Don’t File W‑2s Until You Understand Tax‑Free Overtime

Описание: Tax-free overtime and qualified overtime reporting for 2025 and 2026 can be confusing for employers. In this episode of Overnight Edge, Brett Hersh explains W‑2 reporting rules, Box 12 Code TT, Box 14 options, and FLSA overtime requirements.

Tax-free overtime was created by the Big Beautiful Bill on July 4, 2025, allowing employees to deduct qualified overtime premiums (up to $12,500 single / $25,000 MFJ).

📌 Key Topics Covered:

Tax-free overtime created by the Big Beautiful Bill (July 4, 2025)
2025 W‑2 reporting (Box 14 – optional but recommended)
2026 W‑2 reporting (Box 12 – Code TT, mandatory)
How to calculate qualified overtime (only the FLSA premium)
What does NOT qualify (holiday pay, double time, union rates)
Payroll setup tips to avoid IRS issues
Why employees must NOT deduct the full overtime amount

📌 Employer reminder: Report all qualified overtime, not the employee deduction limit. Payroll and tax software handle the cap.

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0:00 Intro
0:17 Overview of Tax Free Overtime
0:32 2025 Reporting
1:32 2025 Example
1:56 2026 Reporting Instructions
2:20 2026 Reporting Instructions
2:29 Notes
3:22 Not all Overtime Qualifies

💡 Important Reminder: Only overtime required under the Fair Labor Standards Act (FLSA) qualifies—and only the premium portion (generally 1/3 of total OT pay) is deductible.
📂 Best Practice for Employers: Set up qualified overtime as a separate payroll item and keep it out of bonuses, holiday pay, and other wage types.
👇 Got questions? Drop them in the comments—we read them all.
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