On November 5, 2025, the U.S. Department of Treasury and Internal Revenue Service issued Notice 2025-62, which relieves employers from penalties relating to certain reporting requirements under the One Big Beautiful Bill Act (OBBBA).

The OBBBA requires employers to comply with reporting requirements relating to qualified tips, tipped occupations, and overtime paid to individuals who may claim tax deductions under the OBBBA.

For the 2025 taxable year, employers will not incur penalties for failing to file correct information returns under section 6721 and failing to provide correct payee statements under section 6722 of the OBBBA with respect to deductible tips and overtime.  This provides employers a transition year to adjust accounting systems, update reporting processes, and prepare for updated W-2 and 1099 forms for the 2026 taxable year. Note that Forms W-2 and 1099 will not be updated for the 2025 taxable year.

Despite not facing penalties, employers are encouraged to provide employees and other qualified payees with the appropriate tipped occupation codes, qualifying tips, and qualifying overtime under the OBBBA so that individuals may claim these deductions in 2025.

Additional information is available on the IRS’ One, Big, Beautiful Bill provisions’ website. HEC will continue to monitor guidance and provide updates as appropriate.

Please note the information provided is for informational purposes only and may not reflect the most current regulatory developments.  We strive to keep our materials up to date, but there may be occasions when information becomes outdated.  Users are encouraged to verify the applicability of the content before relying on it for decision-making.  If you have any questions or concerns regarding the accuracy or relevance of the information, please contact us directly for assistance.