The IRS has announced temporary relief for employers and other payers who may struggle to comply with new reporting rules on tips and overtime pay introduced under the One Big Beautiful Bill Act (OBBBA).

According to Notice 2025-62, employers will not face penalties for tax year 2025 if they fail to provide a separate accounting of cash tips or qualified overtime compensation, or if they omit the occupation of the individual receiving tips. 

According to Journal of Accountancy, the agency said the relief is being granted because many employers do not yet have the systems or data required to meet the new information-reporting requirements, which take effect for tax years 2025 through 2028. The IRS will not issue new forms for 2025 and acknowledged that compliance challenges could make immediate enforcement impractical. 

The penalty relief applies only if employers otherwise file accurate and complete returns or statements for the year. While not required, employers are encouraged to voluntarily provide the new information, such as separate tip and overtime accounting and occupational codes, to help employees claim the related deductions for 2025. 

The IRS noted that employers may share this information through online portals, written statements, or secure electronic methods. For overtime data, businesses may also include the information in box 14 of employees’ Forms W-2. 

The notice offers a transitional period for businesses adapting to the new reporting structure, which represents one of several major administrative shifts under OBBBA.