The One Big Beautiful Bill Act became law on July 4, 2025. Its passage made sweeping changes to U.S. tax law, introducing numerous new deductions, credits, and compliance requirements directly relevant to corporate finance departments. Here’s a closer look at how these changes impact controllers and finance leadership.
Key Provisions That Affect Controllers
The following are some of the most significant changes in the bill that will have implications for financial reporting, internal controls, and tax compliance:
Permanent Extension of Tax Rates and Deductions
The lower individual income tax rate brackets from prior legislation are now permanent.
These changes will have a minimal direct effect on most corporations, but they’re important for executives and compensation planning, tax withholding, and benefit planning. Make sure to review your payroll and withholding policies to ensure individual employees’ deductions and rates are computed properly.
New Deductions
The bill introduced several new deductions for employees and self-employed individuals. The new deductions for tipped wages and qualified overtime compensation are the most notable changes.
In response, you’ll need to adjust your payroll reporting and HR systems. You may also need to revise your policies for reporting tips and overtime; for example, tracking what portion of tips are qualified and ensuring W-2 or 1099 statements include the required information.
Changes in Reporting Requirements
The act changes the reporting requirements for 1099 forms. If your finance and accounting teams process pay for 1099 contractors or vendors, they must adjust internal controls to address the form changes.
Implications for Your Internal Controls and Reporting Processes
As a controller, you must ensure your internal controls, tax reporting, and finance systems are updated to accommodate the One Big Beautiful Bill Act. Here are some areas to review or strengthen.
Payroll/HR Systems:
- Modify data capture to include the occupation of tip recipients
- Make sure qualified tips are tracked separately
- Capture and track qualified overtime compensation eligible for deduction
Information Reporting:
- Update policies and vendor contracts to ensure filings include new required line items
- Establish review and validation routines
Employee Communication and Policies:
- Inform employees about changes in deductions they may claim individually
- Collect necessary data/documentation from employees
Tax Planning and Forecasting
- Update financial forecasts for tax expense, considering revised deductions and effective rates
- Revisit compensation structures and benefits design
Disclosures in Financial Statements:
- Evaluate whether changes affect tax disclosure requirements, tax rates, valuation allowances, and assets/liabilities
- Stay alert to changes in international tax law that may affect deferred taxes
Audit Risk and Documentation:
- Maintain records needed to substantiate claimed deductions
- Be especially rigorous where phase-outs apply
Now, let’s look at some of the ways you and your organization can remain compliant and on track.
Actionable Steps to Stay Ahead
To prepare your organization to accommodate the new legislation, you should take the following steps:
- Collaborate with tax and legal to identify all new or modified deductions, credits, and reporting requirements
- Review whether current data capture, payroll, HR, and accounting systems support the new requirements
- Draft or revise internal policies to reflect changes in reporting
- Train payroll, HR, tax, and accounting staff on new rules
- Reflect the impact of these changes in tax expense and after-tax earnings
Additionally, be on the lookout for new rules and lists from the IRS. These guides can help you implement effective policies to protect your organization.
Most of these steps must be implemented immediately or by the end of 2025. Relying on outdated policies or procedures in Q1 of 2026 will set your business up for ongoing compliance headaches that could be costly. Additionally, employees who are eligible for new deductions may become frustrated if you mishandle their withholding status.
Things You Should Watch Out For
As you begin working with your legal and tax teams to strengthen your compliance posture, watch out for these potential stumbling blocks:
- Several deductions/credits are reduced or eliminated beyond certain income levels
- Misclassifying an employee’s occupation could lead to filing issues, audit exposure, or penalties
- Not every provision is immediately effective, as some occur in phases
- Make sure your finance team considers state and local tax exposure as well
- As you apply new deductions, confirm that supporting documentation is stored securely and stay audit-ready
Encourage team members from multiple levels of the organization to provide input and share their concerns. Attacking the problem from different angles is one of the best ways to insulate your business from tax risks related to the One Big Beautiful Bill.
Be Proactive to Avoid Compliance Headaches in 2026
The One Big Beautiful Bill Act introduces many changes that you and your financial leadership team must incorporate into your tax planning, reporting, and internal controls. Adjusting your compensation and withholding strategies to reflect these changes will promote better employee morale and understanding.
While some of the new rules are more relevant to individuals, many others affect how your business captures, reports, and forecasts its tax obligations. A proactive approach is the best way to protect your company and its employees.
