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The recently introduced One, Big, Beautiful Bill Act (OBBB Act) brings significant changes for businesses employing tipped workers. A key provision is the “no tax on tips” rule , which removes certain federal tax liabilities for qualified tips. However, not all employees or industries qualify, so it’s essential to understand how this impacts your workforce. To qualify: Tips must be received in an occupation that customarily and regularly received tips on or before December 31, 2024 . Certain fields— healthcare, athletics, and the performing arts —are specifically carved out and do not qualify. Employers must be able to identify if their employees fall into one of the designated Treasury Tipped Occupation Codes (TTOCs) . 📋 Full List of Eligible Tipped Occupations  Below is the complete preliminary list of occupations the Treasury and IRS have identified as customarily tipped roles. Each entry includes the TTOC code, occupation title, description, examples, and related SOC codes . This list is expected to form the basis of official IRS regulations. 🍽️ Beverage & Food Service 101 – Bartenders | Mix and serve drinks (barkeep, sommelier) | SOC 35-3011 102 – Wait Staff | Serve food & beverages to patrons (cocktail waitress) | SOC 35-3031 103 – Food Servers, Nonrestaurant | Serve outside restaurant (room service, beer cart) | SOC 35-3041 104 – Dining Room & Cafeteria Attendants/Bartender Helpers | Clean, reset, assist | SOC 35-9011 105 – Chefs & Cooks | Prepare/cook meals (chef, caterer, food truck cook) | SOC 35-1011, 35-2011, etc. 106 – Food Prep Workers | Prep cold foods, slice meats | SOC 35-1012, 35-2021 107 – Fast Food & Counter Workers | Serve at counters, may prep | SOC 35-3023 108 – Dishwashers | Clean dishes & equipment | SOC 35-9021 109 – Host Staff | Welcome/seat patrons (maître d’) | SOC 35-9031 110 – Bakers | Bake breads, pastries | SOC 51-3011 🎲 Entertainment & Events 201 – Gambling Dealers | Operate games of chance | SOC 39-3011 202 – Gambling Change Persons & Cashiers | Exchange money, tokens | SOC 41-2012 203 – Gambling Cage Workers | Handle casino financials | SOC 43-3041 204 – Gambling & Sports Book Writers/Runners | Take bets, operate keno/bingo | SOC 39-3012 205 – Dancers | Perform dances | SOC 27-2031 206 – Musicians & Singers | Play instruments, sing | SOC 27-2042 207 – DJs (Non-Radio) | Play music for live audiences | SOC 27-2091 208 – Entertainers/Performers | Comedians, magicians, clowns | SOC 27-2099 209 – Digital Content Creators | Streamers, influencers | SOC 27-2099 210 – Ushers/Ticket Takers | Assist patrons at events | SOC 39-3031 211 – Locker/Coatroom Attendants | Provide personal item service | SOC 39-3093 🏨 Hospitality & Guest Services 301 – Baggage Porters/Bellhops | Handle luggage | SOC 39-6011 302 – Concierges | Assist guests with services | SOC 39-6012 303 – Hotel/Resort Desk Clerks | Register, check in/out guests | SOC 43-4081 304 – Maids & Housekeeping Cleaners | Clean hotel rooms | SOC 37-2012 🏡 Home Services 401 – Home Maintenance/Repair Workers | Handyman, roofer, painter | SOC 49-9071 402 – Landscaping/Groundskeeping Workers | Lawn/garden maintenance | SOC 37-3011 403 – Home Electricians | Install/repair wiring | SOC 47-2111 404 – Home Plumbers | Install/repair pipes | SOC 47-2152 405 – HVAC Mechanics/Installers | Heating/AC repair | SOC 49-9021 406 – Appliance Installers/Repairers | Fix/install household appliances | SOC 49-9031 407 – Home Cleaning Workers | House/pool/carpet cleaners | SOC 37-2012 408 – Locksmiths | Keys, locks, safes | SOC 49-9094 409 – Roadside Assistance Workers | Tow truck, tire repair | SOC 49-3023, 53-3032 👤 Personal Services 501 – Personal Care & Service Workers | Aides, butlers, companions | SOC 31-1122 502 – Private Event Planners | Wedding/party planning | SOC 13-1121 503 – Private Event/Portrait Photographers | Wedding/headshot photography | SOC 27-4021 504 – Private Event Videographers | Record events | SOC 27-4031 505 – Event Officiants | Weddings/funerals officiants | SOC 21-2010 506 – Pet Caretakers | Groomers, walkers, sitters | SOC 39-2021 507 – Tutors | Academic tutoring | SOC 25-3041 508 – Nannies/Babysitters | Child care | SOC 39-9011 💇 Personal Appearance & Wellness 601 – Skincare Specialists | Facials, esthetics | SOC 39-5094 602 – Massage Therapists | Therapeutic massage | SOC 31-9011 603 – Barbers/Hairdressers/Cosmetologists | Hair & barber services | SOC 39-5011 604 – Shampooers | Shampoo/rinse hair | SOC 39-5093 605 – Manicurists/Pedicurists | Nail care | SOC 39-5092 606 – Eyebrow Technicians | Threading, waxing | SOC 39-5091 607 – Makeup Artists | Design/apply looks | SOC 39-9031 608 – Fitness Trainers/Instructors | Personal/group exercise | SOC 27-1019 609 – Tattoo Artists & Piercers | Tattoos, body piercing | SOC 51-6052 610 – Tailors | Garment fitting, repair | SOC 51-6041 611 – Shoe/Leather Workers & Repairers | Cobbler, shoe shiner | SOC 39-5012 🎓 Recreation & Instruction 701 – Golf Caddies | Assist golfers | SOC 39-3091 702 – Self-Enrichment Teachers | Piano, art, knitting instructors | SOC 25-3021 703 – Recreational/Tour