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The One Big Beautiful Bill Act (OBBBA) includes two new provisions that may affect your 2025 payroll reporting and employee W-2 forms.
👉 For the latest official information, visit the IRS site:
IRS Newsroom – One Big Beautiful Bill Act: Tax Deductions for Working Americans and Seniors
🕒 1. Overtime Deduction
Employees may now be eligible for a deduction on the premium portion of their overtime pay when filing their federal income tax return.
What to Know
- Only the premium portion of overtime pay qualifies. Example: For time-and-a-half pay, only the extra half counts.
- Only overtime required under the Federal Labor Standards Act (FLSA) is eligible.
- Exempt employees (those not covered by FLSA overtime rules) are not eligible.
How This Works in ABC Payroll
- If you’re using our standard overtime configuration, your overtime hours and pay amounts are already tracked and can be used to calculate the premium portion.
- If you use ABC’s W-2 printing and filing service, we can include the overtime amount on your employees’ W-2s.
- You’ll need to determine which overtime pay qualifies so we can report it correctly.
Note: The IRS has not yet released the updated 2025 W-2 form. Employers may report overtime premium pay on a separate statement for now.
💵 2. Tips Income Deduction
Employees who customarily and regularly receive tips may also qualify for a federal income tax deduction on their tip income.
What to Know
- Only voluntary tips qualify — including cash, charged tips, and shared tips among employees.
- Mandatory gratuities added by an employer do not qualify.
- The occupation must be on the IRS list of jobs that regularly receive tips.
How This Works in ABC Payroll
- Tips entered using our standard configuration are automatically included in your payroll reports.
- If you use our W-2 service, qualified tip income will appear on your employees’ W-2 forms.
💬 Need Help?
If you have questions about these changes or how they apply to your payroll setup, our support team is happy to help.
📧 Email: support@abc.software
We appreciate the opportunity to serve you and help make your reporting smooth and compliant.
Thank you for trusting ABC Software LLC — we’re honored to support your business!
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