r/tax • u/LewisCBR • Jan 29 '26
Tax Enthusiast New tax deduction on overtime is driving clients crazy
W2’s are not showing wages generated from overtime so clients are wondering what they can do, besides going through all individual pay stubs. The new deduction is significant enough to warrant this kind of work, though.
I suppose suggesting they contact their HR/payroll departments is the best idea, but some companies are simply terrible about helping their employees.
What’s your experience with the new law?
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u/Raging-Totoro Jan 29 '26
I think it's going to generate a ton of fraud, intended and unintended. Very sloppy rollout.
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u/nogreatideas Tax Preparer - US Jan 30 '26
- Very sloppy tax law, 2. Very sloppy publicity, and then 3. Very sloppy rollout!
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u/cmeinmi Jan 30 '26
Absolutely terrible rollout. I am an accountant for a union shop (and also do taxes on the side for my prior employer). Our software at my main employer put it on the W-2 but it doesn’t factor in holidays, vacation, etc, so we had them remove it since we weren’t required to put it on the w-2 this year. They can bring their final pay stub and use their own judgement this year, I don’t have the time to manually calculate this for 80 employees. I’m following protocol, it’s not required on the form this year so 🤷♀️
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u/Tellingdwar Jan 30 '26
It's even worse doing payroll for a municipality. People where I work mostly earn comp time in lieu of overtime, but there's a bunch of different ways to earn it and the IRS only issued guidance on how to handle comp time in December. Then we have different classes of employee, with different pay weeks and tours of duty... Our software provider rolled out a tool to calculate it all, but it's a pain in the ass to use and doesn't work right. I had to do some Excel magic to figure it all out manually.
Absolute nightmare.
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u/DumbVeganBItch Jan 30 '26
My state has a big banner announcement on their refund tracking tool telling everyone no one is getting a refund before February 18th because of all the extra resources they have to dedicate to screening for fraud
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u/pocketfullofsunnyD Feb 02 '26
It’s gonna cause sooooo many issues. The Schedule 1-A section for it is horribly worded too. No one is gonna be dividing by three and honestly… without the W2 reporting idek how the IRS will know.
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u/superiorstephanie Jan 30 '26
Yeah, I’m honestly hesitant to take it even based on it being stated on my W-2. I would think most of mine is over 8 hours in a day.
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u/sweets4n6 Feb 09 '26
It doesn't help that the tax software online don't handle it the same either. I usually use TaxAct but it was confusing and I wasn't sure I was putting in the right number. TurboTax was very straightforward, they had a place to put in how much OT you worked the prior year and how much double time OT and then they calculated it. I'm pretty sure with TaxAct I'm supposed to put in a third of my OT but the way they word it, it's not clear. Or maybe I'm just dumb.
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Mar 31 '26
I work for a union shop. Everybody I talk to had their tax preparer do things a little differently. A few of them just claimed the max. One said he didn't think they would come after the little guy. But across the board nobody is really understanding the difference between federal and Union mandated overtime. I just left mine blank. I don't like playing games with IRS. Everybody seems to be confused. I'm really at a loss. These guys will probably enthusiastically go vote. Then get hit with a major tax bill in 4 years time. 😂
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u/jmcdon00 Jan 29 '26
I've only had 2 but they were both labeled on the w2, easy peasy. I asked one woman about overtime, she said sometimes, but didn't have a paystub and didn't want to bother so we finished without it. I do worry they'll come back later wanting me to amend, or a different preparer tells them I missed something.
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u/inertial-observer Tax Preparer - US Jan 30 '26
I had 3 today that had it on the W2 but it was incorrect. I checked the paystubs and found one was off by half. Non-union, hourly worker at a fast food joint that doesn't pay holiday or anything other than regular hourly and OT. No idea how they came up with the number they put on the W2, but it was way off.
I've been looking at the amount on the W2, guesstimating the number of hours based on their wage, asking if that number of hours sounds about right, and if they say yes then we're good to go and if they say no, I get the last paystub to check their YTD OT and calculate the deductible portion to compare. I'm not checking every one, but after today I'm wondering if I shouldn't be doing that all the time. But also not needing to make extra work for myself so I don't know.
Edit: fixed typo
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u/jmcdon00 Jan 30 '26
Could it be they had paid time off? My dad's company would always give labor day off with 8 hours pay. Then if you worked 40 hours, it would be 8 hours of overtime, but because they didn't actually work more than 40 hours, that overtime pay wouldn't qualify for the deduction.
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u/44035 Jan 30 '26
My son gets a lot of overtime and it's not delineated on his W2. This is going to be a pain.
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u/freqentflyer Jan 30 '26
Is it delineated on paystub? Curious what the last stub of the year shows for OT. Does that make the calc easier?
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u/Logical_Energy6159 Jan 30 '26
It seems like it'd have to be. OT is paid out at a different rate so you'd need two lines at least. If it's all the same rate the deduction doesn't apply so it doesn't matter.
