Payroll year-end in Dynamics GP normally follows the same routine every December, and most payroll managers could complete it from memory. The close of 2026 is different. The Form W-2 that you issue in early 2027 has new boxes for overtime, tips and a new type of savings account, and those boxes need data that many companies have not been collecting in Dynamics GP.
In this article, our payroll consultants explain what has changed on the form, what Microsoft’s year-end update does, and the exact order of work between your last 2026 pay run and your first 2027 pay run in Microsoft Dynamics GP. Please treat it as practical guidance and confirm tax questions with your accountant.
What Is New on the 2026 Form W-2
The IRS published the final 2026 Form W-2 in January 2026. The changes come from the federal tax law passed in 2025, which lets employees deduct certain overtime and tip income on their own tax returns. To make that possible, employers must now report those amounts separately.
| Where on the Form | What You Report |
|---|---|
| Box 12, code TT | Total qualified overtime compensation |
| Box 12, code TP | Total cash tips reported to the employer |
| Box 12, code TA | Employer contributions to a Trump account |
| Box 14a | “Other” items, which is the former Box 14 |
| Box 14b | Treasury tipped occupation code, with room for two codes |
For most Microsoft Dynamics GP (Great Plains) customers, code TT is the one that requires work. Qualified overtime is generally only the premium part of overtime pay. When an employee earns time and a half, the reportable amount is the extra half, which equals one third of the total overtime payment. GP stores the full overtime payment, so the premium has to be calculated.
For 2025, employers were allowed to report this figure in any reasonable way. For 2026, reporting it on the W-2 is mandatory.
What Microsoft’s Year-End Update Does
Every year Microsoft issues a U.S. year-end update for Dynamics GP that adjusts the W-2 and W-3 layouts and the electronic file to the current IRS format. In past years it has arrived in late November or early December, and the 2025 update could only be installed on version 18.8 or later.
As we write this in October 2026, Microsoft has not yet published the full details of the 2026 update. We therefore emphasize two points. First, check your version now: if you are several releases behind, plan your Dynamics GP upgrade before December and not during it. Second, the update can change the form, but it cannot create data that was never recorded.
The update is included for customers with an active enhancement plan as part of their Dynamics GP license, so the only cost is the installation work. Microsoft lists the technical steps on its U.S. year-end update page.
The Correct Order of Year-End Steps
The most important rule of GP payroll year-end concerns sequence. Microsoft’s checklist, shortened to its essentials, is as follows.
- Confirm that the latest 2026 tax update is installed.
- Complete every 2026 pay run, including bonus and manual checks dated in 2026.
- Finish month-end and quarter-end procedures, and reconcile your quarterly Form 941 totals to GP.
- Back up the company database.
- Install the 2026 year-end update on the server and on every workstation.
- Create the Year-End Wage file.
- Back up the database again.
- Review and correct W-2 and 1099-R information.
- Print the validation report, the W-2 statements and the W-3, and create the electronic file.
- Set up the 2027 fiscal periods.
- Install the 2027 payroll tax update.
- Process the first 2027 pay run.
If your first 2027 pay date comes before you have time to print W-2s, steps 8 and 9 can wait. Steps 6 and 11 cannot change places: the wage file must exist before the 2027 tax tables are installed and before any 2027 pay run is posted.
Checks to Complete Before the Last 2026 Pay Run
Several problems are easy to correct while 2026 is still open and difficult to correct afterward. Our consultants begin by analyzing four areas.
- Overtime premium: Microsoft suggested that customers create a non-taxable benefit code for 2026, based on their overtime pay codes at 33.33 percent, so that GP would accumulate the premium during the year. If you did this, verify the totals. If you did not, the premium must be calculated from each employee’s overtime history and entered on the W-2 record.
- Tips: Companies with tipped employees need the total cash tips for code TP and the correct occupation code for Box 14b.
- Employee records: Check names, Social Security numbers and addresses now, because a mismatch leads to rejected filings and corrected forms.
