What Employers & Payors Are Now Required to Report
The One, Big, Beautiful Bill, passed in summer 2025, mandates additional reporting duties. In particular:
- Cash tips and occupation of the tip recipient must be reported on returns and statements.
- Total qualified overtime compensation must also be separately reported.
- Reporting vehicle loan interest requirements will kick in for applicable passenger vehicles.
- New information returns/forms may be needed for non-standard deductions. (irs.gov)
Transition Relief for 2025
Good news: no penalties in 2025 for incomplete reporting of cash tips, occupations, or qualified overtime compensation—provided all other reporting is accurate and complete. Notice 2025-62 outlines this relief. (irs.gov)
Employers aren’t expected to update Forms W-2 or 1099 yet for these lines. The IRS has specifically stated these forms will not include new OBBB reporting changes in 2025. (irs.gov)
Action Plan: Steps to Stay Compliant
- Audit your payroll systems. Make sure you have processes to track tips by occupation and overtime by worker and wage band.
- Update internal recording templates or digital systems so you can extract needed info.
- Ensure pay stubs or statements allow employees to distinguish between base wage + overtime + tips.
- Begin drafting how you’ll capture required info for 2026 (since forms will likely include it.)
- Train HR/payroll staff now. Misclassification of overtime or occupations could create future liabilities.
Examples
- Restaurant with bartenders & servers: Bartenders eligible tipped occupations; you might track per server their tips separately, log occupation code when paying. Even if W-2 doesn’t list it, you must record it internally.
- Retail store with hourly overtime workers: For overtime beyond regular rate, distinguish gross pay vs extra overtime rate, report separately on internal statements so employees have what they need.
Penalties & Safe Harbor Periods
There are no penalties in 2025 for failing to provide separate accounting of cash tips or overtime, as long as you still file a complete and correct return with what you do know. (irs.gov)
For 2026 and beyond, full reporting obligations and forms are expected. Being ready early reduces risks of penalties or notices.
Summary Checklist
| Task | Completion Target |
|---|---|
| Assess existing pay-system capability to track required fields | Q1 2025 / now |
| Begin internal reporting of tips & occupations per client | 2025 calendar year |
| Communicate to employees what info they’ll receive for 2025 | ASAP |
| Budget for form updates in payroll software vendors | Before filing season 2026 |
Staying proactive in 2025 means smoother compliance in 2026 and avoiding expensive surprises down the road.