Determining OBBBA reportable overtime premium pay

The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, provides temporary federal income tax deductions for qualified tips and overtime pay.

A key provision is No Tax on Overtime, which allows deductions of up to $12,500 per year, or $25,000 for joint filers, for eligible overtime compensation. This provision applies specifically to the 0.5x premium portion of overtime wages as defined by the Fair Labor Standards Act (FLSA).

For tax year 2025, no changes are required to the W-2 layout. However, we recommend reporting these amounts in Box 14.

Employee year-end parameters

This information is displayed in the employee year-end parameter records.

  • OBBBA Overtime Premium Amount: This field is used to store the computed total overtime premium amount by the Determine OBBBA Reportable Premium action.
  • Description: This field is used to store the result of the Determine OBBBA Reportable Premium action if there is a computed OBBBA Overtime Premium Amount for the employee.
Note: You can manually specify the OBBBA Overtime Premium Amount and Description in the Employee Configurable Fields. However, these values are overwritten each time the Determine OBBBA Reportable Premium action is run.

The Generate W-2 File action references the OBBBA Overtime Premium Amount and Description during processing. These values are displayed in the Box 14 Amount and Description fields in the generated W-2 CSV file.

Report options

Before you run W-2 reporting, you must run the Determine OBBBA Reportable Premium action to determine employee’s total overtime premium amount for the payroll year. This amount is reportable on the W-2 in Box 14. Employees can use this information when filing personal taxes to claim the allowed deduction.

This action automatically updates the Employee Year End Parameters record and can run multiple times. If no Employee Configurable Fields record exists for the employee, a record is created.

You must select from these report options:

  • Employee Timerecord Premium Amount: Select this option if the employee’s historical time records’ payment schedule setup is FLSA compliant to accumulate all the employee’s historical time records tied to the Overtime Pay Class in Time Entry Organizations’ setup with overtime premium amount for the payroll year.
  • Determine OBBBA OT Reportable Premium: Select this option to redetermine employee’s eligible wages and hours to determine the total overtime premium amount for the payroll year, based on the OBBBA payment schedule’s overtime options and work periods.

Payment schedules

The OBBBA Payment Schedules list contains records that map original payment schedules to their corresponding FLSA payment schedules. This mapping is essential to redetermine the eligible overtime premium amounts for employees, based on the requirements of the OBBBA.

At least one record must be defined in the OBBBA Payment Schedules list for the Determine OBBBA Reportable Premium action to proceed when the Determine OBBBA OT Reportable Premium report option is selected. If no records exist, the process logs an error and stops.

If employee historical time records exist without the corresponding payment schedule mapping in the OBBBA Payment Schedules list, then the system uses the original payment schedule from the time record. If the Overtime Premium Rate is blank in the original payment schedule, the system uses the Overtime Premium Rate of 50%.

See Defining OBBBA payment schedules.