- Modified forms: If your W-2 layout or payroll reports contain a customization, keep a copy of the reports dictionary before the update and test the forms afterward.
The Year-End Wage File, W-2 Review and Deadlines
The Year-End Wage file is a snapshot of each employee’s 2026 totals, and Dynamics GP prints W-2s from this snapshot and not from live payroll data. This has two practical consequences.
First, a pay run that is posted with a 2026 date after the file was created will not appear on the W-2 until the file is created again. Second, corrections that you type into the Edit W-2 window are lost if the file is re-created, so make structural corrections first and manual edits last.
After the review, print the W-2 Validation Report and resolve every warning before printing forms. Dynamics GP produces the federal file in the EFW2 format, and electronic filing is required for any employer that submits ten or more information returns in total.
For 2026 forms, the deadline for filing with the Social Security Administration and for giving copies to employees is February 1, 2027, because January 31 falls on a Sunday.
Before the First 2027 Pay Run
When the wage file is safe and backed up, attention moves to the new year. These tasks should be finished before the first 2027 pay run is calculated.
- Install the 2027 payroll tax update: It carries the new federal and state withholding tables and the new Social Security wage limit. Confirm the date shown in the Payroll Tax setup window.
- Open the 2027 fiscal periods: So that payroll can post to the general ledger.
- Update the figures that Microsoft does not maintain: Your state unemployment rate, benefit and deduction limits such as retirement plan maximums, and any local taxes are entered by your own team.
- Decide how overtime premium and tips will be tracked in 2027: Setting up the codes before the first pay run means next year’s W-2 needs no manual calculation.
- Collect new Forms W-4: From employees who want to change their withholding.
Mistakes We See Most Often
- Installing the 2027 tax tables while 2026 pay runs are still open, which causes 2026 checks to be taxed at 2027 rates.
- Re-creating the wage file after the 2027 tables are installed, which can put incorrect Social Security limits on the W-2.
- Updating the server but forgetting some workstations, so that users print forms in last year’s layout.
- Skipping the backup before and after the wage file.
- Leaving the overtime premium until the last week of January.
Most payroll teams will recognize at least one of these from an earlier year. Each of them is avoidable with a written plan and a fixed date for every step.
How Nevas Technologies Supports Payroll Year-End
Year-end falls in the busiest weeks of the year for any payroll organization, and it is also the period when a small error has the largest effect. Nevas Technologies has supported Dynamics GP customers for more than 20 years. Our Dynamics GP support team installs the year-end and tax updates, checks the wage file with you, and helps calculate the new W-2 amounts. For teams with new payroll staff, a short Dynamics GP training session before December is often the best preparation.
It is also worth looking ahead. Microsoft has confirmed that tax updates for Dynamics GP end on December 31, 2029. Companies that run payroll in GP should therefore have a plan for the years after that date, whether it is a Dynamics GP to Business Central migration with a payroll solution or another route.
Frequently Asked Questions
Can we install the year-end update before our last 2026 pay run?
Yes. Microsoft allows the update to be installed earlier, provided you have a backup. It is the 2027 tax update that must wait until the 2026 pay runs are complete.
What if we must pay employees in January before the W-2s are ready?
Create the wage file, install the 2027 tax update and run payroll. The W-2s can be reviewed and printed later from the saved file.
Does Dynamics GP file W-2s with the government for us?
Dynamics GP creates the federal EFW2 file, and you upload it to the Social Security Administration. State filings in other formats and electronic delivery to employees need an additional tool.
Conclusion
Summarizing the whole process in one sentence: finish 2026, create the wage file, and only then bring in 2027. What is new this year is the information behind the form, especially the overtime premium, and that work should start in November. A year-end that is planned in November is usually completed without difficulty in the first week of January, while one that begins on December 28 rarely is.
If you would like an experienced consultant to review your plan, contact our team or request a quote for year-end assistance.
