No Tax on Overtime? Not Exactly. Compliance Changes You Need to Know in 2025

What does “No Tax on Overtime” mean for your employees?

With the passing of the One Big Beautiful Bill (OB3), it’s easy to feel overwhelmed by what’s changing. Colleen Rynne, Senior Manager of Payroll Services Compliance at BambooHR, joins Vanessa Brulotte to help us make sense of the new provisions on tax deductions on overtime pay and tips. This is a must-listen for those in HR and payroll, or for anyone who wants to understand their tax returns going forward.

You'll learn how to prep for year-end reporting, what qualifies for deductions, and how to talk to employees about what’s changing.

Key takeaways:

• What “No Tax on Overtime” and “No Tax on Tips” really mean
• Why state taxes aren’t changing
• How to prepare for year-end reporting under OB3

Key topics:

(00:00) Introducing Colleen Rynne

(03:30) Who qualifies for deductions under OB3

(06:47) Why overtime deductions are more complex

(09:57) What counts as a qualified tip

(15:24) Year-end reporting and IRS guidance tips

(21:50) FSA changes and permanent tax credits

Key links:

Read BambooHR’s blog, “What Are Payroll Taxes? A Guide to State and Federal Tax Withholding”: https://www.bamboohr.com/blog/payroll-taxes-guide 

Read BambooHR’s blog, “How to Manage Employee W-2 Forms (And Go Paperless)”: https://www.bamboohr.com/blog/manage-employee-w2 

Read BambooHR’s blog, “5 Tax Mistakes You Can’t Afford to Make”: https://www.bamboohr.com/blog/tax-mistakes-to-avoid 

Read BambooHR’s blog, “Compliance Corner: Payroll Updates from Q2 2025”: https://www.bamboohr.com/blog/payroll-compliance-june-2025

Subscribe to HR Unplugged Series: https://www.bamboohr.com/resources/podcasts/hr-unplugged/

Join HR Heroes Slack Community: https://join.slack.com/t/hrheroesworkspace/shared_invite/zt-21ad3f1r8-dkWC2EdmyhxUAHw9cGLdQw

BambooHR Homepage: https://www.bamboohr.com/

Connect with Colleen on LinkedIn: https://www.linkedin.com/in/colleen-rynne-2978b332/