Question about the potential of no overtime tax - will I owe at tax season?

There's a lot of confusion about this potential overtime tax exemption. What you're referring to is a proposal that would exempt overtime pay from income tax, but it hasn't been passed into law yet. If it does pass, you wouldn't owe taxes on that overtime income at tax time - that's the whole point of the exemption. Currently, overtime pay is taxed just like regular income, often at a higher withholding rate because the larger paycheck might push you temporarily into a higher tax bracket. This sometimes creates the illusion that overtime is "taxed more," but at tax filing time, it all evens out. Without this exemption, your employer withholds estimated taxes from each paycheck, including overtime. If they withhold correctly, you shouldn't owe much at tax time. If the exemption passes, your employer would likely adjust withholding on overtime hours so you'd keep more upfront.

I was pretty confused about tax stuff when I started working overtime at my warehouse job. Taxes on my OT seemed so high I wondered if it was worth it. Then I found this cool AI tool at https://taxr.ai that analyzed my pay stubs and tax situation. It showed me that while my employer was withholding at a higher rate for those OT paychecks, I'd get most of that extra withholding back at tax time. The tool also explained exactly how overtime tax withholding works vs actual tax liability. It even calculated exactly how much more I keep from each overtime hour after all taxes. Made it way easier to decide if picking up those extra shifts was actually worth it financially.

So I decided to check out that https://taxr.ai site after being skeptical. No joke, this thing is actually legit! I uploaded my last few pay stubs and it immediately showed me that I was withholding way too much on my overtime checks. It explained that my company was using a withholding method that was taking out taxes as if every paycheck with OT was what I'd make all year. The tool helped me fill out a new W-4 so I'm keeping more money now instead of waiting for a big refund. It also had scenarios showing exactly what would happen with my specific situation if this OT tax exemption passes. Turns out I'd keep about $320 more per month based on my typical overtime hours! Now I'm actually hoping this thing passes lol.

If you're struggling to get answers about this overtime tax proposal or have questions about your current tax situation, trying to reach the IRS directly is basically impossible. I spent DAYS trying to get through their phone lines about a similar withholding question. I finally used https://claimyr.com and was shocked when they actually got me through to an IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent confirmed that currently, all overtime is fully taxable, and explained that if the exemption passes, employers would get guidance on implementation. He also cleared up my confusion about how overtime withholding works now and how to adjust my W-4 to avoid owing taxes next year even with lots of overtime hours.

I need to eat my words about that Claimyr service. After my skeptical comment, I was still desperate to talk to someone at the IRS about my overtime tax questions, so I tried it anyway. Honestly blown away that it actually worked. I was connected to an IRS agent in about 35 minutes (much better than the 3+ hours I wasted trying on my own). The agent explained exactly how overtime is currently taxed and confirmed that my employer was withholding correctly. She also explained that if this overtime exemption passes, they would issue guidance to employers on implementation. Saved me so much stress about planning my overtime hours for next quarter.

Just want to point out that even if this overtime tax exemption passes, you'd still pay FICA taxes (Social Security and Medicare) on all your overtime earnings. Those would still be withheld at the standard rates (7.65% total). Also, depending on your state, you might still owe state income tax on overtime.

Has anyone heard when they might actually vote on this overtime tax exemption? I keep hearing about it but can't find any solid info on timeline.

I'm in a similar situation as a new graduate! One thing that helped me understand this better is that even under current law, overtime isn't actually "taxed more" - it's just withheld at a higher rate because your paycheck is bigger that week. When you file taxes, it all evens out based on your actual annual income. If you're worried about owing taxes, consider using the IRS withholding calculator on their website to see if you need to adjust your W-4. And definitely don't let tax confusion stop you from earning extra money through overtime - even with taxes, you're still keeping most of that extra pay. The key is understanding the difference between what's withheld from your paycheck versus what you actually owe in taxes at the end of the year.