Daily overtime and double time on W-2 code TT
Updated · Rotomal
State daily overtime, double time and other premiums count toward W-2 code TT only to the extent the federal Fair Labor Standards Act required overtime that workweek. The IRS FAQs say that where an employer pays more than the FLSA requires, because of state law, a union contract or its own policy, only the amount minimally needed to satisfy the FLSA is qualified overtime. In practice that means the half-time premium on hours over 40 in the workweek, on the FLSA regular rate.
The rule in the IRS FAQs
FAQ 16 of FS-2026-13 covers overtime pay the FLSA does not require: premiums for hours beyond 8 in a day, beyond 35 in a week, on weekends or holidays, or a premium on a different rate. The employer must evaluate those payments under the FLSA's own rules to find the amount the FLSA required, and only that amount is qualified overtime. Double time is the IRS's example: only the half-time premium counts.
Worked weeks
| Week | State-law overtime paid | FLSA hours over 40 | Code TT for the week |
|---|---|---|---|
| Four 10-hour days, $20/hour | 8 daily overtime hours at 1.5x | 0 | $0 |
| 10, 10, 10, 10 and 4 hours, $20/hour | 8 daily overtime hours at 1.5x | 4 | 4 x 0.5 x $20 = $40 |
| 50 hours at $20/hour, paid double time over 40 | 10 hours at 2x ($400) | 10 | 10 x 0.5 x $20 = $100 |
The examples assume no bonuses or other pay in the week, so the regular rate is the hourly rate. Bonuses, shift differentials and commissions raise the regular rate and the premium.
Creditable premiums
Some premiums paid for daily or weekend overtime can be credited toward the FLSA overtime owed for the week. Where an employer relies on such credits, the IRS formula still gives the qualified amount: the portion of the premiums credited, and only that portion, plus any additional FLSA premium paid.
Why your payroll figure may be wrong
- One overtime earning code holds both state daily overtime and FLSA weekly overtime.
- Double time is coded as overtime, so the whole premium reaches code TT.
- Overtime is counted over a semi-monthly period instead of each workweek.
- Holiday or sick hours are counted toward 40, though they are not hours worked.
A QuickBooks Community thread from January 2026 shows a California employer asking how to split FLSA and state overtime pay items for the year-end W-2, a question many payroll setups were not built for.
Get it right before February 1
Code TT Check rebuilds every workweek from your time records, separates FLSA and state overtime, and gives a per-employee code TT with the working. The first employee check is $19; up to 10 employees cost $99.
Questions
Does California's double time after 12 hours count?
Only the part the FLSA required that workweek: the half-time premium on FLSA hours over 40. The extra above time-and-a-half does not count.
If an employee works 38 hours with daily overtime, is there code TT?
No. With no FLSA hours over 40 in the workweek, there is no FLSA-required premium, whatever state law paid.
Does union contract overtime count?
Only to the extent it satisfies the FLSA requirement. The IRS says overtime under a collective bargaining agreement for an FLSA-exempt employee is not qualified at all.
Is a state's own overtime tax treatment the same?
Not necessarily. Code TT is a federal reporting requirement; check your state's rules separately for state income tax.
Can I estimate code TT for 2026?
The IRS says the 2025 relief does not apply after 2025, and its FAQs describe the amount as determined each workweek. That workweek calculation is what we do.
Sources
- IRS FS-2026-13: Updated questions and answers about the deduction for qualified overtime compensation (August 2026) Source: irs.gov
- IRS: General Instructions for Forms W-2 and W-3 (2026) Source: irs.gov
- QuickBooks Community: Qualified overtime tracking for California employers (January 29, 2026) Source: quickbooks.intuit.com
- CPA Practice Advisor: When Box 12, Code TT Will Not Tie to the Payroll Register (October 13, 2026) Source: cpapracticeadvisor.com