Early today, the IRS issued Notice 2025-62, which provides transition relief for issuers of Forms W-2, 1099-NEC, 1099-MISC, and 1099-K with respect to mandatory reporting of tip and overtime compensation under the One Big, Beautiful Bill Act (OBBBA). The transition relief is available for the 2025 taxable year only.
The notice provides that employers and other payors will not face penalties for failing to provide a separate accounting of any amounts reasonably designated as overtime compensation, cash tips, or the occupation of the person receiving cash tips.
The IRS previously announced that it would not be updating its 2025 Forms W-2, 1099-NEC, 1099-MISC, or 1099-K, so today’s transition relief is expected. Recently, however, the IRS released draft versions of these forms for the 2026 taxable year containing new lines for tips and overtime reporting.
The IRS encourages employers and other payors to provide employees and other payees with a separate accounting of tips, overtime compensation, and tipped occupation codes if they are able to. However, this is not required to receive the penalty relief provided in Notice 2025-62. The IRS suggests that employers and other payors provide this information through an online portal, additional written statements provided to the payee, or by using Form W-2, Box 14 in the case of employees.
Obviously missing from Notice 2025-62 is any guidance aimed for payees regarding claiming the qualified tips deduction or the qualified overtime deduction in the absence of information provided by an employer or payor.
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