The 2026 W-2 Reports Tips Under Code TP and Overtime Under Code TT, and Overtime Has No Fallback Form

For tax year 2026, the return filed in 2027, the W-2 itself carries the figures behind both new deductions: box 12 code TP for cash tips, code TT for qualified overtime, and a three-digit occupation code in new box 14b. The difference that matters before January is in the statute. Section 224(a) allows the tip deduction for tips on an information return "or reported by the taxpayer on Form 4137." Section 225(a) allows the overtime deduction only for overtime "included on statements furnished to the individual," and names no form a worker can file alone.

The caps and phase-outs do not change for 2026: up to $25,000 of tips and $12,500 of overtime premium ($25,000 joint), each reduced by $100 per $1,000 of modified AGI above $150,000 ($300,000 joint), under §§224(b) and 225(b). Our Schedule 1-A walkthrough works those lines; this piece covers the paperwork that feeds them.

The 2025 workarounds expire with 2025

The first season ran without any of this. The Act let payers "approximate a separate accounting" of tips and overtime by a reasonable method, but only "for periods before January 1, 2026" (§§70201(k) and 70202(h)). The IRS's penalty relief for employers who skipped the separate reporting is, in its own words, "limited to returns and statements filed and provided for tax year 2025". And the shortcut workers used on their 2025 returns came from Notice 2025-69, which lets a worker whose pay stub lumps overtime together count one-third of the lump as premium. That notice is written for tax year 2025.

For 2026, the separate amounts belong on the form. Employers must furnish 2026 W-2s by February 1, 2027, and the self-employed see parallel boxes on the 1099s:

Sources: General Instructions for Forms W-2 and W-3 (2026); Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026); Instructions for Form 1099-K (Rev. December 2026). Every 1099 box counts dollars already inside that form's total, so it says how much of the total is tips or overtime and adds nothing to it.

Overtime: check the half before the year closes

Code TT is narrower than the overtime line on most pay stubs. The 2026 W-2 instructions limit it to pay "required under section 7 of the Fair Labor Standards Act" above the regular rate, and say plainly that "only the 'half' portion of 'time-and-a-half' compensation would be reported using code TT." The FLSA requires that premium for hours past 40 in a workweek, and the Department of Labor adds that the Act "does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, as such." A weekend differential, holiday pay or a contractual double-time rate stays out of TT except for the time-and-a-half premium the 40-hour rule itself requires.

Because §225(a) reaches only what is on the statement, the records worth gathering now are the ones that let you check the employer's figure: the final pay stub of 2026 with year-to-date overtime hours and dollars, and your hourly rate for each stretch of the year. The year is set by payment, too. Notice 2025-69's own example puts a pay period that ended December 27, 2025 into 2026, because those wages were not paid until January 6, 2026. The same split will move late-December 2026 overtime onto the 2027 return. An employer who gets code TT wrong fixes it on a Form W-2c.

Tips: code TP counts every reported tip, qualified or not

Code TP is "the total amount of cash tips reported to the employer," per the 2026 W-2 instructions, so its total and the deduction can differ. The deduction takes only voluntary tips in a listed occupation, and §224(d)(2) excludes tips earned in a specified service trade or business. Box 14b holds up to two Treasury Tipped Occupation Codes, such as 101 for bartenders, 102 for wait staff and 105 for chefs and cooks. The final regulations list more than 70 occupations in eight categories. If any of the year's tips came from an occupation off that list, the employer must enter "000" as one of the codes. A 14b showing 000 means your TP total includes tips the deduction does not reach, and you separate them using your own records.

Those records are the ones Publication 531 already asks for: a daily log of cash tips, card tips, noncash tips and tips paid out to others, and a monthly report to the employer by the 10th of the following month whenever a job's tips reach $20 in a month. Tips you never reported to the employer are the one gap a worker can close alone. They go on Form 4137, and §224(a) counts tips reported there.

Self-employed workers face one more limit. Section 224(c) allows business tips only to the extent the business shows a profit after its other deductions, so the books behind a Schedule C are part of the tip record.

P1, worked twice

Take P1, TaxMath's $65,000 single filer, in 2026. The $16,100 standard deduction leaves $48,900 of taxable income, below the $50,400 line where the 2026 single schedule turns from 12% to 22% under Rev. Proc. 2025-32.

As a server. P1's W-2 shows $15,000 under code TP and "102" in box 14b, with no 000 beside it, so the whole $15,000 is a qualified tip. Taxable income falls to $33,900, all of it still inside the 12% band: $15,000 × 12% = $1,800 of federal income tax saved.

As a warehouse worker. At $24 an hour with 250 overtime hours across the year, P1's stub shows $9,000 of overtime pay at $36 an hour. Code TT should read $3,000: 250 hours × the $12 premium. The deduction saves $3,000 × 12% = $360. A W-2 that put the full $9,000 under TT would be overstating the deduction threefold, and one with no TT entry leaves §225(a) nothing to count.

Three states, three answers for 2026

The same two W-2s meet different state returns, and for tax year 2026 three states that tax wages each answer differently.

• Michigan subtracts both. MCL 206.30(1)(ee), added by 2025 PA 24, deducts the federal tip and overtime amounts for tax years 2026, 2027 and 2028, and Treasury states that none of it is available for 2025. At Michigan's 4.25% flat rate, the server saves $637.50 and the warehouse worker $127.50.
• Colorado keeps the tips and takes back the overtime. Its return starts from federal taxable income, so both deductions arrive already subtracted; then, "for tax years 2026 and later," the overtime deduction is added back in full while "no addback is required" for tips. At 4.40%, the server saves $660 and the warehouse worker nothing.
• New York starts from federal AGI under Tax Law §612(a), which neither deduction touches, and then adds a tips-only subtraction: §612(c)(48), for taxable years beginning on or after January 1, 2026, subtracts up to $25,000 "to the extent allowed as a federal deduction pursuant to section two hundred twenty-four." The server's $15,000 comes off New York AGI. Section 612 has no counterpart for §225, so the warehouse worker's $3,000 stays taxable in New York.

Our 2026 Michigan entry is provisional and our Colorado entry is provisional; the reasons are on the status board.

A 2026 W-2 arriving by February 1, 2027 with $3,000 under code TT is worth $360 federally to P1, $127.50 more in Michigan, and nothing extra in Colorado or New York. The same W-2 with that box blank is worth nothing in any of them.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.