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How to calculate qualified overtime compensation for box 12, code TT

Tie-Out Press · Current as of 19 October 2026.

Qualified overtime compensation for a workweek is the FLSA hours worked over 40, times one-half, times the FLSA regular rate (IRS Fact Sheet 2026-13, Q12). The year's total goes in box 12 of the 2026 Form W-2 under code TT (2026 General Instructions for Forms W-2 and W-3). The statute defines the figure as "overtime compensation paid to an individual required under section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate (as used in such section) at which such individual is employed" (IRC §225(c)(1)). Three defined terms decide every number: the workweek, the hours worked, and the regular rate. The steps below take them in order, each with its source.

1. Confirm the employee is owed FLSA overtime

An employee who is exempt from the FLSA's overtime requirement, or not covered by it, has $0 of qualified overtime regardless of what they are paid or what state law requires (FS-2026-13 Q1, Q4). A person holding 20% or more of the equity who is actively engaged in management is a bona fide exempt executive and has none (Q5). A salary does not settle the question; the exemption does. A salaried nonexempt employee's premium is computed under 29 CFR 778.113 where the salary covers a fixed workweek, and under 778.114 where it covers fluctuating hours. FS-2026-13 does not address the fluctuating-workweek method by name; our rules reference carries it as a documented assumption.

2. Fix the workweek

Each workweek is a fixed, recurring 168-hour period, and each stands alone. There is no averaging across weeks (FS-2026-13 Q13). A pay period is not a workweek. A semi-monthly register holds 24 pay periods against 52 workweeks, so a register's overtime total is rebuilt by workweek before the formula is applied.

3. Count hours worked, not hours paid

"Hours worked" follows the Department of Labor. The fact sheet says the regular rate and the amount due "cannot be determined without knowing the number of hours worked in a particular workweek" and points to DOL Fact Sheet #22 (FS-2026-13 Q14). Holiday, vacation and sick pay are not compensation for hours of employment, and "no part of such payments may be credited toward overtime compensation due" (29 CFR 778.218(a)). A week of 40 hours worked plus a paid holiday has no hours over 40, whatever rate the register printed on the holiday hours.

4. Determine the regular rate

The regular rate is the week's straight-time earnings divided by the hours worked. Where an employee worked at more than one rate, it is the weighted average of them (29 CFR 778.115), unless a rate-in-effect agreement under 29 U.S.C. §207(g)(2) applies (778.419). What goes in:

• Shift and nightshift differentials must be included (29 CFR 778.207(b)). They raise the rate, and so the premium.
• Nondiscretionary bonuses are included. A bonus paid after the weeks it was earned in is apportioned back over those workweeks (778.208, 778.209). Where the actual weekly earning cannot be determined, 778.209(b) names an equal amount per week first and an equal amount per hour second, and the two methods give different premiums.
• For a tipped employee, the regular rate includes the tip credit (29 CFR 531.60). On the federal cash wage and tip credit, $2.13 plus $5.12 is a $7.25 rate. The regulation states the rule and prints no figures, so those are derived.

What stays out: premiums paid for hours beyond eight in a day are excludable from the regular rate (29 U.S.C. §207(e)(5)), and so are payments for periods when no work was performed (29 CFR 778.218(a)).

5. Multiply, then cap at what the FLSA required

Hours worked over 40, times 0.5, times the regular rate (FS-2026-13 Q12). Only the amount minimally necessary to satisfy 29 U.S.C. §207 qualifies; overtime paid beyond that under state law or a collective bargaining agreement does not (Q16). Where daily premiums were paid, they are credited toward the weekly FLSA requirement (§207(h)(2); 29 CFR 778.202), and the qualified figure is the portion of those premiums credited, and only that portion, plus any additional FLSA premium (Q12). For a §207(g)(2) rate-in-effect arrangement, a §207(j) 8 and 80 plan or a §207(k) schedule, the premium actually paid under that provision is used rather than a §207(a) calculation (Q17).

6. Attribute by pay date, and total the year

"Paid" follows wage-withholding timing, so each premium belongs to the year of its pay date, not the year it was worked (FS-2026-13 Q3). Compensatory time produces qualified overtime when it is taken as leave or paid out on termination, not when it is earned (Q18). The year's total is reported in full, even where it exceeds the $12,500 deduction cap (Q10).

One published example, worked (29 CFR 778.110(b))

This example exercises step 4, because the bonus goes into the rate.

The regulation's own figure for the premium is $6.50 an hour on six hours, $39. A calculation run on the $12.00 hourly rate printed on the stub misses the bonus. The fact sheet's double-time example in FS-2026-13 Q16 ($20.00 an hour, 50 hours, $400.00 of double time, $100.00 qualified), a tipped week and a paid-leave week are worked in tables on the half-time premium, worked, together with where the one-third and stub-rate shortcuts break.

Why approximation is not available for 2026

The statute permitted qualified overtime to be approximated "by any reasonable method" only for periods before 1 January 2026 (Pub. L. 119-21 §70202(h)), and Notice 2025-69 set out the 2025 self-computation methods. No approximation authority exists for 2026. For 2026 the figure is what the six steps produce, workweek by workweek.

One employee, one workweek, free

The free spot check works one employee's workweek: the check for one pay stub or one disputed week. What seven payroll vendors' own published pages say about the figure, quoted and dated, is on the payroll-vendor map, which makes no claim about how any product behaves. Which pay items count, case by case, is on what counts as qualified overtime, and what does not.

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.