DFAS Overtime Reporting is Confusing: Why Federal Firefighters Are Owed More Than What's Shown

January 2026 Update: Your 2025 W-2 is now out—and there's no overtime reported. Read the latest article on what to do →

Updated January 3, 2026: Added clarification on FLSA exempt vs. non-exempt status. Updated December 31, 2025: Clarified taxpayer responsibility per IRS guidance.

If you're a federal firefighter and your year-end LES shows a "Total Qualified Overtime Pay per PL119-21" amount that seems way too low—or worse, $0—you're not crazy. But DFAS isn't necessarily wrong either. Under current IRS guidance, it's YOUR responsibility to calculate your qualified overtime deduction for 2025—not DFAS.

I'll explain why DFAS is only reporting part of the picture, what the IRS guidance actually says about taxpayer responsibility, and the tax position I'm taking on my own return. If you haven't read my previous article on IRS Notice 25-69, start there for the basics of the divide-by-3 calculation method.

First: Check Your FLSA Status—Not Everyone Qualifies

Before calculating anything, you need to confirm you're FLSA non-exempt. The OBBBA overtime deduction only applies to overtime that is "required under 29 USC § 207." According to IRS Notice 2025-69:

"In order for overtime to be required under 29 USC § 207, it must, among other requirements, be paid to an individual who is both covered by and not exempt from the FLSA (an FLSA-eligible employee)."

The IRS guidance is explicit: "Overtime compensation paid to FLSA-ineligible employees is not qualified overtime compensation within the meaning of section 225(c) with respect to such employment, regardless of applicable State law provisions or other circumstances causing these amounts to be paid."

How to Check Your FLSA Status

Your FLSA status appears in two places:

• SF-50 (Notification of Personnel Action): Look at Block 35—it shows "N" for non-exempt or "E" for exempt
• LES (Leave and Earnings Statement): Check Box 10—it shows "N" for non-exempt or "E" for exempt

If your SF-50 shows "N" (non-exempt), you're covered under the FLSA and your overtime is "required under 29 USC § 207." If it shows "E" (exempt), your overtime is paid under Title 5 instead of the FLSA—and it does not qualify for the OBBBA deduction.

Who Is Typically FLSA Exempt?

Many supervisory firefighters—fire chiefs, assistant chiefs, and battalion chiefs—are classified as FLSA exempt under the executive exemption. Even though they may work 144-hour tours and receive overtime pay at 1.5x their rate, that overtime is paid under 5 U.S.C. § 5542 (Title 5), not under 29 USC § 207 (FLSA).

The OBBBA's language is specific: qualified overtime must be "required under" the FLSA. Title 5 overtime—while still legitimate overtime pay—is not required under the FLSA. It's a different statutory authority entirely.

Bottom line: If you're FLSA exempt, this deduction doesn't apply to you—even if you work the same schedule and get paid the same overtime rate as non-exempt firefighters. Check your SF-50 before proceeding.

Why DFAS Isn't "Wrong"—But You May Still Be Owed More

According to IRS IRB 2025-50 and Notice 2025-69, employers including DFAS are not required to separately report qualified overtime compensation on Form W-2 for tax year 2025. The guidance explicitly states:

"Because employers and other payors will not be required to separately account for qualified overtime compensation, a separate accounting of qualified overtime compensation will not appear on written statements furnished to individuals for tax year 2025 absent an entry in box 14 of Form W-2 or a separate statement containing that information."

DFAS may choose to report some overtime premium information (like volunteer overtime shifts) in box 14 or on your LES, but they're not required to report any category of overtime premium for 2025. The absence of your in-tour overtime premium isn't a reporting error under current IRS guidance.

What DFAS Is Reporting

Here's what's showing up on federal firefighter LES remarks:

TOTAL QUALIFIED OVERTIME PAY PER PL119-21 FOR 2025: $X,XXX.XX

That number is only capturing overtime shifts you picked up beyond your regular tour. If you didn't pick up a single extra shift all year, your LES might show $0.

The issue is federal firefighters working a standard 144-hour pay period already work 38 hours of FLSA-required overtime every single pay period—whether they pick up extra shifts or not.

Here's the math:

The 7(k) Exemption and Why Your Regular Tour Includes Overtime

Federal firefighters fall under FLSA Section 7(k), which sets different overtime thresholds for fire protection employees. Under 29 CFR § 553.230, the overtime threshold for a 14-day work period is 106 hours.