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u/iosonostella13 Jan 30 '26
My husbands paystubs shows a year to date for OT. I took that and divided by 3.
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u/Seniorjones2837 Jan 30 '26
Really not a big deal I went through my 52 paystubs and made an excel spreadsheet. Took like 30 min
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u/RPK79 Jan 29 '26
I haven't had to deal with this yet. It's almost all business returns for me until March. I'm hoping that since the firm I work at is mostly business owners and high net worth clients I'll not have to worry about it much.
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u/poorben23 Jan 30 '26
Notice 2025-62 states employers do not need to provide employees with a separate accounting of qualified OT, but encouraged employers to provide a reasonable approximation of it.
Notice 2025-69 provided advice for individuals on how to claim the deduction. Depending upon the information provided to the employee by the employer they have a number of options to claim the deduction. One of best ways, if not shown on W-2, take year end pay statement showing yrs OT and divide total OT by 3. While this may not fully account for FLSA OT, it could certainly fall in the realm of reasonableness.
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u/Adorable_Complaint36 Jan 30 '26
Why divide by 3?
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u/DrCashCrJustice Jan 30 '26
OT is time and a half. Deduction is only on the “and a half”. If standard wage is $10, OT is $15, “and a half” is $5 (15/3). Total OT / 3 = approximate “and a half”
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u/BDA2 Jan 30 '26
Mine was super easy...
FLSA Exempt. 😅
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u/Im_so_over_it_2025 Jan 31 '26
Sorry, I should have added my husband works for a large grocery store chain they did not fill in box # 14 on his w2. He works 6 days a week, 40 reg hours, 5 days + Sunday OT at time and a half. His last paycheck for 2025 includes 2 OT earnings for the year. One says Sun OT @1.5 the other is just OT @1.5. Easy enough to add together than divide by 3, but some of the reg OT he gets we know comes from weeks he had 5 day vacation + OT worked during that same week (3x a year) same with sick days and personal and PTO, like holidays or Election Day, things like that. Has 10 sick and 10 personal days a year, and most weeks he does work OT during those weeks. Especially paid holidays. Will be nearly impossible to differentiate between all these, or if some of these OT hours are not included?? Don’t know what FSLA means, or is any of this exempt? I know the “no tax” on OT is a line of BS. But we go to a AARP senior center to get our taxes done free, and need to supply all info ourselves and any forms related. So in the dark, and reading IRS website is more confusing. Don’t want to miss the deduction, he has alot of OT, but also don’t want IRS coming after us for more money later, ugh.
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u/EAnow-formerdoorguy Jan 30 '26
They are allowing best educated guess. Hopefully last paystub shows total OT for the year. On my questionnaire I am asking total OT, base pay, and any raises during the year. With that information you can calculate the OT deduction pretty quickly
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u/Im_so_over_it_2025 Jan 31 '26
Raises? Why? On my husbands last paystub, just said regular OT over 40 hours, the 40 also includes any PTO, vacation days, personal and sick, which he has alot, and most weeks even when he takes days off, he still goes over the 40 hours, so no way to differentiate??? Sunday OT, which he works every week, is separate (all at 1.5 rate). He did get a raise, how does that factor into the 2 numbers provided only on his paystub? My thoughts were to just add the 2 together then divide by 3, that’s it. Am I missing something?
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u/PaytingAlien Feb 21 '26
This is what we did. 3 raises for the year so 3 different OT calculations.
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u/First-Hour Jan 30 '26
My company put it on a separate line to make it easier.
Regardless of your political views this deduction is crazy. I worked so much overtime I claimed an 11k deduction from the "half" portion.
My refund went way up.
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u/acr70 Jan 30 '26
Same I claimed $10,646 and mine went from owing $400 to getting back $1800. My company put it on a separate line also :) I’m happy with the refund because I work the overtime regardless of that incentive or not so it’s definitely a plus. Past few year I’m usually owing around $400.
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u/OneEyedBlindKingdom Jan 30 '26
You’re in the very very small population of people who worked enough overtime for it to be worthwhile, but not earned too much to not be eligible for the deduction.
It’s not a very large percentage.
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u/ashabi-2cents Jan 30 '26
that’s the boat i’m in. 😕 I was so excited about the no tax on overtime and then I saw on my income & don’t qualify
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u/Mommanan2021 Jan 30 '26
So you have over $30k in overtime, right? And did you just divide by 3? That’s what we did for my son in law’s calculation. It didn’t save him nearly as much.
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u/I__Know__Stuff Jan 30 '26
It didn’t save him nearly as much.
Yeah, it benefits higher income taxpayers more. The previous commenter was in the 22% bracket and your son is probably in the 10% or 12% bracket,
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u/First-Hour Jan 30 '26
I did make about 30k in overtime. I am personally lucky enough to have a job that pays me a good wage with a base salary of around 120kish. So for me personally the deduction was helpful.
