Updated

Updated · Hr Morning · Aug 18

IRS Orders 2026 W-2 Overtime Reporting Under Code TT, Capping Deductions at $12,500

Updated

Updated · Hr Morning · Aug 18

IRS Orders 2026 W-2 Overtime Reporting Under Code TT, Capping Deductions at $12,500

Q: What happens to your tax break if your employer fails to separate your weekend premium from eligible overtime?

If your employer does not separately identify weekend premium pay from FLSA-eligible overtime, your tax break could be reduced or delayed until the reporting is fixed. The IRS says only “qualified overtime compensation” counts for the deduction, and weekend premiums generally do not qualify unless they are part of the overtime premium required by the Fair Labor Standards Act. That means if payroll combines weekend premiums, holiday pay, shift differentials or contract-based extra pay with true FLSA overtime, the amount on your W-2 could be wrong. For 2026, workers generally may claim the deduction only for the amount reported on Form W-2, box 12, code TT. If that figure is understated because the employer failed to separate out nonqualifying weekend premium pay, you cannot simply adjust the number on your own tax return or use Form 4852 to claim more. The IRS says you must ask the employer for a corrected W-2, typically a Form W-2c. If the employer overstates the amount by including weekend premiums that do not qualify, claiming the larger deduction could create an error on your return and increase audit or correction risk. Tax professionals recommend comparing the code TT amount with pay stubs and time records. In practice, the tax break is preserved only if the employer correctly breaks out the FLSA overtime premium from other premium pay. If they fail to do that, you may have to wait for a correction before claiming the full deduction accurately.

3 articles · Updated · Hr Morning · Aug 18

Aug. 6 guidance in Fact Sheet FS-2026-13 replaced the IRS’s January version and tells employers to separately report qualified overtime compensation on 2026 Forms W-2 in box 12 with code TT.
Qualified overtime still remains subject to federal income tax withholding, so payroll departments cannot cut withholding based on an employee’s expected deduction; workers must instead submit an updated 2026 Form W-4.
Code TT covers only the FLSA overtime premium above the regular rate—generally the half-time portion, not the full time-and-a-half payment—and employers must report the full amount even if the worker cannot deduct it all.
A $30,000 qualified-overtime payment would still be reported as $30,000, although the deduction is capped at $12,500 for single filers and $25,000 for joint filers.
Errors in box 12 code TT must be corrected on Form W-2c and sent to the Social Security Administration and the employee promptly, with penalties potentially reduced for timely fixes.