Have you been wondering how payroll is going to handle the new tax law changes regarding no tax on tips and overtime? These changes will not be implemented through payroll. Instead, employees will enter these deductions when they file their tax return.

  • No tax on tips. Employees and self-employed individuals may deduct qualified tips received in jobs listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024.
  • No tax on overtime. Individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay such as the “half” portion of “time-and-a-half” compensation.

For details, see https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors