Put the 2026 payroll register next to the qualified overtime figure your system is building for Box 12 Code TT, and the two overtime totals will not tie. That is true for every employer with Fair Labor Standards Act (FLSA) overtime. The Code TT payroll register gap has seven known causes, each written in a Department of Labor (DOL) rule older than the deduction.
The basics are in our August guide to Box 12 Code TT reporting. Only the FLSA-required premium half counts, the employer reports the full amount paid, and an employee can deduct nothing beyond what the box shows. This article is the next step. It explains why the register's overtime number is not that number, and how to rebuild it by workweek before the 2026 forms are due on February 1, 2027.
A payroll register totals every overtime dollar paid. Box 12 Code TT holds only the FLSA-required premium above the regular rate, figured one 168-hour workweek at a time. Hours paid but not worked, nondiscretionary bonuses, commissions, shift differentials, two pay rates in one week, tip credits and salary methods all move that regular rate. So the register and Code TT diverge unless someone rebuilds the figure workweek by workweek and writes down each method choice.
Why does the Code TT figure not match the payroll register?
The register's overtime line adds up every overtime dollar paid: straight time, the premium, and premiums no federal law required. Code TT, under Internal Revenue Code section 225, holds only the FLSA-required premium above the regular rate, figured for each 168-hour workweek. Unworked paid hours, bonuses, mixed rates, tip credits and salary methods move that rate, so the totals part ways.
The arithmetic itself is short. IRS Fact Sheet FS-2026-13, issued in August 2026, says qualified overtime for a workweek equals the FLSA hours over 40, times one-half, times the FLSA regular rate. An employee paid $20 an hour who works 50 hours shows $300 of overtime on the register and $100 in Code TT. The register is not wrong. It is answering a different question.
Every cause below changes one of three inputs: the hours that count, the regular rate, or which week the dollars belong to. Get those three right for each workweek and the Code TT figure follows.
Code TT payroll register reconciliation: the seven gaps
CPA Practice Advisor walked through this reconciliation on October 13, 2026, and its list maps onto DOL rules that have existed for decades. The rules are old. What is new is that a tax form now depends on them.
Hours paid but not worked
Regulation 29 CFR 778.218 says vacation, holiday and sick pay are not compensation for hours of employment and do not count toward overtime. A week with 32 hours worked and 8 hours of holiday pay has no FLSA overtime, even if the register paid a premium.
Nondiscretionary bonuses raise the regular rate
DOL Fact Sheet #56A puts all remuneration for employment into the regular rate. Under 29 CFR 778.211 and Fact Sheet #56C, attendance, production, quality and retention bonuses are nondiscretionary and must be included. A register that figures the premium on base pay alone reports too little.
Commissions and shift differentials count too
Regulation 29 CFR 778.117 says commissions are payments for hours worked and go into the regular rate, even alongside a salary or hourly rate. Fact Sheet #56C's Example B adds an evening shift differential into the rate before the premium is figured.
Quarterly and annual bonuses reach back
Under 29 CFR 778.209, a bonus earned over several weeks is apportioned back over those workweeks, with extra overtime pay owed on each week's bonus share. An equal split by week or by hour is allowed when the exact weeks cannot be traced.
Workweeks do not line up with pay periods
The DOL defines the workweek as a fixed, regularly recurring 168 hours. Under 29 CFR 778.104 each workweek stands alone, with no averaging over two or more weeks. A semimonthly register can show no overtime in a period that contains a 50-hour workweek.
Two pay rates, tipped staff and the regular rate
With two jobs at different rates in one workweek, 29 CFR 778.115 sets the regular rate at the weighted average of both. For tipped employees, DOL Fact Sheet #15 says overtime is figured on the full minimum wage, not the $2.13 cash wage.
Salaried nonexempt staff
A fixed salary for a set number of hours produces one regular rate under 29 CFR 778.113. The fluctuating workweek method in 29 CFR 778.114 produces a different rate every week and a premium of one-half that rate. Both are lawful, and they give different Code TT figures.
The tipped-employee gap needs a Florida note. Florida's minimum wage sits above the federal $7.25 on the DOL's state tipped-wage table. Under 29 CFR 778.5, a tipped employee's regular rate cannot fall below that state minimum. Our Florida minimum wage checklist has the current state rates and the tipped cash wage.
