Compliance

Stay Compliant with New Forms & Reporting Requirements under OBBB

Learn the updated obligations for employers, employees, and payors under OBBB—from reporting tips and overtime to enforcing new deduction rules while avoiding penalties.

By NomadicTax Research Team • 5-8 min read • March 8, 2026

## What New Compliance Rules Are in Place? The One Big Beautiful Bill Act introduces several significant **reporting and compliance requirements** for tax years 2025 through 2028: new deductions for tips, overtime, and car loan interest, plus enhanced senior deductions. To access these benefits, taxpayers and businesses must adhere to new reporting structures.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) --- ## Employer & Payor Responsibilities - **Information Returns & Statements**: Employers and payors are required to file correct information returns (e.g. Forms **W-2**, **1099**) indicating cash tips, overtime compensation, and occupation for tipped workers. Statements must also be furnished to employees or payees.([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) - **Trail of Proof**: Even if your employer data isn’t updated for 2025, retain logs (tip logs, overtime work tracking) to substantiate deductions. For example, if you receive $7,000 in unreported tips, a tip log where date, customer, and amounts are recorded helps.([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai)) - **Forms to watch**: For tax year 2025, existing forms W-2, 1099, etc., **remain unchanged**. Forms for 2026 will incorporate the new reporting lines. Public Instructions and Schedule 1-A are now used to claim these deductions.([irs.gov](https://www.irs.gov/newsroom/irs-announces-no-changes-to-individual-information-returns-or-withholding-tables-for-2025-under-the-one-big-beautiful-bill-act?utm_source=openai)) --- ## Individual Taxpayer Tips - Use **Schedule 1-A** of the 2025 Form 1040 for claiming deductions for tips, overtime, car loan interest, and seniors.([irs.gov](https://www.irs.gov/newsroom/irs-published-schedule-taxpayers-will-use-to-claim-deductions-on-no-tax-on-tips-no-tax-on-overtime-no-tax-on-car-loans-no-tax-on-seniors?utm_source=openai)) - Report all income and preserve records—your own logs, bank statements, proof of car loan, VIN, proof of age, etc.—especially when employer statements are incomplete.([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025?utm_source=openai)) - If filing jointly, ensure both spouses meet eligibility (age, SSN). Single filers should ensure personal eligibility (SSN, age, income). Phase-out implications matter.([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors?utm_source=openai)) --- ## Penalty Relief & Transition Period For tax year 2025: Forms W-2 and 1099 do **not require updated reporting** for these new deductions. Employers may miss data on tips or overtime without penalty under **Notice 2025-62**. However, **employees** can still claim deductions using self-recorded evidence.([irs.gov](https://www.irs.gov/newsroom/irs-announces-no-changes-to-individual-information-returns-or-withholding-tables-for-2025-under-the-one-big-beautiful-bill-act?utm_source=openai)) --- ## Everyday Examples of Compliance Done Right - *Restaurant Toolbox*: Employer provides separate statements with total cash tips and occupation as per an IRS-published occupation list. Employee uses employer’s statement plus their own tip log to complete Schedule 1-A. - *Overtime Scenario*: An office worker with MAGI exceeding $160,000 should calculate phase-out based on full MAGI. Keep track of overtime premiums from payroll statements, even if employer doesn’t separately report them on W-2 for 2025. - *Senior Deduction*: Senior taxpayer born in 1959 files jointly. Both spouses show valid SSNs. Even if they itemize, they can also take the enhanced senior deduction. If MAGI $150,000, full eligibility; above that, phased. Keep birth dates and SSNs accessible. --- ## Consequences of Noncompliance - **Audit risk** increases if deductions are claimed without adequate documentation. - For **employers and payors**, failure to meet reporting obligations may attract penalties when enforcement begins (after transition relief period ends). Keeping ahead means reduced exposure. - For individuals, incorrect deductions or failure to phase-out properly may result in **tax owing plus interest and penalties**. --- ## Final Takeaway The new deductions under OBBB are valuable—but only if **you comply** with reporting and documentation requirements. Whether you're a tipped worker, beyond 65, or receive overtime or car loan interest, proactive record-keeping and use of the correct schedules (like Schedule 1-A) will help you maximize benefits and stay clear of surprises during audits. Always monitor IRS updates into 2026, particularly forms and instruction changes.