The Internal Revenue Service (IRS) has released guidance (FS 2026-01) on the new deduction for qualified overtime (OT) pay. The guidance is in the form of frequently-asked questions (FAQs).

This guidance focuses more on issues at the worker as opposed to employer level. Specifically it contains eight Q&As focused primarily on eligibility, and on where to find more information.

The IRS noted that more guidance is expected. The agency said, “These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need todo so.”

Prospects: The new OT deduction applies to compensation earned last year (in2025). So the IRS is releasing interim guidance as quickly as possible. More is expected in the coming weeks.

NAIFA Staff Contact: Jayne Fitzgerald – Director –Government Relations, at jfitzgerald@naifa.org.