The One Big Beautiful Bill Act is creating a wave of questions for payroll teams, HR departments, and employees, especially around its new overtime deduction. 

Accounting Today reports that the IRS has confirmed it won’t adjust withholding tables or key forms like the W-2 and 1099 until next year, giving payroll teams a breather for the rest of 2025. But that hasn’t stopped employees from asking how the overtime break will work. 

As Armanio payroll manager Tasha Clark explained, the benefit isn’t an immediate boost in take-home pay. The deduction, up to $12,500 for individuals or $25,000 for joint filers, will apply when taxpayers file their 2025 returns, and only to the “half” portion of time-and-a-half pay under federal rules. It also phases out for higher earners and applies to federal taxes only.

Some employees are even asking to be reclassified as non-exempt to qualify for overtime. Clark noted that’s not a decision employees can make, exemption status is determined by job duties and classification rules, and switching could significantly change how an employee works and reports time. 

The law’s impact could extend beyond payroll. It expands HSA eligibility for employees in certain direct primary care arrangements, provided monthly fees fall under $150 for individuals or $300 for families. That could bring new benefits to more workers but will also mean added administrative steps for employers. 

And there’s uncertainty around state conformity, as well as new Medicaid work requirements that could affect both employees and employers.