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Takeaway
Stay ahead of 2026 HR compliance updates with key changes to federal reporting guidance, pay transparency, employee leave, withholding requirements, employment verification and more.
Paycom is committed to helping HR professionals navigate the ever-changing compliance landscape. In this edition of State of Compliance, we look at changes across 10 states and at the federal level. Please note this list is not intended to be comprehensive. Our team is constantly monitoring for updates that may impact your organization.
Federal HR compliance updates
The Internal Revenue Service (IRS) has issued revised December 2026 instructions for Forms 1099-MISC and 1099-NEC, introducing several reporting updates that affect how tax filers capture and report certain payments. These instructions were issued to keep taxpayers in compliance with the One Big Beautiful Bill Act, which passed in 2025.
To learn more, visit the IRS website.
The IRS released an updated fact sheet on the qualified overtime deduction, specifying that for tax years 2026 and later, the deduction is only allowed for amounts that an employer specifically reports on an employee’s Form W-2. The new guidance, provided in Fact Sheet 2026-13, replaces a set of questions and answers issued in Jan. 2026. The updates clarify the reporting requirements that become mandatory for tax years beginning after Dec. 31, 2025.
For more information, visit the IRS website.
The IRS provided updates on reporting Trump Account contributions in the agency’s Aug. 13 payroll industry teleconference.
Employers can report employer-funded contributions and employee salary reduction contributions to Trump Accounts under a Section 125 cafeteria plan on Form W-2, Wage and Tax Statement, in Box 12 using code TA. The form’s instructions state that code TA is used to identify employer contributions to Trump Accounts. However, because both employee salary reduction contributions under cafeteria plans and employer contributions are exempt from income tax, code TA can be used for both types. However, this is an exclusion from gross income, not an exemption, and is still taxable under FICA/FUTA.
Additionally, Section 128 contributions funded through salary reduction cannot be made to the employee’s own Trump Account; they must be made to the account of the employee’s dependent.
These are still only proposed regulations that are open to public comment until Oct. 20 and, as such, are not yet finalized.
For more information, visit the U.S. Securities and Exchange Commission website.
State HR compliance updates
Alabama
Alabama released income tax withholding guidance for nonresident employees, clarifying that employers generally should withhold Alabama income tax only on wages attributable to services physically performed in Alabama.
If a nonresident employee works entirely outside Alabama, withholding is not required solely because the employer is located in the state. For employees who work both inside and outside Alabama, employers should use a reasonable method to allocate wages to Alabama work and maintain records supporting the allocation.
The guidance also notes Alabama’s 30-day safe harbor rule for certain out-of-state workers performing services in Alabama for 30 or fewer days in a calendar year and reminds employers with employees performing services in Alabama to register for an Alabama withholding tax account.
For more information, visit the Alabama Department of Revenue website.
Colorado
Colorado House Bill 26-1207 requires certain private employers conducting business in the state to include EEO-1 demographic workforce data in periodic reports filed with the Colorado secretary of state beginning July 1, 2027.
The requirement applies to private-sector entities with 100 or more workers that conduct business in Colorado and were required, as of March 1, 2026, to submit EEO-1 data to the U.S. Equal Employment Opportunity Commission. The data includes workforce demographics categorized by race, ethnicity, gender and job category.
Covered employers must provide this information in their periodic reports even if the federal government later repeals or discontinues the federal EEO-1 reporting requirement.
For more information, visit the Colorado General Assembly website.
Connecticut
Connecticut House Bill 5003 updates the state’s pay transparency requirements, effective Oct. 1, 2026.
Under the law, employers must include the wages or wage range and a general description of benefits in internal and public job advertisements. Employers may also need to provide this information to applicants before discussing or offering compensation if the position was not included in a job advertisement.
The law also requires employers to provide employees with the wage range and general description of benefits for their position upon hire, when their position changes or upon the employee’s first request.
For more information, visit the Connecticut General Assembly website.
Louisiana
Louisiana Senate Bill 409 enacts the Louisiana Living Donor Paid Leave Protection Act, effective Aug. 1, 2026, to protect employees who need leave to serve as living organ or bone marrow donors.
Private employers with one or more employees must provide unpaid leave when an employee submits a written request to serve as a human organ donor or bone marrow donor. The leave must equal the time requested by the employee or 30 consecutive calendar days, and employers may allow a longer period of paid or unpaid leave.
The law also prohibits employers from discharging, demoting, suspending, threatening, harassing or discriminating against an employee for requesting or taking protected donor leave.
For more information, visit the Louisiana State Legislature website.
Maine
Maine’s 2026 income tax withholding methods were updated to add the state’s surcharge for high earners and increase the standard deductions provided, Maine Revenue Services reported in an Aug. 13 tax alert.
The standard deductions used in the withholding methods increased to $15,700 for single employees or married employees filing separately, $23,550 for head of household and $31,400 for those filing married joint returns. After withholding is calculated using the percentage method, the 2% surcharge is added to the portion of an employee’s annualized income above the thresholds of $750,000 for married individuals filing separately; $1 million for single individuals; or $1.5 million for individuals filing as heads of households, married individuals filing joint returns or individuals filing as surviving spouses. Weekly, biweekly, semimonthly, monthly and daily equivalents of the thresholds are provided in the wage-bracket tables.
Employers should not reduce Maine withholding by any amount an employee may claim on the deduction worksheets attached to federal Form W-4, Employee’s Withholding Certificate or Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments.
For more information, visit the Maine Revenue Services website.
Massachusetts
The Massachusetts Department of Revenue has updated its Employer Tax Obligations guide, dated Aug. 27, 2026, covering registration, withholding, unemployment tax and workers’ compensation requirements for employers in the Commonwealth.
For more information, visit the Massachusetts Department of Revenue website.
Minnesota
Minnesota Senate File 4760 expands crime victim leave protections by adding stalking to the state’s definition of “violent crime,” effective Aug. 1, 2026.
As a result, employees who are victims of stalking, or whose spouse or immediate family member is a victim, may be able to take leave to attend related criminal proceedings under Minnesota’s crime victim leave law.
For more information, visit the Minnesota Legislature website.
Missouri
Missouri House Bills 2366 and 2511 update the state’s employment verification law, effective Aug. 28, 2026, by strengthening enforcement against employers that knowingly employ unauthorized workers in Missouri.
The law gives the attorney general authority to investigate alleged or suspected violations, seek injunctions, request monetary damages equal to 10 times the wages paid to unauthorized workers during the alleged unlawful employment period and pursue suspension of applicable state-issued licenses, permits or exemptions.
Employers that participate in a federal work authorization program may use that participation as an affirmative defense if they are accused of violating the law.
For more information, visit the Missouri House of Representatives website.
Nebraska
The Nebraska Department of Revenue issued its 2027 Circular EN. It contains updated state income tax withholding tables that employers should use for wages, pensions and annuities, and gambling winnings paid on or after Jan. 1, 2027.
For more information, visit the Nebraska Department of Revenue website.
South Carolina
On Aug. 31, South Carolina issued individual income tax reform guidance following Act 110 of 2026, which makes several income tax changes effective for tax years beginning after Dec. 31, 2025.
The guidance explains that South Carolina will move from three individual income tax brackets to two, reduce the top marginal tax rate, decouple from certain federal deductions and create a new South Carolina Income Adjusted Deduction. It also updates filing requirements and notes that withholding tables will be adjusted to reflect the tax changes.
Employers and payroll teams should watch for updated South Carolina withholding tables and review the changes for potential payroll impacts beginning with the 2026 tax year.
For more information, visit the State of South Carolina Department of Revenue website.
