As we approach the end of the year, it’s important to prepare for the new overtime reporting rules now applying to all employers. For 2025, employers must report any “qualified overtime” amounts paid to nonexempt
employees so they can claim the new deduction on their personal tax returns. This information can be provided in Box 14 of the W-2 or in a simple written statement. Employees will need this information to file their returns, so be sure it’s provided no later than January 31, 2026.
You may have heard rumors that employers don’t need to report this yet—but that’s incorrect. The IRS has stated only that they won’t enforce penalties for failing to report it; or for making reporting errors – However employees will still expect and rely on this information!
For a list of exempt employees not eligible for qualified overtime deduction see https://www.dol.gov/agencies/whd/fact-sheets/17a-overtime.
💡 What Counts as “Qualified Overtime”?
“Qualified overtime” is the **additional overtime premium** paid for hours worked over 40 in a week. For example:
If Mary is paid $30/hour normally and $45/hour for overtime (time-and-a-half), only the extra $15 is considered qualified overtime.
🧮 Example
Mary works 50 hours in a week:
* 40 hours @ $30/hr = $1,200
* 10 hours @ $30/hr (straight time) = $300
* 10 hours @ $15/hr overtime premium = $150
**Total Pay: $1,650
**Qualified overtime to report: $150**
This $150 must be reported to Mary via W-2 Box 14 or a separate employer statement.
🕔 Don’t Wait — Start Calculating Now!
Employees will be looking for this information right after year-end. If you use a payroll provider and want this included on W-2s, you’ll need to supply the amounts by employee with your year-end payroll. Otherwise, plan to prepare separate written statements. 📬
We are always here to help—please reach out with any questions!
Warm regards,
Insight Accounting Group