Compliance
Compliance Essentials: What Businesses Must Know about OBBB Reporting & Penalty Relief
The One, Big, Beautiful Bill imposes new reporting responsibilities—and for 2025, the IRS is offering significant penalty relief. Businesses must understand how to comply with new rules for car loan interest, tips, overtime, and 1099-K thresholds.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## Overview of Key Reporting Changes Under OBBB
Businesses are directly affected by several new information reporting obligations created by the One, Big, Beautiful Bill (OBBB). These include:
| Reporting Topic | Who Must Report / Provide Statements | New Thresholds or Information | Effective Period or Transitional Relief |
|------------------|------------------------------------------|-------------------------------|-------------------------------------------|
| Qualified passenger vehicle loan interest | Lenders or recipients of interest ≥ $600 from individuals on specified passenger vehicle loans | Must report interest under **section 6050AA** and provide statements to borrowers showing total interest for 2025 | Transitional relief: avoid penalties in 2025 if a statement is made available by Jan 31, 2026 using feasible means (online, annual/monthly statements)([irs.gov](https://www.irs.gov/irb/2025-45_IRB?utm_source=openai)) |
| Cash tips & qualified overtime compensation | Employers or payors who pay individuals in tipped occupations | Must report amounts and, for tips, occupation codes; for overtime, the excess above regular hours or rate (e.g., the “half” of time-and-a-half) | Penalty relief in 2025 under Notice 2025-62; full reporting forms (like W-2/1099 updates) not updated until 2026([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)) |
| Form 1099-K (third party payment networks) | Payment settlement entities (e.g. payment platforms) | Reverted reporting standard: threshold is **$20,000 AND more than 200 transactions** | Retroactive to return thresholds under ARPA pre-2021; applies under OBBB with fact sheet guidance issued Oct 23, 2025([irs.gov](https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000?utm_source=openai)) |
## Steps for Businesses to Ensure Compliance in 2025
1. **Audit existing systems and data**: Identify which payments for tips, overtime, or loan interest your business handles and whether you currently collect necessary data (e.g. occupation codes for tipped work).
2. **Communicate with service providers and vendors**: For loan interest, ensure lenders understand how to report or statement. For payroll providers, ensure payroll software aligns with OBBB requirements or is ready for 2026.
3. **Leverage the transition relief**: For 2025, if reporting isn’t fully possible yet, businesses can still benefit from penalty relief by providing statements about the amounts to payees by Jan 31, 2026, or otherwise meeting the alternate statement requirements.([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))
4. **Update contracts and internal policies**: Ensure that loan agreements or employment contracts clearly define car loan terms, tip reporting obligations, and overtime tracking, so parties can obtain required info.
5. **Educate and train staff**: Payroll, HR, accounting teams, and those in management must know about the new definitions (what counts as qualified tipped occupation, what counts as overtime compensation, etc.).
## Example Scenarios
- **Car dealership with finance arm**: The dealership must report total interest received from buyers with specified passenger vehicle loans if the amount from an individual borrower is $600 or above in calendar year 2025. They must also provide a statement to each borrower with that total by Jan 31, 2026. Failure to do either could result in penalties—but in 2025, those penalties are relieved under Notice 2025-57.([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))
- **Restaurant owner with tipped staff**: Even if payroll software does not yet break out a tipped occupation, the employer should provide employees with a statement of their reported tips and occupation code, and overtime pay separated as needed to give employees what they need to claim deductions. Penalty relief allows some leniency for 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))
## Checklist: Compliance-Ready Business Approach
- ❏ Define which payees are in “customary tipped occupations” per IRS regulations
- ❏ Implement or prepare a system to capture and report qualified overtime separately
- ❏ Work with lenders or finance partners to ensure statements or portals exist for borrower interest details
- ❏ Adjust payroll forms or internal reports so data for 2026 is clean and available
- ❏ Monitor IRS guidance—forms for 2025 won’t change yet, but 2026 forms will reflect OBBB updates. Be prepared ahead.([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))
The key takeaway for businesses is: **don’t panic about full compliance in 2025**, but do act now to track, document, and prepare. The transition reliefs give breathing room—use it to build robust processes ahead of 2026.