Compliance
Compliance Checklist for US Employers under the One, Big, Beautiful Bill
Employers need to navigate major compliance shifts under the One, Big, Beautiful Bill—this article lays out exact reporting, systems, and documentation steps to stay on the right side.
By NomadicTax Research Team • 5-8 min read • December 23, 2025
## Why This Matters Now
The IRS has introduced new reporting requirements under the One, Big, Beautiful Bill (OBBB), especially **qualified overtime pay** and **qualified vehicle loan interest**. These requirements hit employers, payors, and lenders starting with tax year 2025—with enforcement eased during the transition period. But missing them could lead to penalties or disruption. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill?utm_source=openai))
## Key Reporting Changes for Employers & Payors
| Responsibility | What Must Be Reported | Who’s Responsible | Timeline & Transition Relief |
|---|---|---|---|
| **Overtime compensation** | Total qualified overtime pay exceeding regular rate per employee or payee | Employers/Payors | Effective 2025. IRS provides penalty relief for 2025 when statements are not perfect but effort made. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill?utm_source=openai)) |
| **Tips & occupation code** | Cash tips, occupation of tip recipient | Employers or payors | New information returns and payee statements. Transition period in 2025. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill?utm_source=openai)) |
| **Car loan interest** | Interest paid on qualified vehicle loans, VIN, borrower statements | Lenders or interest recipients | Loans after Dec. 31, 2024. Reporting begins in 2025; relief for penalties during initial year. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai)) |
## Internal Systems & Payroll Steps
- Update systems/payroll software to distinguish regular vs. qualified overtime compensation.
- Include occupation codes on tip statements.
- Ensure lending institutions collect VIN and loan information for qualifying interest reporting.
- Employers to furnish statements: could be online portal, monthly or annual statements—must supply total amounts. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-transition-relief-for-2025-for-businesses-reporting-car-loan-interest-under-the-one-big-beautiful-bill?utm_source=openai))
## Documentation That Supports Claims
- Pay stubs showing regular vs. overtime rates.
- Written statements or portal entries showing tip amounts and occupation codes.
- Lender statements showing qualified interest and VIN.
- Records of MAGI computation for phase-out calculations.
## Potential Pitfalls & Mitigation
- **Unclear classification** of overtime misreported—ensure payroll meets FLSA rules.
- **Missing VIN** on car deduction claims—vehicles without properly identified VINs may disqualify deductions.
- **MAGI miscalculation**—include excluded income sources as required under statute to avoid unexpected phase-outs.
- **Employer or lender unprepared**—use 2025 transition relief, but don’t ignore requirements. Start early to avoid system or policy changes being overlooked.
## Steps for Employer Action Plan
1. Audit your payroll policies to ensure overtime counting above regular rate.
2. Map out process to capture occupation codes for tipped occupations.
3. Liaise with lenders or finance partners to ensure interest reporting formats align with IRS requirements.
4. Train HR and payroll staff on the new deductions, eligibility thresholds, and reporting obligations.
5. Monitor IRS guidance releases and notice dates to adapt policies accordingly.
## Compliance Summary
- Reporting & statement obligations are mandatory though enforcement penalties are relaxed for 2025.
- Employers and lenders must upgrade systems to capture required data.
- Proper documentation saves claims and avoids future audits.
- Transparency with employees and borrowers about how these deductions work helps build trust and compliance.