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Your servers and bartenders have probably heard about "no tax on tips." Your cooks and dishwashers may have heard about "no tax on overtime." What fewer people have heard about is the part that lands on the employer: the reporting. Under the new tax law, eligible employees can deduct up to $25,000 in qualified tips and up to $12,500 in qualified overtime pay ($25,000 for joint filers) on their individual returns. Those deductions depend on numbers that only your payroll recor
The overtime deduction created by the One Big Beautiful Bill Act has been on the books for a while now, but until recently the guidance on how employers actually report it was thin. That changed in August, when the IRS substantially expanded its frequently asked questions on the deduction for qualified overtime compensation.
The Treasury Department has released crucial guidance on one of the most talked-about provisions in recent tax legislation - the "no tax on tips" deduction from the One Big Beautiful Bill Act. This development represents a significant opportunity for workers in tip-based industries, but like most tax changes, the details matter enormously.
The IRS on July 14 released initial explanations of the new deductions for tips, overtime pay, and auto loan interest, while pledging to quickly release more substantial guidance. The deductions are for individuals but have important implications for businesses. They are effective immediately for 2025.
Many restaurant operators focus intensely on daily operations – ensuring food quality, managing staff, and creating great customer experiences. These elements are essential, but without understanding the financial metrics that drive profitability, even the most popular restaurants can struggle financially.
