THE Internal Revenue Service has officially revealed a key decision impacting millions of American taxpayers.
The federal agency’s announcement last Thursday outlines crucial information regarding the 2025 tax year and how to handle your paychecks.
The IRS is the federal agency responsible for collecting federal taxes[/caption]
The IRS made a recent announcement outlining key details regarding the 2025 tax year[/caption]
President Donald Trump officially signed his comprehensive budget reconciliation tax package called the One Big, Beautiful Bill Act into law on July 4, 2025.
The IRS plans to implement the new legislation in phases to help ease into the changes.
Standard forms and withholding tables for the 2025 tax year will be unaffected by the One Big, Beautiful Bill Act, the IRS announced last week.
For example, Form W-2, existing Forms 1099, and Form 941 and other payroll return forms will remain the same for the 2025 tax year, which refers to income earned between January 1 and December 31 of this year.
Additionally, federal income tax withholding tables will not be updated for tax year 2025, per the press release.
Employers and payroll providers are being directed to continue using current procedures for reporting and withholding taxes.
These decisions are being implemented in order to reduce disruption during the upcoming filing season and allow the IRS, businesses, and tax professionals sufficient time to enact the changes.
Although taxpayers will largely be unaffected by the One Big, Beautiful Bill during the 2025 tax year, the IRS is currently working to create new guidance and updated forms for tax year 2026.
Some of the upcoming changes include how tips and overtime pay are reported.
“The IRS will coordinate with employers, payroll providers and tax professionals to ensure a smooth transition,” says the press release.
“More information will be shared in the coming months about how taxpayers can claim OBBBA-related tax benefits when they file their returns.”
WALLET HELPER
Although the IRS has delayed any changes to reporting forms or withholding procedures until tax year 2026, there are several new tax benefits in the One Big, Beautiful Bill Act that are effective for the 2025 tax year.
For example, Americans will see a boosted child tax credit thanks to Trump’s new legislation.
The budget reconciliation bill is officially establishing several changes to the federal child tax credit by making the 2017 Tax Cuts and Jobs Act, or TCJA, from Trump’s first term permanent.
Trump’s main policy points
- Implementing tax cuts, including no tax on tips.
- Protecting Social Security and Medicare – Trump said, “Incomes will skyrocket and the middle class will prosper like never before.”
- Protecting borders – He pledged to end the “border nightmare.” That means two things on day one – “Drill baby Drill,” as he said, and close the borders.
- Finishing building the wall.
- Keeping our “sons and daughters safe.”
- Replenishing the military and building a military “dome” – Trump insisted he could stop wars with just a phone call and said no military would be able to penetrate the USA if he came into office.
- Ending the war in Ukraine and imposing tariffs on Iran.
- Vowing to “beat” China.
- Working to decrease prices and ease inflation.
- Bringing down the cost of energy.
- Making cities “safe, clean and beautiful” again.
- Making it possible for Americans to buy gas-run cars by ending the electric vehicle mandate on the first day of his presidency.
Before the TCJA, Americans could claim at most $1,000 per child.
The 2017 legislation temporarily boosted the maximum child tax credit to $2,000.
Now, the One Big, Beautiful Bill Act has further bumped up the max credit to $2,200 per qualifying child this year, which will be adjusted annually to account for inflation beginning in 2026.
Trump’s tax reform package dictates that both the child and parents must have a valid work-eligible Social Security Number in order to qualify for the child tax credit.
The refundable portion of the credit is now $1,400.
In addition to affecting the tax season, the One Big, Beautiful Bill Act is projected to spike electricity bills by $130 for each household in a US state.
Meanwhile, families in one state could score a new $1,000 tax credit in a move to “put money back in pockets.”
