New Overtime Law starting 2025 and QB

@NewUser777  While Quickbooks appears to be trying to implement something for reporting the deductible portion of Overtime, it does not appear to be there yet.

Given that another thread on here indicates they are two years in without catching up to the updates on IRA law, I wouldn't hold my breath. I expect we'll need to manually create reports for this, or include it somewhere in Box 14, also manually.

Thanks for reaching out, @NewUser777. This is a great question with the 2025 overtime changes coming into play.

QuickBooks will continue to calculate overtime based on the rules you’ve set up, such as daily overtime after 8 hours, Saturday overtime, or double-time on Sundays. Those calculations won’t change.

What’s important to know is that the new 2025 rules define “qualified overtime” based only on overtime required under federal FLSA guidelines — generally anything over 40 hours in a week. The recent QuickBooks payroll update confirms that state or company policies, like daily overtime or weekend rates, don’t qualify unless the employee also works more than 40 hours that week. Because of that, QuickBooks does not automatically determine whether the overtime you paid is qualified or non-qualified for tax reporting. It simply records the overtime hours you enter.

So in your example, if an employee works 24 hours total with 4 hours of daily or weekend overtime, QuickBooks will calculate that overtime correctly, but it won’t flag those hours as “qualified overtime” since the employee didn’t cross the 40-hour FLSA threshold.

To help you prepare year-end records for your team, QuickBooks Desktop offers several built-in payroll reports that summarize regular, overtime, and double-time hours. You can review how to run these reports here:

Run payroll reports in QuickBooks

If you need anything else, feel free to reach out! We’re here to help you stay confident and prepared.

The update for Qualified OT - the screen that pops up cannot be bypassed and once you answer a question the programs aborts.  Can you have the tech dept look into this and fix it so I can process payrolls on Monday.

Same here - you can't close out of the qualified overtime payroll message and clicking finish (whether you choose to setup the qualified payroll item or not) aborts you out of quickbooks every single time.

Thanks for joining the thread and sharing your concerns, @CiscoSteel.

Let's try some basic troubleshooting steps to have QuickBooks stop aborting you after clicking finish. 

1. Go to Single User Mode. 
2. Go to the Help, then select Update QuickBooks Desktop.
3. Click on Update Now.
4. Check the Reset Update checkbox.
5. Tap on Get Updates. When the download is complete, close and reopen QuickBooks Desktop.
6. Go to the Help, then select Update QuickBooks Desktop.
7. Hit Overview, then Update Now.
8. Once the update has completed, close QuickBooks. 
9. Restart QuickBooks in administrator mode (Right click the QuickBooks application and select Run as Administrator). 

After finishing these steps, go through the set up process again. 

That should do the trick. Please don't hesitate to let me know if you have any additional questions or concerns. Have a good one!  

The workaround to process payroll is to go into after the fact payroll and select edit. Create the payroll check and click the direct deposit button.  Save and close.  Send payroll as normal.

None of this works.  It’s the software update that’s causing it please have tech look into it.

Single user mode actually worked for me. You only need to be in single user mode to get past the qualified OT payroll message prompt - and then once you're in to your payroll screen, you can switch back to multi-user mode and continue the payroll. I believe when you click finish (even if you selected 'no' on the prompt), that quickbooks was trying to create a payroll item to track qualified OT which was causing the crash, as you can only create new payroll items in single user mode.

Yes!  I am needing to run payroll today (Monday) and keep getting booted out of the system.

Thank you, Thank you!  This worked for me.

You're certainly welcome, @aka90.

Please feel free to reach out any time you need a helping hand. I'm happy to assist. Take care! 

Good afternoon,

With the new Qualified Overtime in QBD will I need to manually enter the rate on each paycheck every payroll?

For EX:

Reg pay - $25.00

overtime 1.5 - $37.50

Half overtime - $12.5

worked 6.38 overtime (6.38 x $12.5) = $79.75 Qualified Overtime?

Hi there, @AV Office.

Yes, you need to enter the half-overtime rate manually on every paycheck in QuickBooks Desktop (QBDT).

QBDT uses a different calculation for standard overtime, such as 1.5 times the base wage. While you have the option to customize the rate, the multiplier is limited to a range of 1.0 up to 3.0. Based on your example, the half-overtime rate is 0.5 times the base wage, which means the system cannot perform this specific calculation.


However, you can divide the overtime hours by 3 to get the closest qualified overtime amount.


Note: QuickBooks converts decimals into hours and minutes, which is why the total amount may not be exactly what you expected due to rounding.

If you have follow-up questions, please don't hesitate to click the Reply button.

