No 2025 information return or withholding table changes under OBBBA

The IRS said Thursday it will delay making changes to certain information returns or withholding tables, as part of its phased implementation of H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act (H.R. 1), until tax year 2026. This includes changes related to the temporary deductions for overtime and certain tips that were part of the legislation.

Those two provisions are effective from tax year 2025 to tax year 2028.

The IRS highlighted three points related to H.R. 1 provisions in a news release:

• Form W-2, Wage and Tax Statement; existing Forms 1099; Form 941, Employer’s Quarterly Federal Tax Return; and other payroll return forms will remain unchanged for tax year 2025;
• Federal income tax withholding tables will not be updated for these provisions for tax year 2025; and
• Employers and payroll providers should continue using current procedures for reporting and withholding.

The IRS decisions to delay changes until 2026 are “intended to avoid disruptions during the tax filing season and to give the IRS, business, and tax professionals enough time to implement the changes effectively,” the release said.

No taxes on overtime and tips

Tax relief for overtime and on certain tips were priorities of the Trump administration. On overtime, the legislation provided a temporary deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year. The deduction begins to phase out when a taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). This temporary deduction is available for tax years 2025 through 2028.

For tips, the legislation provided a temporary deduction of up to $25,000 for qualified tips received by an individual in an occupation that customarily and regularly receives tips. The deduction will be allowed for employees receiving a Form W-2 and independent contractors who receive Form 1099-K, Payment Card and Third Party Network Transactions, or Form 1099-NEC, Nonemployee Compensation, or who report tips on Form 4317, Social Security and Medicare Tax on Unreported Tip Income. This deduction is available for tax years 2025 through 2028. A transition rule allows employers required to furnish statements enumerating an individual’s tips for tax year 2025 to use “any reasonable method” to estimate designated tip amounts.

Tax year 2026

The IRS is working on new guidance and updated forms for tax year 2026, including changes to how tips and overtime pay are reported, the release said. The IRS will coordinate with employers, payroll providers, and tax professionals in changing these processes.

More information will be shared in the coming months about how taxpayers can claim OBBBA-related tax benefits when they file their returns. Treasury and the IRS are preparing additional guidance for reporting entities and individual taxpayers.

AICPA resources

The AICPA has compiled multiple resources to help members understand the provisions of the legislation.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.