The new law excludes overtime premium pay (the extra 50%, not the base wage) and certain tips from taxation. Workers are excited—but payroll providers are not. Many systems weren’t built to isolate the overtime premium portion, and there is confusion about how W-2s will reflect this change.

Key questions:
● Will W-2s gain new boxes for overtime and tips?
● How will payroll companies track and report these figures?
● Will employees need new W-4s to adjust withholding?

Until the IRS provides guidance, practitioners are left managing client expectations. The relief is real—but the reporting mechanics are still a work in progress.

These insights come from COCPA's OB3 Individual and Estate Think Tank, where members discussed the challenges of implementing the new overtime and tip exclusion rules. Learn more about the OB3 and what the COCPA is doing to support our members who are breaking it down and working through it.