Compliance
Compliance Essentials: New Reporting & Penalties Under OBBB
The OBBB introduces new reporting duties and transitional penalty relief for tips, overtime, and remittance tax. This article helps employers and payors stay compliant and avoid traps.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What Are The New Reporting Obligations?
The One, Big, Beautiful Bill adds several new information-reporting requirements: tips, overtime, and car loan interest reporting are now subject to more detailed disclosures. Employers and payors must prepare statements showing cash tips and their recipient’s occupation, and report qualified overtime separately on returns. Borrowers with car loans may need statements from lenders. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
Here’s a breaking-down:
- **Tips & Occupation Reporting**: Employers must file information returns or SSA/W-2 statements showing cash tips and the occupation of tip recipients. Deductions allowed for employees/self-employed under certain occupations. Not eligible if in SSTB (Specified Service Trade or Business) employer or self employed. Maximums and income phase-outs apply. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- **Overtime Reporting**: Only qualified overtime compensation (pay above regular wage) is deductible to employees. Payors must provide these amounts separately. Income and deduction caps apply. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- **Car Loan Interest Reporting**: Personal-use vehicle loans (not leases), originating after Dec 31, 2024, for vehicles assembled in the USA, are now deductible up to $10,000. Lenders must file returns and statements showing interest amounts. VIN must be included. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
## Transition & Penalty Relief: What You Need to Know
To avoid unexpected burdens in early adoption:
- **Notice 2025-62** provides penalty relief for payors failing to correctly report tips, overtime, or occupation amounts for tax year 2025. If full and correct returns are submitted otherwise, this relief applies. ([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))
- **Forms un‐changed for 2025**: W-2, 1099, 941, etc., remain the same for tax year 2025—the new reporting lines, boxes, forms will be introduced in tax year 2026. Employers should keep system-ready but aren’t required to modify forms retroactively. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-no-changes-to-individual-information-returns-or-withholding-tables-for-2025-under-the-one-big-beautiful-bill-act?utm_source=openai))
- **Remittance Transfer Tax (Section 4475)**: Providers starting Jan 1, 2026, must collect a 1% tax on certain remittance transfers, make semimonthly deposits and file quarterly returns. Notice 2025-55 grants relief from deposit penalties during the first three calendar quarters of 2026 if certain conditions are met. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## Sample Scenarios and Practical Steps
- **Example 1: Local Restaurant Owner**: Employs servers who receive cash tips. Under OBBB in 2025, she doesn’t yet need to alter W-2 form structure, but should start tracking both total cash tips and occupation codes, so she can comply in 2026. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai))
- **Example 2: Remittance Service Provider**: Starting Jan 1, 2026, certain remittance senders pay the new tax. The business must file Form 720 quarterly and start making semimonthly deposits—if they under-deposit during the first three quarters of 2026, Notice 2025-55 may shield them from penalties if conditions are met. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## Checklist for Employers & Payors
- Update payroll systems to capture cash tips, overtime pay separately, and record employee occupations.
- Begin gathering VIN info for qualified vehicles when interest deductions might apply.
- Train staff and communicate with lenders or remittance partners about new collection and reporting timelines.
- Review your remittance operations and decide which transactions will trigger the 1% tax come Jan 2026.
- Work with tax professionals or advisors now to set up compliance and avoid last‐minute scrambling.
Compliance under OBBB is not just for tax filing—it affects record keeping, systems, reporting, and interactions across payroll, vendors, and financial services.