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Calculating Qualified Overtime in Payroll System 2025

Eric Updated by Eric

Instructing the program how to calculate Qualified overtime

Payroll System 2025 can transfer overtime amounts to Box 14 of the W-2. If you encounter this popup message, you must instruct the program to attempt to automatically calculate the amount or to use the amounts you input into the new Qualified Overtime (Info Only) income item.

Auto

The program will look in three places in the Payroll Grid for paychecks with amounts in:

  • The "OT" column IF the OT hourly rate is 1.5x the regular hourly rate
  • The "OT2" column IF the OT2 hourly rate is 2x the regular hourly rate (i.e. double-time)
  • The new Qual OT column

It will then transfer the following amounts to Box 14 of the W-2.

  • One-third of the "OT" column amount. Only the "half" in "time-and-a-half" is qualified overtime (one-third).
  • One-quarter of the "OT2" column amount. Again, only 0.5x of the 2x amount is qualified overtime, even if it's double overtime.
  • 100% of the amount in the "Qual OT" column. Only fully qualified amounts should have been input into this column.
If there is any overtime that does not qualify for the federal deduction, use the Manual option instead.

Manual

Any amount you put into the new Qualified OT (Info Only) income item will flow to Box 14. Use this option to have more control over the amount.

Employees in states with overtime rules different from federal

Payroll System 2025 can transfer overtime amounts to Box 14 of the W-2. If you encounter this popup message, you will need to utilize the new Qualified Overtime income item.

Some states have overtime laws that are more generous than federal law. For example, California requires overtime to be paid if an employee works over 8 hours in a day or 40 hours in a week, but federal law only requires it be paid after 40 hours in a week.

The popup message above will appear if the program detects the employee is in such a state. Not all states are set up to be detected, so check the state laws the employees and employers are subject to.

Only overtime that matches federal law qualifies for the deduction.

No amounts from any overtime income items will transfer except the new Qualified OT (Info Only) item. Any amount input into this item will transfer

  1. If you haven't yet utilized the new Qualified OT (Info Only) income item, do so.
  2. When you encounter this popup message, click Continue.
  3. Verify that Box 14 contains the desired amount, taking care to ensure that no nonqualified overtime was input into the Qualified OT (Info Only) income item.

Use Payroll System's new Qualified Overtime Calculator to assist in calculating the allowable amount of overtime taht should be reported on the W-2 (or an attachment to the W-2).

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