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Tie-Out Press · Current as of 19 October 2026.
For tax year 2025, an employer that did not separately account for qualified overtime on its Forms W-2 was relieved of the §6721 and §6722 penalties by Notice 2025-62, which says of itself: "This relief applies only for taxable year 2025." For tax year 2026, the Form W-2 is final, created 7 January 2026, and carries a code for the figure: box 12, code TT, the total qualified overtime compensation (2026 General Instructions for Forms W-2 and W-3). Box 14 on the 2026 form holds "Other" at 14a and the Treasury tipped occupation code at 14b, and qualified overtime goes in neither. No relief for 2026 has been issued.
Two fallbacks existed for 2025, and neither exists for 2026. The employer's was Notice 2025-62 (IRB 2025-48): no §6721 or §6722 penalty for failing to separately account for cash tips, occupation and qualified overtime on 2025 Forms W-2 and 1099. The employee's was Notice 2025-69 (IRB 2025-50), which set out the employee's self-computation methods for 2025, and Pub. L. 119-21 §70202(h) permitted approximation "by any reasonable method" only for periods before 1 January 2026. No approximation authority exists for 2026.
Box 12, code TT, is the total qualified overtime compensation: the "and-a-half" portion of overtime that section 7 of the Fair Labor Standards Act required, also included in boxes 1, 3 and 5 (2026 General Instructions for Forms W-2 and W-3; IRC §225(c)(1)). It is the premium, not the overtime pay. The figure is computed workweek by workweek as hours worked over 40, times one-half, times the FLSA regular rate (IRS Fact Sheet 2026-13, Q12), and the steps are on how to calculate qualified overtime compensation. The total is reported in full, even where it exceeds the $12,500 deduction cap (Q10).
Code TP, in the same box, is total cash tips reported to the employer under §6053(a). Box 14b carries up to two tipped occupation codes per employee; that occupation table belongs to the §224 tips deduction and has no bearing on the overtime figure. Overtime paid to a non-employee goes on a 1099: box 1d of the 2026 Form 1099-NEC, included in box 1a, or box 14 of Form 1099-MISC, included in box 3 (Form 1099-NEC, Rev. December 2026, and the Instructions for Forms 1099-MISC and 1099-NEC). FS-2026-13 Q7 calls overtime on a 1099 "rare".
Forms W-2 for 2026 are due to employees and to the Social Security Administration on 1 February 2027, because 31 January 2027 is a Sunday (2026 General Instructions for Forms W-2 and W-3).
IRC §225(a) allows the deduction only for amounts included on a statement furnished under §6051(a)(19) or §6041(d)(4). From 2026, an employee cannot deduct qualified overtime the employer left out of box 12, code TT, and a Form 4852 substitute does not cure the omission (FS-2026-13 Q20, Q23). An amount reported too high cannot be deducted at the overstated figure (Q21). The 2025 season let an employee compute around a missing figure. The 2026 season does not.
From 2026 the deduction looks to box 12, code TT (FS-2026-13 Q20, Q23). An overtime figure placed in box 14 of a 2026 form instead is, for that purpose, a figure omitted from code TT, and the remedy is the employer's (Q11, below). Box 14a on the 2026 form is "Other"; box 14b is the tipped occupation code (2026 General Instructions for Forms W-2 and W-3).
An error in the code TT amount is corrected by the employer on Form W-2c, "as soon as possible" (FS-2026-13 Q11). A correction is a recomputation. A code TT figure is right only where each workweek behind it was built from hours worked and the regular rate, with no averaging across weeks (Q12, Q13), so a correction starts from the workweeks and not from the register's year-to-date overtime line.
Rev. Proc. 2025-32 sets the information-return penalties for statements due in 2027, which includes the 2026 Forms W-2: $60 per form where corrected within 30 days, $130 where corrected by 1 August, $340 after that or where never corrected, and at least $690 per form, with no annual cap, for intentional disregard. §6721 covers the return filed with the Social Security Administration and §6722 the statement furnished to the employee, and both can apply to the same W-2. Errors of $100 or less per amount ($25 for withholding) fall within the de minimis safe harbor unless the payee elects out.
The 2026 Schedule 1-A (Form 1040), on which the employee claims the deduction, had been posted only as a draft, watermarked as not for filing, and without 2026 instructions when our rules reference was last updated on this point, on 17 September 2026. That is the employee's form. The employer's side, box 12 and code TT, is on a final form, created 7 January 2026.
What seven payroll vendors' own published pages say about where the figure goes, quoted and dated, is on the payroll-vendor map, which makes no claim about how any product behaves. The Qualified Overtime Kit, TY2026 edition, is an Excel workbook built to the 2026 Form W-2 instructions for reconciling box 12, code TT; the free spot check works one employee's workweek.
This product is a calculation and documentation tool. It is not tax, legal, accounting, or payroll advice, and it is not a substitute for advice from a qualified professional who has reviewed your client's specific facts. Overtime, regular-rate, and tip-credit rules vary by state and by the terms of employment; you are responsible for confirming the rules that apply to each client and for reviewing all output before it is used.
Tie-Out Press is not affiliated with, endorsed by, or connected to the Internal Revenue Service, the Department of the Treasury, the Department of Labor, or any government agency. No government agency has reviewed or approved this product.
No guarantee is made regarding the accuracy of any output for a particular set of facts, the treatment of any return by any tax authority, or the avoidance of penalties, audits, or assessments.
Statutory and regulatory references are current as of 15 October 2026 and are maintained in the change log.
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Tie-Out Press publishes the Qualified Overtime Kit, which reconciles the qualified overtime figure an employer reports in box 12 of the W-2, under code TT. It is a calculation tool, not tax or legal advice.
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