Key Takeaways:
- Global mobility programs face new compliance and reporting risks due to changes in state and local tax limits, deductions, and refund delivery rules.
- Employers must track and report qualified tips and overtime separately under new IRS rules.
- Tax-equalized employees will see changes in liabilities due to itemized deduction limits and paid family and medical leave taxation.
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The One Big Beautiful Bill Act (OBBBA) introduced sweeping updates that reshape payroll processes, benefits administration, and global mobility strategies. Employers will need to adjust quickly to confirm compliance, particularly for tax-equalized employees and those working across borders.
New Employer Reporting Obligations on Tips and Overtime
As a result of OBBBA updates, employers must now separately report qualified tips and overtime premiums to both employees and the IRS. These data points support new individual deductions and require employers to track compensation that was previously bundled in payroll systems. Employers must:
- Identify tip-based occupations as of December 31, 2024
- Verify that tips are voluntary and earned outside disqualified trades
- Separate Fair Labor Standards Act (FLSA) overtime premiums from other compensation
The IRS has not finalized how this information should be reported, but employers should begin preparing payroll and recordkeeping systems. While 2025 brought transition relief, new W-2 codes will take effect for 2026 and failure to comply may lead to penalties or missed deductions for employees.
Tax-Efficient Benefits Get a Boost
OBBBA makes several employer tax credits permanent, including:
- Paid family and medical leave (PFML): Expanded to cover state-mandated plans, part-time workers, and multistate employers.
- On-site child care (Section 45F): Credit limit raised to $500,000 ($600,000 for small businesses), with a broader definition of qualifying expenses.
- Student loan repayment (Section 127): $5,250 annual tax-free limit is now permanent and indexed for inflation.
Employers can now offer more robust benefits while reducing tax liability, but eligibility and documentation rules remain strict.
Global Mobility and Tax Equalization Face New Pressures
Multinational employers must assess how OBBBA provisions affect their mobile workforce, particularly those in tax-equalized programs. Key challenges include:
- State and local tax (SALT) deduction changes: The cap temporarily rises to $40,000 in 2025, but new phaseouts and AMT interactions complicate tax modeling.
- Deduction limits: A new cap on itemized deductions for high earners limits the benefit to 35% of value.
- Moving expense taxability: Most moving expenses will again be taxable starting in 2026.
- 1% remittance excise tax: Applies to outbound money transfers not processed through U.S.-based cards or banks.
These changes affect both actual and hypothetical tax liabilities, which are central to tax-equalized compensation planning.
IRS Ends Paper Refund Checks: Digital Refunds Only
A new executive order directs the IRS to phase out paper refund checks by September 30, 2025. For global mobility programs, this creates serious logistical hurdles:
- Tax-equalized employees without U.S. bank accounts may face refund delays.
- Refunds will need to be deposited digitally — potentially into personal accounts — before being forwarded to the employer.
- Foreign nationals departing the U.S. may need to maintain dormant U.S. bank accounts just to receive future refunds.
This shift will require new payment workflows and possibly digital wallet or wire transfer solutions to avoid bottlenecks in the tax settlement process.
MGO Supports Payroll and Mobility Readiness
Staying compliant with evolving payroll and benefits rules requires more than reactive updates. MGO partners with employers to take a proactive, integrated approach that connects tax, HR, and finance functions.
We help clients assess the operational impact of new requirements under the OBBBA — from redesigning payroll systems to properly track tips and overtime to modeling how compensation changes will affect tax-equalized employees. Our team also evaluates eligibility for new and expanded tax credits and guides employers through the transition to digital refund delivery, including cross-border considerations for global workforces.
With MGO, employers gain a trusted advisor to help anticipate regulatory shifts, reduce administrative burden, and align compensation strategies with long-term talent and compliance goals. Connect with our team today to assess your processes and adapt your practices to the new OBBBA rules.
New payroll mandates aren’t just compliance issues — they’re opportunities to modernize systems, support employees, and unlock value through smart planning.