Nevada Lawmakers Seek Clarity on Delayed Tax Data for Tipped Workers

Nevada’s congressional delegation is urging the Internal Revenue Service (IRS) to release important tax-filing data. This information is needed to understand how a new tax break for tipped workers is being used. The lawmakers are concerned because the detailed figures, which usually appear within months of the tax deadline, have not yet been made public. This delay affects their ability to oversee a tax benefit that is important to Nevada’s large tourism and hospitality workforce.

Understanding the “No Tax on Tips” Provision

The “No Tax on Tips” provision is part of the One Big Beautiful Bill Act, which became law on July 4, 2025. This law allows employees and self-employed individuals to deduct qualified tips. However, there is a limit to how much can be deducted, and it depends on a person’s income. For the 2025 tax year, which was filed in 2026, the maximum deduction for tips was $25,000 per year. This deduction starts to phase out for individuals earning more than $150,000, or $300,000 for those filing jointly. This rule is in effect from January 1, 2025, through December 31, 2028. The law also introduced a separate deduction for qualified overtime pay, capped at $12,500 for individuals and $25,000 for married couples filing jointly. It is important to note that this tip deduction is only for federal taxes and does not stop states from taxing tip income.

Transition Year for Reporting and Deductions

The first year this new deduction was available, 2025, involved some temporary reporting rules. Normally, the IRS releases detailed data about tax incentives, including how different income levels use them, within a few months after the April 15 tax deadline. This year, an official mentioned the agency was still processing returns filed by the October 15 extension deadline, indicating the large volume of work. The lawmakers want to know why the detailed release is following a different pattern than in previous years.

The IRS issued Notice 2025-62, which provided relief from penalties for employers who did not separately report qualified tips or overtime pay for the 2025 tax year. This relief applied as long as the employer’s filings were otherwise accurate and on time. Additionally, Notice 2025-69 confirmed that the 2025 versions of Forms W-2, 1099-NEC, 1099-MISC, and 1099-K had not yet been updated to include separate fields for these amounts. This made the first year a transition period for both employers and workers. Taxpayers claiming the deductions on their 2025 returns were instructed to use a specific schedule with the Form 1040 instructions.

Future Reporting Requirements

Starting in 2026, the IRS will require separate reporting of qualified tips and qualified overtime on Forms W-2 and 1099. The instructions for Form 1099-K will also be updated to include specific boxes for cash tips reported under the new law and for Treasury Tipped Occupation Codes. This move towards more detailed reporting is expected to provide clearer data for tracking the use and impact of these tax benefits. The Nevada lawmakers are looking for the current year’s data to help them understand how the “No Tax on Tips” provision is working and to ensure it benefits the workers it is intended to help.

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