2026 Payroll Tax Changes: Compliance Guide for Payroll Platforms

The end of the year always brings change to payroll providers — but 2026 is shaping up to be one of the most active years for payroll and compliance yet. From federal tax reform and new deduction rules to expanding Paid Family and Medical Leave (PFML) programs, payroll platforms have plenty to prepare for as they plan for the new year.

At Symmetry, we know that legislative and compliance complexity continues to grow — and that clarity matters more than ever. Here’s what to expect in 2026, what it means for the people tech industry, and how you can stay ahead on payroll taxes.

Paid Family and Medical Leave – Minnesota, Maryland

If your customers have employees in Minnesota or Maryland, these are the high-level updates you need to know for 2026.

Minnesota

Effective Date:
• Payroll contributions begin on January 1, 2026.
• Benefits begin on January 1, 2027.

Update: Minnesota’s Paid Family and Medical Leave program will require employer and employee contributions beginning in 2026. Program details, contribution rate schedules, and employer guidance are available through the Minnesota PFML overview. The combined employee/employer rate is 0.88%, following the SSA wage base but uniquely rounding to the nearest thousand ($185,000 in 2026). Employers can apply for family, medical, or both exemptions if they offer qualified alternative plans.

What’s notable: Employers must set up withholding and remittance, post required program notices, and prepare to administer leave claims through the state portal as it becomes available. Implementation FAQs are published on the Minnesota DEED employer resources page.

Maryland

Effective Date:
• Payroll contributions begin on January 1, 2027.
• Benefits begin on January 3, 2028.

Update: Originally effective July 1, 2025, new legislation enacted under H.B. 102 delayed the Maryland Family and Medical Leave Insurance program employer contributions until January 1, 2027, with benefits for workers beginning January 3, 2028. The new law   requires all employers with at least one worker in Maryland to participate, and offer paid family and medical leave insurance, either through FAMLI or a private plan.  Details are provided through the Maryland Department of Labor FAMLI page.

What’s notable: Maryland allows shared employer–employee contribution rates up. Smaller employers are responsible only for the employee share. The contribution rate was initially set at 0.9% but any changes to the rate will be announced by May 1, 2026. Final regulations, contribution rates, and FAQs are available on the same Maryland DOL FAMLI guidance hub.

How does this affect payroll tech providers?
It is critical to model contributions, rates, file formats, and reporting workflows now. Validate against official state resources once XML specifications and contribution tables are finalized.

Minimum Wage and Paid Sick Leave Ballot Measures – Selected States

Raising the minimum wage and expanding paid sick leave continue to be major themes in several states. Ballot measures passed in recent years are phasing in through 2026, on top of existing statutory increases.

Because ballot outcomes and implementation schedules vary by state, the most reliable information will come from each jurisdiction’s official site. For example:

• Details regarding Alaska’s new minimum wage and page sick leave requirements effective July 1, 2025 and beyond can be found on the Alaska Department of Labor and Workforce Development website.
• Details regarding Nebraska’s minimum wage requirement effective October 1, 2025, and paid sick leave requirement effective January 1, 2026, can be found on the Nebraska Department of Labor website.

What it means:
If your customers’ states have new minimum wage or paid sick leave requirements effective in 2026, your system must account for both hourly rates and leave accrual rules by the effective dates. Where nothing passed, you can follow the usual statutory increases.

Minimum Wage Changes – Nationwide

Aside from ballot-driven changes, scheduled minimum wage updates are slated on the state and local level.

What you need to know
Dozens of states and cities will have new minimum wage rates effective January 1, 2026. Several will remain among the highest in the country, especially on the West Coast and in the Northeast.

You can find up-to-date statewide minimum wages from each state’s labor agency, including:

• California Department of Industrial Relations – Minimum Wage
• The 2026 Minimum Wage poster is available here
• Washington State Department of Labor & Industries – Minimum Wage

Local rates are usually posted on city or county websites and often exceed the state minimum.

How does this affect payroll tech providers?
There has been a sustained movement toward a fifteen-dollar baseline and above, and many states also index wage increases to inflation. Make sure your system can:

• Correctly assign the right state and local minimum based on work location
• Adjust for changes on the exact effective date
• Handle exceptions for youth, tipped, or industry-specific rates where applicable

State Income Tax (SIT) Updates – Indiana, Montana, Wisconsin, New York, Oklahoma

Several states will implement new payroll-relevant income tax rules in 2026.

