Qualified Overtime Tracking

The tax deductible Overtime Premium amount is not the full amount of OT pay. Only the OT portion is tax deductible. If your OT rate is 1.5 x regular pay rate, the Qualified OT Premium is 1/3 of the total OT Pay. If your OT rate is 2 × regular rate, the Qualified OT Premium rate is 1/2 total OT pay.

Therefore, you should add the Qualified OT tracker so that the calculation appears on a separate line; It makes things easier for the tax preparer.

Sorry, there was a typo in my message above. If your OT rate is 2 × regular rate, the Qualified OT Premium rate is 1/4 total OT pay.

Hello there, @Hrstar.

In QuickBooks Online (QBO), adding the Qualified Overtime Tracking pay type can offer key advantages based on the platform’s payroll functionalities. Even if you’re already tracking standard overtime, having a dedicated pay type for Qualified Overtime can enhance payroll efficiency, compliance, and reporting. Here’s a clearer and improved explanation of the benefits:

Some laws and industry standards require tracking Qualified Overtime separately from regular overtime to ensure accurate reporting and compliance with regulations. Proper classification helps meet legal obligations and follow specific rules or agreements.

Tracking Qualified Overtime separately makes record-keeping clearer and more organized, helping with audits, financial planning, and internal reporting needs.

Simplifying payroll is easier with separate tracking for qualified overtime, as it enables efficient management of special calculations such as tax benefits, subsidies, or other incentives tied to these specific hours. This ensures accuracy and reduces the risk of manual errors in processing.

Separately tracking it ensures your payroll system is flexible and ready to adapt to future changes, such as distinguishing between qualified and non-qualified overtime, implementing new policies, or meeting evolving regulatory requirements. Even if all overtime is currently qualified, this setup prepares your system for potential updates without disrupting operations.

Adding the Qualified Overtime Tracking pay type in QuickBooks Online ensures compliance, simplifies payroll, improves transparency, and reduces errors, creating a stronger and more efficient payroll system.

Don't hesitate to comment below if you have additional questions about tracking Quality Overtime in QuickBooks Online.

After setting up Qualified Overtime Tracking it is being tax tracked showing liabilities due, I've tried fixing the issue with no result.

Hi there, PL2026. I'd be happy to help you with Qualified Overtime Tracking (QOT) in QuickBooks Online(QBO).

Before anything else, I want to know more about how you've set up the qualified overtime pay for your employees.

Did you create a custom item for company overtime policies or state laws that differ from the Fair Labor Standards Act (FLSA)? Or did you use the QuickBooks embedded QOT item? This information would help us provide a tailored solution.

Moving on, please ensure you're utilizing the official Qualified Overtime Tracking in each qualified employee's profile.

Here's how:

1. Log in to your QBO Payroll account and go to All Apps.
2. Select Payroll, and then Employees.
3. Choose the qualified employee(s).
4. Navigate to the Additional pay types menu.
5. Pick Qualified OT Tracking under the Pay Type drop-down arrow.

If you haven't filed taxes yet, void the affected paychecks using the correct tracking item, then create a paycheck with overtime pay.

Please don't hesitate to comment below if you need further assistance.