QUALIFIED OVERTIME PAY AND / OR QUALIFIED TIPS - Tracking in QUICKBOOKS – Desktop or Online
Qualified Overtime pay is overtime pay mandated by Fair Labor Standards Act (FLSA) – paid overtime at ‘time and a half’ for hours physically worked over 40 in a work week. It is the ‘overtime premium,’ or the ‘half’ in the ‘time and a half’ that is eligible for the deduction.
Overtime Pay other than that mandated by FLSA may not be qualified and must be reviewed before considering for tracking. An example could be paying overtime based on the number of hours worked in a given day versus a given work week.
Qualified Overtime (only the ‘half’ in the ‘time and a half’) is required to be reported in box 12 of the W-2 with code TT.
Some helpful Qualified Overtime FAQs updated by IRS in August 2026 can be found at
https://www.irs.gov/pub/taxpros/fs-2026-13.pdf
Qualified Tips are tips voluntarily given to servers by customers. These can be via cash from the customer to the employee or via the customer adding the tip to the credit card or check payment to the business and then paid to the employee by the business. Any charges automatically added to customers’ bills (automatic gratuity, service fee, etc) are not qualified and should not be considered in the tips tracking.
Tips must be in the course of a trade or business that customarily and regularly involves tips. Qualified tips do not include those received while working for a specified service trade or business (SSTB.) A specified service trade or business (SSTB) is a trade or business involving services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services or any business where the principal asset of such business is the reputation or skill of one or more of its employees or owners.
Qualified Tips total is required to be reported in box 12 of the W-2 with code TP.
A Tipped Occupation Code is also included in the ‘Tip Tracking’ and is required to be displayed in Box 14b of the W-2.
Occupation Code Categories are:
• 100s – Beverage and Food Service
• 200s – Entertainment and Events
• 300s – Hospitality and Guest Services
• 400s – Home Services
• 500s – Personal Services
• 600s – Personal Appearance and Wellness
• 700s – Recreation and Instruction
• 800s – Transportation and Delivery
• 000 code means the tips are NOT qualified tips and cannot be used for the deduction on the personal tax return
The FULL list of occupation codes can be found at the link below.
This list can be reviewed to determine if a business is considered to ‘customarily’ involve tips.
https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf
Quickbooks Desktop and Quickbooks Online (aka Intuit Quickbooks Workforce) can track Qualified Overtime and Qualified Tips for reporting in the appropriate fields on employees’ W-2s.
Review these links to updated Quickbooks articles that discuss the specific steps to follow to enable your Quickbooks to track these amounts.
Overtime
Tips
Complete list of Tipped Occupation Codes
https://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdf
If you have further questions regarding the Qualified Overtime or Qualified Tips enacted by the One Big Beautiful Bill please reach out to the Accounting Services Team.
© 2026
