Week in Insights: Overtime Tax Break Needs Prompt Implementation

The overtime tax break baked into the fiscal package enacted in July was sold as a reward for hard work. But a firefighter clocking up to 52 hours a week currently doesn’t qualify—and railroad workers are excluded altogether. These are likely unintended results, but they’re still instructive: Promised relief can get lost in the handoff from legislation to regulatory implementation.

With the IRS short-staffed and the government shut down, the Treasury Department is understandably slow to issue guidance. As a result, the gap between what was promised and what’s deliverable continues to grow. Workers and employers are stuck in limbo, unsure how to apply, report, or calculate the overtime tax break.

There are also structural impediments to implementing the tax law’s broad changes. In omnibus policymaking, the illusion of delivery can come across as delivery itself. The overtime deduction technically existed the moment the bill was passed. But in practice, it remains trapped in a bureaucratic thicket with myriad other reforms passed under the same statute.

The overtime deduction should become real for some workers once forms are finalized, guidance is issued, and the IRS is back at full capacity. But prompt implementation requires efficient administration and a government that stays open for business long enough to do what it promised.

Rewarding hard work through the tax code takes both political will and operational competence and capacity. Lately, we’ve had lots of the former and not nearly enough of the latter.

—Andrew Leahey

A firefighter walks down the street in Grand Blanc, Mich.

Photographer: Emily Elconin/Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts examined the H-1B “hiring tax,” employer compliance with tax-free tips, and more.

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Insights

Executive Branch Power Grows as Loper Bright Order Fades: Werfel

Former IRS Commissioner Danny Werfel says the Trump administration is acting as if the US Supreme Court’s 2024 ruling limiting agency interpretations of laws had never happened.

IRS Withdrawing Spinoff Rule Plans Eases Some Corporate Burdens

Despite reducing taxpayers’ compliance burden, the IRS’s retraction of proposed corporate spinoff regulations doesn’t mean the government has abandoned efforts to establish more stringent rules for certain issues.

US Tariffs Mean Transfer Pricing Issues, Risk for Thai Exporters

Multinationals with operations in Thailand need to consider their options to mitigate the impact of tariffs, including restructuring supply chains or pricing.

End H-1B ‘Hiring Tax’ and Make Visas Portable to Protect Workers

Congress should make H-1B visas portable by ending employer “hiring taxes” and having them make payments to the Treasury Department through payroll.

UK Uses International Cooperation Powers to Combat Tax Evaders

The UK tax authority can make use of a wide range of international tools to combat tax evasion and tackle the tax gap.

Employers Need to Prepare Now for ‘No Tax on Tips’ Compliance

Early preparation and clear communication with employees and payroll providers are critical to retroactively enacting the new “no tax on tips” and “no tax on overtime” changes to the tax code.

Taking the Taxman to Court Is Complicated by Government Shutdown

Perhaps the biggest losers in the government shutdown are the taxpayers who are fighting the IRS, since there is now a pause on litigation in all civil cases in which the US is a party.

Starting a Tax Firm Is Easy Now. Here’s How to Make It Thrive

Evaluating tools, finding a niche, and building a deep network are crucial to launching a successful tax firm.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

The US Supreme Court’s eventual ruling in Pung v. Isabella County will determine whether “just compensation” in a tax foreclosure means whatever the government happens to get at auction, Andrew Leahey says in his latest Technically Speaking column.

“A fair compromise would be to use the auction price as a baseline for compensation only when it falls within 10% of the property’s appraised value,” Andrew writes, arguing that requiring compensation to align more closely with fair market value would safeguard property rights. Read More

News Roundup

Tax Court’s Shutdown-Related Trial Cancellations Add to Backlog

The US Tax Court’s move to cancel two weeks of trials due to the government shutdown is threatening to jam up the already busy system.

California Appeals Judge Skeptical of LA ‘Mansion Tax’ Challenge

Opponents of Los Angeles’ “mansion tax” argued that the measure is unlawful according to the California constitution and the city’s own charter to a California appeals court on Thursday, but one judge on the panel appeared unimpressed.

EY Fees Rise Steady 4% Driven by Tariff Swings, AI Surge

Ernst & Young on Wednesday reported steady 4% revenue growth in 2025, buttressed by a surge in demand for tariff support and AI services.

OECD Eyes US Side-by-Side Global Tax Solution by Year-End

The OECD aims to reach an agreement to re-write major parts of the global minimum tax by the end of the year, its Secretary-General told the G20 Finance Ministers and Central Bank Governors in a Wednesday report.

Tax Management International Journal

CJEU Ruling Changes VAT Treatment of Transfer Pricing Adjustments

A recent CJEU ruling provides welcome guidance to companies regarding transfer pricing adjustments and their VAT implications.

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