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| Quick answer Yes. Starting with tax year 2026, qualified overtime compensation can be reported in Form 1099-NEC Box 1d. But the IRS says this applies only in the rare situation where a worker is an employee for Fair Labor Standards Act (FLSA) purposes while being treated as an independent contractor for federal tax purposes. For ordinary 1099 contractors, this is not a new overtime rule and it does not change Form W-9 collection. |
On August 6, 2026, the IRS updated its qualified overtime FAQs in Fact Sheet FS-2026-13. The update matters to payroll teams, accounts payable teams, tax preparers, and businesses that issue information returns because it confirms exactly where qualified overtime must be reported for 2026.
Most overtime-eligible employees will see the amount on Form W-2. The surprising part is that the IRS also created reporting locations on Forms 1099-NEC and 1099-MISC. Those 1099 boxes are real, but they are designed for a narrow classification edge case not for the typical independent contractor relationship.
Where is qualified overtime reported for 2026?
The IRS now requires separate reporting of qualified overtime compensation for tax year 2026 and later. FS-2026-13 gives the following locations:
| Form | 2026 reporting location | Typical use |
| Form W-2 | Box 12, Code TT | Most FLSA overtime-eligible employees |
| Form 1099-NEC | Box 1d | Rare FLSA-employee / tax-independent-contractor overlap |
| Form 1099-MISC | Box 14 | The same rare overlap when the payment is reported on 1099-MISC |
The 2026 Form 1099-NEC instructions also make an important detail explicit: the qualified overtime amount reported in Box 1d is included in Box 1a, Nonemployee Compensation. Box 1d is a separate breakout of the qualifying overtime amount; it does not replace Box 1a. See the IRS 2026 Form 1099-NEC instructions.
What counts as “qualified overtime compensation”?
Qualified overtime compensation is not the worker’s entire overtime payment. It is the portion of overtime compensation required under section 7 of the FLSA that exceeds the worker’s regular rate. In the common time-and-a-half example, the qualified amount is generally the extra “half” portion not the full 1.5 times pay.
The deduction is available for tax years beginning after 2024 and ending before 2029. The annual deduction is capped at $12,500 for an individual or $25,000 for a married couple filing jointly. It begins to phase out when modified adjusted gross income exceeds $150,000, or $300,000 for joint filers. The amount reported on the information return can therefore be higher than the amount the worker ultimately deducts.
What changed from 2025 to 2026?
Tax year 2025 was a transition year. Under IRS Notice 2025-62, employers and other payors received penalty relief for not separately reporting qualified overtime on 2025 Forms W-2, 1099-NEC, and 1099-MISC, provided the returns were otherwise complete and correct.
For 2026, separate reporting is required. That is why the 2026 information returns now include dedicated overtime fields.
Why would overtime ever appear on a 1099-NEC?
This is the part most likely to be misunderstood. A 1099-NEC is usually associated with a worker who is treated as an independent contractor for federal tax purposes, while FLSA overtime is usually associated with employees. The IRS addressed that apparent contradiction directly in Question 7 of FS-2026-13.
The IRS says a payor reports qualified overtime on Form 1099-NEC or Form 1099-MISC instead of Form W-2 only when the worker is an employee for FLSA purposes but is treated as an independent contractor under the Internal Revenue Code. The IRS also says these circumstances are rare.
| What that means in practice If you issue a normal 1099-NEC to a contractor and there has never been a reason to treat that person as an FLSA employee, do not read Box 1d as a new requirement to calculate overtime for all contractors. The new box is a reporting mechanism for a narrow overlap between two different classification systems. |
Does this IRS update change worker classification rules?
No. FS-2026-13 does not create a new worker-classification test, and it does not tell businesses to reclassify independent contractors as employees. FLSA status and federal tax status are determined under different legal standards. In unusual cases, those standards can produce different results for the same worker.
If a worker’s status is genuinely uncertain, classification should be reviewed based on the actual working relationship. That is a CPA or employment-law question—not something to decide from the existence of Box 1d.
