Failing Smart Check overtime deduction because box 1 is lower than box 7

[Cardchucker]

I have a job where most of the pay is tips, all of which come in my paycheck and are on my W2. Overtime premium is not listed on the W2, but I have that information on my year end pay stub.

When I try to enter this into Turbo Tax, I get an error:

"Manually entered overtime should not be greater than one-third of W-2 Box 1 (Wages) minus W-2 Box 7 (Social Security tips)"

The problem is, the box 1 has my total wages+tips MINUS what I put into my 401k, so that number is actually lower than what is in box 7.  Box 5 is what actually has my gross wages+tips.

Is this a bug in the software or did my employer fill out the W2 incorrectly? Is there any workaround?

[AmyC]

Box 1 lower than Box 5 makes sense for 401k pre-tax contributions. Let's check your OT premium. It is not your overtime paid. It is the half in time and a half pay. For example: If you earn $10/hr regular pay and OT is $15/hr. Only the $5 difference is OT premium for deduction.

I just created a return following what your comments and was able to get the OT. Box 1 is small, box 5 larger, box 7 is larger, box 12 with 401k (bigger than box 1), I got the tips and OT.

Maybe you have an answer wrong. Be sure to mark you are not an exempt employee.

Since mine passed the federal review, I wonder if yours is in the e-file review. If so, you need to contact support and let them see your screen. 

[Cardchucker]

It's happening during the regular federal tax smart check. Here's the numbers I'm entering:

[RogerD1]

Based on your screenshots, you get significant tips at your workplace such that the amount of tips that are reported exceed the taxable wages reported in box 1.  Although the limit of the tip deduction is $25,000, this is still greater than the wages in box 1 which is going to result in no taxable income.  Because of that, the overtime deduction is of no benefit to you anyway because there is already no taxable income on this W2.  You can only use the overtime deduction to offset taxable income on this W2 only.  Go back and edit your W-2, and click through screens until you get to the screen "Let's check for other situations" - uncheck the box for Overtime and if nothing else applies on that screen, select None of these apply to me, then click Continue.  If this W2 is the only income for you, then you will not have any tax liability at all even without deducting the overtime.

[Cardchucker]

Thanks for the replies. The W2 I posted was one example, I have about $43k tip income between jobs.

I believe this has to do with how the 401k deduction is applied. It seems to go to wages first, then tips. Because of this, it's letting me do the full tip deduction but is fully locking out the OT deduction. I ran some numbers and if it were applied proportionately, I'd still get the full tip deduction and at least part of the OT.

I guess I'm just trying to figure out if this is a bug or if it's how the IRS is actually doing the calculation. Or maybe it was just a late change that they haven't fully worked out yet. It only affects people with substantial tips, OT, and 401k contributions.