Overview
This guide explains the system's updates for 2025 related to overtime reporting and tips calculations, including IRS changes, new system scripts, and reporting features.
How isolved manages overtime and tips reporting
Here are a few updates that are happening for the One Big Beautiful Bill within isolved
IRS guidance on 2025 overtime law changes
The new overtime law went into effect retroactively in mid-2025, leading to changes in reporting overtime compensation.
Employers are encouraged to provide employees an approximate calculation of qualified overtime compensation for the 2025 tax year; however, this is optional.
Box 14 of Form W-2 can display the estimated overtime premium as "Est OT Premium," per IRS guidelines.
isolved system updates
Release timeline:
Release 11.18 (November 21st, 2025):
Initial functionality updates to Year-End Processing.
"Est OT Premium" scripting added.
Launch of the "Overtime and Tips – Employer" report.
Release 11.19 (December 5th, 2025):
Introduction of the "Overtime and Tips – Employee" report.
System functionalities:
Automatic calculation of estimated overtime premiums for 2025.
Memo calc scripts at system and client levels labeled as "Est OT Premium".
Reports generated:
Overtime and Tips – Employer: Available on demand or with final payroll; included in the Archive.
Overtime and Tips – Employee: Available beginning December 5th.
Year-End Processing:
Premium amounts displayed in W-2 Box 14 as "Est OT Premium."
Important: These amounts will not appear on the Payroll Accumulations screen or Employee W2 Preview reports.
Note: Further guidance from IRS is expected.
Optional actions for customers
Modify or block premium visibility
Option 1: Block the premium from appearing on employee W-2s.
Option 2: Modify earnings used for calculations (necessary for special overtime earnings setups).
Important: Contact Support for assistance if any changes to default settings are needed.
FUTA Credit Reduction Updates
This section outlines updates to FUTA tax credit reductions, including state-level changes and isolved adjustments in payroll calculations for New York and other jurisdictions.
What changed with FUTA tax credits in 2025?
New adjustments for New York
New York paid off its FUTA advance balance by November 10th, 2025, which eliminates its 2025 FUTA Credit Reduction.
Initially, a 1.2% FUTA Credit Reduction was applied for New York payrolls dated after December 1st, 2025.
isolved updates:
Release 11.18 (November 21st, 2025): The FUTA rate adjustment's effective date has been moved from December 1st to December 31st, 2025 to prevent incorrect tax calculations.
Release 11.19 (December 5th, 2025): New York's FUTA Credit Reduction will be updated to 0%, and 2026 anticipated FUTA rates for California and Virgin Islands will be prepared.
Note: These changes aim to align your payroll processes with state-specific FUTA tax requirements.
FAQs
Will the adjustments affect payrolls before December 31st, 2025?
No, isolved's updates prevent the 1.2% New York FUTA tax credit reduction from applying before December 31st, 2025.
How will California and the Virgin Islands be affected in 2026?
Rates for these jurisdictions will be updated for anticipated FUTA Credit Reductions beginning in 2026.
Will employees automatically see "Est OT Premium" on their W-2s?
Yes, isolved will display estimated overtime premiums in Box 14 of employee W-2s unless manually blocked by the company.
Are reports available for employee and employer payroll purposes?
Yes, specific reports titled "Overtime and Tips – Employer" and "Overtime and Tips – Employee" are available to access premium amounts. These reports can be run on demand or as part of final yearly payroll processing.
Can special overtime earnings setups affect premium calculations?
Yes, employers with unique overtime earnings setups may need system modifications. Contact Support to make these adjustments.