Pilots | Helicopter/balloon tours | SOC 25-3021 704 – Tour Guides/Escorts | Sightseeing/museum guides | SOC 39-7011 705 – Travel Guides | Expeditions, cruises | SOC 39-7012 706 – Sports & Recreation Instructors | Ski, dive, surf instructors | SOC 53-2012 🚗 Transportation & Delivery 801 – Parking/Valet Attendants | Park/tend vehicles | SOC 53-6021 802 – Taxi/Rideshare Drivers & Chauffeurs | Transport passengers | SOC 53-3054 803 – Shuttle Drivers | Scheduled route drivers | SOC 53-3053 804 – Goods Delivery People | Deliver goods/packages | SOC 53-3031 805 – Vehicle & Equipment Cleaners | Car wash/detailers | SOC 53-7061 806 – Private/Charter Bus Drivers | Motor coach/tour bus | SOC 53-3052 807 – Water Taxi/Charter Boat Workers | Operate boats | SOC 53-5022 808 – Rickshaw/Pedicab/Carriage Drivers | Bike taxis, horse carriages | SOC 53-6099 809 – Home Movers | Furniture movers | SOC 53-7062 ✅ What Employers Should Do Now Review Employee Roles – Determine if any fall under the TTOC list. Adjust Payroll Processes – Coordinate with your payroll provider to ensure compliance with new tip tax rules. Stay Updated – Treasury/IRS will finalize regulations soon, and some occupations may be clarified or excluded. Educate Managers & Staff – Make sure supervisors understand how tips are treated under the new law. 🔗 Resources Official Treasury & IRS Guidance (forthcoming)

New Tax Breaks on Overtime and Tips: What Employers and Employees Need to Know A major shift in tax policy is here, and it could mean more money in the pockets of millions of American workers — especially those who rely on tips or regularly work overtime. As part of the One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, Congress introduced two key tax deductions: one for qualified tip income and another for overtime premium pay. These changes are designed to reward hard-working Americans and reduce the income tax burden on lower- and middle-income earners. But what does this mean in practice? Let’s break it down. No Tax on Tips: A Win for Service Industry Workers Under the new law, workers in tipped professions — such as servers, bartenders, hotel staff, and others — can now deduct up to $25,000 in tips from their federal taxable income each year. This deduction is retroactive to January 1, 2025 , and is set to remain in effect through the end of 2028. To qualify: The tips must be customary and reported to the employer . The worker must be in a recognized “tipping occupation,” such as those listed in prior IRS guidance. The deduction begins to phase out for individuals earning more than $150,000 (or $300,000 for joint filers). This means a server who reports $15,000 in tips could potentially deduct the full amount from their income when calculating their taxes — reducing taxable income and potentially saving hundreds or even thousands of dollars in federal taxes. This deduction does not apply to Social Security and Medicare taxes. Those payroll taxes are still assessed on total wages, including tips. No Tax on Overtime: Relief for Non-Exempt Employees The law also introduces a deduction of up to $12,500 per individual (or $25,000 for joint filers) for overtime premium pay. This refers specifically to the “time-and-a-half” portion paid for hours worked beyond 40 in a week under the Fair Labor Standards Act (FLSA). It’s important to understand what qualifies: Only non-exempt employees (those entitled to overtime under the FLSA) can claim this deduction. The deduction applies only to the premium portion — that is, the extra 50% above regular hourly pay. High-income earners will see a phase-out starting at $150,000 (individuals) or $300,000 (joint filers). For example, if an hourly worker earned $20/hour and worked 10 hours of overtime in a week, the overtime premium ($10/hour × 10 hours = $100) would be eligible for the deduction — not the full $300 in overtime pay. If that worker consistently earned similar overtime throughout the year, they could reach or exceed the maximum deduction and realize significant federal tax savings . What This Means for Employers Although the new deductions apply to individual tax returns, employers will play a critical role in ensuring that both workers and the IRS have accurate records. Here are the key responsibilities employers now face: Payroll Reporting Enhancements Employers must update their payroll systems to separately track qualified tips and overtime premium pay . These amounts must now be clearly designated on year-end tax forms like the Form W-2 . Form and Recordkeeping Requirements Employers will need to include additional information on employee tax forms, including: A breakdown of earnings by type (regular, overtime premium, tips). Occupation codes that identify whether the employee is in a tipping role. System and Software Updates Payroll vendors and in-house systems must be adjusted to reflect the new codes. For 2025, a “reasonable method” grace period applies, but in future years, precision will be required. Classification Reviews Employers may need to re-evaluate FLSA classifications to ensure that workers are properly labeled as exempt or