January 2026

Effective Jan. 1, the standard mileage reimbursement rate for state business travel has increased to $0.725 per mile, up from the previous rate of $0.70. This adjustment follows the recent business standard mileage rate update released by the IRS.

Any travel completed on or before Dec. 31, 2025, will still be processed at the previous $0.70 rate.

The Trip Optimizer law is still in place for determining the lowest cost of transportation for travel on state business. The new rate is now used for the mileage calculation and for the OMES mileage reimbursement amount referenced in paragraphs E and F of 74 O.S. § 85.45l.

Please update your internal records and travel claim forms to reflect this change. You can find comprehensive guidance and additional travel resources on our travel webpage.

We appreciate your prompt attention to this change to ensure accurate and timely reimbursements!

Agencies are reminded to double-check any executive-level or unusual requests for lists of Forms W-2 or Social Security numbers. Cybercriminals continue to trick payroll and human resource officials by disguising emails to make them appear as if they are from an organization executive.

The bad actor sends an email to an employee in the Payroll or Human Resources department requesting a list of all employees and their Forms W-2. The thieves then attempt to file fraudulent tax returns for tax refunds or post the information for sale on the darknet. Pay close attention to the sender's email address and verbally confirm requests for any sensitive data, either in person or using previously known phone numbers.

As part of the 2017 Security Summit effort, the Don’t Take the Bait education series focused on raising awareness of the critical need for increased computer security and caution when reviewing email inboxes – with a specific focus on email scams where a scammer identifies themselves as a friend, customer or company. View the series on the IRS website. In addition, the Security Summit continues to meet annually to address areas of need and help raise public awareness.

The IRS continues to investigate phishing emails. If an agency receives an email of this type, immediately contact Lisa Raihl at 405-521-3258 or Jean Hayes at 405-522-6300.

With employee self-service in Workday@OK, direct deposit information should be entered directly by employees per OAC 260:25-25-16.

If an agency makes an exception to enter an employee’s direct deposit information on their behalf, the employee must complete the HCM-73 Automatic Deposit Transmittal form and provide it to the agency along with an official document from the financial institution. Bank deposit slips should NOT be used to get the bank routing/transit number for setting up direct deposit information. A voided check from the employee is the most reliable method.

If the employee does not have a voided check or wants to deposit into another type of account, have the employee call the bank directly to get the routing/transit number. A bank routing/transit number should never start with the digit 5. This indicates a branch of the bank and will cause the direct deposit to fail. A direct deposit that fails will not leave OST to be paid, and additional processing by the agency will be required to pay the employee.

Once again, bad actors are attempting to defraud employees by submitting requests to change banking information. Please remain cognizant that this issue is still ongoing and be aware when receiving requests to update payroll information.

To avoid processing fraudulent information, it is necessary to verify any attempts for payroll changes that are requested. Employees should be updating their payment elections directly in Workday@OK as stated above. Any exceptions should follow these best practices:

• Personnel who handle employee payroll direct deposit procedures should verify all requests for changes to direct deposit by personally contacting the employee by a known phone number or a Microsoft Teams call and verifying information such as employee ID number, employment start date, etc.
• Do not contact the employee by responding to the email requesting the change. Make direct contact and ensure you are actually communicating with the employee and not someone posing as the employee.
• We advise agencies to set a time delay when changing direct deposit information to decrease the chance of wage theft.
• Call the OMES Service Desk at 405-521-2444 or contact the appropriate IT or security support for your organization if you receive a suspicious phone call or email.

Employees should see an announcement on the Workday@OK homepage to opt in to electronic tax document delivery. Electronic delivery is a more secure method of distribution, allowing employees to receive their documents more quickly and saving taxpayer dollars by reducing the expense of printing and mailing.

OMES will have Forms W-2 ready electronically by Jan. 16. Employees who do not elect to receive electronic-only W-2s will have their forms printed and mailed on Jan. 30. A Form W-2 user guide has been created to assist employees in opting out of receiving the form by mail.

The following are terms frequently used for different types of Forms W-2 based on when the form is completed.

Original Form W-2: Form W-2 that is originally issued to an employee by Jan. 31.

Reissued Form W-2: Original Form W-2 reissued to an employee when an original form is lost, misplaced, not received, etc. Write "REISSUED STATEMENT” and the reissued date (MM/DD/YYYY) on the employee’s new copies. A reissued Form W-2 can be produced at any time because the data is not being changed.

