--- title: "Federal vs. State: Don't Assume They Match" description: Federal tax changes don't always apply at the state level. Learn how OBBBA impacts Wisconsin payroll, employee benefits, 1099 reporting & 2027 compliance. image: https://blog.b2esolutionsinc.com/hubfs/payroll%20is%20about%20people%20first.%20(5).png --- [UKG Ready Login](https://secure2.yourpayrollhr.com/ta/default.login)    |    [(262)-563-5200](tel:262-563-5200) [![B2E Solutions](https://blog.b2esolutionsinc.com/hs-fs/hubfs/raw_assets/public/B2Esolutions_September2020/images/b2e-logo-full-color-100px.png?width=163&height=100&name=b2e-logo-full-color-100px.png "B2E Solutions")](https://b2esolutionsinc.com/) - Solutions - [UKG Ready Suite](https://b2esolutionsinc.com/workforce-management/) - [Payroll](https://b2esolutionsinc.com/workforce-management/payroll/) - [Time & Labor](https://b2esolutionsinc.com/workforce-management/time-labor/) - [Human Resources](https://b2esolutionsinc.com/workforce-management/human-resources/) - [Talent Management](https://b2esolutionsinc.com/workforce-management/talent-management/) - Resources - [Webinars](https://b2esolutionsinc.com/webinars/) - [Forms](https://b2esolutionsinc.com/forms/) - [State Payroll Tax Registration Links](https://b2esolutionsinc.com/registration-links/) - [Client Bulletin Board](https://b2esolutionsinc.com/bulletin-board/) - [Pricing](https://info.b2esolutionsinc.com/hcm-pricing) - [Blog](https://blog.b2esolutionsinc.com/) - [About Us](https://b2esolutionsinc.com/about/) - [Contact](https://b2esolutionsinc.com/contact/) - [Request a Demo](https://blog.b2esolutionsinc.com/federal-vs.-state#request-demo) [Workforce Ready Login](https://secure2.yourpayrollhr.com/ta/default.login)    |    [(262)-563-5200](tel:262-563-5200) [![B2E Solutions](https://blog.b2esolutionsinc.com/hs-fs/hubfs/raw_assets/public/B2Esolutions_September2020/images/b2e-logo-small.png?width=82&height=100&name=b2e-logo-small.png "B2E Solutions")](https://b2esolutionsinc.com/) - Solutions - [UKG Ready Suite](https://b2esolutionsinc.com/workforce-management/) - [Payroll](https://b2esolutionsinc.com/workforce-management/payroll/) - [Time & Labor](https://b2esolutionsinc.com/workforce-management/time-labor/) - [Human Resources](https://b2esolutionsinc.com/workforce-management/human-resources/) - [Talent Management](https://b2esolutionsinc.com/workforce-management/talent-management/) - Resources - [Webinars](https://b2esolutionsinc.com/webinars/) - [Forms](https://b2esolutionsinc.com/forms/) - [State Payroll Tax Registration Links](https://b2esolutionsinc.com/registration-links/) - [Client Bulletin Board](https://b2esolutionsinc.com/bulletin-board/) - [Pricing](https://info.b2esolutionsinc.com/hcm-pricing) - [Blog](https://blog.b2esolutionsinc.com/) - [About Us](https://b2esolutionsinc.com/about/) - [Contact](https://b2esolutionsinc.com/contact/) - [Request a Demo](https://blog.b2esolutionsinc.com/federal-vs.-state#request-demo) [(262) 563-5200](tel:262-563-5200) [Facebook page opens in new window](https://www.facebook.com/b2esolutions)[Linkedin page opens in new window](https://www.linkedin.com/company/b2e-solutions/)[YouTube page opens in new window](https://www.youtube.com/channel/UCRHbSTKrX_F2gWlKZ3IR8HA/) ## Please provide the following information to help us prepare your demo: # Federal vs. State: Don't Assume They Match November 04, 2026 By B2E Solutions ![Federal vs. State: Don't Assume They Match](https://blog.b2esolutionsinc.com/hubfs/payroll%20is%20about%20people%20first.%20(5).png) Nov 04 2026 Federal vs. State: Don't Assume They Match 6:24 Federal tax changes don't always mean state tax changes. The One Big Beautiful Bill Act (OBBBA) made significant changes to federal tax law that affect 2026 payroll and year-end reporting. However, states are not required to automatically follow every federal provision. States may adopt, modify, delay or reject federal changes based on their own tax laws. Wisconsin provides several good examples, and other states may have their own differences. **Wisconsin: A Few Important Differences** **Dependent Care FSA** The federal exclusion for dependent care assistance increased to $7,500 ($3,750 for married filing separately), while Wisconsin remains at $5,000 ($2,500 for married filing separately). Amounts above Wisconsin's limit may be excluded from federal taxable wages but remain taxable for Wisconsin purposes. This can create a difference between W-2 Box 1 (federal wages) and Box 16 (state wages). For example, an employee who receives $6,000 in qualifying dependent care benefits may have the $6,000 excluded from federal wages, while only $5,000 is excluded for Wisconsin purposes. The remaining $1,000 may be included in Wisconsin taxable