The IRS issued Notice 2025-69 providing guidance for workers eligible to claim the One Big Beautiful Bill Act’s (OBBBA) deduction for overtime compensation for tax year 2025, clarifying how workers can determine the amount of their deduction without receiving a separate accounting from their employer for qualified overtime on information returns such as Form W-2 or Form 1099, as those forms will remain unchanged for the 2025 tax year. This relates to the guidance the IRS issued on November 5th in Notice 2025-62 providing employer penalty relief for tax year 2025 from the new information reporting requirements for overtime, including that employers and other payors will also not face penalties for failing to separately provide the total amount of qualified overtime compensation.
Specifically, Notice 2025-69 provides guidance for tax year 2025 on the deduction for qualified overtime under the FLSA reported on a Form W-2, Form 1099, or other statement furnished to the individual. The IRS clarifies that the OBBBA deduction applies to an individual who is both covered by and not exempt from the Fair Labor Standards Act (FLSA), and not to overtime paid to FLSA-ineligible employees under state law or paid as premium rates for certain work. Because employers and other payors will not be required to separately account for qualified overtime compensation under the November 5th guidance, a separate accounting may not appear on the W-2 or written statements furnished to individuals for tax year 2025. As such, the IRS has determined that for tax year 2025, an FLSA-eligible employee may: (1) treat the separate accounting requirement as satisfied if the qualified overtime compensation is properly reported on the individual’s Form W-2, Form 1099-NEC, or Form 1099-MISC, without regard to the requirements to separately account for the amount of “qualified” overtime compensation; and (2) base the determination of the amount of qualified overtime compensation on other documentation such as earnings or pay statements, invoices, or similar statements that support the determination, using a “reasonable method” explained in examples beginning on pg. 27 of the Notice. Individuals who had multiple employers during 2025 may use different methods for each employer.