Compliance
Ensuring Compliance with New US Reporting Rules for 2025
2025 brings major shifts in U.S. reporting requirements, especially around overtime, tips, and information returns—non-compliance could mean penalties. Here’s what you must update.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## What's New: Reporting Obligations You Can't Ignore
### Qualified Tips & Overtime Compensation
Beginning in **2025**, employers are required to report **qualified tips** and **qualified overtime compensation** under section added by OBBBA. Failure to provide correct information returns or payee statements triggers penalties under sections 6721 (for returns) and 6722 (for statements). However, **Notice 2025-62** delivers **penalty relief** for 2025 if you're getting up to speed this year. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
### Reporting Borrow Fees and Securities Lending Income
IRS proposed regulations (Notice 2025-63) clarify rules for sourcing borrow fees in securities lending and sale-repurchase transactions. These fees will be sourced based on the **residence of the recipient**—critical for expatriates, digital nomads, and cross-border entities. ([irs.gov](https://www.irs.gov/irb/2025-46_IRB?utm_source=openai))
## Who's Affected
- Employers in service industries (restaurants, salons) must update payroll/reporting systems for tips and overtime.
- Financial institutions and investment entities handling securities lending or repo transactions.
- Individuals receiving tips or overtime who must report to the employer and/or via information returns.
## Action Steps for Compliance
1. **Audit payroll systems**: Ensure your payroll, timekeeping, and POS systems capture qualified tips and overtime in a way that supports reporting.
2. **Educate staff & management**: Tip reporting requirements may require adjustments in shifts, allocation, or tracking. Transparency helps avoid errors.
3. **Work with financial advisors** if you receive securities lending or repo income—how you document residency and earning location now matters.
4. **Schedule compliance calendar**: Because penalties are waived in 2025 under Notice 2025-62 if in good faith, aim to have systems tested in Q4 2025 to ensure full compliance in 2026.
## Useful Example Scenarios
| Scenario | Risk Before 2025 | Compliance Strategy |
|---|---|---|
| A restaurant owner failing to track tip pools centrally | Penalties for incorrect statements to employees | Implement centralized tip tracking software and reconcile monthly |
| A long-term investor in foreign securities lending | Uncertainty over where fees are sourced | Maintain residence records and treat income as foreign only when appropriate under IRS guidance |
## Penalties & Relief Details
- **Section 6721 & 6722** penalties are **not enforced for 2025**, provided attempts to comply are made in good faith. Relief applies **only for 2025**. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Carryover relief **does not extend** to years after 2025—so systems must be ready by calendar year 2026.
## Bottom Line
This is a transitional window—2025 is your buffer. Set systems, educate teams, document everything. Come 2026 the IRS will be watching. Proper compliance now avoids costly penalties, risk of audit, and reputational harm.