Compliance
Compliance Essentials: Reporting & Penalties during the Transition Year for OBBB Tax Changes
The One, Big, Beautiful Bill introduces new reporting requirements—for tips, qualified overtime, and car loan interest—yet IRS is providing relief during 2025. Here's what you need to know to stay compliant without getting penalized.
By NomadicTax Research Team • 5-8 min read • November 14, 2025
## New Reporting Rules under OBBB in 2025
The One, Big, Beautiful Bill adds several reporting requirements starting with tax year 2025, including:
- **Information reporting for interest on specified passenger vehicle loans**: Lenders receiving $600 or more in interest must report under section 6050AA, and taxpayers may deduct qualified passenger vehicle loan interest (QPVLI). ([irs.gov](https://www.irs.gov/irb/2025-45_IRB?utm_source=openai))
- **Separate accounting and reporting of cash tips** and the occupation code of tip recipients. Employers/payors must also report **qualified overtime compensation** separately. ([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))
## Transitional Relief & Penalty Safe Harbors for 2025
Recognizing that systems and processes may not yet be ready, the IRS has provided several temporary reliefs:
- Under **Notice 2025-57**, for car loan interest reports in 2025, lenders can satisfy reporting requirements by providing statements to individuals (via online, monthly, annual statements), instead of filing formal returns. Penalties won’t apply under sections 6721/6722 if those statements are provided by January 31, 2026. ([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))
- Under **Notice 2025-62**, employers and payors are temporarily excused from penalties for failing to separately report cash tip amounts, occupations, or qualified overtime on returns/statements, provided a complete and correct return is otherwise filed. Forms W-2/1099 won’t be updated in tax year 2025 to reflect new OBBB changes. ([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))
## Practical Compliance Steps
To avoid surprises:
- **Update payroll/payor systems promptly** to collect occupation codes for tipped employees and track overtime separately, even if penalty relief applies.
- **Ensure lenders and financial institutions have borrower statement systems** in place for car loan interest reporting—even temporary ones—by year-end 2025. ([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))
- **Document relief efforts**: Keep records showing intent to comply—communications with staff, system change-logs, supplier/vendor notices. These can support “reasonable cause” if questions arise.
## Example Situations
- A restaurant hasn’t yet captured occupation codes for tipped waitstaff: it should begin tracking those now and provide statements showing tips in 2025, even if Form W-2 won’t reflect this directly. Under Notice 2025-62, no penalties if return is otherwise correct. ([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))
- A auto finance company with many personal vehicle loans must generate borrower statements showing interest paid in 2025. Under transition relief in Notice 2025-57, failure to file formal information returns in 2025 won’t be penalized if statements are provided properly. ([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))
## Bottom Line
- Even when relief exists, building compliance infrastructure now is crucial. Delaying can lead to mistakes later when penalties return.
- Communicate with employees and customers: clear statements, timely notices, consistent documentation.
- Monitor IRS updates: forms and instructions may change for 2026 and beyond.