© 2025 American Payroll Institute, Inc.
July 11, 2025 Volume 33 Issue 7
President Signs Reconciliation Bill Into Law
On July 4, President Trump signed H.R. 1, the One Big
Beautiful Bill Act (OBBBA), into law (Pub. L. 119-21). On
July 3, the House of Representatives had narrowly passed
the Senate version of H.R. 1 by a vote of 218-214.
Provisions affecting payroll
The OBBBA contains several provisions that will affect
payroll. Here are highlights from Title VII, Subtitle A, regarding
taxes:
• Permanent extension of the Tax Cuts and Jobs Act (TCJA
Chapter 1). Text for most provisions from the TCJA law has
changed from “2018 through 2025” to “beginning after 2017.”
• No tax on tips (Chapter 2, §70201). The legislation
provides a temporary elimination of federal income taxation
on qualified tips through a deduction on an individual’s tax
return. Employers will still deduct payroll taxes.
The legislation provides eligible individuals a deduction
“of an amount equal to the qualified tips received during
the taxable year” up to $25,000. The amount allowed as
a deduction will be reduced by $100 for each $1,000 an
individual earns above $150,000 ($300,000 for joint filers).
The deduction is retroactive to January 1, 2025, and expires
on December 31, 2028.
• No tax on overtime (Chapter 2, §70202). The legislation
provides a temporary exemption of federal income taxation
of overtime pay. The exemption would apply only to the
overtime premium. The legislation establishes a deduction,
subject to certain limitations, equal to the “qualified overtime
compensation received during the taxable year” up to $12,500
($25,000 for joint filers). The amount allowed as a deduction
will be reduced by $100 for each $1,000 an individual earns
above $150,000 ($300,000 for joint filers).
The legislation also includes a requirement to report
overtime compensation on Form W-2, Wage and Tax
Statement. This provision is retroactive to January 1, 2025,
and expires on December 31, 2028.
• Increase in Form 1099-MISC and Form 1099-NEC
reporting threshold from $600 to $2,000 (Chapter 4,
Subchapter D, §70433). This provision is effective beginning
with payments made in 2026. The threshold is also subject to
inflation adjustments beginning in 2027.
Detailed analysis
For PayrollOrg’s take on how OBBBA will affect payroll,
see “In-Depth Analysis: Key OBBBA Payroll Impacts for 2025
and Beyond” on Page 13 of this issue.
President Signs Reconciliation Bill Into Law................................. 1
Social Security Trustees Project $183,600 Wage Base
for 2026.............................................................................................. 2
DOL Will No Longer Seek Liquidated Damages in WHD
Investigations. .................................................................................2
ETAAC Presents 2025 Annual Report to Congress. .....................3
SSA Releases Tax Year 2025 W-2 Electronic Filing Specs........... 4
DOL Modernizes Opinion Letter Program. ...................................4
IRS Says FIRE Users Should Transition to IRIS Soon. ...................5
PayrollOrg Updates Electronic Payments Guide......................... 5
Court Allows ERC Lawsuit Against the IRS to Proceed............... 5
DOL Secretary Discusses Department Policies, Priorities at
Hearing.............................................................................................. 6
7th Circuit Issues Ruling in FMLA Morning Sickness Case........ 6
Payroll Solutions. .................................................................................7
Tax Court Rules Against Employer That Missed Filing
Deadline............................................................................................ 8
DOL Rescinds Guidance on §401(k) Investments in
Cryptocurrencies............................................................................. 8
IRS CI Tax Case of the Month Involves Payroll Fraud.................. 9
IRS Issues Statement on Processing Delays for Electronic
Payments. .........................................................................................9
IRS Tells Taxpayers What to Do When They Receive Agency
Mail...................................................................................................10
IRS Allows Businesses Under Audit to Exchange Info
Securely. ..........................................................................................10
DHS Creates Report to Notify E-Verify Users of Revoked
EADs. ................................................................................................10
USCIS Terminates Additional TPS Designations. ......................11
1st Circuit Orders Further Review of Severance Agreement.....12
OCSS Proposes Extending NMSN Part A for 1 Year...................12
District of Columbia, North Carolina Are Now Using the
e-NMSN. ..........................................................................................13
In-Depth Analysis: Key OBBBA Payroll Impacts for 2025 and
Beyond.............................................................................................13
State and Local Highlights...............................................................16
PayrollOrg Responds to Treasury RFI on Electronic Payments...18
PayrollOrg Advocates on Timing for D.C. Tip Credit Law. ............19
July 11, 2025 Volume 33 Issue 7
President Signs Reconciliation Bill Into Law
On July 4, President Trump signed H.R. 1, the One Big
Beautiful Bill Act (OBBBA), into law (Pub. L. 119-21). On
July 3, the House of Representatives had narrowly passed
the Senate version of H.R. 1 by a vote of 218-214.