Corrected W-2: A Form W-2 used to correct the original W-2 when an error has been discovered before OMES submits the file to the Social Security Administration. “CORRECTED” must be written on the employee’s new copies along with a corrected date (MM/DD/YYYY).

Note: Corrected Forms W-2 must be delivered to OMES by Jan. 23, 2026. Please send the original Form W-2, a copy of the corrected form and a memo explaining why the correction is needed. Do not send copies of checks or other items.

Form W-2C: The form used to adjust the original Form W-2 (or corrected Form W-2) information when an error has been discovered after OMES has submitted the file to the SSA.

Note: Forms W-2C must be submitted to OMES as soon as completed and will be filed with the SSA. Please send a copy of the original Form W-2, Copy A of the Form W-2C and a memo explaining why the correction is needed. Do not send copies of checks or other items. The employee should receive a copy, and the agency should keep Copy D for their records.

Corrected Forms W-2 must be delivered to OMES by Jan. 23 for the corrections to be in the submission file. The due date for the submission of Form W-2 information to the SSA is Feb. 2.

Please send the original Form W-2, a copy of the corrected form and a memo explaining why the correction is needed. If the correction is due to a statutory canceled warrant that is not to be replaced, include a letter asking that the warrant not be replaced.

Note: When a warrant has been canceled by statute, there is no reason for a Form W-2 correction unless the payment was made in error. If it was a valid payroll payment, the employee is still entitled to a replacement warrant; therefore, the Form W-2 reporting is proper.

Any correction needed after this date must be sent to OMES as a Form W-2C for us to notify the SSA. This will ensure reporting is as accurate and complete as possible.

Employee payroll tax withholdings are not authorized to be refunded to an employee once withheld from payroll. Refunds will not be given for those employees who did not enter Form W-4 changes in time for payroll processing. Employees should enter Form W-4 changes directly in Workday@OK. Agencies that enter employee Form W-4 changes should have a deadline for employee submissions. The effective date should not be backdated in an attempt to refund taxes to the employee; this is not authorized by the IRS.

Repayments from employees made in the current year (2026) for overpayments of wages in a prior year (2025 or earlier) must be repaid at the gross overpayment amount in accordance with IRS regulations. A corrected Form W-2 or a Form W-2C, as applicable, must be completed and sent to OMES Central Payroll. Only Social Security and Medicare wages and taxes are corrected on the corrected Form W-2 or Form W-2C.

DO NOT correct federal or state taxable wages or income taxes. The employee received and had use of the funds during the year of overpayment; therefore, the amounts are taxable for federal and state purposes. The employee may be able to take into account such repayments on their current-year (2025) income tax return. Please advise them to speak to their tax accountant. Additional instructions for Form W-2 and Form W-2C are available on the IRS website. For assistance, contact Jean Hayes at 405-522-6300 or jean.hayes@omes.ok.gov, or Lisa Raihl at 405-521-3258 or lisa.raihl@omes.ok.gov.

Agencies are reminded to ensure employees have a valid OTC Form OW-9-MSE, Annual Withholding Tax Exemption Certification for Military Spouse, on file for 2026.

The form must be completed annually to continue the exemption. If a new exemption form has not been submitted for 2026, the employee’s withholding status must go back to the last valid Form OK-W-4 on file.  

Employees can enter the military spousal exemption directly in Workday@OK for their OK-W-4 entries. The system will send a notification of documentation and review/approval needed prior to the exemption taking effect.

When an employee submits a paper Form OW-9-MSE to the agency, they must also submit a completed Form OK-W-4. If you receive an exempt Form OK-W-4 with Form OW-9-MSE after processing a payroll, do not process a tax refund to the employee or submit one to OMES CAR Central Payroll for processing. The new exemption form will take effect going forward; it is not retroactive to the beginning of the year.  

As a reminder, a nonresident spouse of a nonresident service member may be exempt from Oklahoma income tax on income from services performed in Oklahoma. OTC Form OW-9-MSE must be completed and returned to the employer with the required documentation, along with OTC Form OK-W-4. 

The instructions contain a list of requirements the employer must meet before the withholding exemption will be allowed. The forms must be completed each year the exemption is to be claimed. 

