IRS: No Last-Minute Changes to 2025 Form W-2 Due to OBBBA
The IRS announced it isn’t planning late-in-the-game changes to tax year 2025 Forms W-2 and other payroll forms, such as the 941.
That’s the case even though the One Big Beautiful Bill Act (OBBBA) says employees can take deductions on their personal income tax returns, starting with tax year 2025 returns.
The deduction is for qualified overtime compensation and/or tips. For overtime, the maximum deduction amount is $12,500 for individuals and $25,000 for joint filers. For tips, the maximum deduction amount is $25,000.
According to the OBBBA, employees will determine how much overtime and tips they earned during the year by referencing their W-2s. So, how will workers know what to enter on Form 1040 for tax year 2025 if the IRS isn’t updating W-2s right now?
The OBBBA provides transition relief for TY 2025: Employers may approximate a separate accounting of the amount of overtime and tips employees earn. The IRS will lay out reasonable methods for doing that.
IRS Gives Time to Prepare
Information Release 2025-82 explains the reason for leaving the forms unchanged in the short-term, including giving businesses prep time.
For similar reasons, the IRS won’t update the federal income tax withholding tables that employers are currently relying on each pay period to withhold the correct amount.
For tax year 2026, the form revisions should be in place.
In fact, Payroll should be on the lookout for a draft version of the 2026 Form W-2 in the coming months.
That draft form will reflect the new reporting requirements under the no-tax-on-overtime and no-tax-on-tips provisions of the OBBBA.
The IRS says it’ll coordinate with stakeholders before moving forward with the revisions.
Independent Contractor Forms
The August 7, 2025, guidance also addresses when updates will be made to Forms 1099, which will provide tip info to independent contractors.
The IRS plans to use the same time frame as with Forms W-2 and Forms 941.
Free Training & Resources
Further Reading
The cost of being a federal contractor is going up for 2024 due to a minimum wage increase. There’s legal pushback in some parts of t...
Could it be time for a review of your employee severance agreements? Right now Twitter’s experiencing major pitfalls from having them...
The metropolitan areas where employers and employees want to settle are in flux this decade. COVID-19 accelerated the flexible on-site ...
The Secure 2.0 Act became law just before the close of 2022, as part of the federal spending bill. Roll up your sleeves – the list of ...
A federal court in Texas has dismissed a challenge to the IRS regulation governing lock-in letters, leaving withholding directives issued t...
Wyoming’s unemployment insurance (UI) wage base rises to $34,900 per employee in 2027, up from $33,800 in 2026. The $1,100 increase takes...