The One Big Beautiful Bill Act (OBBBA) was signed into law on July 5, 2025. As of today, the IRS has not released any formal guidance regarding specific changes or implementation requirements, however, the IRS is expected to release detailed regulations and instructions within 90 days of the law’s enactment, as mandated by the legislation.
CSC Paymaster is actively monitoring updates and carefully reviewing the implications of this new legislation to ensure we remain fully compliant and ready to respond to any changes. At this time, no action is required on your part.
We understand there are many questions surrounding what this law may mean for employers and employees alike. Below are a few key points you can share with your employees based on early interpretations of the law.
Key Topics to Know about the One Big Beautiful Bill Act (OBBBA)
- How will employees receive the tax benefit?
- Tax credits will not be applied through payroll or employee paychecks. Instead, eligible employees can claim the benefit as a deduction on their personal tax return.
- What types of earnings are eligible for reduced taxes?
- Under OBBBA, eligible employees may receive federal income tax relief on cash tips, credit card tips, and the premium pay portion of overtime.
- What taxes will be reduced?
- OBBBA provides that for eligible employees, only federal income tax will be excluded from cash or credit card tips and the premium-only portion of overtime wages. There is no change with the taxability of these earnings for other applicable taxes, including Social Security, Medicare, and applicable state or local taxes.
- Will all employees qualify for the deduction?
- Not all employees will be eligible. The law includes income-based wage caps, and eligibility will be determined by individual or household income thresholds on filed tax returns.
- What comes next?
- Formal IRS guidance is expected within 90 days, if not sooner. CSC Paymaster is closely monitoring all updates and will provide additional communications as more details are made available.
- Where can we find out more information?
- Employers and employees can visit irs.gov/newsroom or reputable news sources such as Kiplinger.com or Forbes.com for more information.
Disclaimer: This communication is provided for informational purposes only and should not be considered legal or tax advice. CSC Paymaster does not provide legal or accounting guidance. Clients and their employees are encouraged to consult with their own legal counsel or tax advisor regarding how the provisions of the One Big Beautiful Bill Act (OBBBA) may apply to their specific circumstances.
