The IRS released Notice 2025-62 on November 5, 2025, providing penalty relief for tax year 2025 regarding new information reporting requirements under the One, Big, Beautiful Bill Act (OBBBA). While OBBBA created income tax deductions for qualified tips and qualified overtime compensation and requires separate reporting of these amounts on Forms W-2, 1099-MISC, 1099-NEC, and 1099-K (along with occupation codes for tipped employees), the IRS will not impose penalties for failures to separately report this information for tax year 2025.
The penalty relief applies only if filers submit complete and correct returns that include tips and overtime in aggregate compensation totals as currently reported. The IRS encourages voluntary supplemental reporting through Box 14 of Form W-2, online portals, or additional statements to help employees claim the new deductions.
The notice also reminds practitioners that OBBBA increased the Section 6041/6041A reporting threshold from $600 to $2,000 (effective for payments after December 31, 2025) and retroactively amended the Section 6050W third-party network transaction threshold to $20,000 and 200+ transactions.
This transition relief is limited to tax year 2025 only. Employers and payors must implement full compliance systems for tax year 2026 when updated forms will be available and penalties will apply.
IR-2025-110 can be found here.
Notice 2025-62 can be found here.
Draft 2026 information returns can be found here.
