Treasury, IRS Provide Penalty Relief for Tax Year 2025 for Information Reporting on Tips and Overtime Under the One Big Beautiful Bill Act

On November 5, the Treasury Depart and IRS issued Notice #2025-62 that provides transition-year penalty relief to employers, payroll services providers, and third-party settlement organizations (TPSOs) for tax year 2025 in accordance with the One Big Beautiful Bill Act (OBBBA). New fields will appear on 2026 W-2 and 1099 forms for qualified tips and overtime payments. Regular reporting will still be required, but employers/payors who cannot assemble the information required for the new fields will not be penalized for the 2025 tax year only. While compliance with the breakdown of funds is not required, the guidance accompanying the notice encourages employers to provide it if at all possible. They can do so in several ways, including posting on an online portal, providing an additional written statement furnished to the employees or payees, another secure method or, in for qualified overtime, by using box 14 on the employee's Form W-2. Future additional guidance is expected.