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In response to the “no tax on overtime” provision of H.R. 1 (OBBBA), OFM has added two new wage types in HRMS. These wage types were effective 12/16/2025 for agencies to use retroactively for the 2026 tax year.
HR1 OT Premium (Wage Type 1416)
This wage type is generated on the earnings statement when Wage Type 1432 is used, and it isolates the premium portion of compensation payable to overtime eligible employees after exceeding 40.0 regular hours worked in their work week (regular hours do not include paid leave or holiday hours). HR1 OT Premium (1416) will be reported in box 12 TT of the W2.
HR1 OT All Agy 1.5x (Wage Type 1432)
This wage type is for the compensation payable to overtime eligible employees after exceeding 40.0 regular hours worked in their work week (regular hours do not include paid leave or holiday hours).
The two new wage types mirror 1232 (OT FLSA 1.5 All Agy) and 1216 (Overtime Premium) and will calculate the same. They have been created to pay and report qualified overtime as defined in H.R. 1 (OBBBA). The 2026 W-2 form has not yet been released by SAP. Therefore, reflecting the new wage types as part of W-2 Box 12TT will be included in the 2026 year-end activities and communicated through the year-end process.
OFM Statewide Accounting has developed the HR1 OT Wage Type Scenarios tool for agency use. Please visit the OFM website under Statewide Accounting > Payroll to access and review the HR1 OT Wage Type Scenarios tool.
Additional information:
- Previous OFM communications for H.R. 1 (OBBBA) can be found here.
- Additional wage types to track qualified overtime are still under development and will be communicated soon.
- As a reminder, agencies should never provide tax advice to employees.
- This communication was sent to the OFM GovDelivery HRMS Communications topic.
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