IRS Requires Employers to Report Overtime Pay on W-2 Forms Starting in 2026

The Internal Revenue Service issued new guidance in 2026 requiring employers to separately report qualified overtime compensation on Form W-2, Box 12, using code TT, starting with the 2026 tax year.

The reporting requirement supports the new "No Tax on Overtime" deduction created by the One Big Beautiful Bill Act. The deduction allows eligible workers to subtract the premium portion of their overtime pay from their taxable income.

The deduction is capped at $12,500 for individual filers and $25,000 for married couples filing jointly. It begins to phase out for taxpayers with a modified adjusted gross income above $150,000 for single filers or $300,000 for joint filers.

Only overtime required under the Fair Labor Standards Act qualifies. Overtime paid solely because of employer policy, state law, or collective bargaining agreements does not qualify unless it meets the minimum FLSA threshold.

Employers must report the full amount of qualified overtime paid in Box 12, even if it exceeds the employee's allowable deduction limit. If an employer makes an error, they must file a corrected Form W-2c with the Social Security Administration and give the employee a corrected copy.

Workers who want to reduce their withholding to account for the deduction can submit an updated Form W-4 using Step 4(b). Employers are not required to automatically reduce withholding on their own.

The IRS said employees generally cannot claim the deduction unless the qualified overtime is reported on their W-2. Using Form 4852 as a substitute is not permitted for this purpose.