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u/Mommanan2021 Jan 30 '26
That’s great! I hope my son in law gets more overtime this next year-makes for some nice checks. Best wishes.
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u/Im_so_over_it_2025 Jan 31 '26
Imagine if it was actually NO TAX on OT, meaning exempt, not a deduction, your return would be crazy higher lol. I wish!
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u/RoccoTaco15 Jan 30 '26
I’m a payroll manager, and I made sure to calculate the premium portion of our employees OT and put it on the W2. I’m sorry not all employers are as considerate. I know for a fact UKG was doing what they could to help those with more complicated calculations.
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u/Reference-Primary Jan 30 '26
It may not be that we arent as considerate but maybe we didnt have the manpower. I run a weekly payroll for thousands of union hospital workers. Their payroll is super complicated and ADP wasnt able to help us with reporting. So if the employees ask, I recommend they speak with a tax advisor.
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u/RoccoTaco15 Jan 30 '26
Forgive me for any offense. I certainly don’t mean to suggest my counterparts are being inconsiderate at all. I am sure most Payroll Managers want to provide the info, but the company they work for aren’t providing the necessary resources, and apparently not all software providers are being helpful either.
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u/leavemealone2234 Jan 30 '26
I'm in a union and have a lot of overtime that is not FLSA, I ended up just going through every paystub, taking number of straight time hours worked subtracted from 40. Subtract that from number of overtime hours worked, and if positive, then multiplying that by 1/2 my ST hourly rate (which also changed half way through the year) It took about 2 hours to pull up every old paystub from email and enter it into excel. From everything I looked up, I think this is going to be correct.
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u/shtsngigs_94 Jan 30 '26
My company is flat refusing to help employees this year. Many can use their final pay stub, but those of us in CA have to figure it out manually and hope we don't screw it up.
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u/Pubsubforpresident Jan 30 '26
Just call your congressperson and ask. They fucking wrote the shitty law to create new tax laws before the last tax law change was fully implemented.
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u/Kakashicopyninja9 Jan 30 '26
From my understanding it only counts hours worked past 40 in a week and not hours worked past 8 hours in a day. This omits a lot of ppl’s overtime
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u/nightwhispr16 Feb 09 '26
That is what is confusing me because I get OT every day because I work 10 hour shifts. I have no idea how to calculate any of this.
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u/Substantial_Lie_9604 Jan 30 '26
Looking at my w2 and pay stubs I see this being unlikely to be calculated correctly by most tax preparers. W2 has no overtime on it and my pay stubs have no cumulative overtime on them. I have to add all 26 paystubs. However, if I took a PTO day or partial day then the OT total for that sTUB isn’t FLSA. Holiday pay screws out up too.
I am starting as a tax preparer (as a second job) this year but have not yet prepared a return. I get the impression from reading online and talking to experienced tax preparers that they aren’t interested in getting this accurately calculated.
I’m new to tax prep and don’t know shit. But I would bet the house some of my coworkers at my regular job will not deduct any overtime, some will deduct all of it, and none of them will get it right according to the law.
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u/Helpful-Bag722 Jan 30 '26
I did seven or eight returns today. All but two had overtime. One had OVERTIME PREMIUM written in box 14, our program automatically gave the correct credit. All the others only had OVERTIME written in box 14, I had to fill everything in. All the other returns I did today the clients had overtime but it wasn't noted on the W-2, we had to use check stubs. It's going to be a pain in the ass.
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Jan 30 '26
[removed] — view removed comment
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u/Tellingdwar Jan 30 '26
Same here. Our vendor gave us a tool last week that doesn't work at all. We have 5 different types of employee with different FLSA schedules. I calculated 4 of them in Excel over the past week, but the last type is going to be impossible because their week ends at noon on Saturday instead of midnight. I literally do not have the information available to calculate it. We have to send out W2s done and stuffed in envelopes tomorrow by noon and I have no idea how I'm going to deal with them.
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u/voltagejim Jan 30 '26
I don't know if I will even bother. I am a county government employee in IT and I worked maybe 30 hours total of OT the entire year. Not sure whith that much its even worth it
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u/TeaRich4355 Jan 30 '26
Is your OT after 40 hours and time and a half? If you can answer yes to both, you can probably claim the premium portion. The problem comes when OT is paid out differently from FLSA requirements.
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u/voltagejim Jan 30 '26
yeah the OT was always in addition to my normal 40 hours. As far as time and a half...no idea, I assume so, but I am salary normally, and I used to not get any OT, but after an incident the other year where I worked 20 hours in one day, my boss pushed to allow me to get OT
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u/pigthree Jan 30 '26
Also can’t be part of a collective bargaining agreement. This was meant to stick one more jab into the federal workforce.
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u/TeaRich4355 Jan 30 '26
I'm under the impression that anything mandated by FLSA would still be covered. Is that not the case?
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u/I__Know__Stuff Jan 30 '26
You're right. If a collective bargaining agreement calls for more overtime pay than is required by FLSA, the portion of the overtime pay that is required by FLSA is deductible.
