How does the ‘One Big Beautiful Bill’ Impact Your Business?  

Updated: September 4 2025

What Employers Need to Know Now About the Latest IRS Tax and Labor Bill 

The “One Big Beautiful Bill Act,” officially called the Tax Deductions for Working Americans and Seniors Act, was signed into law on signed into law on July 4, 2025, and is shaping up to be one of the most closely watched business policy updates in years. Introduced with the intent to simplify the tax code and make work more rewarding for everyday Americans, the bill also includes key changes that will affect employers of all sizes, especially those with hourly workers or tipped employees. 

Let’s break down some of the tax implications for employers coming out of this bill and what business leaders like you can do now to prepare. 

IRS Implementation Update for 2025

While the “One Big Beautiful Bill Act” includes sweeping tax and labor changes, the IRS has announced in an update that there will be no immediate changes to Forms W-2, 1099, 941, or federal withholding tables for Tax Year 2025. Employers and payroll providers should continue using current reporting and withholding procedures through the 2025 filing season. 

This pause is intentional, as it gives the IRS, businesses, and payroll providers time to prepare systems for a smooth transition. Expect new forms, withholding updates, and additional guidance beginning with Tax Year 2026.  

Tax Highlights from the ‘One Big Beautiful Bill Act’ 

The “One Big Beautiful Bill Act” (OBBBA) enacts a wide range of tax benefits for workers and retirees. At its core, it aims to simplify how deductions and benefits are calculated, particularly for middle- and lower-income workers, and create financial incentives to stay in the workforce. 

Highlights include: 

• A new universal standard deduction for all working adults 

• Expanded tax credits for caregivers and older workers 

• Changes to reporting on qualified tips and overtime for hourly employees 

• Streamlined withholding guidelines for employers 

While much of the attention has focused on the individual tax benefits, there are important operational and compliance implications for employers, especially in how you report, track, and compensate your workforce.  

What It Means for Businesses 

Businesses will need to prepare for updated withholding systems, but not until TY 2026. For 2025, the IRS has confirmed that W-2s, 1099s, 941s, and withholding tables remain unchanged. Employers should keep current processes in place while preparing for revisions in the year ahead. 

For employers, this bill touches three critical areas: 

1. Payroll Tax Deductions 
   Businesses will need to update their withholding systems to reflect the bill’s simplified deduction structure. Expect a revised W-4 process and adjustments to employee payroll records. 

2. Tipped Employee Pay 
   Employers in hospitality, food service, and related industries should pay special attention. The bill contains accelerated reporting requirements for qualified tips and stricter documentation rules. These changes won’t take effect until at least Tax Year 2026. For now, continue with your existing reporting procedures.

3. Overtime & Classification Changes 
   While the bill doesn’t directly amend FLSA rules, experts caution that enforcement of overtime pay and worker classification may shift in response to the bill’s financial incentives for workers to track hours accurately. The overtime deduction provisions are part of the law, but IRS guidance on how to claim them won’t affect employer reporting until 2026. Employers should continue using existing FLSA guidelines and payroll reporting for 2025. 

Impact on Business Taxes 

From a tax perspective, the bill intends to simplify filings, but the transition could require temporary adjustments to payroll software, employee classifications, and deduction tracking. 

Key considerations: 

• The standard deduction shift may reduce the number of employees itemizing deductions, simplifying year-end tax statements. 

• Employers will need to reexamine pre-tax vs. post-tax benefit configurations. 

• Withholding changes could require updates to payroll platforms and recalibration of forecasting tools for labor costs. 

Impact on Overtime and Classification 

The bill places more attention on accurate time tracking and fair compensation. 

Here’s what to expect: 

• With greater worker visibility into take-home pay, expect increased scrutiny of unpaid overtime or rounding errors. 

• If your business uses salaried non-exempt classifications, recheck thresholds for compliance. 

• Mobile punch-in/out tools and automated audit trails will become even more important to avoid costly disputes. 

Bottom line: Employers will be held more accountable for tracking time accurately and justifying classifications. The safer bet? Transparent systems that make time, pay, and compliance visible for everyone. 

Impact on Tipped Workers and Reporting 

For businesses with tipped employees, including restaurants, salons, and hospitality venues, the bill could reshape how tips are reported and taxed. 

What might change: 

• Increased frequency of tip reporting to match real-time payroll periods 

• Possible shift in how pooled or distributed tips are treated under IRS scrutiny 

• Stronger recordkeeping requirements to separate discretionary vs. nondiscretionary tips 

If your team relies on manual entry or paper tip declarations, this is a moment to consider digital tip-tracking tools that integrate directly with payroll. 

