Key Compliance Changes Under OBBB
OBBB brings several new obligations for employers, payors, lenders, and employees:
- Tips deduction & occupation codes: Employers must furnish statements showing tips received, and record occupations listed in IRS guidance. Certain occupations qualify for the “no tax on tips” deduction. (irs.gov)
- Overtime deduction & reporting: Qualified overtime (above regular rate under FLSA) becomes deductible, and employers/payors must report overtime compensation. (irs.gov)
- Car loan interest reporting: Lenders have new reporting responsibility for interest received on qualified vehicle loans; businesses must provide borrower statements or equivalent under guidance. Relief exists for penalties in 2025 if certain methods used. (irs.gov)
- Remittance transfer excise tax: Providers must collect a 1% tax on specific remittance transfers, make semimonthly deposits starting Jan 1, 2026, and file quarterly returns. Penalty relief exists for first three quarters of 2026 under Notice 2025-55. (irs.gov)
Employer & Employee Responsibilities
| Role | Must Do | Timing & Penalty Exposure |
|---|---|---|
| Employer / Payor | Adjust payroll/reporting systems to capture tips and overtime amounts, furnish to employees; ensure occupation codes are tracked per IRS guidance. Maintain records of overtime compensation. | For tax year 2025, forms remain largely unchanged—but systems need to be ready for 2026 changes. Penalties may apply if reporting is missing or inaccurate without reasonable cause. (irs.gov) |
| Lender or Interest Recipient | Provide payee statements for qualified car loan interest using acceptable formats (online portal, monthly statement, etc.), and file information returns where required. | For 2025, transition relief means leniency if statement is made available via email/portal or regular statement. Penalties may apply after transition period. (irs.gov) |
| Remittance Providers | Begin collecting tax from sender, make semimonthly deposits, file quarterly returns starting Jan 1, 2026. Be alert for penalty relief provisions. | First deposit due Jan 29, 2026. Under Notice 2025-55, providers may avoid deposit penalties for first three quarters provided correct payment is made and reasonable cause shown. (irs.gov) |
Examples of Compliance in Action
- Restaurant Owner Rita adds code “110” for beverage and food service staff into payroll software so servers can benefit from tips deduction under OBBB.
- Bank Loan Officer Leo ensures that clients purchasing qualified vehicles receive annual statements showing interest paid. Leo’s bank sets up online portal to distribute statements—qualifies under transitional relief.
Practical Steps to Avoid Audit Risk
- Document everything: tips, overtime pay, qualifications. Keep logs for unreported tips.
- Use clear written statements / disclosures to employees and borrowers.
- Update payroll/lender policies now—not in 2026. Pilot systems early.
- Consult regs and notices: Notice 2025-69 (tips, overtime); Notice 2025-57 (car loan interest); Notice 2025-71 (rural property interest) etc. (irs.gov)
By proactively aligning your processes with OBBB rules, employers and employees avoid penalties and make the most of the available deductions.