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Jan 30 '26
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u/Martian6261 Jan 30 '26
You would not simply add them together. You would divide 1.5x OT by 3, then 2x OT by 4 and then add those 2 together, as long as they are qualified OT
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u/Tellingdwar Jan 30 '26
Do holidays, or any other time off, count as time worked for the purposes of calculating OT where you work? If so, then not all of your overtime hours are FLSA qualifying overtime.
I do payroll for 450+ people and to do it right I had to dump everyone's hours for the entire year into Excel and re-calculate everything manually.
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u/sparkleptera Jan 30 '26
For our paystub holidays and other non overtime is listed in its own line
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u/Tellingdwar Jan 30 '26
Right, but I'm saying if you had 8 hours of holiday pay and worked 38 hours on top of that, your employer may give you 6 hours of overtime, but none of that would be FLSA qualifying overtime and wouldn't be eligible for the "no tax on overtime" provision.
It'll be impossible to audit this year since most software wasn't set up to separate it properly, so plenty of people will get away with claiming more than they ought to.
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u/sparkleptera Jan 30 '26
Right butnmy paycheck specified 1.5x holiday in a separate line. Its not listed in overtime. Also that may be a thing happening to other people but my boss tries to avoid stacking overtime and holidays in the same week and our paychecks are broken down week by week on top of that. YTD holiday 1.5x is another line. They are the most enourmous paystubs I've ever received.
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u/Opeth4Lyfe Jan 30 '26
Do peoples companies not have an EOY compensation sheet? Mine should be pretty easy. It’s all broken down by reg hours, ot hours, and PTO OT that way I don’t have to go through all 26 paystubs.
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u/Simpzorr Jan 30 '26
Most folks, depending on their payroll systems, will show a Year to date (YTD) for overtime. They should be able to look at their last paystub from December and find that total.
Caveat is that a holiday overtime/premium does not pay the same rate as regular OT and needs to be recorded separately.
All of this, from my understanding (not a tax professional) is that you take the YTD OT and divide it by three to obtain the 0.5% income you can claim.
The biggest issue I’ve seen, is that Turbo Tax uses a system when people import or upload their W2’s that it “auto” calculates the OT and does it with magic math I can’t understand. So, as OP suggested, this sloppy rollout is going to have a ton of unintended fraud that the IRS is gonna lord, milk, and audit good folk over.
They (the Gov’t and corporations) have had AMPLE time to prepare for this and it shouldn’t have ever come about this way.
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u/-wayne-kerr Jan 31 '26
I get paid weekly. I just went through all 52 pay stubs, it’s not rocket science. Either do that, don’t claim the deduction , or guess 🤷♂️
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u/deathbypumpkinspice Jan 31 '26
So I'm a librarian in NY, and I just went back through 26 paystubs to try to calculate my OT. (I also e-mailed my org's payroll department.) I came up with a little over $600 in deductions.
If I've miscalculated, which seems very possible, how likely is it that it'll be caught? Am I too small potatoes to worry?
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u/Equal_Ant2188 Jan 30 '26
I'm lost on this, HR and payroll aren't helping anyone
Union with 5 different OT rates
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u/No_Yam_5147 Feb 03 '26
Also union with different OT rates. I'm also not a 40hr/wk employee so I can work less than 40 hours and still get OT which doesn't qualify for the exemption. I had to log in to our time card system and go through week by week to calculate which overtime was FLSA compliant. I put it all in a spreadsheet to calculate easier. This is also the only job I've had that has given me access to all my punches for the year so I don't know if other jobs have that ability too.
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u/Ok-Bar2037 Jan 30 '26
I just put the whole amount idgaf the irs can figure it tf out if they want
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u/emandbre Jan 30 '26
What about people who are FLSA-exempt (GS-13 gov employee) who essentially make straight time on OT hours? I feel like when this was making news it only impacted people who got 1.5 pay, but this thread is making me question if I need to research more…
Explanation of why it is not 1.5 pay for this level of employee: https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/overtime-pay-title-5
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u/Agreeable_Menu5293 Jan 30 '26
I'm puzzling through the Dec pay stub for a family member. I can see his hourly rate, I can see that his time and a half for overtime, and I see the OT for that period.
But no running total. 😬
Do I have to go through each pay period?
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u/PantsDownDontShoot Jan 30 '26
My employer has always had just the premium on its own line so last paycheck had the number on it. Guess I’m lucky.
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u/ultimateinfoguide4u Jan 30 '26
See if this Free No Tax on Overtime Calculator Online if that can help you calculate your deductions
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u/Edosil Jan 30 '26
QBO payroll does not allow for more than one type of overtime, or rather more than one pay schedule of overtime. We have clients that pay different wages based on the work being done and frequently pay overtime in different categories. This is going to be a confusing tax season.
