On August 7, 2025, the IRS announced (IR-2025-82) that it will not update individual information returns or withholding tables to reflect changes made by the "One Big Beautiful Bill Act" (P.L. 119-21, OBBBA) for the 2025 tax year.

The IRS said in the announcement that employers and payroll providers should continue using current procedures for reporting and withholding. The IRS also said it is working on new guidance and updated forms for the 2026 tax year, including how to report tips and overtime pay.

OBBBA requirements on tips and overtime pay

The OBBBA allows individuals to deduct qualifying tips and overtime for federal income tax purposes, effective for tax years beginning in 2025 (see Tax Alert 2025-1476).

Reporting tips

The OBBBA imposes a new statutory requirement to report cash tips and the individual's occupation on certain Forms 1099 and on the Form W-2. The statute applies these reporting requirements for calendar year 2025. The news release, however, indicates that the reporting will now apply beginning with Forms W-2 due on February 1, 2027, for calendar year 2026.

The OBBBA provides a transition rule for reporting for years beginning before 2026, allowing certain taxpayers to "approximate a separate accounting of amounts designated as cash tips by any reasonable method specified by the Secretary." Although the statutory transition rule does not apply to Form W-2 reporting by employers, the news release indicates that changes to Form W-2 reporting will not apply for 2025. Additionally, there will be no changes to withholding for 2025.

Reporting overtime

Similar to the rules for qualified tips, the OBBBA federal income tax deduction for individuals with qualified overtime compensation includes qualified overtime that was to be reported on Form W-2 for tax years 2025 through 2028. The news release, however, indicates that the 2025 Form W-2 will not be required to report qualified overtime.

Implications

Although employers will not be required to separately report qualified overtime pay and tips on the 2025 Form W-2, employees may still claim these deductions on their personal income tax returns for 2025. As such, employers may want to voluntarily provide a separate statement to employees that includes this information.

Although federal income tax withholding tables will not be updated for 2025, employees can make withholding adjustments using Form W-4 in accordance with its instructions and any additional guidance that may be provided by the IRS.