This article is about Justworks PEO and Payroll. What product am I using?
Overview
Employees may be eligible for a federal tax deduction on the overtime premium portion of their pay. For 2026, Justworks reports that amount on each employee's Form W-2. This article explains what the premium is, how Justworks calculates it, where it appears on the W-2, and how you can review the amounts and request a change.
You can review federal overtime at any time during the year. It's especially important at the end of the year, and the End of Year task list includes a task to review federal overtime hours.
What is the federal overtime premium?
Under the Fair Labor Standards Act (FLSA), non-exempt employees must be paid at least 1.5 times their regular rate for hours worked over 40 in a workweek. The extra 0.5 times is the overtime premium. Under the One Big Beautiful Bill Act, employees may be able to deduct the federal overtime premium when they file their taxes. The deduction applies to the premium only, not the full overtime wage.
Justworks reports the total FLSA-eligible overtime premium, whether or not it reaches any deduction limit.
How is the premium calculated?
For example, an employee has a regular rate of $30 per hour and works 50 hours in a workweek.
- The overtime rate is 1.5 × $30 = $45 per hour.
- The overtime premium is the extra 0.5 × $30 = $15 per overtime hour.
- The employee worked 10 overtime hours, so $15 × 10 = $150 is the premium for that week.
Overtime pay doesn't change. This only affects how a portion of overtime may be treated for tax purposes, not how overtime is calculated or paid.
How does Justworks calculate FLSA-eligible overtime?
Justworks uses a consistent, federally aligned method. For time tracked in Justworks, any hours worked over 40 in a workweek are treated as federal overtime. The following are not included:
- State overtime rules, such as daily overtime
- Company-specific premium pay policies
- Paid time off hours
- Off-cycle salary payments
Overtime that Justworks calculates on non-discretionary bonuses and commissions is included. See Incentive Pay FAQ.
How is the premium amount determined?
Justworks calculates the premium separately from the overtime calculation on Timecards: federal overtime hours × 0.5 × the employee's weighted-average base hourly rate. If an employee has more than one hourly rate, the weighted average is used.
Which workweek does the report use?
The report doesn't use a fixed Sunday–Saturday week. The workweek depends on your product.
- Justworks PEO: weeks are based on the work week configured as part of your company’s pay schedule.
- Justworks Payroll: weeks are anchored to the start of each paycheck's pay period.
Justworks Payroll: previous provider data
If your company joined Justworks during the year and provided year-to-date payroll data from a previous provider, Justworks doesn't receive workweek-level detail for that period. All overtime reported from the previous provider is treated as federal overtime.
Where does the overtime premium appear on the W-2?
For 2026, the FLSA overtime premium is printed on each employee's Form W-2 in Box 12, code TT. The amount reflects only the federal overtime premium (the 0.5× portion), not the full overtime wage. See How to read your W-2.
How do I review federal overtime hours?
Review employees' overtime hours regularly to confirm they're logged correctly, especially before the end of the year.
- Go to Analytics > Reports.
- Select FLSA Overtime.
- Review the amounts for each non-exempt employee, by workweek.
The report includes data through your most recent pay period, so you can return at any time to see the latest. If the amounts are correct, no further action is needed.
How do I request a change?
- On the FLSA Overtime report, download the CSV.
- Make your changes directly in the CSV.
- Email the corrected CSV to Customer Support.
The deadline to request corrections in a given tax year is your final off-cycle payroll processing date. After that deadline, any corrections will require a Form W-2c.
FAQs
Is overtime on bonuses and commissions included?
Yes, for overtime that Justworks calculates on non-discretionary bonuses and commissions. It does not appear in the report but it will be included in the Box 12 code TT amount on the employee's Form W-2. Overtime you schedule manually under Other supplemental pay isn't included automatically.
Why doesn't state overtime count?
State-specific rules, such as daily overtime in California, aren't part of the federal FLSA overtime definition, so they aren't eligible for the federal deduction. Justworks still pays state overtime as required.
Is the amount on the W-2 the full overtime the employee earned?
No. It's only the federal overtime premium, the extra 0.5× portion.
Does this change how employees are paid?
No. It only affects how a portion of overtime may be treated for tax purposes.
Can Justworks tell employees how much they can deduct?
No. Justworks can't provide tax advice. Employees should consult a tax advisor about how to claim the deduction.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.