Compliance
Navigating One, Big, Beautiful Bill: Compliance Updates for Employers
The OBBB brings updated reporting requirements and enforcement for employers—what’s new for tipping, overtime, Form 1099-K, and how to stay compliant.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## What Employers Need to Know Under One, Big, Beautiful Bill
The One, Big, Beautiful Bill introduced several new compliance obligations. In late 2025, the IRS clarified many via recent announcements: changes to Form 1099-K thresholds, Employee Retention Credits (ERC), and required reporting for tips and overtime compensation.([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))
## Updates to Form 1099-K Thresholds
Prior to the OBBB, third-party settlement organizations (TPSOs) were required to issue a Form 1099-K only if payments exceeded **$20,000 AND** there were **more than 200 transactions**.([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)) Under OBBB, these requirements were **reinstated retroactively**—meaning the $600 threshold enacted by ARPA does **not** apply for TPSOs unless both old thresholds are met. Employers using TPSOs need to be aware.([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))
## Employee Retention Credit (ERC) Claims Limitation
Under section 70605(d) of OBBB, ERC claims for Q3 and Q4 of 2021 filed **after January 31, 2024** will no longer be permitted to generate credits or refunds—**effective July 4, 2025**.([irs.gov](https://www.irs.gov/newsroom/irs-frequently-asked-questions-faqs-address-employee-retention-credits-under-erc-compliance-provisions-of-the-one-big-beautiful-bill?utm_source=openai))
## New Reporting on Tips & Qualified Overtime Compensation
OBBB now requires employers and other payors to report separately:
- **Cash tips received**, along with the occupation of the tip recipient;
- **Qualified overtime compensation**.([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))
However, for **tax year 2025**, the IRS is granting **penalty relief**—employers won’t be penalized for lacking the information or misreporting as long as they file returns or statements that are otherwise complete and 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)) Note: Forms W-2 and 1099 for 2025 will not include updated boxes or fields for these new items. Employers should still try to provide the information.
## Action Items for Employers
- **Update payroll systems**: Ensure systems can track cash tips, occupations, and overtime separately for payees whose positions receive tips.
- **Train staff and collect information** from tipped employees—know their occupation codes and track cash tips accurately.
- **Review third-party payment platform usage**: If your business receives payments via these platforms, be clear on whether Form 1099-K will be issued—based on old threshold rules under OBBB.([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))
- **Plan for future W-2 / 1099 changes**: While boxes haven’t changed for 2025, ensure readiness for 2026 forms.
## Practical Example
A restaurant employs servers who receive tips. Under the OBBB, the employer must report cash tips received and the occupation of the server. For 2025, if the system doesn’t capture these, the employer **won’t be penalized** if everything else is correct. But starting in 2026, lack of occupation or improperly seperated tip amounts could trigger penalties.
## Compliance Best Practices
- Keep organized records: tip logs, job descriptions, overtime hours, and payment modes.
- Consult payroll vendors: Verify their software supports new reporting fields.
- Communicate with employees: Collect wage statements, ensure clarity of roles.
- Seek professional advice if unsure about tip classification or how to adjust compensation packages.
## Conclusion
Compliance under the OBBB is expanding employer duties. Through transitional relief in 2025, businesses have a grace period—but action now prepares you for full enforcement. New reporting rules on Form 1099-K, ERC claims, tips, and overtime require clear systems and tracking.