The IRS issued a press release yesterday:
The Internal Revenue Service today announced that, as part of its phased implementation of the One Big Beautiful Bill Act, there will be no changes to certain information returns or withholding tables for Tax Year 2025 related to the new law.
Key points for TY 2025 relating to OBBBA provisions:
- Form W-2, existing Forms 1099, and Form 941 and other payroll return forms will remain unchanged for TY 2025.
- Federal income tax withholding tables will not be updated for these provisions for TY 2025.
- Employers and payroll providers should continue using current procedures for reporting and withholding.
These decisions 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.
There’s problem here: Certain tip income and overtime income isn’t subject to tax under the OBBBA. How am I, a tax professional, to know the total of tips and overtime? Or that the taxpayer worked in an industry where tipping is ‘normal?’
For tips, there is a box on the W-2: box 7, so that should be straightforward as to the amount paid. As to the industry, well, I’ll have to use my judgment. But there’s no box on the current W-2 for overtime. That means either it will need to be listed as an other item in Box 14 (the current ‘catch-all’ box) or we’ll need the final pay statement (aka pay stub) for the year for anyone who earned overtime.
The new OBBBA may be good for many workers, but it absolutely adds complexity to tax preparation. It will increase the amount of time it takes to prepare a tax return. Given the OBBBA didn’t (and couldn’t) change the clock–our day still remains 24 hours–and I’m loathe to require my employees to work additional hours (nor do I really want to myself), that means the cost to prepare a 2025 tax return will rise. And that’s before inflation, demand increase, and the overall shortage of tax preparers is factored into the cost.
