Funds To Function — U.S. Tax, Payroll & Accounting Expert

Introduction:

The IRS has officially announced major penalty relief for employers and payors for Tax Year 2025 regarding new information-reporting requirements on cash tips and qualified overtime compensation under the One, Big, Beautiful Bill (OBBB).

This updated guidance gives U.S. businesses extra time to adjust their systems without facing penalties.

At Funds To Function, we break down this important update so business owners, payroll managers, and HR teams can stay compliant and future-ready.

What the IRS Announced:

For Tax Year 2025 only, employers and payors will not face penalties for failing to:

1. Separately report cash tips
2. Report the occupation of tipped employees
3. List qualified overtime compensation separately
4. Provide separate employee/payee statements

This relief applies as long as employers file accurate and complete W-2 or 1099 forms.

Why the IRS Offered Relief:

The IRS recognized that many businesses:

1. Lack updated payroll systems
2. Do not track tips & overtime separately
3. Need technical upgrades and staff training
4. Cannot meet OBBB requirements immediately

So, 2025 is a transition year focused on education, not penalties.

Recommended Steps for Employers:

Even though optional, employers are encouraged to provide:

1. Separate cash tip accounting
2. Overtime breakdowns
3. Occupation info for tipped workers

This helps employees claim new deductions for qualified tips and qualified overtime.

What to Expect After 2025:

Employers will eventually be required to:

1. Report total cash tips and employee occupation
2. Report total qualified overtime compensation
3. Provide proper statements to employees

What This Means for U.S. Businesses:

2025 gives businesses penalty-free time to prepare:

1. Update payroll systems
2. Improve tracking methods
3. Train HR & bookkeeping teams
4. Strengthen documentation workflows

Conclusion: Funds To Function Helps You Stay Ahead:

The OBBB introduces significant changes for workers, employers, and payroll teams.
While penalty relief gives temporary breathing room, full compliance is just around the corner.

At Funds To Function, we help small businesses, contractors, restaurants, service providers, and corporations stay fully compliant, efficiently and confidently.

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Declaimer :

The information shared in this article is for educational and informational purposes only.

While Funds To Function , LLC ensures accuracy from reliable sources, readers should verify details independently before applying them to personal or business decisions.

Funds To Function, LLC is not responsible for any actions taken based on this content, it is provided solely to enhance your knowledge.