Updated January 28, 2026
It’s that time of year again—tax season is here, and if you’re running payroll in Dynamics GP, you need to make sure your tax tables are current. The good news? Microsoft just released the second round of US tax table updates, and installation is straightforward with no code changes required.
Here’s everything you need to know, plus a preview of what’s coming in the January Hotfix.
What’s Available Right Now: 2nd Round Tax Table Updates
The second round of tax table updates for US taxes were released, covering 12 states with tax changes effective for 2026.
States Included in This Update:
- Arkansas
- Illinois
- Indiana
- Louisiana
- Michigan
- Minnesota
- Mississippi
- Montana
- North Carolina
- North Dakota
- Oregon
- Vermont
Important Details:
- No code changes needed for this update—just install and you’re ready to process payroll
- New date after installation: January 20, 2026
- Installation is quick and straightforward
How to Get the Update
You can download the cab file directly from Microsoft:
Direct Download Link: https://mbs2.microsoft.com/fileexchange/?fileID=959c4ed7-0051-49d1-979e-61abaf725190
Complete Documentation: For detailed information about specific tax changes in each state, visit Microsoft’s US Payroll Tax Update documentation.
January Hotfix
Microsoft’s January Hotfix brings several important updates:
Important Note: You do NOT need to install this hotfix just to print general W-2s, 1099s, or other standard tax forms. Only install this update if you’re specifically impacted by one of the changes listed below.
Download It Here: https://mbs2.microsoft.com/fileexchange/?fileID=e1a486b4-7029-459a-9857-791bd38e4985
Key Updates in the January Hotfix:
SQL Server 2025 Support (Great News!) 🎉
- SQL Server 2025 will be officially supported with the January Hotfix
- This will be added to the system requirements documentation
- Note: Analysis Cubes installer will NOT be supported on SQL Server 2025
Payroll W-2 Changes:
- OMB Number Updated: The OMB number has changed for the 2025 tax year (this only affects forms printed with lines and boxes)
- New Box 12, Code II: Added for Medicaid waiver payments to the EFW2 electronic file
Form Alignment Issues Fixed:
- Payroll 1096 Summary Form: Corrected alignment issues (this existed last year as well)
- Payroll 1099-R for Pension Employees: Corrected alignment issues
1099-MISC and 1099-NEC Changes for 2026:
- Golden Parachute Payments Moving: Starting with 2026 reporting, Excess Golden Parachute Payments will move from Form 1099-MISC to Form 1099-NEC Box 3
- This change was announced by the IRS in April 2025 regarding reporting requirements
- Previously: Reported on Form 1099-MISC Box 14
- Going Forward: Must be reported on Form 1099-NEC Box 3
Why These Updates Matter
Tax compliance isn’t optional—it’s essential. Installing these updates ensures:
- Accurate payroll processing for employees in the affected states
- Compliance with IRS requirements for 2025 W-2s and 1099 forms
- Proper electronic filing with updated formats and codes
- Reduced risk of penalties or corrections
The good news is that these updates are designed to be as straightforward as possible. Microsoft has handled the heavy lifting with the tax calculation logic—you just need to install the updates and verify they’re working correctly.
Installation Best Practices
While these updates are relatively simple to install, here are some recommendations:
Before Installing:
- Back up your Dynamics GP system
- Review the documentation for specific state tax changes that might affect your business
- Plan installation during a maintenance window if possible
After Installing:
- Verify the new date shows correctly (January 20, 2026 for the current tax update)
- Test with a sample payroll calculation to ensure tax amounts calculate correctly
- Review any affected states’ calculations against your previous payroll data
For the January Hotfix:
- Evaluate whether your organization needs this update based on the specific changes listed
- If you process pension payments, use the new 1099 codes, or need SQL Server 2025 support, plan to install promptly
- Standard W-2 and 1099 processing for most organizations does NOT require this hotfix
Dynamics GP in 2026: Still Supported, Still Valuable
If you’re reading this and wondering about Dynamics GP’s future, here’s what you need to know:
Microsoft announced that new sales of Dynamics GP perpetual licenses stopped in 2025, with new sales of GP subscriptions ending in 2026. However, existing customers can continue using their GP systems with extended support through 2029.
This means:
- Microsoft is still providing regular updates like these tax table releases
- Technical support continues
- Your investment in Dynamics GP remains protected through 2029
- You have plenty of time to plan any future migrations to cloud platforms like Dynamics 365 Business Central or Acumatica
For organizations still running Dynamics GP, staying current with updates like these tax table releases ensures you’re maximizing your investment while maintaining full compliance.
Need Help with Your Dynamics GP Tax Updates?
At CAL Business Solutions, we’ve been helping organizations manage their Dynamics GP systems for decades. Whether you need assistance with:
- Installing tax table updates or hotfixes
- Verifying that calculations are working correctly
- Troubleshooting payroll or tax form issues
- Planning your eventual migration to modern cloud ERP platforms
- Maximizing your GP investment while you continue to use it
We’re here to help. Our team understands Dynamics GP inside and out, and we can ensure your tax updates are installed correctly and functioning properly.
Don’t wait until tax filing deadlines are looming—get these updates installed now and stay ahead of compliance requirements.
By CAL Business Solutions, Connecticut Acumatica & Microsoft Dynamics 365 BC/GP Partner, www.calszone.com
