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For 2025, the IRS granted relief to employers for not reporting amounts to workers, and provided individuals some guidance on how to claim amounts on their individual tax filings—which did not necessarily follow the FLSA criteria. Some have already suggested that IRS grant some relief to employers for 2026 as well due to continued uncertainty. Reporting tip amounts is more straightforward, but questions remain about the Treasury Tipped Occupation Codes that are needed on Form W-2, Box 14b. There remains uncertainty when tip amounts for work in multiple tipped positions need to be split by occupation code, and also for reporting amounts received in a role that is not a designated Treasury Tipped Occupation. Guidance from the IRS came late for last year’s filing season, fueling speculation about what employers needed to do to comply right up until November. Payroll professionals are hoping more clarity for 2026 comes sooner.
Payroll professionals are seeking better guidance for ensuring that the criteria for determining qualified overtime pay are reported correctly on affected employee Forms W-2, Employee Wage and Tax Statement (and other forms). While the 2026 Form W-2 has been adjusted to include information on the overtime amounts (Box 12, Code TT), more clarity on how to calculate the amount employers must provide is desired. The law refers to qualified overtime pay as pay that is required under the Fair Labor Standards Act (FLSA), but many employer policies label amounts as overtime that go beyond the base FLSA overtime requirement, sometimes including hours not worked (holiday or sick pay time) in figuring the overtime. In addition, the law only allows the deduction on the additional one-half time of the total time-and-a-half amount that normally is reported as overtime on employee payslips.
Some have already suggested that IRS grant some relief to employers for 2026 as well due to continued uncertainty.
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GLOBAL PAYROLL MAGAZINE ISSUE 26
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