Not tax advice. An employer-side guide to filling in Form W-2 box 12, code TT for tax year 2026, based on IRS fact sheet FS-2026-13 and the 2026 W-2 instructions. For how techs claim the deduction, see no tax on overtime for trade technicians.
Quick answer
Code TT is the FLSA overtime premium you paid each non-exempt employee in 2026: the “half” in time-and-a-half, on hours over 40 in a workweek, at the FLSA regular rate. It’s new and mandatory for 2026 W-2s. The 2025 penalty relief doesn’t carry over.
- Box 1 doesn’t change. All overtime pay stays in boxes 1, 3, and 5. Code TT is informational.
- Report the full premium, even if it’s over the employee’s $12,500 deduction cap.
- State-only overtime doesn’t count, including California daily overtime when the week stays at 40 hours or less.
- Bonuses, spiffs, and flat-rate pay change the regular rate, and therefore the number.
- Due February 1, 2027 to employees and the SSA.
On this page
For 2025, employers could skip separate overtime reporting under transition relief. For 2026 W-2s, going out in January 2027, it’s required. Your techs will use the number in code TT to claim the overtime deduction, and the IRS says a tech can only claim what’s on the W-2 unless you issue a correction. Get it wrong low and your techs lose money; get it wrong high and they claim a deduction they can’t defend.
Where overtime goes on the W-2
| W-2 box | What goes there |
|---|---|
| Box 1 (wages) | All overtime pay, straight-time and premium, with other taxable wages. Unchanged. |
| Boxes 3 and 5 (Social Security and Medicare wages) | All overtime pay. The deduction doesn’t reduce FICA. |
| Box 12, code TT | Total qualified overtime compensation: the FLSA-required premium only. |
| Box 12, code TP | Cash tips reported to the employer (new; mostly not relevant to trade shops) |
| Box 14b | Treasury Tipped Occupation Code (for tipped workers) |
Sources: IRS FS-2026-13; 2026 General Instructions for Forms W-2 and W-3; Fingercheck.
The formula
Per the IRS fact sheet, for a typical employee:
Code TT = hours over 40 in the workweek × 0.5 × FLSA regular rate, summed over every workweek in 2026.
The regular rate isn’t always the hourly rate. It’s total pay for the week, including non-discretionary bonuses, spiffs, commissions, and shift differentials, divided by total hours worked. Excluded items like discretionary bonuses, holiday gifts, and expense reimbursements stay out.
Worked examples for trade techs
| Tech | The week | Regular rate | Code TT for the week |
|---|---|---|---|
| Hourly | $30/hour, 48 hours | $30.00 | 8 × 0.5 × $30 = $120 |
| Hourly + spiffs | $30/hour, 48 hours, $96 in spiffs | ($1,440 + $96) ÷ 48 = $32.00 | 8 × 0.5 × $32 = $128 |
| Flat rate | $1,500 flat-rate earnings, 50 hours | $1,500 ÷ 50 = $30.00 | 10 × 0.5 × $30 = $150 |
| California, 4 × 10 | Four 10-hour days, 40 hours | — | $0: state daily overtime only |
| Salaried service manager | Exempt, 55 hours | — | $0: no FLSA overtime |
In the first example, the tech’s overtime pay is $360 (8 hours × $45). All $360 goes in box 1. Only $120 goes in code TT.
Late bonuses: if a quarterly production bonus raises the regular rate for weeks with overtime, the extra half-time you owe is FLSA-required overtime premium. Confirm with your payroll provider how it’s being added to code TT. See year-end bonuses and the overtime trap.
What stays out of code TT
The IRS fact sheet is clear: only overtime required by Section 7 of the FLSA counts. Overtime paid under state law, a union contract, or company policy counts only to the extent it’s the minimum needed to satisfy the FLSA.
- State daily overtime: California, Alaska, Nevada, and Colorado have daily overtime rules. Hours over 8 in a day count only if the tech is also over 40 for the week, and then only the FLSA half-time portion.
- Double time: only the FLSA half-time portion qualifies. The extra half above time-and-a-half doesn’t.
- Company-policy premiums: “time and a half on Saturdays” or “double time on Christmas” isn’t FLSA overtime unless the tech is over 40 for the week. Only the FLSA-required amount counts.
- Exempt employees: salaried managers who meet an FLSA exemption have no qualified overtime, even if you pay them overtime anyway.
- Owners: a bona fide owner with at least a 20% equity interest who actively manages the business is generally not overtime-eligible under the FLSA.
- The straight-time part of any overtime hour.
Payroll setup mistakes
- Reporting the full overtime check. Code TT is the premium, roughly a third of total overtime pay at time-and-a-half.
- Using the base hourly rate when spiffs, commissions, or bonuses should have raised the regular rate.
- Mapping state or policy overtime into the same earnings code as FLSA overtime. If you pay California daily overtime or holiday premiums, they need separate codes, or your provider can’t separate them in January.
- Capping at $12,500. Don’t. The IRS says to report the full amount; the employee applies the cap on their return.
- Running it at W-2 time. Code TT depends on workweek-level data captured all year. If your payroll provider didn’t track it, you’ll be rebuilding it from timecards.
Wrong number? W-2c
The IRS fact sheet spells out what happens:
- Too high: if you paid $5,000 of qualified overtime but reported $10,000, the employee can only deduct $5,000. They’re exposed if they claim the W-2 figure.
- Too low and corrected: if you paid $10,000 but reported $5,000, the employee can deduct $10,000 once you furnish a Form W-2c.
- Too low and not corrected: the employee can only deduct the $5,000 on the W-2.
So an under-reported code TT costs your tech real money unless you fix it. Expect questions in February and plan to issue W-2c forms quickly.
Deadlines and penalties
| Item | Tax year 2026 |
|---|---|
| W-2 to employees | February 1, 2027 |
| W-2 and W-3 to SSA | February 1, 2027 |
| E-filing required | 10 or more information returns in total |
| 2025 penalty relief for code TT | Doesn’t apply to 2026 |
Standard information-return penalties apply to late or incorrect W-2s, per form. For returns due in 2027, those are $60 if corrected within 30 days, $130 by August 1, $340 after August 1, and $680 for intentional disregard. The penalty for filing with the SSA and the penalty for furnishing the employee copy are separate.
January checklist
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