non-exempt. Improper classification could result in missed deductions or even penalties. Communication and Training HR and payroll teams should be trained on the new rules, and employers should proactively communicate with employees about the potential benefits and what information will be required at tax time. How Employees Benefit — and What They Need to Do These changes are being praised as a way to put more money into the hands of frontline workers, but the deductions don’t apply automatically. Employees need to take certain steps to ensure they receive the tax benefits they’re entitled to. Maintain Accurate Records Employees should keep good records of their reported tips and overtime hours . While much of this will be available on their W-2, they should verify it for accuracy. Understand Eligibility Limits High earners may not qualify, and the deductions only apply to properly classified pay. Employees paid “overtime” who are exempt under the FLSA may find their pay doesn’t count. Prepare for Tax Filing These deductions will likely appear as line items on Form 1040 or a new IRS schedule. Employees should consult a tax preparer or financial advisor, especially during the first year of implementation. Track Annual Caps Workers should be aware of the annual deduction limits and ensure they do not over-report. Overstating deductions could trigger audits or penalties. What This Means in Dollars According to preliminary estimates from tax experts: A tipped worker who earns $20,000 in tips could save between $1,800–$2,200 in federal income taxes, depending on their tax bracket. An hourly worker earning $8,000 in qualified overtime premium pay might reduce their federal taxes by around $800–$1,200 . For households that include both tipped and overtime-earning workers, the combined benefit could reach $4,000–$5,000 annually — a significant reduction in their federal tax liability. Final Thoughts This new legislation signals a clear shift in tax policy — one that rewards work done during evenings, weekends, and holidays, and recognizes the financial challenges of service industry workers. For businesses, it means adjusting payroll systems, refining classifications, and improving documentation . For employees, it means paying attention to how their income is reported and taking full advantage of available tax savings . Time & Pay is here to help employers navigate this transition. Our systems can be tailored to properly track and report eligible tip and overtime income, ensuring compliance and helping your employees take advantage of these new deductions. If you’re unsure whether your payroll processes are ready, now is the time to evaluate and prepare. Need help tracking qualified wages and ensuring accurate reporting? Contact Time & Pay today — we’ll help you get compliant and keep your employees informed.

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On December 23, 2024, President Biden signed into law two significant pieces of legislation aimed at streamlining Affordable Care Act (ACA) reporting requirements for employers: the Paperwork Reduction Act (PRA) and the Employer Reporting Improvement Act (ERIA). These laws introduce several changes that will affect Applicable Large Employers (ALEs) and other entities responsible for furnishing Forms 1095-B and 1095-C to individuals. Key Provisions of the Paperwork Reduction Act (PRA): • Simplified Form Furnishing: Employers can satisfy the requirement to furnish Forms 1095-B or 1095-C by providing a clear, conspicuous, and accessible notice to employees, informing them that they can request a copy of the form. Upon request, the employer must provide the form by the later of January 31 of the following year or within 30 days of the request. • Effective Date: These changes apply to forms for the calendar year 2024, which are due in 2025. • Electronic Filing Requirement: ALEs must continue to electronically file forms with the IRS. • State-Specific Requirements: The federal provisions do not override any state-specific requirements; employers must continue to comply with state mandates regarding form furnishing. Key Provisions of the Employer Reporting Improvement Act (ERIA): • Electronic Form Delivery: Employers are permitted to furnish Forms 1095-B and 1095-C electronically, provided they obtain the employee's consent. • Alternate Information Use: If an individual's Social Security Number (SSN) is unavailable, employers may use the individual's date of birth for Form 1095-B or 1095-C reporting. However, this exception does not apply to Form 1095-C for employees. • Extended Response Time: The response time for initial Employer Shared Responsibility Payment (ESRP) letters has been extended If you are a Time & Pay client would like to participate in paperless deliver, please let your CSR at Time & Pay know ASAP via email. If you do choose to participate, we have provided examples of the required Employee Notices below. Please make any edits necessary in order to provide accurate instructions based on your organization’s delivery process. Reference: SyncStream

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