OBBBA Compliance in Virginia: W-2 Requirements for Tipped Employees (Non-Conforming)

Virginia does not conform to the One Big Beautiful Bill Act (OBBBA). Here's what that means for employers with tipped employees in Virginia.

State Conformity Status: Non-Conforming

Because Virginia does not conform to OBBBA, your employees can claim the deduction on their federal return but NOT on their Virginia state return. You are still required to report the qualified amounts on the W-2 for federal purposes.

This means Virginia employees will see a smaller overall tax benefit compared to employees in conforming states. As an employer, your W-2 reporting obligations are the same regardless of state conformity.

W-2 Reporting Requirements in Virginia

Regardless of state conformity, all Virginia employers with tipped employees must:

1. Track qualified tips separately — voluntary cash and credit card tips vs. mandatory service charges
2. Calculate the 0.5x overtime premium for each employee's overtime hours
3. Assign a TTOC code to each tipped employee based on their primary role
4. Report on W-2s — Code TP (qualified tips) and Code TT (overtime premium) in Box 12, TTOC code in Box 14b

Key Deadlines

• 2025 (transition year): IRS offers penalty relief for good-faith compliance efforts
• 2026 onwards: Full enforcement — penalties of $60-$680 per incorrect W-2
• January 31: W-2 filing deadline for the prior tax year

Common TTOC Codes for Virginia Businesses

The most common tipped occupations in Virginia include:

• FB01 — Waiter/Waitress
• FB02 — Bartender
• FB08 — Barista
• HL06 — Valet Parking
• PC01 — Hairdresser/Stylist

See the complete TTOC code list for all occupation categories.

Related Guides

• What Is OBBBA? Complete Employer Guide
• IRS Penalties for Incorrect W-2s
• Complete TTOC Code List
• Qualified Tips vs. Service Charges

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