I appreciate you providing detailed information about the challenges you're facing with Qualified Overtime in QuickBooks Desktop, eljebooks. I understand that payroll calculations can be confusing, and I’m here to address the points you’ve raised.     
 

While it may seem like a bug, this is not a system error. QuickBooks is designed to strictly adhere to federal tax regulations, which require Social Security and Medicare taxes to be applied to all gross taxable wages, including overtime pay. These calculations are accurate and ensure compliance with Form 941 filings. The gross taxable wages reflected in your payroll reports will align with IRS requirements, so you can feel confident about your upcoming filings.
    

You don’t have to wait until filing Form 941 to confirm accuracy, you can calculate manually if needed for verification. Qualified OT Tracking (QOT) is designed to track the portion of an employee’s wages that comes from overtime premiums. Social Security and Medicare taxes are always calculated on the total gross taxable wages, which include regular pay and overtime. Under federal tax regulations, all overtime wages, including the premium ($10/hour), are treated as taxable and must have deductions applied. Employees can use these taxable amounts to get a tax break at the end of the year if they are eligible.
 

In your first calculation, the employee worked 40 regular hours at $20/hour and 1 overtime hour at $30/hour (time-and-a-half). This setup calculates everything correctly in QuickBooks. The gross pay comes out to $830, and Social Security (6.2%) and Medicare (1.45%) taxes are calculated based on the total gross taxable wages of $830. That's why it shows the correct calculation of the employee's pay.

The example calculation:

• Regular Pay: 40 hours × $20/hour = $800.

• Overtime Pay: 1 hour × $30/hour = $30.

• Total Gross Pay: $800 + $30 = $830.
QuickBooks calculates SS and Medicare base on total gross pay:
• Social Security: $830 × 6.2% = $51.46.
• Medicare: $830 × 1.45% = $12.04.

This means that your company’s matching taxes and the employee’s deductions are correctly calculated based on the full overtime pay of $30/hour (time-and-a-half). There hasn’t been any overpayment, and QuickBooks ensures compliance with federal laws. While QOT tracking separates the overtime premium for reporting purposes, it cannot override tax calculations, as this is required by IRS standards.

The second calculation seems like it should work, but QuickBooks ends up counting the overtime as two separate hours instead of one. This makes it show 42 total hours worked instead of the correct 41 hours (40 regular + 1 overtime). Because of this, the hours worked are inflated, which throws off vacation and sick leave calculations. Even if you split the overtime into two items (1 hour at $20 and 1 hour at $10), QuickBooks still calculates Social Security and Medicare taxes based on the full gross pay, so the taxes don’t change.

To avoid inflated hours and inaccurate accruals, I recommend using the first setup: 40 hours at $20/hour and 1 hour at $30/hour. This approach ensures accurate hours worked, proper vacation and sick accruals, and compliance with payroll tax laws.
   

You can check this article to know more about Qualified OT Tracking: Impact of the No Tax on Overtime provision to QuickBooks Payroll

If you think the overtime premium ($10/hour) shouldn’t be taxed, I recommend consulting a tax professional to ensure everything complies with federal guidelines. 
  
Please leave us a response if you have other questions or concerns.