Summary
The IRS and the Department of the Treasury have announced that employers will not face penalties for failing to report new details on cash tips and overtime pay for the 2025 tax year. This comes after the One Big Beautiful Bill Act required new reporting standards, but many employers are not ready to meet these requirements. The 2025 tax year will act as a transition period for enforcing these changes.
Key Facts
- The One Big Beautiful Bill Act was signed into law in July 2025.
- The Act requires employers to report details on cash tips and overtime pay.
- The IRS will not penalize employers for not reporting these details accurately in 2025.
- 2025 is considered a transition year for employers to adjust to the new requirements.
- Employers in hospitality and other tipped industries are most affected by these changes.
- The IRS encourages employers to voluntarily provide tip and overtime details to help employees claim deductions.
- Changes to tax forms W-2 and 1099 to include these details will not happen in 2025.
- Full enforcement of these new reporting requirements is expected to begin in the 2026 tax year.
