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What We Don’t Know About The Tip Income Provision Several aspects of this provision of the new law are uncertain. These include: Until the Treasury Secretary releases a list of qualified occupations, there will be questions as to who may qualify. Employers already receive reports from employees with amounts that are received as tips and these are reported to the federal government on Form W-2 and Form 8027, but will amounts up to the $25,000-a-year limit need to be reported separately? How will tips be reported for non-employees who do not receive a Form W-2? Will the Treasury Secretary adjust Form W-4 instructions so employees can exclude appropriate amounts from withholding? Will employers have to apply new federal tax withholding tables in 2026 to account for the deduction? Tax law in the United States is almost never straightforward. The retroactive nature of the new tax relief provisions covering overtime

By Oct. 2, 2025, the Treasury Secretary is required to publish a list of occupations that traditionally receive tips for the purpose of determining who qualifies. and tips will make this year’s reporting and reconciliation effort more of a challenge. However, unlike some new laws enacted that impact payroll, there is some transition time to have employers and payroll providers make system changes before the year- end process begins. One more uncertainty is how the Internal Revenue Service will be able to issue proper guidance and adjust the needed forms in a timely and effective way, since staff reductions at the key agency are hovering around 25%.

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ISSUE 14 GLOBAL PAYROLL MAGAZINE

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