Federal law regarding tips and overtime

Federal legislation enacted July 4, 2025, provides deductions for certain qualified overtime compensation and tips.

For regulatory details, see irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors.

Track qualified overtime

Sage BusinessWorks still calculates applicable payroll taxes on overtime pay. Consult your tax advisor or the IRS website for tax requirements.

Enter qualified overtime

1. Select PR, Processing, Time Card Entry.
2. Enter qualified overtime hours using Shift = 6.
   
3. Enter the appropriate overtime rate.
4. Process payroll normally.

Sage BusinessWorks tracks the qualified overtime premium separately when you use Shift 6.

Display qualified overtime on paycheck stubs

1. Install a currently supported Sage BusinessWorks version.
2. Enter qualified overtime using Shift = 6.
3. Review Adding qualified overtime premium fields to a check form for instructions.

Check stubs display the qualified 0.5 overtime premium separately for applicable overtime rates.

Review state-specific overtime requirements

State overtime rules can differ from Federal requirements. For example, California employee must review each paycheck to determine which overtime hours meet Federal qualification requirements.

Enter federally qualified overtime hours using Shift = 6.

Review overtime totals

Use the Employee Personal Pay Report

Sage BusinessWorks 2025 SP3 and newer includes the Employee Personal Pay Report.

1. Select PR, Reports, Employee Reports, Employee Lists.
2. Click....
3. Select the Employee Personal Pay Report.
4. Select the desired date range.
5. Click Print or Preview.

Use the Employee Hours List

Run the Employee Hours List customized to show one employee per page.

See report for overtime totals with a page for each employee for instructions.

Use year-to-date overtime totals to help follow No Tax on Overtime and Tips reporting requirements.

Report qualified overtime on W-2 forms

• Entering qualified overtime using Shift = 6 allows Sage BusinessWorks to provide the applicable amounts for W-2 reporting.
• If you didn't use Shift 6, see adding an additional box for W-2s.
• Consult your tax advisor for specific reporting requirements.

Track qualified tips

Sage BusinessWorks still calculates applicable payroll taxes on tips.

1. Continue entering tips on employee timecards.
2. Review your tip entries for accurate year-end reporting.
3. Consult your tax advisor or the IRS website for reporting requirements.
4. See Track qualified and non-qualified tips when employees receive both types.

Enter Treasury Tipped Occupation Codes

The currently supported Sage BusinessWorks version includes the Treasury Tipped Occupation Code field.

1. Select PR, Employees, Maintain Employees, Status.
   
2. Enter the applicable TTOC code.
3. Review IRS guidance for listing occupations that receive tips for valid codes.

Handle 1099 reporting

Sage BusinessWorks tracks vendor payments for 1099 reporting but doesn't separately track qualified overtime or tips for vendors.

Track the applicable amounts separately and enter the required values during year-end 1099 processing.