Purpose:
The purpose of this bulletin is to inform agencies of how the premium overtime earnings for “Reported”, employees discussed below, will be calculated and appear on IRS Form W-2 for calendar year 2025 and to provide information on additional groups.
Affected Employees:
Employees in the groups defined below are affected:
- Employees who were paid overtime in a title that may be covered and nonexempt under the Fair Labor Standards Act (“FLSA”) (“Reported”). This includes all employees of the New York State Unified Court System and the State University of New York (SUNY), and the Bargaining Units and Salary Grades listed in the chart below
| Union | BU NUMBER(S) | SALARY GRADE(S) |
|---|---|---|
| Civil Service Employees Association (CSEA) | 02, 03, 04, 35, 47, 78, 79, 87, 97 | 1 through 22 |
| Public Employees Federation (PEF) | 05 | 1 through 22 |
| Management Confidential | 06 | 603 through 622 |
| Council 82 (C82) | 61, 91 | 101 through 122 |
| NYS Correctional Officers and Police Benevolent Association (NYSCOPBA) | 01, 21 | 101 through 122 |
| Police Benevolent Association of New York State (PBANYS) | 31 | 101 through 122 |
| Police Benevolent Association of New York State Troopers (PBA) | 07, 17 | 701, 703, 705, 706, 712 |
| New York State Police Investigators Assoc (NYSPIA) | 62 | 704, 707 |
| District Council 37 (DC 37) – Rent Regulation Unit | 67 | 1 through 22 |
| United University Profession (UUP) Lifeguards | 68 | All grades |
- All Employees who were paid overtime (may have been in a title that may or may not be covered and nonexempt under the Fair Labor Standards Act (“FLSA”)) (“ALL"). Note: CUNY employees will not be reported by OSC.
- Employees who were paid qualified overtime earnings in a title that is both covered by and nonexempt from the FLSA. An employee may deduct the premium overtime earnings on their taxes so long as the overtime compensation paid to the employee is in excess of the regular rate of pay as required under the FLSA *(“Qualified”).
*All overtime paid by the New York State Unified Court System and the State University of New York (SUNY) is paid per FLSA guidelines and is qualified.
Background:
The Omnibus Budget Reconciliation Bill for Budget Accountability, or One, Big, Beautiful Bill Act (OBBBA), became Public Law 119-21 on July 4, 2025. The OBBBA amends the Internal Revenue Code allowing an income tax deduction of qualified overtime compensation received during taxable years 2025 – 2028.
- New Tax Deduction: Individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” portion of “time-and-a-half” compensation -- that is required by the FLSA and that is reported on an IRS Form W-2, Form 1099, or other specified statement furnished to the individual. For further information please see the IRS News Release “Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025 | Internal Revenue Service” IR-2025-114, dated November 21, 2025.
- Employer Reporting: Employers and other payors are required to furnish information statements, such as IRS Form W-2, to employees.
Effective Dates:
Paychecks issued from January 1, 2025 through December 31, 2025.
Eligibility Criteria:
“Reported” employees with premium overtime earnings paid in 2025 will be included in Box 14 of the IRS Form W-2.
Please Note: Employees that are exempt or ineligible under the FLSA may receive premium overtime earnings pursuant to State law or other authority, and those earnings may be reported on their IRS Form W-2 (see OSC Actions, Employee Reporting). Accordingly, employees should consult a tax advisor should they have any questions on whether they are eligible to deduct the amount of premium overtime earnings on their 2025 taxes.
OSC Actions:
Premium Overtime Calculation: OSC will calculate the premium overtime rate for “All” employees. This rate is calculated differently for each overtime earnings code paid at 1 ½ times the regular rate or greater and is equivalent to ½ the regular rate. Therefore, an employee being paid $2,500 at a rate of 2 ½ times their regular rate would have $500 calculated for premium overtime earnings.
Employee Reporting: OSC will provide the 2025 premium overtime earnings to “Reported” employees in Box 14 of Form W-2.
Agency Reporting: Premium overtime earnings for “All” employees will be provided to agencies via the NHRP738 Premium Overtime Report on Control D. This report will include DeptID, EmplID, Empl Rcd, Title_Grade_BU, Premium Overtime Amount and Reporting Status (Reported on W-2, Not Reported),.
Agency Actions:
Agencies should recommend that Employees consult a tax advisor should they have any questions in determining whether to deduct “Reported” premium overtime earnings for tax year 2025.
Agencies should respond to employee inquiries regarding premium overtime earnings calculations.
If an employee determines their overtime earnings are “Qualified” and are not reported, review the NHRP738 Premium Overtime Report and provide the employee with their total (reported and not reported) premium overtime earnings.
Resources:
WHD Fact Sheets | U.S. Department of Labor
NYS DOL Overtime FAQ’s https://dol.ny.gov/system/files/documents/2021/03/overtime-frequently-asked-questions_0.pdf
Questions:
Agency questions regarding this bulletin may be emailed to the Tax and Compliance mailbox.