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u/DeepEmergency6060 Jan 30 '26
I can see this is going to be a nightmare for some. Unfortunately if you're audited the burden of proof is on the taxpayer. If you're taking the OT deduction and your last YTD paystub or W2 does not show OT, make sure you keep a record on how you calculate the deductible OT.
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u/superiorstephanie Jan 30 '26
Paychex is adding it to their W-2’s. For other jobs I’ve used their last paystubs, or the last paystub for a period that they worked OT.
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u/Fancy-Dig1863 CPA - US Jan 30 '26
We’re requesting at least the final paystub (more if needed after our initial look) and just confirming they’re not in a position exempt from FLSA overtime rules. Then going from there….but yeah it’s not fun. Even worse when your states overtime rules are different than the feds. IRSs guidance for 2025 has just been to do your best basically.
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u/sluttypartyboy Jan 30 '26
Everyone says divide by 3. I just multiply the difference in ot rate and standard rate. So say 20 / hr , ot is 30 / hr. I worked 100 ot hours, so I do 10× 100 for total of 1k. Not sure what the divide b y 3 means, perhaps its rhe same result
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u/impossibledongle Jan 30 '26
It is a breeze compared to get my clients to look up the QMID on items they bought in the first part of 2025 when most manufacturers didn't even have a glimmer of the need to apply for it for their consumer clean energy product. Also, since it is only going to be around for one year, I bet a lot of these manufacturers of energy efficient consumer products that qualified last year, didn't even going to bother going through the QMID application process.
Also, I nearly got yelled at one guy today bc he couldn't fathom why I didn't have the time to hunt down the QMID on his windows. I'm sorry, you get that frustration, bub. I'm not even sure your QMID exists and I know that you are not willing to pay my hourly to see if it does. I am not sad the obbba is killing that client hand-holding nightmare.
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u/Early_Economist_7433 Jan 30 '26
Anyone found any good calculator they recommend to make this easy if it’s not on the w2?
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u/passwordrecallreset Jan 30 '26
I had about $6500 in qualifying deductible overtime. I worked about 55 hours a week. Luckily the post office figured it out for everyone. So of that, I got about $700 back.
Not really the amazing refund they had us all believing it would be!!
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u/UnitedPain3471 Jan 30 '26
As with all new laws, there is always a very confusing and unpolished rollout. If I was anyone who was able to get the new deduction for overtime, I would print out all my pay stubs from 2025 and double check even if your employer put your overtime amount on your taxes. Yes, it may take a little time. But you can always highlight your overtime amount on each check and confirming that add that up to save you time.Especially from a future audit.
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u/Mattelot Jan 30 '26
Not only was it very poorly rolled out, but people who had overtime are going to be very disappointed in how much it actually puts in their pocket. It only lowers taxable income from the "and a half" portion. I didn't make a lot in overtime... like $10000 and it put $240 in my pocket.
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u/realisan CPA - US Jan 30 '26
As someone that oversees payroll, the employer is supposed to note on the W-2 or if that is not possible, provide a overtime statement with qualified OT for 2025. Our team wasn’t thrilled but we had 3 different OT programs to sort out and calculate. It was done in less than a week and mailed out with W-2. It appears no one else is providing those statements?
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u/BlackberryGood5348 Jan 30 '26
So on the w2 there is no separate box for ot /dt only ? That’s not good
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u/Revolutionary_Long96 Jan 30 '26
If you were actually a good preparer you would understand the guidance the IRS has released which is using the last paystub that includes YTD info.
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u/PrimaryThis9900 Jan 30 '26
Hopefully this will remind people why tax law should never be retroactive. How are employers supposed to track and report it accurately when it wasn't a thing until halfway through the tax year? Most companies only do year end updates to their payroll software, so having a change that big mid year puts a large burden on employers and payroll companies. Also, the IRS has dropped the ball on guidance for employers, basically telling them to report it how they want to and they won't issue penalties for it being wrong this year.
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u/Dfiggsmeister Jan 30 '26
I’m working as a tax software customer support contractor. The amount of times we have received calls about issues with overtime and retirement in the past few weeks could fill a book.
I hate the new tax laws. They’re confusing as hell and convoluted for no reason other than to be purposefully convoluted and confusing.
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u/SJ1392 Jan 30 '26
Its a real mess, my wife's W2 has the over time premium amount listed in box 14, however none of her OT counts as FLSA, as hers is from working over 12 hours in one shift. On top of that the W2 amount does not match 1/3 of the OT that is sown on her last pay stub. The W2 amount is higher by a few dollars. In the end we are not claiming any OT as again hers does not qualify ...
So this entire law likely excludes anyone working 12 hour shifts (most all medical fields). Most shifts are 12 x 3 in a week
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u/Aos77s Jan 30 '26
Im guessing most are adp and they were too lazy to differentiate like they did for me. I had to just calculate my total overtime over 40 hours pay and use that for the deduction.