wages, resulting in Box 16 being $1,000 higher than Box 1, assuming no other wage differences. **1099 Information Reporting** The federal reporting threshold increased from $600 to $2,000 for certain payments made after Dec. 31, 2025. Wisconsin continues to use a $600 threshold for applicable information returns under current guidance. These thresholds apply to specified payment categories, not every Form 1099. Employers and businesses should verify the requirements for each applicable form and jurisdiction rather than automatically applying the federal threshold to Wisconsin reporting. **Employer Student Loan Payments** Federal law allows up to $5,250 in qualifying employer educational assistance, including eligible payments toward an employee's student loans, to be excluded from income for 2026, subject to applicable program requirements. Wisconsin does not provide the same exclusion for these employer student loan payments. Amounts excluded from federal wages may therefore remain taxable for Wisconsin purposes. Employers should review their educational assistance programs and confirm that federal and Wisconsin taxable wages are calculated correctly. **Trump Accounts** The OBBBA created new federal Trump Accounts under IRC Section 530A. Contributions began July 4, 2026, and the accounts have specific federal tax rules. Wisconsin does not currently recognize Trump Accounts for state tax purposes, including income related to the accounts. Employers considering contributions should review the Wisconsin implications before determining the appropriate payroll and reporting treatment. **Other Areas to Review** Wisconsin also has differences from federal tax treatment in other areas, including certain hazardous-duty compensation, ABLE accounts, gambling losses, research expenses and depreciation. Employers should review the specific provision and current state guidance before determining whether a federal change applies. **And It's Not Just Wisconsin** Wisconsin is only one example. Other states may also choose not to conform to federal tax changes, and the differences can vary significantly from state to state. For employers with a multistate workforce, a federal tax change should be viewed as the starting point — not the final answer. State rules can affect taxable wages, withholding, benefit treatment, deductions and year-end reporting. **Looking Ahead to 2027** Some of these differences will continue into 2027. The federal $2,000 information-reporting threshold for certain payments will be adjusted for inflation beginning in 2027, while Wisconsin's applicable threshold remains $600 under current guidance. Employers should also watch for additional federal and state guidance that may affect payroll setup, benefits and reporting requirements. **What B2E Is Doing** B2E is reviewing state regulations and working with UKG to understand how federal and state tax differences will be handled in UKG Ready. We are monitoring updates and evaluating any payroll or year-end reporting impacts. If a change requires action on your part, we will keep you informed and provide guidance on the next steps. **Employer Action Checklist** Before closing out 2026 and preparing for 2027, complete the following checklist: ☐ **Review federal and state treatment** for benefits, taxable wages, withholding and information reporting. ☐ **Check Dependent Care FSA records** for employees whose contributions exceed Wisconsin's applicable exclusion limit. ☐ **Review employer student loan payments** to confirm the correct federal and Wisconsin taxable wage treatment. ☐ **Review Trump Account contributions** and confirm applicable state tax treatment before determining whether adjustments are needed. ☐ **Verify federal and applicable state 1099 reporting requirements** separately, based on the type of payment. ☐ **Review W-2 Box 1 and Box 16 differences** to ensure state-taxable wages are reported correctly. ☐ **For multistate employers,** review each state's conformity rules rather than assuming federal or Wisconsin treatment applies everywhere. ☐ **Confirm year-end and 2027 requirements** with us or tax advisor before making changes in UKG Ready or processing adjustments. *State tax treatment and implementation guidance may change. Confirm current requirements before finalizing year-end reporting and 2027 payroll setup.* **The Bottom Line** Don't assume federal treatment automatically applies to your state. As you close out 2026 and prepare for 2027, review both federal and state treatment for provisions that affect payroll, benefits, withholding, and year-end reporting. Federal may set the starting point—but state conformity is where the details begin. 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