OBBBA Overtime Reporting (2026)

Overview

The One Big Beautiful Bill Act (OBBBA) introduced significant changes to overtime tax deduction and reporting requirements in 2026, impacting how employers track and report overtime compensation.

Key Requirements

• Employers must separately report qualified overtime compensation on Form W-2, box 19
• Information must be provided to employees and the IRS by January 31 of the following year
• Payroll systems must track FLSA-qualified overtime (federal, 40-hour workweek, 1.5×) and non-FLSA-qualified overtime and double-time (state-specific rules) as separate line items

Qualified Overtime Defined

Qualified overtime compensation means the amount paid to an employee for hours worked exceeding 40 hours in a work week, calculated at a rate not less than one and one-half times the regular rate at which the employee is employed.

Implementation Requirements

Employers must:

• Update payroll systems to separately track FLSA-mandated overtime premiums
• Communicate with employees about the new deduction and related reporting changes
• Maintain detailed records of overtime hours, pay rates, and premiums paid

Effective Date

These reporting requirements became effective for the 2025 tax year, with the first reporting deadline being January 31, 2026.

Pricing

N/A - This is a regulatory compliance requirement, not a paid service.