The One Big Beautiful Bill Act (OBBBA) introduced two new, retroactive, and temporary federal income tax deductions starting in the 2025 tax year applicable to employees who receive qualified tips or qualified overtime compensation. Under IRS guidance, employers are not required to change how they report pay for 2025. Due to the lack of changes from employer/payer reporting, additional IRS guidance provides employees with instructions for determining the amount of their deduction without a form like a Form W-2, Wage and Tax Statement, from their employer. It also provides transition relief for workers who receive tips in a specified service trade or business that are not normally eligible for the deduction.

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