Compliance

Complying with OBBB’s Tip and Overtime Reporting: Relief for Employers in 2025

New reporting requirements under the One, Big, Beautiful Bill for tips and qualified overtime are softened by temporary penalty relief—but employers must still prepare for changes.

By NomadicTax Research Team • 5-8 min read • November 20, 2025

## What the One, Big, Beautiful Bill Requires The **One, Big, Beautiful Bill (OBBB)** introduces new information reporting requirements for employers and payors regarding **cash tips** and **qualified overtime compensation**. These include: reporting cash tips separately, providing the **occupation codes** of tip recipients, and separately disclosing the total amount of qualified overtime pay on Forms W-2, 1099, or other statements. ([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)) ## Relief for 2025: What’s Relaxed and Why - For *tax year 2025*, the IRS and Treasury issued **Notice 2025-62**, offering **penalty relief** to employers and payors who fail to file complete tip and overtime reporting as required under OBBB. ([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)) - Employers won't face penalties for omitting the occupation of tip recipients or the amount of qualified overtime, **as long as they ultimately file correct, timely, and complete information returns**. ([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 W-2 and 1099 are **not updated in 2025** to accommodate the new reporting fields; the IRS treats 2025 as a transition year for enforcement. ([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)) ## What Employers Should Do Now to Stay Compliant - **Implement tracking systems**: Even though penalty relief is in place, starting tracking occupation codes and separating cash tips/overtime in payroll processes helps for the 2026 compliance cycle. - **Communicate internally**: Inform payroll and HR teams and, where applicable, other payors about the new reporting requirements and relief guidelines. - **Adjust payee and employee statements**: While not updated by IRS forms in 2025, providing internal data (e.g. via portal or internal statement) ensures employees have needed info for their returns. ([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)) ## Examples of Transition Relief in Action - A restaurant that traditionally reports cash tips without including occupation codes: in 2025, they are **safe from penalties** if they *later* include those codes when the system allows. - A business that includes overtime pay combined with regular wages: they won’t be penalized in 2025 for separate reporting omissions—but should plan to report separately in 2026. ## Forward-Looking Compliance Planning - **Prepare for form changes in 2026**: New IRS/SSA form revisions will require separate boxes or fields for occupation and overtime reporting under OBBB, so your systems must adapt. - **Audit readiness**: Maintain internal documentation of how cash tips and qualified overtime are tracked—reports, internal records, policies—so you can demonstrate good faith during transition. - **Budget for compliance costs**: Systems, training, payroll adjustments will cost time/money; anticipate these in your Q4-2025 or early-2026 budgets. ## Action Plan Summary - Use 2025 as a preparation year—but don’t ignore OBBB’s reporting requirements. - Adopt internal practices earlier to avoid surprises (e.g., begin tracking occupation codes). - Consult with payroll vendors and tax advisors to ensure you’re up to date and in compliance for tax year 2026.