from state tax overtime pay to Alabama workers working in the state, under certain conditions. The law’s provisions are “complicated for taxpayers, tax preparers, employers, and the agencies to administer,” he said. As for removing the federal tax on tips, implementing a program based on type of worker or industry they work in can cause uncertainty in application. Then there is the definition of tips. Is it a gift, as one proposal would characterize the transaction? Such a program eliminating the federal income tax on tipped amounts would be “difficult to administer, and subject to gaming” by employers, Isberg said. More impactful, possibly, for payroll is whether the Tax Cut and Jobs Act gets extended and which provisions from the existing law would remain. Should the law, scheduled to sunset the last day of 2025, not get extended, how individual income taxes are calculated would revert back to pre-2018 methods. The IRS spent years folding aspects of the current law into payroll-related forms like Form
One significant payroll-related proposal, now paused, is from the CFPB and could have affected the way earned wage access (EWA) providers in the U.S. do business.
The Larger Picture on U.S. Taxes Payroll professionals in the U.S. will be looking at how several proposals, some from the Trump campaign trail, will progress as Congress tackles the extension of the President’s first-term signature accomplishment, the Tax Cut and Jobs Act, which was enacted in 2017, but sunsets the end of 2025. Already being considered by Congress include moves to exclude from federal income taxes on overtime pay overall and taxes on tip income to service workers. The proposals currently vary widely as introduced in Congress. And implementation for payroll likely will be tricky. Isberg noted that Alabama currently has a law that excludes
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ISSUE 9 GLOBAL PAYROLL MAGAZINE
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