W-2 code TT: Tipped employees
Short answer: For a tipped employee the regular rate includes the tip credit, so it is at least the minimum wage, not the cash wage. Code TT is half of that rate for each hour over 40. Tips themselves go in code TP.
Example
A server is paid a $2.13 cash wage and the employer takes a $5.12 tip credit, so the regular rate is $7.25. In a 45-hour week code TT is 0.5 × $7.25 × 5 = $18.13. Enter the cash wage plus the tip credit for all hours ($326.25) as straight-time pay.
A server is paid a $2.13 cash wage and the employer takes a $5.12 tip credit, so the regular rate is $7.25. In a 45-hour week code TT is 0.5 × $7.25 × 5 = $18.13. Enter the cash wage plus the tip credit for all hours ($326.25) as straight-time pay.
The rules
- The regular rate of a tipped employee includes the tip credit (29 CFR 531.60).
- Cash tips are reported in box 12 with code TP and the occupation code in box 14b (2026 W-2 instructions).
- A state with a higher minimum wage or no tip credit gives a higher regular rate: use what you actually credit or pay.
Work it out for your payroll
The free code TT calculator does this per workweek for one employee or a whole payroll CSV, with bonuses spread back and weeks split by pay date. It runs in your browser.
The free code TT calculator does this per workweek for one employee or a whole payroll CSV, with bonuses spread back and weeks split by pay date. It runs in your browser.
Whole payroll, offline? The W-2 Code TT Kit runs every employee in one file with no network access, plus CSV templates, the week-by-week audit trail and a 12-page guide to every rule.
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Get the kit ($29, accountants $99)
Sources
- IRS FS-2026-13: Qualified overtime compensation FAQs (August 2026)
- IRS: 2026 General Instructions for Forms W-2 and W-3
- eCFR: 29 CFR 531.60, overtime for tipped employees
Not tax or legal advice. Facts checked 27 Oct 2026 against the IRS FAQs (FS-2026-13) and the FLSA regulations.
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Other situations
- Double time
- State daily overtime (California and others)
- Salaried non-exempt employees
- Fluctuating workweek
- Nondiscretionary bonuses
- Piece-rate and day-rate pay
- Hospitals (8/80) and police or fire (7(k))
- Public-sector comp time
- Exempt employees and owners
- Weeks paid in the next year
- Fixing a wrong code TT amount (W-2c)