W-2 Tips & Overtime Kit › Guides
Starting with tax year 2026, Form W-2 has two new Box 12 codes for employers that pay tips or overtime: TP and TT. Here is what the IRS 2026 General Instructions for Forms W-2 and W-3 say about each.
The IRS instructions explain that P.L. 119-21 allows individuals a deduction for qualified tips and, for tax years beginning after 2024 and ending before 2029, a deduction of up to $12,500 ($25,000 if married filing jointly) for qualified overtime compensation. Employers report the amounts on the W-2 so workers can figure those deductions. (IRS iw2w3, What's New)
Per the IRS: "Report the total amount of cash tips reported to the employer." Tips are still generally subject to federal income tax withholding and both shares of social security and Medicare tax if the tips received are $20 or more per month. When you report TP, you must also list an occupation code in Box 14b.
Mandatory service charges are not qualified tips per the IRS instructions, so they generally stay out of TP. Your facts may differ (for example, if a "charge" is really voluntary).
Per the IRS, qualified overtime is compensation paid to an individual required under section 7 of the Fair Labor Standards Act (FLSA) that is more than the regular rate at which the individual is employed. The IRS example: "only the 'half' portion of 'time-and-a-half' compensation would be reported using code TT." So for an hourly worker, a working estimate is FLSA overtime hours × regular rate × 0.5. Overtime is still generally subject to federal income tax withholding and social security and Medicare tax. See also the DOL overtime page.
Overtime paid only because of a state rule or a company policy, rather than FLSA section 7, is not described by that definition; check with your advisor.
The due date for filing 2026 Forms W-2 and W-3 with the SSA is February 1, 2027, whether you file on paper or electronically (IRS iw2w3). Reconciling TP and TT from your payroll register in December leaves time to fix gaps before forms go out, instead of filing W-2c corrections later.
Doing this for real payroll? The 2026 W-2 Tips & Overtime Kit includes a year-end checklist, a payroll-to-TP/TT workbook and a guide to all 71 IRS tipped-occupation codes, for one business ($149) or up to 25 client businesses ($399). See the kit
Related: W-2 Box 14b Treasury Tipped Occupation Codes
Educational, not tax advice. This page summarizes the IRS 2026 General Instructions for Forms W-2 and W-3 as read on October 30, 2026. It is not tax, legal or payroll advice; confirm with your CPA, enrolled agent or payroll provider and check current IRS instructions before you file. Swift Labs LLC is not affiliated with the IRS.
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