Set Up FLSA Wages for No Tax on Overtime Home | FAQs & Troubleshooting

 

 

Follow these steps to set up FLSA (Fair Labor Standards Act) wages that qualify for the "no tax on overtime" policy under the One Big Beautiful Bill Act (OBBBA) for tax years 2026–2028.

For the "no tax on overtime" policy, only a portion of the overtime that qualifies is considered nontaxable overtime wages.

To set up FLSA wages for no tax on overtime

1. Select Payroll Setup > Earnings Code Maintenance.
2. Enter a new earnings code and description for FLSA wages that qualify for no tax on overtime. For example, enter FLSAOT for the earnings code. For more information, see Earnings Code Maintenance - Fields.
3. Select Overtime in the Earnings Type field.
4. Enter the pay rate multiplier for the overtime. For example, enter 1.5 for time-and-a-half.
5. Enter an overtime tax rule in the Tax Rule field.
6. Select the FLSA Wages Eligible for No Tax on Overtime check box.
7. Complete one of the following.
   • Select the Post Expense by Dept. check box if expense amounts for this earnings code are to be posted to General Ledger by department.
   • Enter the general ledger earnings expense account if expense amounts for this earnings code are not posted by department.
8. Select the Post Expense by Dept. check box.
9. Click Accept.

The earnings code is created to capture FLSA wages that qualify for the "no tax on overtime" policy for tax years 2026–2028. When payroll is processed, you can view the year-to-date amount for the FLSA wages in the Qualified Nontaxable OT field in the Benefits window.

Note If you have non-FLSA wages for overtime, you will need to create an earnings code for the non-FLSA wages (clear the FLSA Wages Eligible for No Tax on Overtime check box).