The IRS updated its tax withholding estimator to help taxpayers account for changes to credits and deductions they may be eligible for under Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA) [IRS, IR-2026-35, 3-12-26].
The IRS said the estimator now takes into account: no tax on tips, no tax on overtime, and other tax benefits related to OBBBA.
If employees want to account for these deductions in the income tax withheld from their paychecks, they must submit a new 2026 Form W-4, Employee’s Withholding Certificate, to the payroll department.
To make it easier for employers to inform employees about the new deductions, PayrollOrg created a sample letter that can be given to employees. The letter provides basic information about the steps employees will take to update their withholding and can be customized for your organization.
The customizable letter can be downloaded from the OBBBA Payroll Hot Topics webpage. The webpage also details important changes payroll professionals need to know about the OBBBA.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Director of Payroll Information Resources for PayrollOrg.