One Big Beautiful Bill Update
| As many of you have heard, the H.R.1 Bill also known as the “One, Big, Beautiful Bill” has passed. You may have questions regarding the sections pertaining to “No Tax on Tips” and “No Tax on Overtime.” We are here to help you! The “No Tax on Tips” and “No Tax on Overtime” are employee benefits. They allow employees to deduct “qualified tips and overtime” from their taxable income. Here are a few things to know: How Are “Qualified Tips and Qualified Overtime” Defined? |
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| Industries Potentially Impacted The “qualified tips” must be from “traditional and customarily received” before 2025. The IRS will publish the official list due within 90 days of the bill’s enactment. However, there will be a list of excluded occupations from participating on the “no tax on tips” that are considered specified service trade or businesses under Section 199A. Areas of Concern – Would Tip-Pooling be considered set by employer policy? – Business owners who receive tips – Employers may need to manually adjust withholding initially – Administrator cost/resources would need to be increased to accommodate these changes What Does This Mean for the Employer? – Employer verification needed. Document that tips and overtime premiums meet all qualification requirements. – The IRS to publish an official list of “traditional tipping occupations. – Reporting Obligations: employers would be required to report qualified tips and overtime premiums separate from taxable wages. – These are meant to be a benefit to allow employees to make above-the-line tax deductions. Despite the bill passing, there are still a lot of unknowns. That being said, we are dedicated to providing you with any relevant updates, especially in the next 90 days as the IRS publishes more details. As always, we are here to help! Please reach out to us with any questions. WRITTEN BY MARCY ANGELO, PARTNER, WHITE GLOVE PAYROLL |