IRS Gives Relief to Employers That Have Tips, Overtime Roles (1)

The IRS issued guidance Wednesday providing penalty relief for employers from reporting requirements in President Donald Trump’s new tax law on tips and overtime.

Notice 2025-62 said that employers won’t face penalties for failing to provide separate accounting of tip amounts or occupations. For employers with workers who make overtime, there won’t be penalties for not separately providing the total amount of overtime compensation. The relief applies for tax year 2025.

Some workers who typically earn tipped wages or overtime pay get benefits from Trump’s multi-trillion-dollar tax law signed in July. Those earning tipped income can deduct up to $25,000 per year and employees earning overtime pay can deduct up to $12,500.

“Treasury and IRS are aware that employers and other payors may not currently have the information required to be reported under the OBBB, or the systems or procedures in place to be able to correctly file,” the notice said.

The IRS previously said that Forms W-2 and 1099 for tax year 2025 won’t be updated to account for the tax law changes.

The IRS on Sept. 19 proposed rules to define a qualified tip to include tips paid in cash or equivalent medium and given by a customer or through tip pool.