One Big Beautiful Bill Act (OBBBA) tax reporting
The One Big Beautiful Bill Act (OBBBA) provides temporary federal tax relief on qualified tips and overtime pay for the 2025 through 2028 tax years. To help 7shifts Payroll customers stay compliant, 7shifts and our payroll partner, Check Technologies, implement updates to handle these reporting requirements for qualifying employees who earn $150,000 or less annually.
Things to know
- This article pertains to customers using 7shifts Payroll only.
- Only overtime mandated by the Fair Labor Standards Act (FLSA) for hours worked over 40 in a week qualifies for the deduction.
- Overtime paid due to state or local laws, such as daily overtime in California, is not tax-exempt.
- Qualified tips must be voluntary and earned by employees in one of approximately 70 customary tipped occupations.
- Mandatory charges, such as automatic gratuities for large parties, are not considered qualified tips.
Reporting for the 2026 tax year
Starting with tax year 2026, the IRS updated Form W-2 to add dedicated fields for OBBBA reporting:
- Box 14b: up to two Treasury Tipped Occupation Codes (TTOCs), or 000 for an occupation that doesn't qualify.
- Box 12, Code TP: total tips reported.
- Box 12, Code TT: qualified overtime compensation.
Note: For steps on assigning a TTOC see What is a Treasury Tipped Occupation Code (TTOC) and how do I apply it?. Specific details on qualified occupations are maintained on the IRS tipped occupations list.
How the W-2 fields related to OBBBA are calculated
Here's where the numbers in each box come from, so you know what to check before W-2s publish.
| W-2 field | What it reports | How its calculated |
|---|---|---|
| Box 14b | The employee's tipped occupation(s) | The employee's Primary TTOC and Secondary TTOC setup parameters. If only one TTOC is entered, or both are the same, it appears once. If neither is entered, 000 appears. |
| Box 12, Code TP | Total tips | Year-to-date cash tips plus paycheck tips. This is the total of all tips, whether or not they qualify. Box 14b is what determines whether the tips qualify. |
| Box 12, Code TT | Qualified overtime | Check's default calculation, or a W-2 override if you create one. |