Stay Compliant in 2026: Tracking Overtime and Tips

Beginning in 2026, new OBBBA overtime and tip reporting rules require employers to act now to establish accurate tracking and compliance.

Both qualified overtime and qualified tips must be reported separately on the W-2, using new codes in box 12 and a new box 14b for the tipped occupation code.

Track overtime accurately

• Record employee hours carefully, including overtime worked beyond 40 hours per week.
• Calculate the extra “half-time” above the regular rate correctly.
• Separate overtime pay from bonuses or other discretionary pay.

Track tips carefully

• Record qualified tips such as cash, credit, debit, or gift card tips.
• Exclude service charges, mandatory gratuities, and non-cash items.
• Ensure employees report tips promptly and keep documentation.

Best practices for business owners

• Record qualified tips such as cash, credit, debit, or gift card tips.
• Exclude service charges, mandatory gratuities, and non-cash items.
• Ensure employees report tips promptly and keep documentation.

Partner with experts

Working with a trusted payroll provider simplifies compliance. Abacus Payroll can help set up reporting codes, generate accurate payroll and tax reports, and ensure your business and employees fully benefit from available deductions. The key to a smooth year ahead is clear: track carefully, report accurately, and rely on a trusted advisory team.