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The portion of overtime pay that is tax exempt is only the overtime premium - the half part of time-and-a-half. So, if your hourly rate was $10 an hour and you worked 10 hours of overtime, you would get $15 an hour for 10 hours or $150. But only $50 of that is tax exempt overtime. The other $100 is taxable, just like any other earnings. So if your overtime was $7,780.62 and that is time-and-a-half, then the half part is $2,594, and that is the tax exempt portion. The program's calculation is correct.
@rookflex what isn't clear from your post is what the hourly rate is on the 50 hours and on the 10 hours.
Based on the way you wrote it, it could be that the entire $7780 is the eligible OT, but maybe not.
if you work 50 hours, what is the rate of pay for those 50 hours and what is the rate of pay for those 10 hours?
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