For more information on IRIS, see my blog “IRS Modernizes 3921 and 3922 Filings with IRIS.”
Are You Ready to Add the ARPA Five for Your Section 162(m) Covered Employees?
Starting next year, under the American Rescue Plan Act, an additional five highest-paid employees will become subject to Section 162(m) (the “ARPA Five”).
Based on comments from the US Treasury Dept Speaks panel at this year’s NASPP Conference, it seems like we won’t have final regulations before the end of this year. But the panel noted that the IRS has until the end of 2027 to issue the final regs, since companies won’t file their tax returns that are affected by the new requirement until the end of their 2027 tax year.
On the other hand, you likely can’t wait until your company files its tax return to start considering the effect of the ARPA Five on your corporate tax deductions for equity awards. When tax deductions are limited under Section 162(m), this may need to be reflected in the deferred tax assets and tax expense adjustments you record for equity plan transactions.
The NASPP Conference session “Planning for the 162(m) Expansion & the New Proxy Disclosure Landscape,” presented by Ken Foulks of Clearbridge Compensation Group, Shalom Huber of Skadden, and Andrea Wilson of Excelerate Energy, offered some excellent tips to start preparing for this new requirement:
- Size the Exposure: Identify who would have been included in the ARPA Five during 2024 to 2026 to get an idea of what the impact might be on your tax expense and how much the group might change from year to year.
- Book the Impact: Start adjusting forecasts and budgets for the additional tax expense. As already mentioned, you may also need to adjust DTAs recorded for equity awards.
- Own the Process: Put together a team to start working on this and document your methodology.
For more information on the ARPA Five, see my blog “Section 162(m) in 2027: Are You Ready for the ARPA Five?”
Beware Form W-2 Phishing Scams
The end of the year is a good time for me to remind you to be on the lookout for Form W-2 phishing scams, especially if you work in payroll or HR. Here’s how the scam works: the cybercriminal sends you an email that looks like it is from your CEO or another executive and urgently requests a list of all employees and their Forms W-2. If the scammer manages to procure the list, they will file fraudulent tax returns for the employees to claim any refunds that are due to the employees.
If your company has been victimized by this scam, the IRS has announced special procedures to report this. If you notify the IRS quickly enough, they can take steps to prevent employees from being victimized.
A Few of My Favorite Tax Resources
While we’re on the subject of taxes and heading into year-end tax reporting season, I’d like to mention a few of my favorite resources that are available for NASPP members.
Year-End Tax Reporting Webinar
Our annual webinar on US tax reporting for stock compensation is a handy refresher for this once-a-year task. This year’s webinar is scheduled for December 2.
Tax Reporting Guide
Another one of my favorite resources is our handy Tax Reporting Guide for Stock Plan Transactions, which illustrates, in tabular format, how to report an extensive list of stock plan transactions on Form W-2. It provides an easy-to-use checklist to verify that you are reporting stock plan transactions correctly for federal tax purposes.
Form W-2 Reporting Checklist
Make sure you haven’t overlooked any reportable income with our Form W-2 Reporting Checklist. This list can be a helpful framework for your year-end kick-off meeting with payroll.
Tax Reporting FAQs
You’ve got questions on how to report stock plan transactions on Forms W-2, 1099-NEC, and 1099-MISC and we have answers. Check out the following FAQs:
- FAQs on W-2 and 1099 Reporting for Restricted Stock and Units
- FAQs on W-2 and 1099 Reporting for Stock Options
- FAQs on W-2 Reporting for ESPPs
Taxation in the Event of Death, Divorce, and Retirement—Videos Available
Death, divorce, and retirement are some of the trickiest tax withholding and reporting scenarios you can encounter for stock compensation. To help you understand the rules, I recorded three videos that cover the tax treatment of equity awards in these situations. Each video is only about ten minutes long and summarizes the company’s US tax reporting and withholding obligations.
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By Barbara BaksaExecutive Director
NASPP