PayrollOrg® (PAYO) created a sample letter payroll professionals can give employees to help them update their income tax withholding to account for changes due to Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA).
Employees who want to account for the OBBBA deductions in their income tax withheld for 2026 must submit a new 2026 Form W-4, Employee’s Withholding Certificate.
OBBBA contains several new or enhanced deductions that individuals can claim on their tax returns, including:
- New income tax deductions for qualified overtime compensation and tips and qualified passenger vehicle loan interest;
- An enhanced deduction for seniors (individuals age 65 and older);
- An increase in the standard deduction and the child tax credit; and
- An increase in the limit on the itemized deduction for state and local taxes.
Sample Letter
To make it easier for employers to inform employees about these 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 their organization.
The “Sample Letter Explaining 2026 Tax Withholding Updates to Employees” is also available to download on the OBBBA Payroll Hot Topics webpage.
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!
Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.