Here's the calculation:

• Standard tour: 144 hours per pay period
• 7(k) overtime threshold: 106 hours
• FLSA-required overtime in tour: 144 - 106 = 38 hours per pay period

That 38 hours isn't discretionary. It's not a bonus. It's overtime compensation required under 29 USC § 207(k)—which is exactly what qualifies for the deduction under the One Big Beautiful Bill Act (OBBBA).

What IRS Notice 2025-69 Actually Says

IRS Notice 2025-69 provides guidance on calculating qualified overtime compensation for the 2025 tax year. Section III.B.2(G) specifically addresses firefighters:

"If an individual's employer satisfies the requirements under 29 USC § 207 by operation of another subsection of the FLSA other than 29 USC § 207(a) (including but not limited to public sector employees in fire protection and law enforcement (29 USC § 207(k)))...the individual must compute the amount of overtime compensation by operation of the different overtime rules used in the relevant provision of 29 USC § 207 that apply to the individual."

Translation: You calculate your qualified overtime using the 7(k) thresholds, not the standard 40-hour workweek rules.

Example 5 in the notice confirms this approach for law enforcement on a 7(k) schedule:

"Individual C works in law enforcement and is paid $15,000 of total annual overtime pay on a 'work period' basis of 14 days that complies with section 207(k) of the FLSA. For purposes of determining the amount of qualified overtime compensation received in tax year 2025, Individual C may include $5,000 ($15,000 divided by 3)."

Notice it says "total annual overtime pay"—not just picked-up shifts. The example uses all overtime earned under the 7(k) work period, then applies the one-third calculation to get the FLSA premium portion.

Your Responsibility: Calculate the Full Amount

The IRS guidance is clear: for 2025, employees must use payroll statements, pay stubs, or other documentation to determine the deductible amount for their tax return. The IRS allows "any reasonable method" for approximating qualified overtime compensation.

Here's a simple example of what you may be entitled to:

A federal firefighter works a standard 144-hour tour every pay period for 26 pay periods. They don't pick up a single extra shift. Their regular hourly rate is $30.

In-tour overtime per pay period:

• 38 hours × $30/hour × 1.5 = $1,710 total OT compensation
• FLSA premium (the "half"): $1,710 ÷ 3 = $570

Annual qualified overtime:

• $570 × 26 pay periods = $14,820

Under DFAS's current reporting, this firefighter would show $0 in qualified overtime on their LES—but they may be entitled to deduct $14,820 (capped at $12,500 per the statute). The difference? Potentially thousands in tax savings.

Why This Makes Sense

Consider this: if you pick up an extra overtime shift, DFAS reports that premium as qualified overtime. But the overtime rate for that extra shift is the exact same rate as the 38 hours of overtime built into your regular tour. It's the same rate because both are required under 7(k).

If the premium qualifies when you pick up an extra shift, there's no logical reason it wouldn't qualify for the in-tour overtime that's paid at the identical rate under the identical FLSA provision.

What Changes in 2026

Beginning with tax year 2026, employers will be required to separately report the total amount of qualified overtime compensation on Form W-2 (box 19). But this requirement does not apply for 2025. For now, you're responsible for calculating it yourself using your pay stubs and LES statements.

The Tax Position I'm Taking

I'm claiming the FLSA premium portion of my in-tour overtime as qualified overtime compensation on my 2025 return. Here's why I believe this is defensible:

1. The statute is clear: Section 225(c) defines qualified overtime as "overtime compensation paid to an individual required under 29 USC § 207 that is in excess of the regular rate." My 38 hours of in-tour OT is required under § 207(k).
2. Notice 2025-69 supports it: The IRS specifically tells 7(k) employees to use their applicable overtime rules, and Example 5 uses total annual overtime—not just discretionary overtime.
3. The notice provides calculation methods: Section III.B.2 allows taxpayers to use pay stubs and the one-third method when employers don't separately report the FLSA premium.

Is this position aggressive? Somewhat. DFAS is clearly interpreting it differently. But I believe the plain language of the statute and the IRS guidance support treating in-tour 7(k) overtime as qualified overtime compensation. This is the tax position I'm taking on my own return—I'm not telling you what to do with yours. Talk to a tax professional if you're unsure how to proceed.