""## 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)
- 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)
Withholding, Reporting & Tax Filing Timeline Changes
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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)
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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.
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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)
Examples & Scenarios
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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.
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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.
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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. ""