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Reporting Qualified Overtime 2025 W-2

Eric Updated by Eric

In tax years 2026 and later, Qualified Overtime—a deduction created by the "One Big Beautiful Bill Act" and signed into law in July 4, 2025—should be reported on Box 12 using the code "TT".

For the transition year 2025, however, Qualified Overtime is treated differently. Employers may furnish to employees the amount of Qualified Overtime. This can either be a separate statement or on Box 14 of the W-2 form. CFS Payroll System 2025 supports both methods.

Reporting Qualified Overtime

Payroll System 2025 has two methods for reporting qualified overtime.

Transfer amounts to W-2 Box 14

  1. Click Payroll -> W-2 on the menu bar.
  2. Select the desired employee(s) then click Create W-2, then follow the on-screen prompts.
    1. For employees in select states, the program may ask if overtime should be automatically calculated. Read how it will be calculated here.
    2. Otherwise, the user must supply the Qualified Overtime amounts manually using the new Qualified Overtime (Info Only) income item. A new module can help with this called Qualified Overtime Calculator.
  3. Check Box 14 for the correct Qualified Overtime amount to double-check that no nonqualified overtime was input into the paychecks that the program is deriving its calculations from.
    The code for Tips is "TP" and the code for Overtime is "TT", which is consistent with the 2026+ codes.

Generate separate statements with W-2s

  1. Double-click Print Forms W-2/1099/1098.
  2. Mark Qualified Tips/OT Statement.
  3. Select the desired employee(s) then click Print.
  4. Read the onscreen prompts carefully.
    1. For employees in select states, the program may ask if overtime should be automatically calculated. Read how it will be calculated here.
    2. Otherwise, the user must supply the Qualified Overtime amounts manually using the new Qualified Overtime (Info Only) income item.
  5. Check the statement contains the correct Qualified Overtime amount to double-check that no nonqualified overtime was input into the paychecks that the program is deriving its calculations from.

Printing individual separate statements

For a quick statement that offers maximum control, a letter template is provided where the user can input all values.

  1. Click Qualified Tips/Overtime Statement.
  2. Fill out template and make any other desired adjustments, then send to the client.

Adding the Qualified Overtime income item to the Employer

CFS Payroll System 2025 can report this amount on Box 14 of the 2025 W-2 using the new Income Item called Qualified OT (Info only) for this purpose.

This new income item will not change the calculation of paychecks, but entries into it will flow to W-2 Box 14.

  1. Double-click on the desired client.
  2. Click the Payroll Setup tab.
  3. Click Add under Income Items.
  4. In the Full name pulldown select Qualified Overtime (Info only).
    Do not mark any tax or deduction boxes. This Income Item is informational only.
    By default the Box 14 Description is set to "TT", which is code for Qualified Overtime that will be used for 2026 and beyond for Box 12.
  5. Click OK then Save.

Entering Qualified Overtime amounts for employees

  1. Open the Payroll Grid.
  2. Select the desired Employee.
  3. Input the amount of Qualified Overtime.
    Only the premium portion of the overtime pay (the "half" in "time-and-half") should be input.
    Some states, like California, have more generous overtime laws but only overtime that meets the federal standard is Qualified. Only input overtime premium amounts that match the federal definition of overtime.
    As this is an informational income item only, users may input an amount for each paycheck or the total amount for the year in one row of the Payroll Grid.
  4. When generating the W-2, the amount(s) will flow to Box 14 on the 2025 W-2. Double-check the amount and make any desired modifications.

How did we do?

Qualified Overtime Calculator

South Carolina Form WH-1612 – Transmittal Form for W-2s or 1099s Submitted by Paper

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