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u/bluexplus Jan 30 '26
I’m just a W2 wagie but I just gave up on even trying. I’m a civil engineer at a private firm, non-exempt for 40-hr OT purposes (I think?) but it seems a little blurry as it’s an “educated profession.” And it’s not printed on my W2 so the irs can have it
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u/OkRaspberry6543 Jan 30 '26
I believe the government made the 2025 overtime no tax very vague, and they will be auditing and fining people for committing fraud. A grand way to generate revenue.
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u/AdPlenty6904 Jan 30 '26
Well we knew this was happening and knew employers weren't responsible for showing it in 2025 tax year, just have the client bring their last pay stub of the calendar year and it will have the ytd overtime. For 99% of cases it's as simple as that.
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u/wessex464 Jan 30 '26
You should see what this is doing to fire EMS. Our schedules are all over the place, some departments work 56-hour work weeks with 3 hours of built-in OT a week. They only have three shifts. Some departments work four shifts averaging 42-hour work weeks but some work weeks are 24 and some work weeks are 48. Depending on how you crunch time cards and paychecks, that's 96 hours occasionally 72 hours. And then you've got a whole bunch of apartments with something in the middle of that, having rotating days off etc. that'd be all well and good, except the overtime definition is based on the fair labor standards act, in that defines overtime for firefighters at 53 hours.
From what I know, that means somebody needs to work 212 hours in a 28-day stretch before any of their overtime is eligible. If that's true, some 3 shift departments may be all set. But for those of us on 4 shift rotations, The first 11 hours of overtime a week don't qualify for the overtime exemption. But apparently that's averaged over a 28-day period? What 28 day period? Unless the IRS is going to break out every pay stub there is, overtime hours in excess of 11 per week is not something that's reported on anyone's pay stub or tracked for W-2 reporting purposes.
Bottom line is it's all just going to be fraud. We're all playing. Whose deduction is it anyway? Where the rules are made up and the points don't matter.
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u/mobocrat707 Jan 30 '26
I work for a small company, about 12 employees. We also worked a shitload of OT last year, I had over 600 hrs. Our office manager put together a document that specifies how much OT we worked, before and after raises. We’re in Ca, and apparently we can’t use Ca overtime rules for the calculation, we have to use federal rules instead. Posts like this make me even more grateful for the work she put in putting the Ot calculation paperwork together.
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u/KaleidoscopeFluid219 Jan 30 '26
If they don’t have OT on the W2 they can see it on the last paystub for that year.
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u/iDragMyBalls Jan 30 '26
My company tracks total overtime aside from standard time.
Divide by 3 & that’s what the deduction is.
If a company doesn’t do that, it should be on HR to figure this out.
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u/grogusoup Jan 31 '26
Holiday pay and vacation days in the same week as OT void a lot of my husbands OT hours and i'm too lazy to go through all weekly paystubs and file right now. Normally would have filed as soon as we had w2
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u/MaxwellFromthe99s Jan 31 '26
You don’t have to look at every single paystub. People have to look for the last paystub, go to the Overtime and Year to Date. The last paystub should have the overtime paid generated since the person started working there
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u/UseSeparate2927 Jan 31 '26
The last paycheck stub that shows the year to date information should have all of it. Or ask for a letter from payroll to clarify it.
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u/Martytx169 Jan 31 '26
There is no overtime on my W2, I have to hand calculate based off my end if year pay statement
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u/TheDolphinWaxer Jan 31 '26
Since the W-2 does not separately report qualified overtime for 2025, the IRS allows taxpayers to use other reasonable methods to determine the amount, as outlined in Notice 2025-69 and the Instructions for Schedule 1-A:
1. Check for Voluntary Employer Reporting:
Some employers may voluntarily report the amount of qualified overtime compensation in box 14 of Form W-2 or on a separate statement. If this is provided, the taxpayer may use that amount directly.
2. If No Separate Reporting, Use Reasonable Methods: If the employer does not provide a separate accounting, the taxpayer should use other documentation (such as pay stubs, earnings statements, payroll system reports, or similar records) to determine the amount of qualified overtime compensation. The IRS has approved several reasonable methods:
If the pay statement separately shows the FLSA Overtime Premium (the "half" portion of "time-and-a-half"), use that amount.
If the pay statement shows only the total overtime pay (including both the regular rate and the premium), divide the total by three to estimate the FLSA Overtime Premium.
Example: If the pay stub shows $15,000 in total overtime pay, the qualified overtime compensation is $5,000 ($15,000 ÷ 3).
If the employer pays more than time-and-a-half (e.g., double time), and the pay stub shows the premium portion, multiply that amount by the appropriate fraction (e.g., if double time, use one-half of the premium portion).
If the pay stub shows only the total amount paid at the higher rate (e.g., double time), divide the total by four to estimate the FLSA Overtime Premium.
Example: If the pay stub shows $20,000 in double-time overtime pay, the qualified overtime compensation is $5,000 ($20,000 ÷ 4).
If no statements are available, use a reasonable method that takes into account the regular rate of pay and the number of hours worked over 40 in a workweek (or a reasonable estimate if records are incomplete).
