One Big Beautiful Bill Act (OBBBA) Reporting Guidance for 2025

The Department of the Treasury and the IRS issued Notice 2025-62 on November 5, 2025, providing transition-year penalty relief for employers, payroll service providers, and third-party settlement organizations (TPSOs) for tax year 2025. This relief relates to new information-reporting requirements created by H.R. 1, the One Big Beautiful Bill Act (the Act), enacted on July 4, 2025.

Under the Notice, employers and other payors will not be penalized under Internal Revenue Code Sections 6721 and 6722 for failing to correctly file or furnish information returns and payee statements related to the new requirements. These requirements include separate reporting:

• cash tip amounts,
• qualified overtime compensation, and
• occupation codes for employees receiving cash tips.

The Notice also clarifies that employers and payors are not required to provide employees or payees with a separate statement itemizing cash tips or qualified overtime compensation. However, the IRS encourages them to do so.

On November 21, 2025, Treasury and the IRS issued a second guidance document—Notice 2025-69—offering important instructions for individual taxpayers eligible to claim new federal tax deductions for qualified tips and qualified overtime compensation for the 2025 tax year. These deductions were established by Public Law 119-21 (the Act), also known as the One, Big, Beautiful Bill Act (OBBBA).

The OBBBA added:

• Code Section 224, allowing a deduction for “qualified tips,” and
• Code Section 225, allowing a deduction for “qualified overtime compensation.”

Both deductions apply for tax years beginning after December 31, 2024, and before January 1, 2029. The IRS is updating tax forms and instructions to support these new claims for the upcoming filing season.

Qualified Overtime Deduction (Code Section 225)

Code Section 225(a) provides a deduction for qualified overtime compensation—defined as the portion of overtime pay that exceeds the employee’s regular rate and is required under Section 7 of the Fair Labor Standards Act (FLSA). Since the FLSA generally requires payment of at least “time-and-a-half” for hours worked over 40 in a week, the deductible amount is generally the “half-time” premium portion.

For public sector employees who can receive compensatory time off (CTO) instead of cash overtime pay, the value of that accrued comp time may also qualify for the deduction when it is eventually paid out as wages. The deductible amount is the "half" premium portion of the "time-and-a-half" rate. 

The maximum annual deduction is:

• $12,500 for single filers, or
• $25,000 for joint filers,

and it phases out for taxpayers with Modified Adjusted Gross Income (MAGI) above:

• $150,000 (single), or
• $300,000 (joint).

The deduction is available to both itemizers and non-itemizers.

 

The Department of the Treasury and the Internal Revenue Service issued frequently asked questions in Fact Sheet 2026-01 related to the new deduction for qualified overtime compensation under the One, Big, Beautiful Bill.

Qualified Tips

For taxpayers receiving qualified tips, the Notice provides transition relief regarding the “specified service trade or business” (SSTB) limitation. Taxpayers may treat their tips as not received during an SSTB, if their occupation is one that is typically eligible to receive tips.

2025 Reporting 

Because 2025 forms may not yet include separate fields for qualified overtime compensation (as required by Code Sections 6051(a)(19) and 6041(d)(4)), the IRS will consider the reporting requirement met if the compensation is included on the individual’s Form W-2 or Form 1099.

If employers do not list the qualified overtime amount in Box 14 of Form W-2 or on a separate statement, FLSA-eligible employees may determine their qualified overtime using other documentation—such as pay earning statements or invoices—and any reasonable method.

 

Texas Tech employees who were paid overtime (Overtime Hourly), compensatory time (Comp Time Pay or Comp Time Payout), or tips (Tip Wages Payment) can view these gross wages on their earnings statements, if applicable.  

The Overtime Hourly, Comp Time Pay, and Comp Time Payout earn code on the employee earnings statement represents the “half-time” gross premium amount and the Tip Wages Payment earn code on the earnings statement is the tip gross amount reported by the employee to Texas Tech. These earn codes included on the earnings statement meet the reporting required for individual income tax reporting as provided in OBBBA. These earn codes can be viewed and printed with the YTD (year-to-date) earn code totals for 2025 on their final earnings statement for 2025.  

To view and print your earnings statement, you may navigate to the Employee Dashboard, through Raiderlink/Webraider.