The IRS announced that for tax year 2025, employers will not face penalties for failing to separately report qualified overtime compensation under the One, Big, Beautiful Bill Act (OBBBA). This transition relief applies only for 2025, as Forms W-2 and 1099 will not be updated to reflect the new overtime reporting requirements until later years. Employers may still choose to provide separate overtime details to help employees claim new deductions, but it is not mandatory for 2025. More info can be found here.
Save the date for an AGC of America Virtual Meeting on Thursday, December 4, at 2:00 – 2:45 PM EST, where AGC of America will provide a forum for tax experts from Baker Tilly to discuss with attendees what contractors uniquely need to know about the no tax on OT provision, especially for the 2025 reporting year. While the IRS has provided this transition relief, many questions remain especially for contractors who are required to provide unique additional overtime pay, such as required in many CBAs.
The OBBA specifically allows eligible employees to deduct a certain amount of qualifying overtime pay from their federal taxable income for 2025-2028 tax years. Additionally, employers are required to file information returns with the IRS and furnish statements to employees showing the total amount of qualified overtime compensation paid during the year.
For more information, contact Claiborne Guy at claiborne.guy@agc.org.