Earlier this year, the “One Big Beautiful Bill Act” made qualifying tips and overtime payments tax-free to employees, in the form of a deduction on their personal income taxes. The bill also required an employer to put these items on each employee’s W-2 starting for 2025:

• The total amount of cash tips received, along with the employee’s occupation.
• “Qualified overtime” compensation paid to the employee. This is not just the amount of total overtime paid, but the amount that represented the “half” of “time and a half” overtime pay, which is the amount that is not taxable.

In November, the IRS announced that employers will not face any penalties for leaving these items off the 2025 W-2s. However, the IRS encourages employers to try to provide this information elsewhere, such as through its payroll system, to employees. Employees will expect to receive this information from their employer, so employers should determine how to provide it in another format, if it isn’t on the W-2.

Please note that these items are expected to be required on 2026 W-2s, so employers should make sure their systems are set up to keep track of this information as we enter the new year.

Questions? Feel free to reach out to Miller Cooper’s Client HR Services group for help at aadams@millercooper.com.