What Has to Match Before a Small Texas Business Closes 2026 Payroll?

At a lot of small Texas employers, that spreadsheet is the real year-end checklist. It exists because the payroll records drifted apart one hand-written check or after-the-fact correction at a time. Before 2026 payroll closes, three things should tie: the wages on your four quarterly Form 941s should add up to the totals on your W-3, the wages on your four Texas Workforce Commission (TWC) quarterly reports should trace back to the same payroll register and every employee who earned overtime needs the qualified overtime premium reported separately in box 12 of the W-2, under a code that is new for 2026. Most of the forms are due Monday, February 1, 2027.

Which payroll records have to agree before W-2s go out?

Three records describe the same 2026 wages. They should line up. The payroll register holds every check, deduction, and tax withheld. The four quarterly Form 941s reported those wages and taxes to the IRS as the year went. The W-2s, summarized on the W-3, report the same wages to the Social Security Administration and to each employee. The IRS instructions for Forms W-2 and W-3 include a whole section on reconciling Forms W-2, W-3, and 941 for that reason.

Texas adds a fourth record. The quarterly wage reports you file with TWC list each employee's gross wages. They come from the same register. They won't always equal the federal numbers. That's fine as long as every difference has a reason you can name. Employee 401(k) deferrals, for instance, count as wages on your TWC report even though they're left out of box 1 on the W-2. A difference with a reason is a footnote. A difference nobody can explain is the spreadsheet.

Why do the numbers stop agreeing during the year?

Fixes get made in isolation, not across the board. Each fix made outside payroll is double work waiting to happen: once when it's made, and again in January when somebody has to explain it. Nobody needs a second career in re-keying payroll. The useful question is which records disagree and which step put them out of agreement, because that's the part you can change.

What is new on 2026 W-2s for crews that work overtime?

For tax year 2026, the W-2 reports qualified overtime compensation in box 12 under a new code, TT. Qualified overtime is only the premium the Fair Labor Standards Act (FLSA) requires, such as the "and-a-half" in time-and-a-half. Employees use the box 12 amount to claim a federal deduction of up to $12,500, or $25,000 for married couples filing jointly, according to the IRS W-2 instructions.

For a construction or trades payroll, that changes what payroll needs to know about every overtime check. If overtime is paid as one line at 1.5 times the regular rate, someone has to split the premium out of it. Overtime your company pays under its own policy, like double time on Saturdays regardless of weekly hours, needs a separate look before any of it goes in box 12. Payroll can separate the premium when each check is cut. Rebuilding it in late January means reading a year of pay stubs.

Employers whose workers receive tips also have a parallel change: cash tips reported to the employer go in box 12 under code TP.

When are the 2026 year-end payroll filings due in Texas?

Most of them are due Monday, February 1, 2027. January 31 falls on a Sunday, so the deadline moves to the next business day.

What should be set up before the first 2027 payroll?

Two wage limits matter on January 1. The Social Security wage base rises to $192,300 for 2027, up from $184,500 in 2026, so any employee near the cap needs the new limit in payroll before the first check. The TWC taxable wage base stays at $9,000 per employee per calendar year. The count starts over with the new year.

This is also the time to fix the step that produced this year's spreadsheet. If the December bonus came from a check outside payroll, run next year's through payroll. If the time app and payroll disagreed, decide which one the crew's hours come from and enter them there once.

How does Lone Star PEO handle year-end payroll?

We run payroll so the year-end forms come out of the same entries the year's checks did. Payroll reporting, 940 and 941 reporting, and W-2 forms management are part of Lone Star PEO's payroll service, along with job costing and certified payroll reports for contractors who need them. Each client has a dedicated payroll specialist as a primary contact, so a mid-year correction has one place to go.

Want to see where your 2026 records disagree before February?

Bring your payroll register and this year's 941s when you talk with Lone Star. We'll start with the lines that don't tie. The goal for 2027 is a January with no spreadsheet on the side, because the fix happened in payroll when it was made.

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