Overtime the FLSA did not require is the eighth gap, and it comes up most. The IRS fact sheet names premiums paid after 8 hours in a day, after 35 hours in a week, or for weekend work. Only the part the federal law required goes in Code TT; the rest is wages. The August guide lists those premiums line by line, so this article does not repeat them.
| Gap | What the register usually does | What the rebuild does | Rule |
|---|---|---|---|
| Hours paid, not worked | Counts holiday or sick hours toward 40 | Counts hours worked only | 29 CFR 778.218 |
| Bonuses and commissions | Premium on base rate | Premium on base plus bonus and commission share | 29 CFR 778.211, 778.117 |
| Bonus paid for a quarter or year | Premium on the week it was paid, or none | Extra premium spread over the weeks earned | 29 CFR 778.209 |
| Semimonthly pay period | Overtime per pay period | Overtime per 168-hour workweek | 29 CFR 778.104; DOL overtime page |
| Two rates in one week | Rate of the job with the extra hours | Weighted average of both rates | 29 CFR 778.115 |
| Tipped employees | Premium on the cash wage | Premium on the full minimum wage | DOL Fact Sheet #15 |
| Salaried nonexempt | One method for everyone | Fixed-hours or fluctuating method, per the agreement | 29 CFR 778.113, 778.114 |
Which year an overtime dollar belongs to
Code TT follows the date the wages were paid, not the week the hours were worked. The IRS fact sheet says the same principles that decide when a payment is wages for income tax withholding decide when qualified overtime compensation is paid. A workweek that ends on December 30 and is paid on January 8, 2027 belongs to the 2027 W-2.
That matters for the bonus gap above. When a 2026 annual bonus paid in 2027 raises the regular rate for 2026 workweeks, the extra premium is paid in 2027. The reconciliation for 2026 should not reach for it.
State and local government employers that give compensatory time off have their own rule. The fact sheet says qualified overtime compensation is paid when the banked time is used or cashed out. The amount is the hours paid, times the applicable rate, divided by three. That rule does not reach private employers.
The 2025 relief is gone, and the due date is February 1, 2027
For 2025 wages, IRS Notice 2025-62 waived the information reporting penalties for employers that did not separately report qualified overtime. It encouraged employers to share the figure in Box 14 or a separate statement. That was a one-year bridge.
For tax years after 2025, the fact sheet says an employee may not count any qualified overtime beyond what Code TT shows. So an employee whose 2026 W-2 shows nothing in Code TT has nothing to deduct, and an understated box is a smaller deduction. The only repair is a Form W-2c from the employer, and an incorrect W-2 can draw penalties under sections 6721 and 6722. The August guide covers the W-2c mechanics and the substitute-form rule.
The 2026 General Instructions for Forms W-2 and W-3 set February 1, 2027 for both deadlines. Copy A goes to the Social Security Administration, and Copies B, C and 2 go to employees by that date. A reconciliation that starts in January leaves no room for a second pass.
A Code TT payroll register rebuild to run before January
Most payroll systems will produce a Code TT figure. The question is whether anyone has checked how the system got there. The check below works backward from hours to premium, the order the DOL rules use.
- Confirm each employee's FLSA status, because exempt employees and bona fide 20 percent owners have no qualified overtime no matter what the register shows
- Rebuild hours by the FLSA workweek your business has set, not by pay period, and count only hours actually worked
- Separate FLSA-required overtime from daily overtime, double time, holiday premiums and contract premiums the federal law did not require
- Recompute each week's regular rate with nondiscretionary bonuses (29 CFR 778.211), commissions (29 CFR 778.117) and shift differentials (Fact Sheet #56C) included
- Allocate quarterly and annual bonuses back to the workweeks they covered and add the extra premium those weeks were owed
- Multiply overtime hours by one-half of the regular rate for each week and total the year, the formula in IRS FS-2026-13 Q12
- Compare that total to the system's Code TT figure and to the register, and write down every method choice, including bonus allocation and rounding
- Confirm the 2026 W-4 on file for any employee who asked to reduce withholding for the deduction
The written record of each method choice is the part most teams skip. CPA Practice Advisor's point is that the record is what you show the IRS if a figure is questioned later. It costs little now and a great deal in March.
Where SMAART fits
SMAART Company runs payroll for Florida businesses and handles the year-end W-2 and W-3 filing that goes with it. Our HR compliance work covers FLSA classification and workweek setup, which is where most Code TT gaps start. If your system's Code TT figure has never been rebuilt by hand for one employee, that is the first test to run.
Questions about reconciling Code TT to the payroll register
The register totals every overtime dollar: straight time, the premium and any premium no federal law required. Code TT holds only the FLSA-required premium above the regular rate, workweek by workweek. Hours paid but not worked, bonuses, commissions, two rates in one week, tip credits and salary methods each move that rate, so the totals differ.