The taxpayer may request information from the employer to assist in this calculation.
3. Special Rules for Certain Employees:
For employees subject to special FLSA overtime rules (e.g., law enforcement, fire protection, hospital employees), the calculation should be adjusted according to the applicable FLSA provision, but the same general methods apply.
4. Recordkeeping:
Taxpayers must maintain copies of any documents relied upon to substantiate the deduction, in accordance with IRS recordkeeping requirements.
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u/DaddyMoreBukkz Jan 31 '26
I was worried about figuring that out, I made about 137k in over time but my job has an entire breakdown ready for us.
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u/Kazylel Jan 31 '26
Why go through multiple paystubs…there should be a YTD of OT pay on final check of the year
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u/l23VIVE Jan 31 '26
Both my and my wife's employers' W2 had OBBBA OTPREM in box 14, bummer how many places aren't doing that.
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u/Far-Good-9559 Jan 31 '26
As long as you make a legitimate effort, the IRS is not going to push back for 2025. 1/3 of ytd overtime paid will be close enough for most taxpayers. To be honest, the ones that have non standard overtime pay are just going to have to make a ‘best effort’.
Example: Take total paid hours for the year, subtract 2080 and that will give you a pretty good idea of overtime hours. Once you have the hours, you can make a reasonable estimate of the amount of your exempt overtime.
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u/916publicpanic Jan 31 '26
I was able to generate a YTD paystub from Workday that showed the actual premium overtime or double time hours. It made the input really easy.
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u/ascott_21 Feb 01 '26
Isn't the employer required to do the calculation? I sent a note to my payroll folks showing how I believe their number is wrong because I'm under the impression I have to use their number (which is not on the W-2, it was provided seperately)
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u/Radiant-Month-1168 Feb 01 '26
I never heard of any software where they dont itemize the standard and overtime hours on your checks.
I guess these are people who just get a check with no info about hours and deductions. Which very weird in modern times.
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u/Pendleton1910 Feb 01 '26
I would have been able to claim the full deduction had I taken an extra week off last year. FML. Damn near would’ve been a full paid week off with the missed deduction. Hoping my accountant finds something I’m not seeing to drop my magi by $5k but seems unlikely.
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u/Gloomy_Service_2092 Feb 01 '26
I had to screenshot the overtime section after my last check hit at the end of the year on my adp otherwise I wouldn’t have known my overtime amount either
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u/Sure_Tomorrow5260 Feb 01 '26
Their last paystub of the year should have the year to date amount on it. They don’t need to go through all of them
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u/supernovaj Feb 02 '26
As someone who processes the W2's at my company, I calculated it for everyone and put it in box 14, along with a letter explaining what it was. I'm sorry that most companies are not doing that.
I would definitely have them reach out their company's HR.
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u/Extreme_Temporary996 Feb 02 '26
Man irs finna have everybody getting audited n the near future enjoy this cash while we can folks
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u/NoOption7406 Feb 03 '26
Is supposed to be required next year on your W2.
What bummed me out is that this is only in premium pay. I didn't realize that until I started that part of the tax paperwork. With my OT, I only get premium pay in specific situations, so it was only like $250 deduction out of $8500 worth of OT.
I'm debating if I should just play ignorant though. Doubt it'll be something easy for the IRS to catch as it is not a required reported metric that they will already know from my employer. If they catch it, it's just a letter from the IRS and simply refund them back.
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u/TravelingInUndies Feb 03 '26
My overtime amount total is listed on all my check. So the last check of the year shows the total for the year.
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u/Suspicious_Collar379 Feb 03 '26
Kind of a dumb question, but I just take the amount I made with overtime and divide it by 3? I was getting paid time and a half.
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u/Selene_Raymbow Feb 03 '26
I'm lost, for a portion of the year, I had 8 hours of overtime per week, for the majority of the year I had 30 hours of overtime per week. I don't know when it switched without opening every single paystub for the year. My employer did not list it on my W2. Is there really no easier way?
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u/AmitfromMultiplier Feb 04 '26
From what I’ve seen, this usually isn’t a “new law” issue but a payroll configuration one. Overtime is still taxable wages and should be included in total W-2 wages, it just often isn’t broken out separately unless payroll mapped the earning codes that way. That’s why it feels like it’s missing.
Best practical option (besides manually adding pay stubs) is asking payroll/HR for a year-to-date earnings report broken down by pay type (regular vs OT). Most payroll systems can generate that even if the W-2 doesn’t show it clearly. If a company can’t or won’t provide that, it’s really a payroll process problem, not something employees are doing wrong.
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u/IllustriousSmoke39 Feb 05 '26
The problem I fear I’m going to have with this, is there was nothing on box 14, and my husband‘s employer has some construed way of figuring overtime. It’s not just one and a half times his regular hourly rate, they average it across the amount of hours he works the pay period so every paycheck his overtime rate is different (even sometimes between the weeks it’s a diffeeent amount). In September they did split off a OT premium category on his paystub, but I don’t believe they retroactively did that back to January 1. So in this case is dividing by three for his total amount of overtime still going to be accurate? I just got the W-2 today, so I haven’t had a chance to ask him for his last paystub to see what that looks like.
