On November 21, 2025, the Internal Revenue Service (IRS) and the U.S. Department of the Treasury released guidance outlining how workers can calculate their tax deduction for tips and overtime pay for the 2025 tax year when their employer does not separately report the information. The guidance provides specific examples of how a tax deduction for tips or overtime pay would be determined in various scenarios with different types of payroll data available to employees.

Quick Hits

• The IRS and Treasury Department recently published guidance to clarify how employees may calculate their tax deduction for tips and overtime pay for the 2025 tax year when they have limited information.
• The guidance shows examples of common situations, such as a bartender with reported and unreported tips, a self-employed travel guide who received tips on digital payment apps, and a law enforcement employee who is paid overtime on a “work period” basis of fourteen days.

Under the 2025 budget reconciliation bill, workers who customarily and regularly receive tips can deduct up to $25,000 in tips from their income subject to federal income tax starting on January 1, 2025, through December 31, 2028. The deduction does not apply to workers earning more than $150,000 per year (for single filers) or $300,000 (for joint filers). The IRS issued a list of eligible tipped occupations, including bartenders, waitstaff, cooks, dishwashers, bakers, gambling dealers, dancers, musicians, concierges, hotel...

Read Full Story: https://news.google.com/rss/articles/CBMiswFBVV95cUxNWEM3dUN5dVg2MWNtT0NnSkdI...