After all, the legislation passed in July 2025, leaving employers with little prep time before tax year 2025 Forms 1099 and Forms W-2 were due. Worse, the law contained limited guidance on how to do the calculations, which was especially tricky given the retroactive component.

But now, the IRS has granted relief.

Here are the details.

IRS Guidance

In Notice 2025-62, the IRS said that it’ll provide TY 2025 penalty relief to employers and other payors for two errors as they relate to the OBBBA.

The errors and their Internal Revenue Code (IRC) references are:

• Failure to file correct information returns (IRC Sec. 6721), and
• Failure to furnish correct payee statements (IRC Sec. 6722).

That means, thanks to this penalty relief, the immediate pressure is off when it comes to:

• No tax on tips — the OBBBA requires a separate accounting of any amount reasonably designated as cash tips and the occupation of the individual receiving such tips, and
• No tax on overtime — the law says that employers must separately provide the total amount of qualified overtime compensation.

As the IRS previously announced, it won’t make changes to Form W-2 or Form 1099 for tax year 2025. That was good news on the one hand, but it also led to uncertainly about what boxes and codes to use in order to communicate the payment details to the IRS and workers.

Optional Info on W-2s and 1099s

The latest IRS notice explains that, while businesses don’t have to relay any information to employees and...

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