For tax year (TY) 2025, the IRS will provide employers with penalty relief in connection with new information reporting requirements for qualified tips and qualified overtime compensation required under Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA) [Notice 2025-62, 11-5-25].
PayrollOrg’s Government Relations staff met with the IRS this summer and requested this transition relief.
The penalty relief is under IRC §6721 for failure to file correct information returns and §6722 for failure to furnish correct payee statements. The relief is limited to returns and statements filed and provided for TY 2025.
The notice states that employers will not face penalties for failing to provide a separate accounting of any amounts reasonably designated as cash tips or the occupation of the person receiving such tips. In addition, employers will also not face penalties for failing to separately provide the total amount of qualified overtime compensation to employees.
The notice encourages employers to provide employees, particularly those in a tipped occupation, with the occupation codes and separate accountings of cash tips. Employers also are encouraged to provide employees with separate accountings of overtime compensation.
Employers can inform employees through an online portal, written statements, or, in the case of qualified overtime compensation, in Box 14 of the employee’s Form W-2.
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!
Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.