Overtime U S. Department of Labor

The overtime rate must be at least 1.5 times the amount of your hourly pay rate. Your employer must pay you at the overtime rate for the extra hours you worked. If California mirrors the federal timeline, we could see movement by mid-2025. And, California’s no tax on overtime policy will need to navigate a gauntlet of committees, unions, and fiscal hawks. For California, a state that prides itself on worker protections, the question is whether this federal nudge will spark a bespoke California’s overtime tax exemption bill—or if it’s just noise. But even workers who are covered by the Fair Labor Standards Act may not be entitled to overtime pay.

Can employers force you to work overtime?

Different workweeks may be established for different employees or groups of employees. Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned. Overtime gets confusing when it comes to salaried versus hourly employees. When most people talk about overtime, it’s typically in the context of a 40-hour workweek paid on an hourly basis. To understand which employees are entitled to overtime pay, business owners must determine whether real estate cash flow they’re categorized as exempt or nonexempt employees. The FLSA outlines how employers should classify employees; failure to correctly classify employees can result in costly penalties that can retroactively apply as far back as the employee’s hire date.

No Tax on Tips and Overtime Proposals Gain Steam Across States, but Remain a Bad Idea

• « Is Extra Pay Required For Weekend Or Night Work? »Additional information about overtime pay.
• If and when tax laws change, TurboTax will be up to date with the latest tax laws when the IRS issues guidance.
• The following year, that figure plunged as the country reeled from the pandemic, the police killing of George Floyd and the racial reckoning that followed.
• Since the FLSA defines a workweek as “any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods,” overtime can run as long as you need if you properly compensate employees for the additional time.
• Exempting overtime from taxation would do more harm than good, and there are far better ways to support workers putting in long hours.

In the example below, a taxpayer regularly working five hours of overtime a week would pay 30 percent less income tax compared to a taxpayer with the same pre-tax income but who is FLSA-exempt or does not work overtime. The concept piggybacks on a federal resolution to exempt overtime pay from taxes. However, it’s up to state legislators to craft and pass a local version. As of today, March 12, 2025, there’s no firm date for how much is overtime pay when California’s no tax on overtime might start.

What is Form 720? Understanding the Ins and Outs of Quarterly Federal Excise Tax Returns

Despite its populist allure, exempting tips, overtime, and bonuses from taxation is a flawed idea that undermines economic fairness, distorts labor markets, and jeopardizes tax revenues. Two workers earning the same annual income could face vastly different tax burdens simply because of the nature of their livelihoods. Under specific conditions, employers are allowed to pay their workers one-half the regular rate for overtime. For overtime, employers have to use the minimum wage, not the cash wage they actually pay, to calculate your regular rate. Workers who regularly make more than $30 in tips every week are considered “tipped employees.” Employers are allowed to take a “tip credit,” essentially reducing their cash wage obligations below the federal minimum wage.

No tax on overtime is ripe for abuse by high earners, straining public budgets while further complicating the tax code

Advocates say it rewards effort; critics warn it could strain state coffers or complicate payroll. Federal law allows you to file a lawsuit against your employer for double the wages you’re owed, and prohibits any kind of retaliation. Learn more adjusting entries about how a wage and hour attorney can help you get back the money you’ve lost, check out our FAQ.