On April 10, the IRS issued final regulations to provide guidance on the “no tax on tips” provision of Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA). The final regulations were published in the Federal Register on April 13 and are effective on June 12 [91 F.R. 19026, 4-13-26].
Qualified Tips Defined
The final regulations adopt the definition of “tips” from the proposed regulations. Whether the tip is a “qualified tip” depends on whether the other requirements under IRC §224 and the final regulations are satisfied.
IRC §224(d)(1) defines “qualified tips” as cash tips received, directly or indirectly, by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024.
The Occupations List
The finalized regulations adopt the proposed regulations’ list of separate occupations of tipped workers categorized by a Treasury Tipped Occupation Code (TTOC). The main categories remain the same, although several of the TTOC Occupation Titles have been updated. The final regulations also add columns for TTOC Occupation Descriptions and TTOC Illustrative Examples.
The final regulations add: TTOC 509 for visual artists; TTOC 510 for floral designers; and TTOC 810 for gas pump attendants. The updated table is in the Federal Register.
For More Information
For more information, see the PAYO Compliance Update, IRS Issues Final Tip Regulations Under the OBBBA. Compliance updates are emailed to PayrollOrg members and are also available on the Compliance Updates webpage.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Director of Payroll Information Resources for PayrollOrg.