This exemption will require an update to the employee's State Tax Election in Workday@OK. The Military Spouse Exemption box should be selected, which will kick off the approval process. This does not affect the federal tax withholding, which will still be calculated based on the IRS Form W-4 in effect.  

The Oklahoma Tax Commission website has additional information and Frequently Asked Questions. 

Note: Agencies with employees who claim the military spouse exemption and are in other states must follow those specific state rules.

Please be aware of the processing time when entering the tax journal entry and scheduling the tax payment on the OST ACES system to ensure payments are entered and set to pay by the liability due date. Tax payment information must be provided by 10 a.m. for the payment to be released that day. With the release one day, the effective date must be at least one day in the future.

All 1099 forms will be distributed as Adobe PDF files through email between Jan. 14-16, 2026. Agencies should retain the PDF files provided in January for any supplier requests and for at least a minimum of three years for record retention.

Please email your agency's contact information to payrollreporting@omes.ok.gov with the following details for a primary and alternate contact:

• Agency number
• Agency name
• 1099 contact name
• 1099 contact phone number
• 1099 contact email address

Note: This does not apply to Higher Ed Institutions; these institutions will process their own 1099 reporting.

Agencies are required to print and mail all 1099 forms. The forms can be printed on standard 8 ½ x 11 paper, trifolded and fit in a Standard No. 10 windowed envelope. Sample printed forms can be provided if requested. For sample forms, contact Alicia Reel at 405-522-1099 or alicia.reel@omes.ok.gov.

Note: This does not apply to Higher Ed Institutions; these institutions will process their own 1099 reporting.

Any agency needing to submit an additional file for 1099 MISC or 1099 NEC reporting should use the 1099 Detail File Format listed on the CAR Accounting Forms webpage. Instructions for this file format and an Account Code Cross Reference list can be found on the same webpage. Due to the sensitive nature of the data, please submit your password-protected file by email to Alicia.Reel@omes.ok.gov. It is recommended that these agencies submit a test file by Dec. 17, 2025, to have a Name and TIN Match done with the IRS. Final information is due Wednesday, Jan. 07, 2026.

Forms 1099-NEC and -MISC will be ready for email distribution the week of Jan. 14-16. Please thoroughly review the 1099s you receive. Any changes must be reported as soon as possible to OMES. Corrected 1099s can be created and submitted to your agency for distribution to the vendor. Please return as many changes as possible to OMES before Jan. 26.

Please note the following procedures pursuant to such changes to 1099 documents:

• For missing addresses, address changes, name or FEIN/SSN changes to the 1099 document only, please email a copy of an updated Form W-9 to Alicia Reel at alicia.reel@omes.ok.gov.
• If a change to the permanent supplier file is needed, please submit an updated Form W-9 to Central Purchasing using the Central Purchasing ServiceNow 1099 Update.
• For all amount changes to the 1099 document, please email your change to Alicia Reel at alicia.reel@omes.ok.gov. Please include the appropriate documentation that explains the nature of the transaction change. 
• Any changes that need to be made after Jan. 26 still need to be sent to OMES as soon as possible, and we will forward the information to the IRS.

In all instances, please make sure that your documentation includes enough information for us to understand your changes, the reasons for them and a contact person in case we still have questions.

FYI:

• As in recent years for 1099 reporting – To ensure security on Form 1099-MISC and Form 1099-NEC, we will truncate the SSNs and FEINs so that only the last four digits are shown, e.g., xxxxx6789. If you have an inquiry on any Form 1099-NEC or Form 1099-MISC, please provide OMES with the Account Number that is found in the lower left portion of the form.
• In January, before submitting our 1099 file to the IRS, we will TIN-match the file with the IRS e-Services system. Any vendors that mismatch in this process will need to be corrected before we can submit our final file to the IRS by Jan. 31.

Questions should be directed as follows:
1099 document changes only: alicia.reel@omes.ok.gov or 405-522-1099
Supplier Registration changes: Central Purchasing ServiceNow Catalog or servicedesk@omes.ok.gov.

Note: This does not apply to Higher Ed Institutions; these institutions will process their own 1099 reporting.

