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It describes the “qualified overtime compensation” definition under the Fair Labor Standards Act, the deduction limits up to $12,500 ($25,000 for joint filers), and phase-down rules above specified income thresholds. The memo also requires retroactive overtime reporting on Form W-2 (effective Jan 1, 2025, through Dec 31, 2028) and notes no immediate change to biweekly net pay for eligible employees.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":41,"@type":70,"position":76},"https://docshare.wps.com/template/letters/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/bcpo-payroll-memo-bcpo-payroll-memo-25-03-one-big-beautiful-bill-act-obbba-no-tax-on-overtime/302732/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/bcpo-payroll-memo-bcpo-payroll-memo-25-03-one-big-beautiful-bill-act-obbba-no-tax-on-overtime/302732.png","ImageObject",442,249,{"name":88,"@type":89},"Gelato","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-09-28","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":76},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"What does the OBBBA change regarding overtime taxation?","Question",{"text":108,"@type":109},"The OBBBA provides a temporary exemption of federal income taxation of the overtime premium pay and a deduction related to qualified overtime compensation.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"How is “qualified overtime compensation” defined in the memo?",{"text":113,"@type":109},"It is overtime compensation paid to an individual required under the Fair Labor Standards Act (FLSA) that exceeds the regular rate at which the person is employed, with limits tied to FLSA standards.",{"name":115,"@type":106,"acceptedAnswer":116},"What reporting is required, and what is the effective and expiration period?",{"text":117,"@type":109},"Employers must report overtime compensation on Form W-2. The requirement is retroactive to January 1, 2025 and expires on December 31, 2028.","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},302732,1790573208,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":40,"category_name":41,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":76,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":73,"language":135,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":136,"faqs":137,"seo_title":138,"seo_description":61,"update_tm":139,"read_time":9},19241457091524,"https://us-avatar.wpscdn.com/davatar_276721f389ce27ea32af1340a28f341c","MEMO  \nTO: All Human Resource Directors  \nfor Agencies Serviced by the  \nBureau of Commonwealth Payroll Operations FROM: Stephen R. Burns  \nDirector  \nBureau of Commonwealth Payroll Operations DATE: July 16 , 2025  \nRE: BCPO Payroll Memo \\#25-03, One Big Beautiful Bill Act (OBBBA)– No Tax on Overtime  \nOn July 4, 2025, H.R. 1 , the One Big Beautiful Bill Act (OBBBA), was signed into law. The following information is being shared with you from PayrollOrg (PAYO) , formerly the American Payroll Association:  \nThe OBBBA contains several provisions that will affect payroll. Here are highlights from Title VII, Subtitle A, specifically regarding No tax on overtime (Chapter 2, §70202):  \nThe legislation provides a temporary exemption of federal income taxation of overtime pay. The exemption would apply only to the overtime premium. The legislation establishes a deduction, subject to certain limitations, equal to the “qualified overtime compensation received during the taxable year”up to $12,500 ($25,000 for joint filers) . The amount allowed as a deduction will be reduced by $100 for each $1,000 an individual earns above $150,000 ($300,000 for joint filers) .  \n“Qualified overtime compensation” means overtime compensation paid to an individual required under Section 7 of the Fair Labor Standards Act of 1938 (FLSA) that is in excess of the regular rate at which such individual is employed. The OBBBA specifically limits the qualified overtime compensation to the standards set forth in the FLSA.  \nAlthough specifics are not fully available yet , the overtime premium would be limited to the premium portion only, the half or 0.5 portion of the time and a half. For example, an employee who is paid $15 per hour would receive $22.50 per hour for time and a half overtime. The overtime premium eligible for the tax deduction in this instance would be $7 .50.  \nThe legislation also includes a requirement for employers to report the overtime compensation on Form W-2, Wage and Tax Statement. This provision is retroactive to January 1, 2025, and expires on December 31, 2028.  \nThe Internal Revenue Service is expected to issue regulations or other guidance for employers to implement the reporting requirements for the “no tax on overtime” provision and BCPO will issue any updates to you as they become available.  \nEmployees should not expect any changes to their biweekly net pay as a result of this legislation as this is a deduction that eligible employees would claim when filing their tax return. Employees should consult their personal tax advisor with questions regarding their eligibility for this federal tax deduction or any tax filing related questions.  \nAny questions on this memo can be sent to BCPO at [ra-ob-bcpo@pa.gov](ra-ob-bcpo@pa.gov).  \nc: John Kaschak, Deputy Secretary for Comptroller Operations, Office of the Budget  \nJason Swarthout, Acting Deputy Secretary for Human Resources and Management , Office of Administration Michele Wiest, IES Business Operations Payroll/Travel Manager , Office of Administration  \nOffice of Comptroller Operations Bureau Directors (5)","cbCaifDPKyQ3uB3u","https://ap.wps.com/l/cbCaifDPKyQ3uB3u","pdf",199228,"English","# Overview of BCPO Payroll Memo\n## Key provisions for “No tax on overtime”\n## Qualified overtime compensation and deduction limits\n## Employer reporting requirements and timeline\n## Expected impact on employees","[{\"question\":\"What does the OBBBA change regarding overtime taxation?\",\"answer\":\"The OBBBA provides a temporary exemption of federal income taxation of the overtime premium pay and a deduction related to qualified overtime compensation.\"},{\"question\":\"How is “qualified overtime compensation” defined in the memo?\",\"answer\":\"It is overtime compensation paid to an individual required under the Fair Labor Standards Act (FLSA) that exceeds the regular rate at which the person is employed, with limits tied to FLSA standards.\"},{\"question\":\"What reporting is required, and what is the effective and expiration period?\",\"answer\":\"Employers must report overtime compensation on Form W-2. The requirement is retroactive to January 1, 2025 and expires on December 31, 2028.\"}]","BCPO Payroll Memo - BCPO Payroll Memo #25-03 - One Big Beautiful Bill Act (OBBBA) - No Tax on Overtime | PDF",1789796424]