On July 4, 2025, President Trump signed into law the so-called “One Big Beautiful Bill Act.” The Act established new above-the-line tax deductions for “qualified tips” and “qualified overtime compensation.” To facilitate these deductions, the Act requires employers to include on the Form W-2: (a) the total amount of cash tips reported by the employee, as well as the employee’s qualifying tipped occupation; and (b) the total amount of qualified overtime compensation. On August 7, 2025, the IRS announced that Form W-2 “will remain unchanged” for tax year 2025, leaving employers with no further information on how to comply with the Act’s reporting requirements.
Just one week later, however, the IRS published a draft revised Form W-2. Along with other changes associated with the Act, the form instructions direct employers to use Box 12 to report the employee’s “qualified tips” using code “TP” and “qualified overtime compensation” using code “TT.” The draft revised Form W-2 also includes a new Box 14b for employers to report the employee’s qualifying occupation (referred to as the “Treasury tipped occupation code”). The IRS publication emphasizes that this is an “early release draft” and that additional changes may be forthcoming before it is finalized for use.
We expect to receive more guidance from the IRS in the coming weeks. For example, by October 2, 2025, the IRS must publish a list of “qualifying occupations” eligible to claim the “no tax on tips” deduction. Presumably this would include a list of corresponding “codes” to use in Box 14b. The IRS also committed to providing guidance “in the coming months” on the “reasonable method” that employers can use to “approximate” the amounts designated as qualified tips and qualified overtime compensation for tax year 2025. Finally, the IRS announced that it will provide “transition relief” for tax year 2025 for employers subject to the new reporting requirements.