The Tax Cuts and Jobs Act of 2017 added Internal Revenue Code (I.R.C.) Section 6050X, which imposes a reporting requirement on certain government entities involved in settlements where I.R.C. Section 162(f) applies. Section 162(f)(1) disallows any deduction for amounts paid or incurred by a taxpayer, to or at the direction of a governmental entity, for violation of a law or the investigation or inquiry by such entity into the potential violation of a law. However, Section 162(f)(2) provides exceptions for amounts related to restitution, remediation and costs incurred by a taxpayer to come into compliance with a law.

Beginning with tax year 2022, the IRS required governmental entities to file IRS Form 1098-F for amounts required to be paid pursuant to a suit, court order or agreement with respect to any violation of law or the investigation or inquiry into the potential violation of a law, if the aggregate amount involved in all suits, orders or agreements in relation to the violation of the law equals or exceeds $50,000 (threshold may change in future years).

• Reporting is required for a suit, order or agreement that becomes binding on or after Jan. 1, 2025.
• The amount required to be paid includes costs to provide services or to provide property.
• A separate Form 1098-F must be filed with respect to each payer that is a party to the suit, order or agreement.
• Form 1098-F is not required for any person who doesn’t have a payment obligation or obligation for costs to provide services or to provide property.
• Forms are due to payers by Jan. 31, 2026.

Instructions for IRS Form 1098-F can be found here. 

A reporting document has been created for state agencies to provide OMES with the required information to create the 1098-F forms. Please complete and submit the reporting document just as soon as possible but no later than Jan. 16, 2026, to payrollreporting@omes.ok.gov.

NOTE: Institutions of higher education will not submit any information to OMES for 1098-F reporting. Please consult your tax accountant if you feel reporting may be required.

With the new age of social media, agencies may be using social media influencers as part of their overall marketing strategy. This type of service creates an independent contractor relationship, and as such, any payments by cash or noncash methods are considered payments for services. Influencers often receive free gifts or services such as trips, accommodations, food or swag in exchange for their social media posts promoting the agency. Gifts or services related to this type of relationship are considered taxable income when the cumulative value to an individual influencer is $600 or more during a calendar year.

The agency will need to obtain the influencer’s taxpayer identification number using the IRS Form W-9, Request for Taxpayer Identification Number and Certification, for the income to be reported on Form 1099-NEC. For any noncash income to be reported for 2025, the 1099 Detail File Format spreadsheet must have been completed and submitted no later than Tuesday, Jan. 6, 2026. If you have any questions, please contact Alicia Reel at 405-522-1099 or at alicia.reel@omes.ok.gov.

Note: This does not apply to Higher Ed Institutions, which will process their own 1099 reporting.

OMES is expecting the backup withholding notice from the IRS and will be sending any mismatches to agencies. This notice identifies payees with a taxpayer identification number (TIN) missing or an incorrect name/TIN combination. Agencies must obtain correct information from the payees and resolve the discrepancies. All corrections must be reported to OMES Supplier Registration. The information will be TIN-matched with the IRS to verify the accuracy and to update the supplier file as needed. 

Backup withholding may need to begin with these suppliers. When a supplier’s information does not match the IRS records for two out of three years, the entity is required to apply backup withholding to future payments until the mismatch is corrected. The backup withholding rate is 24%.

IRS Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), provides the actions an entity must take when notified of a mismatch, which includes the requirement to apply backup withholding until the correct information is provided.

Backup withholding held from miscellaneous claim payments must be submitted to OMES on the same day as the vendor payment is completed. Interagency wires from backup withholding should be payable to the State Contribution Fund (Vendor 0000000467, LOC #0001, ADDR #1). After processing a payment for backup withholding, email details of the payment to OMES at payrollreporting@omes.ok.gov.

Once the correct information has been provided, verified and entered in the system for correct reporting, the agency may stop applying backup withholding.

Ongoing series of 30-minute virtual training sessions for state finance personnel:​

• Jan. 15: Warrant Replacements.​
• Feb. 10: Deposit Corrections.​
• Mar. 11: Payroll Funding Corrections​.
• Apr. 16: Encumbrance Corrections.

Building a Better Tax Commission: Passion with Purpose
Jan. 23, 2026
11:30 a.m. to 2 p.m.   
ODOT Commission Room

Join us to hear from the executive director of the Oklahoma Tax Commission. 

Come in person for lunch at 11:30 a.m., or if attending virtually, join online at noon.

This will provide 2 CPE for accounting professionals.

View more details.

Register now.