The One Big Beautiful Bill Act (OBBA) is a sweeping piece of legislation that changes tax deductions, credits, and compliance requirements across the board. Many provisions are already in effect, some are retroactive to January 1, 2025, and others will phase in over the next few years.
In this webinar, Greenshades’ Tax Specification Compliance Manager, Laura Detsch, and Director of Marketing, Danica Weappa, broke down the most critical changes for payroll and HR teams.
The session emphasized proactive adaptation, as several rules are still awaiting IRS clarification—particularly for retroactive application and qualifying role definitions.
You can watch the full session here:
Note: This information is for informational purposes only and does not constitute formal tax, legal, or compliance advice. Always consult with qualified tax advisors, legal counsel, and your organization’s internal teams for guidance specific to your situation. Additional regulations may apply. For the most accurate and up-to-date information, refer to official government resources and regulatory agencies.
Updates were made to the standard deductions and new provisions were introduced that affect take-home pay. For all items listed below, full details are available at the IRS OBBA provisions page. Many deductions have income phase-out limits, which may affect how employees complete W-4s. While deductions apply to the individual, employers must process any W-4 changes submitted and ensure accurate tracking.
IRS Update: On August 7, 2025, the IRS confirmed there will be no changes to individual information returns or withholding tables for 2025 under OBBA. This decision aims to streamline 2025 year-end processes and give businesses more time to implement changes effectively. Guidance for 2026 will be released in due course.
Important note: On August 7, the IRS posted "Employers and payroll providers should continue using current procedures for reporting and withholding" until they post formal guidance regarding how to track and report on these new deductions. However, your organization may find it beneficial to start breaking out tips and overtime in your payroll records (leaving the income tax calculation alone for now!).
Updates were made to various 1099 thresholds and additional exclusion policies went into effect. These new rules affect your reporting at year-end, including:
Businesses might be eligible for certain credits and adjustments under the new bill as well.
Be sure to check eligibility for new or expanded credits, confirm programs meet wage and service thresholds, and partner with benefits to optimize tax savings.
Now is the time to make sure you payroll system is ready for what's already changed, and what's ahead. Be sure to:
In addition, check out these key resources that will help you stay up to date with any and all compliance changes.
Greenshades keeps pace with shifting payroll and tax requirements, with automatic updates to tax codes, forms, and deduction fields and support for complex scenarios. Greenshades can help your team stay aligned with evolving rules and beyond, with agile solutions that include:
“OBBA’s impacts were immediate. The question is whether your team is ready to respond quickly and accurately.” – Laura Detsch
Q: Will Greenshades update the timesheets portal for the new overtime rule?
A. Greenshades already tracks this information and can provide data on both tips and overtime.
Q: How should tips be handled for part-time employees who are also full-time students?
A: Unless the student is hired in the capacity of a student by a university (see IRS Student Exception to FICA Tax), regular rules apply. For traditional tipped positions, tips are exempt from federal taxes up to $12,500.
Q: How do we retroactively calculate overtime for union and non-union employees when we only use one pay code at 1.5x?
A: The IRS has not issued guidance on retroactive calculations. One approach:
If your state requires daily overtime (e.g., CA), tracking hours going forward will be necessary. But to get a more formal estimation, I would need additional information.
Q: Is overtime based on actual work time, excluding vacation, holiday, or sick pay?
A: Yes. Under FLSA, overtime applies to actual hours worked.
Q: Does overtime apply to bonus and commission “true-ups”?
A: Yes for non-discretionary bonuses. Some commission work is exempt from overtime—details depend on the specific role.
Q: How does double time factor into the overtime premium exemption?
A: The exemption applies to the portion paid over the regular rate of pay (RROP) for physically worked hours. Non-worked pay like PTO, PSL, or holiday is excluded.
Q: How do I set up pay codes to make overtime tracking manageable going forward?
A: Track overtime separately. If your state requires double time (e.g., CA), create separate pay codes for those hours.
Q: An employee’s Line 3 entry causes no federal tax withholding in Great Plains—why?
A: Total wages and W-4 status must be reviewed to determine correct withholding. We would need to see this information to provide a more concrete answer.
Q: For W-2 reporting, is it correct that only the amount over the employee’s normal hourly rate (1/3 of OT paid) is reported?
A: Until the IRS says otherwise, yes—1/3 of overtime pay is a reasonable estimate.
Q: Does the OT deduction apply only to the 0.5 portion of the 1.5 rate, up to $12,500/year?
A: Correct, based on current IRS guidance.
Q: For the new 1099 threshold - is that for the 2026 year that will be filed in 2027?
A: The 1099-K is retro-active to 1/1/2025; the NEC/MISC will remain $600 for TY 2025/FY 2026 and then increase to $2,000 for TY2026 / FY 2027