Yes. Under 29 CFR 778.211 and DOL Fact Sheet #56C, nondiscretionary bonuses such as attendance, production and quality bonuses go into the regular rate. Regulation 29 CFR 778.117 says commissions do too. A bonus earned over a quarter or a year is apportioned back over those workweeks under 29 CFR 778.209, which raises the premium owed. The Code TT figure rises with it.
Not unless the FLSA also required it. IRS Fact Sheet FS-2026-13 names overtime paid after 8 hours in a day, after 35 in a week, or for weekend work. Those payments are sorted under the FLSA's rules, and only the part the federal law required qualifies. Employees who are exempt from the FLSA have no qualified overtime at all.
The 2027 W-2. IRS Fact Sheet FS-2026-13 says qualified overtime compensation is paid when the wages are treated as paid for income tax withholding. So a December workweek paid in January counts in the new year. The same rule applies to the extra premium owed when a bonus paid in 2027 raises the regular rate for 2026 workweeks.
The IRS General Instructions for Forms W-2 and W-3 set February 1, 2027 for Copy A to the Social Security Administration and for employee copies. Notice 2025-62 waived separate-reporting penalties for 2025 wages only. For 2026, the fact sheet says an employee may deduct nothing beyond what Code TT shows, so the figure has to be right on the form.
This article explains what the Internal Revenue Code, the IRS and the Department of Labor have published about reconciling Box 12 Code TT to a payroll register. It is not tax or legal advice, and your facts may differ. Confirm your own payroll figures with your CPA or payroll provider before the W-2s are filed.
Sources
- Internal Revenue Service, FS-2026-13, "Updates to questions and answers about the new deduction for qualified overtime compensation," August 2026. https://www.irs.gov/pub/taxpros/fs-2026-13.pdf
- Internal Revenue Service, General Instructions for Forms W-2 and W-3 (2026). https://www.irs.gov/instructions/iw2w3
- 26 U.S.C. 225, Qualified overtime compensation, added by Public Law 119-21, section 70202, July 4, 2025. https://www.law.cornell.edu/uscode/text/26/225
- Internal Revenue Service, Notice 2025-62, "Relief from Certain Penalties Related to Information Reporting Required in Connection with No Tax on Tips and Overtime," November 5, 2025. https://www.irs.gov/pub/irs-drop/n-25-62.pdf
- U.S. Department of Labor, Wage and Hour Division, Overtime Pay. https://www.dol.gov/agencies/whd/overtime
- U.S. Department of Labor, Fact Sheet #56A, Overview of the Regular Rate of Pay Under the Fair Labor Standards Act. https://www.dol.gov/agencies/whd/fact-sheets/56a-regular-rate
- U.S. Department of Labor, Fact Sheet #56C, Bonuses under the Fair Labor Standards Act. https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses
- U.S. Department of Labor, Fact Sheet #15, Tipped Employees Under the Fair Labor Standards Act. https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa
- U.S. Department of Labor, Minimum Wages for Tipped Employees, state table. https://www.dol.gov/agencies/whd/state/minimum-wage/tipped
- 29 CFR 778.104, Each workweek stands alone. https://www.law.cornell.edu/cfr/text/29/778.104
- 29 CFR 778.113, Salaried employees, general principle. https://www.law.cornell.edu/cfr/text/29/778.113
- 29 CFR 778.114, Fluctuating workweek method of computing overtime. https://www.law.cornell.edu/cfr/text/29/778.114
- 29 CFR 778.115, Employees working at two or more rates. https://www.law.cornell.edu/cfr/text/29/778.115
- 29 CFR 778.117, Commission payments, general. https://www.law.cornell.edu/cfr/text/29/778.117
- 29 CFR 778.209, Method of inclusion of bonus in regular rate. https://www.law.cornell.edu/cfr/text/29/778.209
- 29 CFR 778.211, Discretionary bonuses. https://www.law.cornell.edu/cfr/text/29/778.211
- 29 CFR 778.218, Pay for certain idle hours. https://www.law.cornell.edu/cfr/text/29/778.218
- 29 CFR 778.5, Relation to other laws generally. https://www.law.cornell.edu/cfr/text/29/778.5
- CPA Practice Advisor, Aeon Aurora, "When Box 12 Code TT Will Not Tie to the Payroll Register," October 13, 2026. https://www.cpapracticeadvisor.com/2026/10/13/when-box-12-code-tt-will-not-tie-to-the-payroll-register/191510/
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