In an effort to help our clients comply with new legislation regarding overtime in 2025, we want to make you aware of an informational item that will appear on 2025 Forms W-2.
For employees who earned overtime in 2025, Box 14 of the W-2 will include an estimated amount representing the premium portion of overtime earnings.
This amount reflects only the portion of overtime pay that may be eligible for the federal tax credit authorized under the OBBBA (generally, the “half” portion of “time-and-a-half” compensation).
A few important points to note:
- This is not the employee’s total overtime pay.
- It represents only the estimated overtime premium portion, calculated for tax-credit purposes.
- The amount is informational only and does not change taxable wages reported in Boxes 1, 3, or 5, nor does it affect withholding.
- You may notice a payroll dated 12/31/2025 that includes a memo code M200 – “2025 FLSA Est OT”. This memo entry is used solely to facilitate the Box 14 reporting and does not represent additional wages or impact payroll totals.
2025 is a transition year under IRS guidance, and employers are permitted to provide this information using Box 14 or a supplemental statement. Beginning with the 2026 filing season, the IRS expects more formalized reporting on the W-2.
For additional detail, a supplemental statement titled “OBBBA 2025 Estimated EE FLSA OT Detail” has been posted to the Published Reports section within your admin portal. This report was made available as of your last scheduled payroll of the year and provides a breakdown supporting the Box 14 amount.
No action is required on your part. If employees have questions, they can be advised that this information is provided to assist them and their tax preparer when determining eligibility for the OBBBA tax credit.
You can find more information on the overtime tax deduction and its application at this link.
Please feel free to reach out if you have any questions or would like to discuss this further.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.
