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One Big Beautiful Bill Act

Eric Updated by Eric

Information in this article is subject to change as IRS and state guidance becomes available.

On July 4th, the One Big Beautiful Bill Act was signed into law. Here is a what to expect as far as updates to our software.

Payroll System

No Tax on Overtime

Only the premium amount (e.g. the .5 in 1.5x pay) is deductible.
Only overtime that conforms to federal standards is deductible (e.g., OT performed after 40 hours/week). Some states, like California, do not conform and only a portion is deductible (e.g. the portion after 40 hours/week, not the portion after 8 hours/day).
  • Withholding: there is no need to change any withholding behavior at this time. Federal guidance has not been published for 2025, and it may even be risky to modify withholding from OT since each employer is only responsible for one W-2 but the actual OT deduction amount may be reduced depending on the employee's income from other sources.
  • A new worksheet module is planned for Payroll System 2025 to help determine federally applicable OT deduction amounts to go onto the W-2.
  • Federally conforming OT payroll items will flow to the W-2 automatically subject to any IRS rules requiring it.

Both features are expected to be released at the end of 2025.

TaxTools & W4 Calculator

The Tax Planner is being extensively tested for conformity to the OBBBA. It is expected to be released by the end of July, followed by an update to W4 Calculator in early August.

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