The IRS provided transition relief in Notice 2025-62 for qualified overtime compensation and qualified tips reporting brought about by the One Big Beautiful Bill Act, or OBBBA, enacted in July. 

Penalty relief provided is favorable for employers and other payors, merely encouraging reporting for 2025 OBBBA qualified tips and overtime compensation, but not requiring it. Preexisting rules for reporting tips and other information reporting requirements are unchanged.

The IRS had previously announced that 2025 W-2s and 1099s would not be updated for changes brought about by the new tax bill, leaving employers wondering how they would meet statutory requirements for reporting the new information.

Here’s what to know:

• Payors who otherwise would be required to formally report new qualified overtime compensation and/or qualified tips on information returns for 2025 are encouraged, but not required, to report the information. 
• The Notice includes examples of and encourages employers to provide alternative documentation to employees through an online portal, additional written statements furnished to the employees or payees, other secure methods, or in the case of qualified overtime compensation in Form W-2 Box 14.
• Employers are encouraged to provide occupation codes for individuals seeking a qualified tips deduction, as well as alerting recipients when the industry is considered a specified service trade or business which may disallow a deduction. 

Regardless of formal IRS penalty relief, employees and those seeking tax deductions in 2025 for qualified tips and overtime compensation will still likely be requesting such information from payors. It’s advisable to anticipate these requests now and determine how to proceed.

Related guidance is forthcoming for individuals seeking deductions in 2025, which could shed light on what the IRS will accept for substantiation of deductions at the individual level.

We will keep you posted on further developments.

 

Published: 11/12/2025

_{^{Readers should not act upon information presented without individual professional consultation.}}

_{^{Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.}}