Compliance
Penalty Relief & Compliance Guidance for Employers Under OBBBBA’s New Reporting Rules
The OBBB Bill adds new reporting obligations for tips, overtime, vehicle interest, and remittance transfers—here’s what employers must know and how to comply without triggering penalties.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## New Reporting Requirements Introduced by OBBBBA
The One, Big, Beautiful Bill (signed July 4, 2025) introduced several reporting obligations affecting employers, lenders, remittance providers, and other payors. Relevant items include:
- **Cash tips & qualified overtime**: Employers must report cash tips and occupations of tipped workers, as well as qualified overtime compensation on information returns and statements to employees. ([eitc.irs.gov](https://www.eitc.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
- **Qualified passenger vehicle loan interest**: For certain vehicle loans, lenders or interest recipients must file returns and statements showing qualified interest received during the year. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
- **Remittance transfer excise tax**: Remittance providers must collect a 1% tax on certain remittances (cash, cashier’s check, money order, etc.) beginning Jan. 1, 2026, remit semimonthly deposits, and file Form 720 quarterly. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-remittance-transfer-providers-who-fail-to-deposit-excise-tax-under-the-one-big-beautiful-bill?utm_source=openai))
## Penalty Relief: Transition Period & Safe Harbors
Recognizing implementation burdens, IRS/Treasury have given transition relief and adjustments:
- **Tax Year 2025**: Employers/payors will not face penalties for failing to provide the newly required data (e.g. occupations, separate amount of cash tips/overtime) so long as they file otherwise complete and correct returns/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))
- **Remittance providers**: For first three quarters of 2026, providers failing to deposit remittance tax or miscalculating deposits may avoid penalties if they make timely (though possibly incorrect) payments and pay any underpayments by the due date of Form 720. Safe harbor rules apply with a “reasonable cause” standard. ([irs.gov](https://www.irs.gov/irb/2025-43_IRB?utm_source=openai))
## What Employers & Providers Should Do Now to Comply
1. **Assess your current data tracking systems**. Do you already collect occupation codes, cash tip details, overtime breakdowns, etc.? If not, begin modifying payroll and POS systems to record these reliably.
2. **Train staff & payroll managers** on the new definitions: what counts as “qualified tips” (excluding mandatory service charges, etc.), what is “qualified overtime,” and how vehicle interest deductions apply. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
3. **Draft or modify employment/payor statements**: even for 2025 transition year, it's useful to provide employees with occupation codes and breakdowns of tips/overtime, so they have documentation for deductions.
4. **Review your remittance transfer income/business**: If applicable, start planning for the deposit schedule, recording instruments, and ensuring you understand what qualifies for remittance tax beginning Jan. 1, 2026.
5. **Documentation is crucial**: keep records showing your good faith efforts—deleted for tips/overtime calculation, internal memos, training notes—in case you need to show “reasonable cause” under tax law.
## Why This Matters & Risks for Non-Compliance
- Without proper reporting, employees or self-employed persons may be unable to take deductions they're entitled to under OBBBBA.
- For employers failing to provide required information, penalties may kick in starting tax year 2026 unless covered by relief.
- Remittance transfer providers mis-deposit or misreport may incur excise tax deposit penalties if they do not comply with new Form 720 obligations.
## Action Plan Timeline
| Time Frame | Key Actions |
|------------|-------------|
| **Now (Late 2025)** | Review systems; adjust reporting formats; plan adjustments ahead of 2026. |
| **January 2026** | Begin remittance tax collection and semimonthly deposits; ensure Form 720 filings ready. |
| **Throughout 2026** | Monitor updates from IRS/Treasury; ensure full compliance; update staff and payors. |
By handling compliance proactively during the transition periods and leveraging relief provided, employers can avoid audit exposure and penalties while enabling employees and payees to claim new deductions they qualify for.