W-2 box 12 code TT: how to calculate qualified overtime
Updated · Rotomal
Box 12 code TT on the 2026 Form W-2 reports the total qualified overtime compensation you paid an employee: only the overtime premium the Fair Labor Standards Act requires, the half in time-and-a-half. The IRS formula, applied each workweek, is FLSA hours worked over 40, times one-half, times the employee's FLSA regular rate. Report the full amount even above the $12,500 deduction limit, and furnish and file the W-2s by February 1, 2027.
The formula
For each workweek:
qualified overtime = (FLSA hours worked over 40) x 0.5 x (FLSA regular rate)
FLSA regular rate = total pay for the workweek, except FLSA exclusions
/ total FLSA hours actually worked
Code TT = sum of all workweeks paid in 2026A workweek is a fixed, regularly recurring period of 168 hours that you choose. Each workweek stands alone: hours cannot be averaged over two or more weeks.
What counts and what does not
| Item | In code TT? |
|---|---|
| Half-time premium for FLSA hours over 40 in a workweek | Yes |
| Straight-time part of overtime pay | No |
| Double time above the FLSA requirement | Only the FLSA-required half-time part |
| State daily overtime, weekend or holiday premiums | Only to the extent the FLSA required overtime that week |
| Overtime for employees exempt from FLSA overtime | No, regardless of state law or union contract |
| Overtime-like pay to an owner with 20% or more who manages the business | Generally no: the IRS treats them as exempt executives |
| Bonuses, shift differentials and commissions | Not themselves, but they raise the regular rate and so the premium |
Worked example from the IRS
An employee earns $20 an hour, works 50 hours in a workweek and is paid double time for the 10 extra hours, $400. The FLSA required only $300 for those hours: $200 straight time plus a $10-an-hour premium for 10 hours, $100. Qualified overtime for that week is $100, the required half-time premium, not the $400 paid or the $200 premium paid.
Reporting rules for 2026
- Report the total qualified overtime paid in box 12 with code TT, even above the $12,500 limit ($25,000 joint) that applies to the employee's deduction.
- The 2025 option to use box 14 or a separate statement does not apply to 2026; the IRS says no relief is available after 2025.
- Employees may only consider what you report in code TT, so an understated figure needs a Form W-2c.
- Overtime is still subject to withholding, Social Security and Medicare. Do not reduce withholding unless the employee gives you an updated Form W-4.
- In the rare case where a worker is an employee for FLSA purposes but treated as a contractor for tax, qualified overtime goes in Form 1099-NEC box 1d or 1099-MISC box 14.
Deadline and penalties
| When the correct W-2 is filed | Penalty per Form W-2 |
|---|---|
| Within 30 days after the due date | $60 |
| More than 30 days late, by August 1 | $130 |
| After August 1, or not filed or corrected | $340 |
| Intentional disregard | At least $690, no maximum |
These amounts apply to returns required to be filed after December 31, 2026, and the same amounts apply to statements not furnished to employees by February 1, 2027. If you file at least 10 information returns in total, the W-2s must be filed electronically.
Where the payroll register goes wrong
- Pay periods that do not match workweeks, so overtime is counted per period instead of per week.
- Overtime calculated on paid hours such as holiday, vacation or sick time, which are not hours worked.
- Base rate used instead of the regular rate, leaving out bonuses and shift pay.
- Several jobs at different rates, where the regular rate is a blended rate for the week.
- State daily overtime or double time coded as one overtime earning type.
Code TT Check rebuilds each workweek from your records and gives a per-employee figure with the working. The first employee check is $19; up to 10 employees cost $99.
Questions
Is code TT the full overtime pay?
No. Only the premium the FLSA requires, the half in time-and-a-half. The straight-time part of overtime hours is not included.
Do salaried employees get code TT?
Only if they are FLSA overtime-eligible. Employees exempt from FLSA overtime, such as qualifying executive, administrative and professional staff, have no qualified overtime.
When is overtime paid for code TT purposes?
The IRS says the same principles that decide when wages are paid for withholding apply, so code TT follows pay dates in 2026.
What if I overstate code TT?
The employee can only deduct the qualified overtime actually paid, and the IRS expects you to correct an error with Form W-2c.
Can an employee use Form 4852 if I will not correct the W-2?
No. The IRS says a substitute Form 4852 does not meet the reporting requirement, which is why getting code TT right on the W-2 matters to your staff.
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
- IRS: Questions and answers about the new deduction for qualified overtime compensation (FS-2026-01, superseded) Source: irs.gov
- CPA Practice Advisor: When Box 12, Code TT Will Not Tie to the Payroll Register (October 13, 2026) Source: cpapracticeadvisor.com