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IRS Delays Tip and Overtime Tax Breaks by Keeping 2025 Withholding Tables

This delay prevents mid-year upheaval as the IRS prepares for full implementation in 2026.

A sign for the Internal Revenue Service (IRS) is seen in Washington, D.C. on February 13, 2025.
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Overview

  • The IRS announced that it will maintain existing withholding tables for Tax Year 2025 under the One Big Beautiful Bill Act to avoid mid-year disruptions.
  • Taxpayers will continue paying federal income tax on wages from tips and overtime throughout 2025 and will receive above-the-line deductions as larger refunds when they file in spring 2026.
  • Employers and payroll providers will use current W-2, 1099 and 941 forms and standard withholding procedures for the remainder of 2025 pending updated reporting rules.
  • The Treasury Department and IRS are drafting detailed guidance and revised W-2 forms for Tax Year 2026 to integrate the new tip and overtime deductions.
  • The delayed rollout may prompt some taxpayers to seek CPA assistance to ensure correct refund claims and navigate added complexity.