Overtime Reporting Updates (Recording)-10.06.26 - PPT

10.06.26 - PPT - Overtime Reporting Updates

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The presentation explains employer reporting requirements for qualified overtime compensation (QOC) under IRC Section 225, enacted as part of the OBBBA. Employees may deduct eligible QOC for tax years 2025–2028, subject to annual limits, income phaseouts, and filing requirements. Employers’ reporting was optional for 2025 but becomes mandatory for 2026: report QOC on Form W-2, Box 12, Code TT. Existing withholding practices remain unchanged unless an employee submits an updated Form W-4.<br /><br />QOC is limited to overtime required by the Fair Labor Standards Act (FLSA) for nonexempt employees. Only the FLSA overtime premium—the additional 0.5 of the regular rate in time-and-a-half pay—qualifies. More generous contractual overtime, daily overtime, or overtime paid to exempt employees generally does not. The basic calculation is FLSA overtime hours multiplied by 0.5 and the employee’s FLSA regular rate.<br /><br />Determining the regular rate requires including all employment remuneration unless a statutory exclusion applies. Payments covering multiple workweeks must be reasonably allocated to the periods they compensate, potentially requiring recalculation of overtime. Retroactive wages paid in 2026 are reported for 2026, even if they relate to earlier work.<br /><br />For public employers providing compensatory time instead of cash overtime, QOC is reported when employees use the accrued time or receive a payout—not when the time is earned. The amount is calculated as compensatory hours paid multiplied by the applicable pay rate, divided by three.<br /><br />The presentation’s examples illustrate how to report overtime under collective bargaining agreements, retroactive wage adjustments, COLA lump sums, and compensatory time. Employers should maintain accurate regular-rate calculations and correct W-2 reporting errors promptly.

Keywords

qualified overtime compensation

IRC Section 225

OBBBA

Form W-2 Code TT

FLSA overtime premium

regular rate calculation

tax years 2025-2028

employer reporting requirements

compensatory time reporting

overtime withholding

Form W-2 Box 12 Code TT

overtime reporting requirements

employee tax deduction

retroactive wage adjustments

employer withholding