What should businesses and AP teams do before 2026 forms are filed?
1. Identify whether you have any workers with an existing FLSA-versus-tax classification issue. For most businesses, the answer will be no.
2. Confirm that your 1099 software supports the 2026 Form 1099-NEC layout, including Box 1a and the new Box 1d breakout when applicable.
3. If qualified overtime is reported incorrectly, correct the information return promptly. IRS guidance makes clear that incorrect overtime reporting can trigger information-reporting penalties if errors are not corrected.
4. Keep your W-9 collection process separate from this issue. The overtime update changes year-end reporting fields; it does not change the information requested on Form W-9.
Can workers use their own records if the overtime amount is wrong?
For 2026, the IRS tightened the rule for employees who receive Form W-2. A worker generally cannot increase the qualified overtime deduction simply by relying on personal records when the employer omitted or understated the amount on the W-2. The employee should seek a corrected Form W-2c. The IRS also says Form 4852, the substitute wage statement, does not satisfy this reporting requirement for the qualified overtime deduction.
FS-2026-13 notes that similar principles apply to 1099-series reporting for FLSA overtime-eligible individuals. The practical takeaway for payors is straightforward: the information return needs to be accurate; do not assume the recipient can fix a payer-side reporting error with a personal spreadsheet.
Does the overtime deduction change withholding?
For employees, no automatic withholding reduction occurs just because qualified overtime may be deductible. Overtime compensation remains subject to normal federal income tax withholding. An employee who wants withholding adjusted can submit an updated Form W-4 that accounts for the expected deduction.
That W-4 rule is an employee-payroll issue. It should not be read as a new wage-withholding rule for ordinary 1099 contractors.
Does this change Form W-9?
No. As of August 28, 2026, the IRS still lists the current Form W-9 as the March 2024 revision. FS-2026-13 does not change what Form W-9 asks for, when a business requests one, or how W-9 information is collected.
For GetW9 users, the practical point is simple: keep collecting complete W-9 information as part of vendor onboarding and recordkeeping. The new overtime box belongs to the 2026 information-reporting stage, not the W-9 collection stage.
The bottom line
Starting with tax year 2026, qualified overtime compensation must be separately reported. Most FLSA overtime-eligible employees will receive the amount on Form W-2, Box 12, Code TT. Form 1099-NEC Box 1d and Form 1099-MISC Box 14 apply only in the rare situation where a worker is an FLSA employee but is treated as an independent contractor for federal tax purposes.
So, yes—overtime can appear on a 1099-NEC in 2026. But for most businesses collecting W-9s from ordinary independent contractors, the important message is what did not change: your W-9 process remains the same.
Frequently asked questions
Can overtime really be reported on Form 1099-NEC in 2026?
Yes. Qualified overtime can be reported in Box 1d, but the IRS says the 1099 situation is rare and applies only when the worker is an FLSA employee while being treated as an independent contractor for federal tax purposes.
What is Form 1099-NEC Box 1d?
Box 1d is the 2026 field for qualified overtime compensation. The amount is also included in Box 1a, Nonemployee Compensation.
Does every independent contractor now qualify for overtime?
No. The new reporting box does not change FLSA worker-classification rules or create overtime rights for ordinary independent contractors.
Is there a new Form W-9 for 2026?
No. The IRS currently lists Form W-9 as the March 2024 revision.
Does the new overtime reporting rule change how GetW9 collects W-9s?
No. The IRS overtime update affects 2026 year-end reporting fields. It does not change the information requested on Form W-9.
Primary sources
- IRS Fact Sheet FS-2026-13 — Updates to questions and answers about the new deduction for qualified overtime compensation
- IRS 2026 Instructions for Forms 1099-MISC and 1099-NEC
- IRS Notice 2025-62 — 2025 transition penalty relief
- IRS current Form W-9 listing
Disclaimer: This article is for general information only and is not tax or legal advice. For guidance on how these rules apply to a specific business or worker relationship, consult a licensed CPA or employment attorney.
