How to calculate W-2 box 12 code TT (qualified overtime)
From tax year 2026, employers report qualified overtime compensation on Form W-2 in box 12 with code TT. This is how the amount is worked out, taken from IRS Fact Sheet FS-2026-13 and the Department of Labor's overtime rules. Checked November 11, 2026.
This guide explains a calculation. It is not tax or legal advice; your facts (who is exempt, what counts as hours worked, whether a bonus is discretionary) decide the answer. Want the arithmetic done for you? Use the free code TT worksheet. It runs in your browser and never uploads your payroll data.
The formula
The IRS gives it in FS-2026-13, question 12. For each workweek, for an employee who is owed overtime under the Fair Labor Standards Act (FLSA):
FLSA hours worked over 40 × ½ × the employee's FLSA regular rate = qualified overtime for that week
Add up the weeks paid in the year. That total goes in box 12, code TT, even if it is more than the $12,500 the employee can deduct (FS-2026-13, Q10). It is only the "half" of time-and-a-half. For a simple time-and-a-half employee, it is one third of the overtime line on the paycheck.
Step 1: Use workweeks, not pay periods
A workweek is your fixed, recurring 168-hour period. It can start on any day, but it doesn't move. Each workweek stands alone: hours are never averaged across two weeks (FS-2026-13, Q13). A biweekly or semimonthly paycheck has to be split into its workweeks. A week of 50 hours followed by a week of 30 has 10 overtime hours, not zero.
Step 2: Count only hours actually worked
Holiday, vacation, sick and other paid time off are not hours worked. An employee who works 36 hours and is paid for an 8-hour holiday has no FLSA overtime that week, so code TT is $0, even if your policy paid overtime for the extra hours.
Step 3: Work out the regular rate
The regular rate is the week's pay for employment divided by the hours worked (FS-2026-13, Q15; 29 USC 207(e)).
- Included: hourly pay at every rate, shift differentials, nondiscretionary bonuses and commissions, and the tip credit for tipped employees.
- Left out: overtime premiums for hours over 8 a day, 40 a week or normal hours (at any multiplier, 29 CFR 778.202(c)), weekend and holiday premiums of 1.5 times or more, discretionary bonuses, gifts, expense reimbursements, and pay for time not worked.
Two rates in one week give a weighted average. For example, 30 hours at $20 and 20 hours at $30 is $1,200 for 50 hours, a regular rate of $24. Code TT is 10 × ½ × $24 = $120 (29 CFR 778.115).
A bonus raises the rate. For example, $12 an hour for 46 hours plus a $46 production bonus is $598 for 46 hours, a $13 regular rate. Code TT is 6 × ½ × $13 = $39, not the $36 the base rate alone would give (29 CFR 778.110(b)).
Step 4: Count only what the FLSA requires
Double time, daily overtime under a state law, or union overtime above the federal rule do not add to code TT. Only the half the FLSA requires counts (FS-2026-13, Q16). The IRS example: $20 an hour, 50 hours, paid double time for the last 10. The employer paid $400 for those hours, but only $300 was required. Code TT is $100.
The same applies to daily overtime: in a 38-hour week with two 10-hour days, there are no FLSA overtime hours, so code TT is $0.
Step 5: Spread bonuses back over the weeks they cover
A quarterly or annual nondiscretionary bonus has to be allocated to the workweeks it was earned in (29 CFR 778.209). Each overtime week then owes an extra ½ × (the bonus share ÷ hours worked) × overtime hours. If the bonus can't be tied to particular weeks, any reasonable and equitable method may be used; equal shares per week assume equal earnings each week, and per hour fits when that assumption does not (778.209(b)). The extra overtime this creates is owed to the employee, and code TT reports overtime compensation paid (FS-2026-13, Q10), so it belongs in the year the true-up is actually paid.
Why the payroll register may not match
Many payroll systems work out code TT themselves. Where one doesn't, or only partly does, the register total and the correct figure can differ. Intuit's help page for QuickBooks Desktop Payroll (updated August 25, 2026) says:
- It fills in the qualified amount automatically only when you said yes in its Qualified Overtime Tracking setup.
- When the overtime item's multiplier is not 1.5 (double time, for example), it calculates from the rate on the pay item directly above the overtime item.
- It can't calculate automatically with several qualified-overtime tracking items, or several overtime items at different rates.
Shift differentials on a separate pay item, bonuses, or pay at different rates in the same week change the regular rate. A calculation from the base rate alone then comes out too low.
Not covered by the simple formula
Salaried nonexempt employees, the fluctuating workweek method, rate-in-effect agreements under 207(g)(2), hospital 8-and-80 schedules, police and fire work periods, and public-sector comp time follow their own rules. FS-2026-13 questions 17 and 18 cover some of them. If a W-2 you have already filed is wrong, the IRS says to file Form W-2c and give the employee a copy as soon as possible (Q11).
Sources
- IRS Fact Sheet FS-2026-13, Qualified overtime compensation FAQs (August 6, 2026)
- DOL Fact Sheet #56A, the regular rate under the FLSA
- 29 CFR part 778, overtime compensation
- Intuit: impact of the tax on overtime provision in QuickBooks Payroll