Other OBBBA Business Impacts to Know 

Business Tax Changes 

• Domestic R&D Expenses: 
  Businesses can immediately deduct U.S.-based research and development costs starting in 2025 (instead of spreading them out over five years.) Foreign R&D must still be amortized over 15 years. 
• Retroactive Relief for Small Businesses: 
  Small businesses (under ~$31M in receipts) can apply this immediate expensing rule retroactively to 2022–2024, with catch-up deductions allowed over 1–2 years. 

Employee Retention Tax Credit (ERTC) Updates 

• ERTC Claims Cutoff: 
  Businesses can no longer file Q3 or Q4 2021 ERTC claims after January 31, 2024. 
• Audit Window Extended: 
  For Q3 and Q4 2021 claims, the IRS now has six years to audit (previously five.) Earlier 2020 and Q1/Q2 2021 claims still follow the original 3-year window. 

Employer-Provided Childcare Credit (Expanded) 

• Larger Credit: 
  Credit increases from $150,000 to $500,000, and the reimbursement rate jumps from 25% to 40% of qualified childcare expenses. 
• Extra Boost for Small Businesses: 
  Eligible small businesses are now able to now claim up to $600,000 with a 50% rate (gross receipts <$31M.) 
• Pooled Childcare Allowed: 
  Multiple small businesses can partner together to provide childcare services and still claim the credit. 

Paid Family & Medical Leave Credit (Expanded + Made Permanent) 

• Permanent Credit: 
  Originally set to expire in 2025, the credit for employer-paid family/medical leave is now permanent. 
• Expanded Eligibility: 
  Employees only need 6 months of tenure (down from 1 year), and state/local leave mandates now count toward the requirement. 
• Includes Insurance Premiums: 
  Employers can claim the credit even when using qualifying paid leave insurance plans. 

Business Meals Deduction (Preserved + Expanded) 

• Still 50% Deductible: 
  The 50% deduction limit on employer-provided meals stays in place for now. 
• New Exemptions Added: 
  Meals provided on certain fishing vessels or processing sites are now fully deductible. 

Transportation & Relocation Benefits 

• Bike Commuter Reimbursement Permanently Removed: 
  The $20/month tax-free employer reimbursement for bicycle commuting is officially gone. 
• Moving Expense Deduction Gone for Most: 
  Employers can no longer deduct moving expenses or reimburse employees tax-free, except for military and intelligence community members. 

5 Smart Tips for Preparing Your Business Now 

Now is the time to get ahead of the curve. Prepare your business for what lies ahead. 

Here’s how: 

1. Audit Your Current Classifications 
   Review any “gray area” positions with your HR or legal team to avoid future misclassification issues. 

2. Educate Your Frontline Managers 
   Make sure shift leads and department heads understand the importance of time tracking and overtime limits. 

3. Update Time and Attendance Systems 
   Now’s a great time to invest in accurate, mobile-friendly tools that ensure compliance from the first punch. 

4. Watch for IRS and DOL Guidance 
   Bookmark the official IRS.gov summary page and subscribe to email updates from credible employment law firms. 

5. Talk to Your Payroll Provider 
   Ask how your system can adapt to the bill’s proposed deductions and tip reporting requirements. 

Stay Informed and Stay Nimble with Netchex 

How Netchex Can Help 

Legislation like the “One Big Beautiful Bill Act” can feel overwhelming. From changing tax codes to new reporting requirements, it’s not always clear what’s required or how soon you need to act. 

That’s where Netchex comes in. 

We’re more than just payroll software. We’re a trusted, U.S.-based team that seeks to understand your business and picks up the phone when you need us. Whether you manage hourly, salaried, tipped, or remote employees, we’ll help you stay ahead of compliance changes with tools built for the way you actually work. 

Here’s how we make it easier: 

• Payroll & Tax Expertise: While we encourage you to work with your tax professionals, we stay on top of the latest IRS and DOL updates. 

• Real-Time Reporting & Insights: Easily track wages, tips, and timekeeping with built-in compliance dashboards. 

• Friendly, Human Support: Get answers fast from a team that sticks with you from Day 1—No complicated phone trees. Just real people. 

• Built for Change: Whether it’s a new bill or a new policy, our flexible platform adapts quickly so your business can, too. 

No matter what’s coming next, we’re here to help you move forward with clarity and confidence. 

Let’s keep your team on track—and your business out in front. 

Contact us today. 

Disclaimer: This content is intended to provide general information and does not constitute legal, tax, or accounting advice. Due to changing IRS regulations, information may not be complete, accurate, or up to date. Please consult with a professional advisor to assess your specific business needs. 

References: 

1. IRS.gov 

2. Illinois State University – FAQs for OBBA Not Tax on Overtime 

3. H&R Block – Tax Deductions 
   
4. IRS.gov update IR-2025-82 (August 7, 2025)