© 2025 American Payroll Institute, Inc.
August 1, 2025 Volume 33 Issue 8
IRS to Provide OBBBA Guidance, Transition Relief
The IRS created a fact sheet to describe some provisions
of the One Big Beautiful Bill Act (OBBBA), which was
signed into law on July 4 [Pub. L. 119-21 IRS, FS-2025-03,
7-14-25].
The “One Big Beautiful Bill Act: Tax Deductions for
Working Americans and Seniors” fact sheet discusses four
main provisions that are effective for 2025 through 2028.
Two are relevant to payroll. For both provisions, the IRS
will provide transition relief for tax year 2025 for taxpayers
claiming the deduction and for employers subject to the
new reporting requirements.
No tax on tips
The OBBBA allows employees and self-employed
individuals to deduct qualified tips from their individual
federal tax returns. These qualified tips are reported on
Forms W-2, Forms 1099, or other specified statements.
“Qualified tips” are voluntary cash or charged tips received
from customers or through tip sharing.
Employers must file information returns with the IRS (or
Social Security Administration (SSA)) and furnish statements
to taxpayers showing cash tips received and the occupation
of the tip recipient. The maximum annual deduction is
$25,000 and is phased out for taxpayers with adjusted gross
income over $150,000 ($300,000 for joint filers).
The IRS said the agency will provide guidance on the no
tax on tips provision by October 2.
No tax on overtime
Individuals who receive qualified overtime
compensation may deduct their overtime pay from their
individual federal income tax return. They can only deduct
the “overtime pay” that exceeds their regular rate of pay
(the “half” portion or 0.5 portion of the time and a half
compensation) that is required by the Fair Labor Standards
Act and reported on a Form W-2, Form 1099, or other
statement furnished to the individual.
Employers are required to file information returns with
the IRS (or SSA) and furnish statements to taxpayers showing
the total amount of qualified overtime compensation paid
during the year. The maximum annual deduction is $12,500
($25,000 for joint filers) and is phased out for taxpayers with
adjusted gross income over $150,000 ($300,000 for joint
filers).
IRS to Provide OBBBA Guidance, Transition Relief...................... 1
ACA Affordability Percentage Increases to 9.96% for 2026. 2
ACA Employer Shared Responsibility Payments Adjusted
for 2026............................................................................................. 2
SSA Provides Information During Semi-Annual Meeting. .......2
E-Verify Status Change Report Now Includes Document
Numbers............................................................................................ 3
OBBBA Includes Provisions That Affect HSAs, HDHPs. ..............4
PayrollOrg Offers Webinar on One Big Beautiful Bill Act.......... 4
DOL Withdraws Proposed Rule to End Subminimum Wage... 5
DOL Proposes to Exempt Domestic Service Employees From
FLSA.................................................................................................... 5
IRS Updates Specifications for Substitute Forms W-2 and W-3. ...5
IRS to Offer IRIS 101 Meeting on August 5. ...................................6
National Payroll Week Celebrates Payroll Professionals.......... 6
WHD Relaunches PAID Program, Now Includes FMLA. ............7
DOJ Adjusts Immigration-Related Civil Penalties for
Inflation............................................................................................. 7
9th Circuit Rules FLSA Plaintiffs Must Have Contacts With
State. ..................................................................................................8
IRS Issues Tax Year 2025 Specifications for Substitute Forms
1099.................................................................................................... 9
District Court Questions Reversionary Clause in FLSA
Settlement. .......................................................................................9
DOL Proposes End of EEO-1 Reporting for Federal
Contractors.....................................................................................10
IRS Provides Information About Scams.......................................10
E-Verify+ Reminds Employers of System Benefits, Changes.....10
Court Allows Tax Case Filed Under Wrong Business Name to
Proceed............................................................................................11
USCIS Terminates More TPS Designations, Provides Updates....11
OCSS Requests Comments on NDNH. .........................................12
TIGTA Issues Semiannual Report to Congress. ..........................12
DOL Answers Wage and Hour Questions at Payroll
Congress..........................................................................................13
State and Local Highlights...............................................................15
PayrollOrg Talks With IRS About Implementing OBBBA........ 17
PayrollOrg Asks Questions About Alaska’s Paid Sick Leave
Mandate......................................................................................... 18
PayrollOrg Seeks Clarity on Seattle’s Social Housing Tax
Rules. ...............................................................................................18
August 1, 2025 Volume 33 Issue 8
IRS to Provide OBBBA Guidance, Transition Relief
The IRS created a fact sheet to describe some provisions
of the One Big Beautiful Bill Act (OBBBA), which was
signed into law on July 4 [Pub. L. 119-21 IRS, FS-2025-03,
7-14-25].
