The Internal Revenue Service (IRS) released guidance on November 5, 2025, granting employers relief from tax penalties for failing to provide employees information related to their (1) “qualified tips” and (2) “qualified overtime compensation” that is otherwise required under the One Big Beautiful Bill Act (OBBBA). The relief applies only to the reporting obligation for the 2025 tax year.
Related Links
- IR-2025-82 (IRS announces no changes to individual information returns or withholding tables for 2025 under the One, Big, Beautiful Bill Act)
- IR-2025-92 (Treasury, IRS issues guidance listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill)
- IR-2025-110 (Treasury, IRS provides penalty relief for tax year 2025 for information reporting on tips and overtime under the One, Big, Beautiful Bill)
- IRS Notice 2025-62 (Relief from Certain Penalties Related to Information Reporting Required in Connection with No Tax on Tips and Overtime)
Background
- Deduction for overtime pay and tipped income: For tax years 2025 -2028, the OBBBA allows employees to take an above-the-line tax deduction on qualified overtime pay and qualified tips.
- Employer reporting obligations: The OBBBA requires employers to report on Form W-2 the portion of an employee’s pay that is qualified overtime compensation and qualified tips. For employees receiving qualified tips, employers must also identify the employee’s qualifying tip-earning occupation. The...
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