“The deduction for qualified overtime compensation does not mean that overtime compensation is excluded or exempt from gross income,” the IRS said. The agency also said workers may not use Form 4852, Substitute for Form W-2, to claim additional deductible overtime compensation that was not reported on Form W-2. Eligible taxpayers may deduct up to $12,500 of qualified overtime compensation annually, or up to $25,000 on a joint return. Reporting and withholding guidanceThe updated FAQs add extensive guidance for employers on reporting qualified overtime compensation. The IRS said employers must separately report qualified overtime compensation on Form W-2, box 12, code TT, beginning in 2026.