The One Big Beautiful Bill Act (OBBBA) is a new federal law that provides temporary tax relief on tips and overtime pay for certain employees. It officially takes effect in tax year 2025 and will apply through 2028.
If you use Workstream Payroll, there’s no action needed for now as payroll processing and tax reporting will continue as usual throughout 2025.
How OBBBA works
Starting with tax year 2025, employees who earn $150,000 or less may qualify to deduct part of their tips and overtime pay when they file their federal tax return.
Here’s what to know:
Up to $25,000 in tips and $12,500 in overtime pay can be deducted from taxable income.
Tax relief happens later, when employees file their 2025 taxes in early 2026.
Paychecks won’t change. Employers will still withhold and report taxes as usual during 2025.
What this means for Workstream Payroll users
For now, nothing changes in how you process or report payroll.
You’ll continue using the same forms and reports (W-2s, 1099s, 941s).
Workstream will keep withholding and reporting taxes normally in 2025.
Any OBBBA deductions will be handled directly by employees when they file their personal tax returns.
In short, payroll processing remains the same until at least tax year 2026, when the IRS may release updated forms and reporting guidance.
What’s next
The IRS plans to phase in OBBBA-related reporting updates in 2026 to avoid disruptions during the 2025 tax filing season.
Workstream will share more information once those updates are released.
Until then, continue running payroll as usual, no setup or configuration changes are required.
Frequent Asked Questions (FAQs)
Q: Do I need to make any changes in Workstream Payroll?
Q: Do I need to make any changes in Workstream Payroll?
A: No. Everything stays the same for 2025. Workstream will handle any future changes when the IRS updates reporting rules.
Q: Will employees see this deduction in their paychecks?
Q: Will employees see this deduction in their paychecks?
A: No. The tax relief applies when employees file their personal tax return for 2025. It won’t appear in their regular pay.
Q: When will this take effect?
Q: When will this take effect?
A: The law applies to tax years 2025 through 2028, but payroll changes (if any) won’t happen until the IRS updates forms and guidance, expected in 2026.