One Big Beautiful Bill Act (OBBBA) Updates for 2026

Quick refresher: What changed (and what didn’t)

What changed

The OBBBA, signed into law on July 5, 2025, allows employees to deduct from their federal taxable income when filing their personal tax returns:

• Certain tip income, and

• The premium portion of FLSA overtime wages

What didn’t change

• There is no impact on payroll calculations

• Tips and overtime are still taxed and withheld the same way they are today

• This is a W-2 reporting requirement only for employers

How Fuse will handle 2026 FLSA overtime reporting

• For the 2026 tax year, Fuse will populate Form W-2, Box 12, with the FLSA overtime premium portion of wages.
• For the 2026 tax year, Fuse will also configure your company to populate the FLSA overtime premium portion of wages as a separate line item on employees' Pay Statements.
• For the 2026 tax year, Fuse is implementing a more robust and flexible framework to support the wire variety of overtime configurations used across our client base.
• To ensure accurate and compliant reporting for each employer, the Fuse team is:
  • Reviewing your current overtime and payroll configuration
  • Applying company-specific configuration updates aligned to your existing rules and pay practices
  • Testing and validating results to confirm correct tracking of the FLSA overtime premium portion
  • Reviewing year-to-date payrolls for accuracy
  • Processing adjustment payrolls, if needed, to ensure all qualifying FLSA O/T amounts are properly reflected year to date

This individualized approach allows Fuse to support accurate reporting regardless of how overtime is currently tracked in your system.

 

What this means for you

• Fuse will handle the configuration, testing, and validation work on your behalf
• You may be contacted if any clarification or confirmation is needed regarding your overtime setup
• In limited cases, adjustment payrolls may be processed to correct or align year-to-date FLSA O/T amounts for reporting purposes

At this time, no immediate action is required from you unless contacted by the Fuse team.

Overtime (Form W-2, Box 14 and Employee Pay Statements)

• A new line item labeled "FLSA OT" will appear in Box 14 of the Forms W-2

• A new line item labeled "FLSA OT" will appear under the Earnings section of each Pay Statement

• This reflects only the premium portion of overtime covered by the Fair Labor Standards Act

 

Tips (Form W-2, Box 7)

Based on updated IRS guidance released on November 21, 2025, tips may be reported in Box 7 of the W-2.

• This is reporting only

• There is no change to how tips are taxed or withheld during payroll

 

One-Time Implementation fee

This legislative change has required significant development work to enhance the Fuse system and substantial client-specific effort to ensure compliance for each employer. A nominal one-time fee of $500 will be charged to your next invoice upon completion of the FLSA overtime reporting updates for your company.

Looking Ahead

We will continue to refine and enhance Fuse’s overtime tracking and reporting capabilities as regulatory guidance evolves. Our goal is to ensure that your organization remains compliant while minimizing administrative burden.

What’s next

• Fuse will complete the configuration and testing to ensure proper reporting compliance for your company

• Fuse will process necessary payroll adjustments to support the updated reporting on both Pay Statements and W2s

• Fuse will notify you once the work has been completed for your company
  
  

As always, this is general information and not tax advice. Employees will determine how these amounts are handled on their individual tax returns.