Penalty Relief for Employers’ Reporting on Tips and Overtime Pay

The One Big Beautiful Bill Act (OBBBA) created deductions for workers’ tips and overtime pay and imposed new reporting requirements for employers. While the deductions apply for 2025, the IRS designated 2025 as a transition year for purposes of reporting requirements. It won’t impose penalties on employers that fail to satisfy OBBBA imposed reporting requirements. While not a requirement to receive the penalty relief, employers and payors are encouraged to provide employees and payees with the occupation codes and separate accountings of cash tips, so they have the information needed to determine whether they can claim the deduction for qualified tips. #IdeaoftheDay