IRS Penalty Relief for Tax Year 2025
The Internal Revenue Service (IRS) announced transition relief for tax year 2025 from penalties related to information reporting requirements for qualified overtime compensation.
Effective 2025, Public Law (P.L.) 119-21 Sec. 70202 allows individuals who receive qualified overtime compensation to deduct the pay that exceeds their regular rate of pay (the “half” portion of the “time-and-a-half” rate) that is required by the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
Employers are required to file information returns with the IRS — or Social Security Administration in the case of Form W-2 — and provide statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.
Notice 2025-62 provides transition relief for tax year 2025 for taxpayers claiming the deduction and for employers subject to the new reporting requirements. This notice of penalty relief also applies to the deduction for qualified tips (Sec. 70201).
The IRS will release additional guidance for taxpayers claiming deductions for qualified overtime compensation. More information on the provisions of P.L. 119-21 can be found on the IRS website.
Sarah James
Sarah James joined HR Services in 2019. Prior to that, she worked at a Central Texas school district for 11 years. She is responsible for managing web content, HR Services articles, HRX newsletter, social media accounts, and marketing efforts.
James has a bachelor’s degree in communications from Concordia University Texas in Austin.
Email Sarah if you have a story idea for the HRX.
HR Services
Subscribe to HRX
Stay up to date with all the latest HR news and trends by joining the HRX mailing list!