Tie-out tool / Government comp time
Comp time and Code TT for state and local government
Comp time counts when it is used or cashed out, not when it is earned. The Code TT amount is the comp hours paid x the rate for those hours, divided by three.
Table: comp time paid, and the Code TT part
| Comp hours used or cashed out | Code TT (wages divided by three) | Rate for those hours | Wages paid for them |
|---|---|---|---|
| 8 | $53.33 | $20.00 | $160.00 |
| 12 | $90.00 | $22.50 | $270.00 |
| 24 | $224.00 | $28.00 | $672.00 |
| 40 | $416.67 | $31.25 | $1,250.00 |
| 80 | $933.33 | $35.00 | $2,800.00 |
The rule
Under section 207(o) of the federal wage law, a state or local government agency may give comp time at one and one-half hours for each overtime hour instead of cash. For the deduction, the IRS says the qualified amount is the hours of accrued comp time that are taken and paid as wages, or cashed out at termination, multiplied by the rate that applies to those hours, "divided by three." (IRS FS-2026-13, Q18)
Qualified overtime compensation is not paid when the employee earns the compensatory time off in accordance with 29 USC ยง 207(o).
Which year
The year the comp time is paid. In the IRS example, overtime hours worked in 2025 were banked as comp time and used for a day off in 2026: the qualified overtime is paid in 2026.
What this rule does not cover
- Private employers. The IRS notes that section 207(o) does not apply to private employees or federal employees.
- Police and fire staff on a work period under a different part of the law: qualified overtime is the premium paid under that method. (FS-2026-13, Q17)
- Cash overtime for hours over 40 in a workweek, which uses the ordinary formula.
The tie-out tool does not compute comp time. Add this amount by hand to the cash-overtime figure it gives.
Do the whole year from a file
Drop a timesheet CSV, paste the register overtime totals, and get a worksheet per employee with the reason for every difference.
Open the tie-out toolRuns in your browser. Payroll data is never uploaded.
Questions
Why divide by three?
Comp time is banked at one and one-half hours per overtime hour. One third of the pay for those banked hours is the half-time premium; the rest is straight time.
Does comp time earned in 2026 and still unused go in Code TT for 2026?
No. The IRS says qualified overtime is not paid when the comp time is earned. It counts in the year it is used and paid, or cashed out.
Sources
Fetched 2026-11-10. Regulation text was checked against the federal annual edition; links open the current online version.
Updated 2026-11-10. Tickfoot is an information tool, not tax, legal or professional advice.