Reporting qualified overtime on the W-2 in 2026

Only the FLSA overtime premium counts, which means telling federal overtime apart from state overtime.

Last reviewed October 30, 2026. This article explains the rules in plain words. It is not legal advice: your company and its counsel decide your policy.

Starting with tax year 2026, employers must report employees' qualified overtime compensation on Form W-2, box 12, code TT, under the One Big Beautiful Bill Act (IRS fact sheet FS-2026-13).

What counts#

Only the premium portion (the extra half) of overtime that the federal FLSA requires: hours over 40 in a workweek. Two things do not count:

• the straight-time part of an overtime hour,
• overtime that only state law requires, such as California's daily overtime after 8 hours or double time.

Why time data matters#

To fill box 12, payroll has to know which overtime hours were FLSA overtime and which were state-only. A timesheet that says only "overtime: 9 hours" cannot answer that.

An example#

Tom works 13 h 30 min on Tuesday and four 8-hour days. California pays 4 h of overtime and 1 h 30 min of double time for Tuesday. The week is 45 h 30 min, so 5 h 30 min are over 40. Under the FLSA the employer owes overtime on those 5 h 30 min, and the qualified amount is the half-time premium on them. The rest of California's daily premium is state-only.

How Oh! Thyme handles it#

The engine keeps the workweek and the daily rules apart, so the weekly hours over 40 can be told from the daily overtime and double time on each day. Ask your payroll provider how it wants FLSA overtime identified in the hours you import.

Sources#

• EY Tax News, IRS 2026 guidance on the overtime deduction: taxnews.ey.com
• Best Best and Krieger, mandatory reporting of qualified overtime for 2026: bbklaw.com