On Nov. 21, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued additional guidance for workers eligible to claim the deduction for tips and overtime compensation for tax year 2025, as allowed by Public Law 119-21, also known as the One Big Beautiful Bill Act (OBBBA). Notice 2025-69 clarifies how employees determine the amount of their deduction without receiving an accounting from their employer for cash tips or qualified overtime, since Form W-2 and Form 1099 for tax year 2025 will not be updated to account for the OBBBA-related changes, as previously reported here. The Notice also references the process for employers that for TY2025 voluntarily choose to report the amount of an employee’s qualified tips and overtime, and the tipped employee’s occupation code. Employers may use box 14 of Form W-2 or a written statement to provide such information. For more information, see the IRS press release.
Once the TY2025 transition period is over, employers’ reporting requirements will be mandatory; internal review of payroll processes to achieve compliance with reporting requirements may be necessary.