Shift in enforcement under OBBB: Penalty relief for 2025
On November 5, 2025, the Treasury and IRS issued Notice 2025-62, offering penalty relief to employers and other payors for failing to provide required information returns and statements concerning cash tips and qualified overtime compensation during the 2025 tax year. (irs.gov) Reporting obligations exist under the One, Big, Beautiful Bill, but enforcement is delayed. (irs.gov)
What this means for Digital Nomads, Entities & Employers
- Employers/payors getting ready to implement new reporting spec (cash tips, overtime) can use the grace period. A chance to adjust systems without fear of penalty.
- Workers/digital nomads in tipped or overtime-eligible roles should begin documenting tips, overtime, and occupation to support deductions down the line.
- Entities hosting remote workers should assure payroll providers are aware of upcoming changes and their role in statements or returns.
Action steps to take
- Update payroll systems now. Identify how to capture cash tips and qualified overtime separately.
- Communicate with employees/freelancers. Let them know what documentation they’ll need—occupation codes, allocated tips, overtime amounts.
- Train payors & vendors. Sellers or payors using 1099s—for example, gig platforms—must understand requirements.
- Monitor IRS guidance release. Additional details and forms likely for 2026 tax year. 2025 serves as transition.
Practical example for Digital Nomads and Small Entities
- A small café hiring tipped staff: management aligns tipping policy, tracks cash tips separately, records occupation codes so employees can claim the deduction.
- A remote platform paying freelancers in “specified service trade or business” (SSTB): distinguish qualified overtime, issue proper 1099s or statements—even if not enforced, prepare for compliance.
Key reminders
- You won’t be penalized for 2025 mistakes with returns or statements if you otherwise provide correct or nearly correct info.
- However, zero effort won’t protect you—file statements and returns with best available data.
- Keep an eye on Form W-2 and 1099 updates—they won’t change for TY2025, so extra statements may be necessary. (irs.gov)
Wrap-up: The 2025 penalty relief gives employers, payors and digital nomads a cushion to build systems for reporting tips & overtime correctly. Use this year to prepare—accurate tracking, education, and alignment with new law will smooth the path.