How to process No Tax on Qualified Overtime Compensation Tax Year 2025

No Federal withholding tax on Qualified portion of Overtime Compensation - OBBBA

Effective Tax years 2025 through 2028.

 NOTE: MUST install Payroll Update 2.26.0 

Compatible with versions:

• • Sage 100 2025 (7.40)
  • Sage 100 2024 (7.30)
  • Sage 100 2023(7.20)
  • Sage 100 2022 (7.10)

One Big Beautiful Bill Act 2025

For Tax Year 2025 - Requirements (Tax Year 2026 article in process)

 NOTE: This tax break is a tax deduction taken at the time you file your taxes. There are no changes to the tax calculations or withholding amounts on the employee’s paycheck. If the employee anticipates getting extra money back, it’s up to the employee to change their W-4 accordingly. The purpose of this enhancement is to provide an easier way for the user to separate out the 0.5 portion of the overtime.  Print that amount on the employee’s check and populate the W-2 field during year-end processing starting in tax year 2026. 

1. Manually calculate and enter the Qualified Nontaxable OT amount in the Employee Maintenance, Tax Summary, Benefits window.
   • This amount is one half of the Premium on Overtime. Prints in W-2, Box 14.
   • If Total Overtime is $15,000 for the year, the Qualified Non-Taxable Overtime is $5,000 deduction.
   • 
2.  The Check or Direct Deposit Printing NEW field "Print nontaxable overtime" on the Check & Direct Deposit Printing screen does ONLY displays when check date is for tax years 2006 - 2008, which are the OBBBA requirement dates.   This field will not display on any other check dates with any other year.
3.  
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4. The amount entered in the Benefit window under Qualified Nontaxable OT is displayed in Box 14. The description OBBBTT will display.  The W-2 prints the Amount and Code in Box 14 for Tax Year 2025.

 NOTE: 

IR-2025-110, Nov. 5, 2025

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued guidance providing penalty relief to employers and other payors for tax year 2025 regarding new information reporting requirements for cash tips and qualified overtime compensation under the One, Big, Beautiful Bill.

Link to IRS document Notice 2025-62  Transition penalty relief for tax year 2025