The Internal Revenue Service (IRS) released on August 6, 2026, updated frequently asked questions (FS-2026-13, FAQs) for employers and employees on how to calculate qualified overtime compensation for purposes of the overtime pay deduction. The new FAQs confirm that the 2025 transition relief will not be extended and emphasize the need for extremely thorough federal overtime analysis when calculating qualified overtime compensation for 2026. Employers must identify the portion of compensation that satisfies the FLSA overtime requirements, calculate the applicable overtime premium using the FLSA regular-rate rules and separately report qualifying amounts on Forms W-2.
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