Overtime and Tips on 2025 W2s

We have received many calls regarding reporting Overtime and Tips on 2025 and 2026 W2s. 

2025 Exempt Overtime Reporting 

For 2025, the IRS instructs employers to report the premium portion of FLSA overtime in Box 14 as “Exempt OT.” Only the overtime premium is reported—not the full overtime earnings.

We will review all “Pay” type items with pay factors of 1.5 and 2.0 and automatically calculate the correct premium amounts for Box 14.

• For overtime paid at 1.5×, we will report 1/3 of the total amount (this represents the extra 0.5× premium).

• For overtime paid at 2.0×, we will report 1/4 of the total amount (the extra 0.5× portion of double time).

You will not have to do anything to calculate these amounts or make the print (other than make sure your Pay Factors are set up correctly.

Note:
If a client pays overtime for reasons other than exceeding 40 hours in a workweek (for example, overtime after 8 hours in a day), the premium amount may not always qualify as exempt. We are developing enhancements that will allow you to distinguish exempt from non-exempt overtime. More detailed instructions will be provided in the next update.

2025 Exempt Tip Reporting 

For 2025, the IRS instructs employers to report qualified tips in Box 14 as “Exempt Tips.” 

We will review all “Other Income” type items with Box 7 - Reported Tips in the W2 Tracking field and automatically report these amounts in Box 14 with a label Exempt Tips

Note: If you have set Tips up as a 'Pay' type item, go to Utilities>Payroll>Convert Tip Pay Items to Other Income to convert it to an 'Other Income' type item.