One Big Beautiful Bill Act (OBBBA)

What is OBBBA?

Key Provisions

• Tax Relief Scope:
• Employees can deduct up to $25,000 in tip income and $12,500 in overtime wages from federal taxable wages.
• Available only to workers earning $150,000 or less.
• Provisions are in effect for 2025 through 2028.

• Timing of Benefits:
• Employers will continue withholding taxes from paychecks throughout 2025.
• Employees will not see changes in take-home pay immediately.
• Instead, they’ll claim the deduction when filing their 2025 tax return in early 2026, which could lower their tax bill or increase their refund.

Implementation Timeline

• Tax Year 2025:
• No changes to Forms W-2, 1099, or 941.
• No updates to IRS withholding tables.
• Employers and payroll providers (including Check) should continue current reporting and withholding procedures.

• Tax Year 2026:
• IRS plans to phase in reporting and form updates to reflect the new law.
• This delay avoids disruptions during the upcoming filing season.

How Check is Supporting Partners

• Check will continue to withhold and report taxes normally for 2025.

• At year end, employees will be able to claim the OBBBA deduction on their personal returns.

• Check’s Year End training will cover:
• Best practices for handling tips and overtime reporting.
• Guidance on surfacing overtime that may not appear on W-2s.

Key Takeaways

• OBBBA does not change payroll processing in 2025.

• Employees earning under $150,000 can deduct up to $37,500 (combined tips + overtime) when filing 2025 taxes.

• Deductions will be claimed at tax filing in 2026, not in real-time paychecks.

• Reporting and withholding procedures remain unchanged until at least 2026.