The “One Big Beautiful Bill Act: Tax Deductions for
Working Americans and Seniors” fact sheet discusses four
main provisions that are effective for 2025 through 2028.
Two are relevant to payroll. For both provisions, the IRS
will provide transition relief for tax year 2025 for taxpayers
claiming the deduction and for employers subject to the
new reporting requirements.
No tax on tips
The OBBBA allows employees and self-employed
individuals to deduct qualified tips from their individual
federal tax returns. These qualified tips are reported on
Forms W-2, Forms 1099, or other specified statements.
“Qualified tips” are voluntary cash or charged tips received
from customers or through tip sharing.
Employers must file information returns with the IRS (or
Social Security Administration (SSA)) and furnish statements
to taxpayers showing cash tips received and the occupation
of the tip recipient. The maximum annual deduction is
$25,000 and is phased out for taxpayers with adjusted gross
income over $150,000 ($300,000 for joint filers).
The IRS said the agency will provide guidance on the no
tax on tips provision by October 2.
No tax on overtime
Individuals who receive qualified overtime
compensation may deduct their overtime pay from their
individual federal income tax return. They can only deduct
the “overtime pay” that exceeds their regular rate of pay
(the “half” portion or 0.5 portion of the time and a half
compensation) that is required by the Fair Labor Standards
Act and reported on a Form W-2, Form 1099, or other
statement furnished to the individual.
Employers are required to file information returns with
the IRS (or SSA) and furnish statements to taxpayers showing
the total amount of qualified overtime compensation paid
during the year. The maximum annual deduction is $12,500
($25,000 for joint filers) and is phased out for taxpayers with
adjusted gross income over $150,000 ($300,000 for joint
filers).
IRS to Provide OBBBA Guidance, Transition Relief...................... 1
ACA Affordability Percentage Increases to 9.96% for 2026. 2
ACA Employer Shared Responsibility Payments Adjusted
for 2026............................................................................................. 2
SSA Provides Information During Semi-Annual Meeting. .......2
E-Verify Status Change Report Now Includes Document
Numbers............................................................................................ 3
OBBBA Includes Provisions That Affect HSAs, HDHPs. ..............4
PayrollOrg Offers Webinar on One Big Beautiful Bill Act.......... 4
DOL Withdraws Proposed Rule to End Subminimum Wage... 5
DOL Proposes to Exempt Domestic Service Employees From
FLSA.................................................................................................... 5
IRS Updates Specifications for Substitute Forms W-2 and W-3. ...5
IRS to Offer IRIS 101 Meeting on August 5. ...................................6
National Payroll Week Celebrates Payroll Professionals.......... 6
WHD Relaunches PAID Program, Now Includes FMLA. ............7
DOJ Adjusts Immigration-Related Civil Penalties for
Inflation............................................................................................. 7
9th Circuit Rules FLSA Plaintiffs Must Have Contacts With
State. ..................................................................................................8
IRS Issues Tax Year 2025 Specifications for Substitute Forms
1099.................................................................................................... 9
District Court Questions Reversionary Clause in FLSA
Settlement. .......................................................................................9
DOL Proposes End of EEO-1 Reporting for Federal
Contractors.....................................................................................10
IRS Provides Information About Scams.......................................10
E-Verify+ Reminds Employers of System Benefits, Changes.....10
Court Allows Tax Case Filed Under Wrong Business Name to
Proceed............................................................................................11
USCIS Terminates More TPS Designations, Provides Updates....11
OCSS Requests Comments on NDNH. .........................................12
TIGTA Issues Semiannual Report to Congress. ..........................12
DOL Answers Wage and Hour Questions at Payroll
Congress..........................................................................................13
State and Local Highlights...............................................................15
PayrollOrg Talks With IRS About Implementing OBBBA........ 17
PayrollOrg Asks Questions About Alaska’s Paid Sick Leave
Mandate......................................................................................... 18
PayrollOrg Seeks Clarity on Seattle’s Social Housing Tax
Rules. ...............................................................................................18