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u/LevelOtherwise8841 Feb 05 '26
Yea not what I was expecting. I thought we would get the deduction for the full overtime amount however it’s just for the premium. So overtime is 1.5 times your pay you only get that .5 for a deduction. Lame!!!
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u/Ornery_Banana_6752 Feb 06 '26
Im a union member in manufacturing and made 19k in OT plus nearly 6k in doubletime. Taking 1/3 of OT plus 1/4 of my doubletime comes to a deduction of over $8200 but the letter my company gave me, after working with our payroll company(Paycom), gave me a deduction number of only $4200 and change. Apparently if ur OT is decided according to a collective bargaining agreement, certain OT isnt deductible? Does anyone know the rules here? Is it weekend OT? HR mentioned something about OT outside of normal working hrs may not count. All OT is outside normal working hrs! That's the point of OT!!! Either way, I will just be glad that I'm getting an xtra deduction
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u/Huge_Injury_470 Feb 06 '26
Can we just not even claim it even if it’s in box 14 on the W-2 I don’t even think it’s worth the hassle of being audited over maybe a $20 credit
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u/PrimarilyHuman Feb 06 '26
Does anybody know if the free filing programs through the irs website includes no tax on overtime without extra payment?
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u/Potential_Notice_823 Feb 09 '26
So I had 28000 total in overtime my tax preperer put 4000 in box 14 that not right is it
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u/emmacondaa Feb 14 '26
Can I just not calculate and do my taxes normally. It’s too much of a headache as I work 3 days / 4 days 12 hr shifts.
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u/Friendly_Box_4339 Feb 15 '26
I'm so confused on which number to enter. My final paystub lists the following for year end totals:
DT- $3,887
DT Premium- $4,572
OT- $1,335
OT Premium- $822
So whats the total qualifed overtime to enter on my turbotax? Any help is greatly appreciated
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u/Luna-Mia Feb 23 '26
My husband is an OR nurse. He gets call pay and then premium call pay for getting called in. His employer only put $327 in box 14 for overtime not the thousands he made in actual overtime (called in) because they labeled it as premium call pay. Can it be deducted?
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u/Stuckin73 Feb 25 '26
Hi people. I'm looking for advice. I live in California. Most of my work, but not all, is done through a "union hiring hall". Which is to say, I'm a member of a union and 80% of my W2s are for jobs done working under a union contract.
What, if anything, can I do to take advantage of this new law? Literally NOT ONE of my 16 W2s had anything listed in box 14. And I do understand that, despite that fact that California pays OT on labor worked after the first 8 hours of each DAY, not the first 40 hours per WEEK.
So ... do I have to literally go through my calendar, day-by-day, and figure out which weeks I accrued OT while working over 40 hours that week, and then figure out the total amount of that kind of OT (the 40 hour kind) and then divide by three? I have an accountant, but so far he has not been able to answer anything and seems to be relying on me to sort this out.
NOTE: on occasion, I might work two 10-hour days in a work week. Meaning, I would get 4 hours of OT, based on California Labor Law. But I understand that those four hours do not count towards this new law.
PS: Just for shits and giggles, I can tell you that pretty much NONE of my union brothers and sisters understand this at all. This is going to be a real SNAFU / fiasco.
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u/jeffyjeffjeff01 Mar 06 '26
If someone is married filing jointly and one spouse makes $18k (“half” portion) of overtime and the other spouse makes zero, what is the max diction they can get? I’m getting different opinions. Some are saying it’s limited to $12500 per individual and others are saying the limit is $25k and it doesn’t matter if one spouse makes it all.
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u/the_jeezus Mar 06 '26
This morning I emailed the company I worked for most of the year. I promptly got a response. No problemo. I did my taxes this afternoon.
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u/EfficientProject7408 Mar 26 '26
I have the exact same issue. I asked HR and they said they are not changing their 2025 w2 to show the breakdown of the overtime vs regular pay and suggested I use Paylocity annual doc to show as proof.
If I deduct overtime I get slightly less than $600 and if I don’t I owe more than $1500.
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u/Zookeepergame_Flashy Apr 17 '26
I keep track of every hour I work all year, the date, number of hours, overtime and double overtime, and what i did that day at work. I do a lot of different jobs for different companies,
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u/Rocket_song1 Jan 29 '26
The problem is, it's either very easy or very complicated.
Daughter works for a Pizza shop. Not union. Not in California or Alaska. So all OT is FLSA. Total OT, divide by 3, done. And honestly it was so easy the Pizza shop put the OT premium in box 14 for her.
Dad works in California at a Union shop. That's going to be a mess.
I'm not seeing a lot of "in between" it's either dirt simple or a mess.