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The One, Big, Beautiful Bill Act, enacted July 4, 2025, creates new tax deductions for tax years 2025 through 2028 for recipients of qualified tips and qualified overtime compensation. The OBBBA amendments to the Code generally impose information reporting requirements, such as on Form W-2 or Form 1099, on the payors of qualified tips and overtime in order for the recipients of such compensation to be eligible to take the deductions. However, for tax year 2025, OBBBA includes transition relief that permits employers and payors to approximate and report qualified tips and qualified overtime by any reasonable method specified by the Secretary.

The IRS and Treasury have now provided guidance in the form of two notices – Notice 2025-62 providing penalty relief for employers and payors who do not report qualified tips or qualified overtime on information returns for 2025, and Notice 2025-69 providing guidance for taxpayers who receive overtime and tips on how to calculate the deductions for 2025 in the absence of information reporting from employers and payors.  Continue Reading IRS Issues 2025 Transition Relief and Hints at Future Tips and Overtime Information Reporting Obligations

Special thanks to co-authors Glenn Fox and Paul DePasquale.

One of the biggest sleeper issues (in my opinion) for US companies when granting equity awards to non-US employees or other service providers is the fact that their heirs may be assessed with US estate tax and be required to file an estate tax return in the US if the individual dies while holding equity awards or shares.

US Estate Tax Exemptions

Individual US taxpayers (i.e., US citizens and non-US citizens who are domiciled in the US) can currently benefit from a significant estate tax exemption: no estate tax is due unless the value of the estate exceeds US$13,610,000 (this is the inflation-adjusted amount for 2024), reduced for taxable lifetime gifts, but doubled for married couples if both spouses’ estates qualify for the exemption. Accordingly, relatively few US estates currently are subject to estate tax. In any event, US employees and their heirs will most likely be well aware of possible estate tax consequences for their assets, including equity awards and shares acquired under a company share plan.Continue Reading A Cautionary Tale: US Estate Tax May be Due on Equity Awards/Shares Held by Non-US Residents

With many thanks to Chris Guldberg for this post. 

On May 12, 2020, the IRS released Notice 2020-29 (the “Notice”) providing greater flexibility to make mid-year election changes under Code Section 125 cafeteria plans during 2020 with respect to employer-provided health coverage and health and dependent care flexible spending accounts (“FSAs”). The notice also provides additional time in which unused amounts in FSAs can be used to pay expenses and avoid forfeiture.

Mid-year Election Changes

As background, cafeteria plans are the vehicle that allow employees to elect to pay their share of benefit premium costs for certain welfare benefits (for example, the employee premium portion paid for medical coverage) on a pre-tax basis rather than paying for those costs on an after-tax basis. In general, employee cafeteria plan elections must be made prior to the first day of the plan year and cannot be changed during the plan year except for specific change in status type events permitted under the relevant regulations (for example, the birth of a child).Continue Reading Increased Flexibility for Taxpayers in Section 125 Cafeteria Plans in Response to COVID-19

With many thanks to Chris Guldberg for this post. 

Employers considering COVID-19-related layoffs and RIFs right now should add one more item to their checklist of considerations: the possibility of inadvertently triggering a “partial termination” of their tax-qualified retirement plan.

Where plan participant numbers decrease substantially, the plan may incur what’s known as a “partial termination.” This is significant because, once triggered, the IRS requires the benefits of all “affected employees” be fully vested. Failure to provide such vesting could put the plan’s tax-qualified status at risk.Continue Reading Beware — COVID-19 Layoffs May Trigger Liability for Partial Plan Terminations

On Friday, March 20, 2020, the Internal Revenue Service (IRS), US Department of Labor (DOL), and US Department of the Treasury published a joint news release (Release) regarding tax credits available to employers who will be required to provide paid sick and family care leave for COVID-19-related purposes under the Families First Coronavirus Response Act…

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law bringing significant changes to US tax law. One provision of the Act may further incentivize individuals to work as independent contractors instead of as traditional employees.

The new provision allows for independent contractors, and for service providers structured as a partnership or other flow-through entities, the potential to deduct up to 20% of their revenue from their taxable income. And while some companies might view the opportunity to re-classify individuals from employees to independent contractors as a “win–win” scenario, it could create substantial legal exposure for employers.Continue Reading New Tax Law Could Incentivize Employees To Become Independent Contractors – Employers Should Proceed With Caution