Compliance
Compliance Essentials for Employers after the One, Big, Beautiful Bill Act
New rules under P.L. 119-21 are changing what employers must track, report, and withhold—here’s your guide to staying on the right side for tax year 2025 and beyond.
By NomadicTax Research Team • 5-8 min read • March 6, 2026
""## Key Employer Obligations Under New Law
Several provisions under the One, Big, Beautiful Bill Act (OBBBA, P.L. 119-21) now create or modify obligations for employers, including:
- **Trump Accounts**: Employers may contribute up to **$2,500/year** (indexed after 2027) toward these accounts for children under age 18. Contributions are excluded from the employee’s gross income when made via employer programs. This begins July 4, 2026. ([irs.gov](https://www.irs.gov/publications/p15?utm_source=openai))
- **Employer-Provided Childcare Tax Credit**: For tax year 2026, increased credit caps apply ($500,000 or $600,000 for eligible small businesses). Employers must document qualified expenses properly. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Withholding, Reporting & Tax Filing Timeline Changes
1. **Backup withholding**: Proposed regulations under §3406 reflect changes to when third-party settlement organizations must perform backup withholding. Employers using TPSOs should monitor further guidance. ([irs.gov](https://www.irs.gov/irb/2026-05_IRB?utm_source=openai))
2. **Digital tool & Form updates**: IRS is updating business and employer-related tax forms and payroll reporting to align with OBBBA provisions such as overtime deductions, tips, and Trump accounts. Staying current on publication updates is essential.
3. **Electronic payments**: Under Executive Order 14247 and supported in Publication 15, IRS is phasing out paper refunds/checks and pushing direct deposit & electronic payment for tax liabilities and refunds. Employers should ensure banking info is accurate. ([irs.gov](https://www.irs.gov/newsroom/prepare-to-file-in-2026-get-ready-for-tax-season-with-key-updates-essential-tips?utm_source=openai))
## Examples & Scenarios
- A small business with employees under 18 launches a Trump Account program. An eligible employer contributes $2,500/year for employee's dependent. Must ensure payroll system excludes that amount from wages and reports properly.
- Business pays employer-provided childcare and has gross receipts under threshold for eligible small business. It can claim up to $600,000 credit in 2026 under new limits.
- Payroll firms should prepare for proposed backup withholding requirement changes for platforms like Uber or Etsy sellers paid via TPSOs.
## Best Practices to Avoid Risk
- Update payroll systems to recognize new deductions and program payroll for Trump accounts.
- Consult with legal/tax counsel when classifying expenses as ‘‘qualified childcare expenses’’ vs. other benefit types.
- Train HR and accounting staff on documentation and compliance standards.
## What’s Next for Employers
- Watch for final proposed regulations under section 3406 to understand backup withholding thresholds.
- Stay current with IRS releases and bulletins—many provisions are retroactive or apply to 2025 income even if they were signed mid-2025.
**Take action now**:
- Review your payroll and benefits offerings.
- Communicate with employees about changes (Trump Accounts, additional standard deduction options for seniors, etc.).
- Ensure recordkeeping and reporting systems capture required data for new credits and exclusions under OBBB Act.
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