• Indiana (SB 451): Provides for phased income tax rate reductions. You can review current law and future scheduled rates on the Indiana General Assembly site by searching for SB 451 in the 2025 session.
• Montana (HB 337): Reduces the top individual income tax rate and increases the Earned Income Tax Credit percentage. The bill’s text and summary are available through the Montana Legislature bill search by looking up HB 337.
• Wisconsin (SB 45): Adjusts brackets in connection with the state budget. You can find the bill and any fiscal estimates on the Wisconsin State Legislature documents site.
• New York (AB A3009B): Part of the state budget legislation, with schedules that affect high-income brackets and lower bracket reductions over time. The full text is available via the New York State Senate legislation search.
• Oklahoma (HB 2764): Reduces the top personal income tax rate and adjusts brackets. Details are posted on the Oklahoma Legislature bill information page by searching for HB 2764.

What does this mean for payroll tech providers?
All SIT changes must be incorporated into withholding calculations by the end of the year. That includes:

• Updating your state tax tables
• Configuring the right brackets and credits
• Running scenario testing for different filing statuses and wage levels

The earlier you start testing, the less likely you are to see errors once updated SIT rates take effect.

SECURE Act 2.0 – Nationwide

While the SECURE (Setting Every Community Up for Retirement Enhancement) 2.0 Act was enacted in 2022, an important provision touches payroll starting in 2026.

Roth catch-up contributions for certain high earners

Beginning with the 2026 plan year, employees age 50 and over who earned at least 150,000 dollars in the prior year must make catch-up contributions on a Roth (post-tax) basis for 401(k), 403(b), and certain 457(b) plans. The IRS outlined its transition relief and timing in IRS Notice 2023-62.

What it means for payroll tech providers:
You will need to:

• Identify affected employees based on prior year W-2 wages
• Route their catch-up contributions to Roth sources
• Warn employers when a plan does not offer a Roth option so they can coordinate with their recordkeeper or provider

PFML Payroll Tax Treatment – Federal Guidance

The IRS has clarified how employer “pick-up” contributions to state Paid Family and Medical Leave (PFML) programs are treated for federal tax purposes. When an employer pays the employee’s share of PFML contributions, that amount is treated as taxable wages for income tax, FICA, and FUTA purposes.

You can find the Service’s explanation and examples on the official IRS PFML guidance page.

What it means for payroll tech providers:
Update your tax treatment for employer pick-up amounts:

• Are included in federal taxable wages
• Are subject to Social Security and Medicare
• Are reflected correctly on Forms W-2 once the IRS releases year-specific instructions

Canada Payroll Tax Changes

For Canadian payroll, the authoritative deduction rules come from the Canada Revenue Agency (CRA) and Revenu Québec.

Key references include:

• CRA T4127 Payroll Deductions Formulas
• Revenu Québec WebRAS
• Revenu Québec TP-1015.F-V Formulas to Calculate Source Deductions and Contributions

What it means for payroll tech providers:
Use the January 2026 T4127 and the current TP-1015.F-V as your source of truth. Validate calculations with PDOC / WebRAS or other official tools before finalizing your first 2026 payroll runs.

Preparing for 2026

With a large slate of changes coming in 2026, what can you do to prepare? Careful year-end planning will help payroll providers and employers navigate the complex regulatory landscape and ensure smooth operations from the start of the year.

Final preparations to take in 2025

• Updating and testing new rates: Load 2026 federal, state, local, and PFML tables as soon as they are released. Run regression tests on common and edge-case scenarios.
• Review employee information: Confirm addresses and work locations so state and local taxes, PFML, and minimum wage rules are applied correctly.
• Form and format reviews: Monitor the IRS Draft Forms page for upcoming versions of Forms W-4 and W-2, and re-test once the final 2026 versions are posted.

Starting the Year Strong

Knowledge is power, especially when it comes to payroll tax compliance. By closely monitoring legislation and proactively implementing updates, payroll tech providers can ensure customers remain compliant with new requirements throughout 2026.

A trusted partner like Symmetry can make all the difference when navigating the complexities of payroll compliance. With Symmetry’s payroll tax compliance technology, your payroll processes stay current with the latest rates and rules. From precise gross-to-net calculations to seamless employee onboarding with accurate tax forms, Symmetry keeps your business compliant as payroll tax legislation evolves.

Approach 2026 with the confidence that you are ready to handle every new payroll tax compliance requirement. Instead of wading through tax tables, the right support enables you to integrate updates quickly, keep operations compliant, and stay focused on your own goals for the year ahead.

For Symmetry’s guide on 2025 payroll tax changes, click here.