I had this issue yesterday. I had to go into Single User Mode, Verify Company Data, Rebuild Company Data, Get Payroll Updates, then close & reopen Quickbooks. Then when it took me throught the screens again for the Qualified Overtime, no crash. I found this fix by sitting in a Chat with Intuit support. 

Wow this seems like an extremely labor intensive “fix” that Quickbooks is providing. You would think with how much we pay for QB that something could be set up that is a little more automatic.  Having to first calculate it then manually enter it on every paycheck every time stinks. 

If you are in California it's even a little more complicated.  The only overtime premium that qualifies if if the employee works 40 hours or more.  The daily overtime doesnt count toward the qualified otherwise.

Ie.  If an employee works 30 hours in a week and one of those days is more than 8 hours in a day then overtime pay is required. However the qualified overtime is ZERO because none of the overtime hours is over 40 hours in the workweek.  

If  you are a California employer please be aware of this.

Thank goodness I'm not!   Again - QB advertises that they comply with all state and federal laws.  It seems that for what QB charges that they should provide a way for their software to automatically calculate all of the OT, even for individual states.  What they are offering is no better than keeping up with it with pen and paper.  I think I'll opt to just give the employees a report showing OT information and let their tax person figure it out. 

I have no idea why this solution/example is being given - that is absolutely incorrect.  Intuit actually published correct instructions on how to set up the payroll item for this tax tracking and it works correctly.  There is a degree of manual entry needed on paychecks, but NOT doing what is shown above. That is absurd honestly.  Here is what you need to do in layman's terms.

1) Set up the payroll item "Qualified OT Tracking" as a company contribution and map the expense and liability accounts to the same account (we used Payroll Liabilities). You can leave the name of agency to be paid rows blank since there is no one getting paid, it is just for internal tracking. As you progress through the screens you will see that the Tax Tracking type identifies that it will start reporting on W-2s in 2026. Intuit will put it in Box 14 for you BUT for 2025, you will need to send your employees their Qualified OT amounts (just run a payroll summary to calculate). Look on the IRS site for more info, but it is super straightforward. We just created a form letter for all employees since most of them were not even aware that there was a tax cut. It gave them the info they needed including their amount for 2025.

2) Add this payroll item to every non-exempt employee's payroll profile under the "Additions, Deductions and Company Contribution section on the right). Note - I would recommend adding it at the top of the list because it will make the manual entry later (on paychecks) much easier.  You will need to set the Rate for each employee as 0.5* standard wage rate.  That is the OT premium they are paid (the 0.5 of the 1.5x).  So, for a $50/hr employee wage, the rate you will enter under "AMOUNT" is $25.   Initial set up takes a bit of time unless your employees all make the same base wage (which means you can enter a default rate in the setup). We had to manually enter each employee's rate in their profile.  Keep in mind that you will need to change this item every time their base wage changes. 

3) When you run payroll, you will need to edit each paycheck when employee has Overtime pay.  Just open the paycheck and you will see the new Qualified OT Tracking item in the list under Other Payroll Items. Just enter the hours of overtime they were paid (from the Earnings section of paycheck) into the QTY column. Now QB will track the amount. In my example, let's say the employee worked 2 hours OT, I add 2 into the column and it will multiply it by the Rate of $25 (from profile) and this amount $50 will show up on their paystub under Company Contributions. No affect on any taxes, etc.  And it will keep track (you will see updated YTD amount each paystub) and it will be on the W-2 under Box 4 starting 2026.

I feel your frustration. However, except for 2025 employers are REQUIRED to track and report on W-2s. Just be aware of that. Otherwise, it would be easier to just run at report at year end and give them the figure to take to their tax accountant.  That said, we should also be able to opt out of tracking in the system and then run a report at year end and provide the amount for Box 14 of the W-2 manually.  

@AV Office  The answer you received below is wrong.  See my post - I forgot to link it to you.  No you don't have to manually add the pay rate on each paycheck, but you do have to (1) set up the tracking payroll item, (2) add the item and correct qualified OT rate (the 0.5 rate) in their profile, and (3) manually add any OT hours worked in the paycheck so that it calculates/tracks the qualified OT amount.  I am hoping that QB/Intuit will figure out a systematic way to pull the OT hours from the timesheets and auto-populate the tracking payroll item; however, I don't have my hopes  up that it will be soon (or ever possibly knowing Intuit) because it needs to map from timesheet data to the "Other Payroll Items" section of paychecks. 

Thank you for bringing this up! I did not realize this was the case as I am a California employer who pays OT for over 8 hours a day and came here trying to determine how to set this up.

Seems like this could get confusing and I do wish QB would be more helpful.

Employers are REQUIRED to provide the Qualified overtime totals to employees, but they do Not need to do so on their W-2s.

See:  https://www.irs.gov/pub/irs-drop/n-25-69.pdf