One Big Beautiful Bill Act (OBBBA) tax reporting for 2025

The One Big Beautiful Bill Act (OBBBA) provides temporary federal tax relief on qualified tips and overtime pay for the 2025 through 2028 tax years. To help 7shifts Payroll customers stay compliant, 7shifts and our payroll partner, Check Technologies, are implementing updates to handle these reporting requirements for qualifying employees who earn $150,000 or less annually.

Things to know

• Only overtime mandated by the Federal Labor Standards Act (FLSA) for hours worked over 40 in a week is tax-exempt.
• Overtime paid due to state or local laws, such as daily overtime in California, is not tax-exempt.
• Qualified tips must be voluntary and earned by employees in one of approximately 70 customary tipped occupations.
• Mandatory charges, such as automatic gratuities for large parties, are not considered qualified tips.

Reporting for the 2025 tax year

For the 2025 tax year, the IRS allows employers to provide a reasonable estimate of qualified earnings. Check Technologies calculates these estimates based on payroll data processed within 7shifts.

• Check Technologies populates Box 14 of the W-2 with a Qualified OT label.
• The overtime estimate is calculated as one-third of an employee's overtime earnings and one-fourth of double overtime earnings.
• Employees in qualified occupations should refer to Box 7 of their W-2 to estimate their qualified tips.