Provisions affecting payroll
The OBBBA contains several provisions that will affect
payroll. Here are highlights from Title VII, Subtitle A, regarding
taxes:
• Permanent extension of the Tax Cuts and Jobs Act (TCJA
Chapter 1). Text for most provisions from the TCJA law has
changed from “2018 through 2025” to “beginning after 2017.”
• No tax on tips (Chapter 2, §70201). The legislation
provides a temporary elimination of federal income taxation
on qualified tips through a deduction on an individual’s tax
return. Employers will still deduct payroll taxes.
The legislation provides eligible individuals a deduction
“of an amount equal to the qualified tips received during
the taxable year” up to $25,000. The amount allowed as
a deduction will be reduced by $100 for each $1,000 an
individual earns above $150,000 ($300,000 for joint filers).
The deduction is retroactive to January 1, 2025, and expires
on December 31, 2028.
• No tax on overtime (Chapter 2, §70202). The legislation
provides a temporary exemption of federal income taxation
of overtime pay. The exemption would apply only to the
overtime premium. The legislation establishes a deduction,
subject to certain limitations, equal to the “qualified overtime
compensation received during the taxable year” up to $12,500
($25,000 for joint filers). The amount allowed as a deduction
will be reduced by $100 for each $1,000 an individual earns
above $150,000 ($300,000 for joint filers).
The legislation also includes a requirement to report
overtime compensation on Form W-2, Wage and Tax
Statement. This provision is retroactive to January 1, 2025,
and expires on December 31, 2028.
• Increase in Form 1099-MISC and Form 1099-NEC
reporting threshold from $600 to $2,000 (Chapter 4,
Subchapter D, §70433). This provision is effective beginning
with payments made in 2026. The threshold is also subject to
inflation adjustments beginning in 2027.
Detailed analysis
For PayrollOrg’s take on how OBBBA will affect payroll,
see “In-Depth Analysis: Key OBBBA Payroll Impacts for 2025
and Beyond” on Page 13 of this issue.
President Signs Reconciliation Bill Into Law................................. 1
Social Security Trustees Project $183,600 Wage Base
for 2026.............................................................................................. 2
DOL Will No Longer Seek Liquidated Damages in WHD
Investigations. .................................................................................2
ETAAC Presents 2025 Annual Report to Congress. .....................3
SSA Releases Tax Year 2025 W-2 Electronic Filing Specs........... 4
DOL Modernizes Opinion Letter Program. ...................................4
IRS Says FIRE Users Should Transition to IRIS Soon. ...................5
PayrollOrg Updates Electronic Payments Guide......................... 5
Court Allows ERC Lawsuit Against the IRS to Proceed............... 5
DOL Secretary Discusses Department Policies, Priorities at
Hearing.............................................................................................. 6
7th Circuit Issues Ruling in FMLA Morning Sickness Case........ 6
Payroll Solutions. .................................................................................7
Tax Court Rules Against Employer That Missed Filing
Deadline............................................................................................ 8
DOL Rescinds Guidance on §401(k) Investments in
Cryptocurrencies............................................................................. 8
IRS CI Tax Case of the Month Involves Payroll Fraud.................. 9
IRS Issues Statement on Processing Delays for Electronic
Payments. .........................................................................................9
IRS Tells Taxpayers What to Do When They Receive Agency
Mail...................................................................................................10
IRS Allows Businesses Under Audit to Exchange Info
Securely. ..........................................................................................10
DHS Creates Report to Notify E-Verify Users of Revoked
EADs. ................................................................................................10
USCIS Terminates Additional TPS Designations. ......................11
1st Circuit Orders Further Review of Severance Agreement.....12
OCSS Proposes Extending NMSN Part A for 1 Year...................12
District of Columbia, North Carolina Are Now Using the
e-NMSN. ..........................................................................................13
In-Depth Analysis: Key OBBBA Payroll Impacts for 2025 and
Beyond.............................................................................................13
State and Local Highlights...............................................................16
PayrollOrg Responds to Treasury RFI on Electronic Payments...18
PayrollOrg Advocates on Timing for D.C. Tip Credit Law. ............19
