This document answers frequently asked questions as they relate to tax Form W-2 and other related tax forms.

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Overview of Tax Implications Under the One, Big, Beautiful Bill Act

1. What is the One, Big, Beautiful Bill Act?
   1. The One, Big, Beautiful Bill Act (OBBBA) is a new federal law signed on July 4, 2025. Among other provisions, it creates new federal income tax deductions for tips and overtime pay (referred to as “No Tax on Tips” and “No Tax on Overtime”).
   2. These deductions are retroactive to January 2025, meaning they apply to pay you have already earned this year.
   3. As of now, these deductions are temporary and apply only to tax years 2025 through 2028.
2. What does “No Tax on Tips” really mean?
   1. Despite the slogan, tips are still taxed. What the law actually provides is a federal income tax deduction for certain “qualified tips” received by employees working in jobs the IRS deems as customarily and regularly receiving tips. Qualified tips are those that are paid in cash or an equivalent (check, credit card, debit card, etc.), come directly from customers or through a tip-sharing arrangement, and are given voluntarily by the customer (not negotiated). These qualified tips can be subtracted from the employee’s taxable income, up to certain limits, when they file their federal tax return.
   2. In simple terms: the new rule can lower the amount of income the IRS uses to calculate federal taxes, but it does not make tips completely tax-free.
3. How much can an employee deduct for qualified tips?
   1. Employees can deduct up to $25,000 per year in qualified tips. This amount starts to decrease once an employee’s adjusted gross income reaches $150,000 (single) or $300,000 (married filing jointly). To claim this deduction, an employee must have a valid Social Security Number, and if married, must file jointly.
4. What does “No Tax on Overtime” really mean?
   1. Here too, the slogan can be misleading. Overtime pay is still taxed. The law provides a federal income tax deduction for “qualified overtime,” which includes only the extra half-time portion of “time-and-a-half” pay for hours worked over 40 in a workweek, as defined by the Fair Labor Standards Act (FLSA). This deduction does not apply to overtime paid under state laws or collective bargaining agreements that differ from FLSA rules.
   2. This qualified overtime can be subtracted, up to a limit, from the employee’s taxable income on their federal tax return. Again, this does not make overtime completely tax-free.
5. What is the maximum deduction an employee can take for qualified overtime?
   1. For qualified overtime, an employee can deduct up to $12,500 per year if filing single, or up to $25,000 if married filing jointly. This deduction begins to phase out once an employee’s adjusted gross income reaches $150,000 (single) or $300,000 (married filing jointly). The employee must also have a valid Social Security Number to claim it.
6. Does this change Social Security, Medicare, or state taxes?
   1. No. These new deductions apply only to federal income tax. They do not change Social Security tax on wages, Medicare tax on wages, or any state or local income taxes (those depend on your state and city laws). So, tips and overtime are still fully subject to those other taxes unless separate laws are passed in the future.
7. Since these changes are retroactive to January 2025, should my paycheck have gone up or should the University be withholding less tax?
   1. No. Even though the law is retroactive to January 2025, your paycheck will not increase as a result of the new deductions. The University must continue withholding taxes based on standard IRS rules and the withholding elections you selected in Workday.
   2. The benefit from these deductions will be applied when you file your 2025 federal tax return in 2026, not in your regular paycheck. At that point, you may be able to claim the deduction and potentially receive tax savings or a larger refund, depending on your personal situation.
   3. If you want to adjust how much tax is withheld from future paychecks, you can update your federal withholding elections in Workday at any time. Please see the Updating Withholding Elections in Workday Knowledge Base Article for detailed instructions.
8. How will I know the amount of qualified tips and qualified overtime I can deduct on my tax return?
   1. The University will report this information on the employee’s Form W-2. Qualified tips and qualified overtime amounts will be listed in Box 12 of the form.
9. The amount of overtime reported on my W-2 doesn’t seem to match what I actually earned. Why is this?
   1. Remember that these deductions apply only to qualified tips (see question 2) and qualified overtime (see question 4). This means that not all tips and overtime an employee earns will be included when the University calculates the annual amount to report. Any tips or overtime that do not meet the criteria for “qualified” earnings will be excluded.
   2. For overtime specifically, some types of overtime do not qualify, even if they are paid at an overtime rate. Examples include overtime created by a union contract, daily overtime rules, holiday premium pay, or hourly shift differentials. The examples below help explain the difference between qualified and non-qualified overtime.

Example	Hours Paid	Qualified Overtime per OBBBA	Explanation
Non-union, non-exempt employee works 44 hours/week at $20/hour (normal shift is 8 hours/day) Weekly breakdown: - Two 10-hour days - Three 8-hour days	- 40 hours regular time - 4 hours overtime	- 4 hours of FLSA defined overtime - 4 hours * $10 ($20/hour * 0.5) = $40	Only the extra half-time portion of overtime pay for hours worked over 40 in a week qualifies under the OBBBA. In this example, the amount that qualifies for the deduction is $40.
Union, non-exempt employee works 43 hours/week at $20/hour (normal shift is 8 hours/day) Weekly breakdown: - Three 8-hour days - One 12-hour day - One 7-hour day	- 39 hours regular time - 4 hours overtime (union daily OT rules)	- 3 hours of FLSA defined overtime - 3 hours * $10 ($20/hour * 0.5) = $30	Only overtime based on FLSA rules (hours over 40 per week) qualifies. Even though 4 hours were paid as OT under the union agreement, only the 3 hours above 40 are used to calculate qualified overtime. The qualifying amount is $30.
Non-union, non-exempt employee works 40 hours/week at $20/hour (normal shift is 8 hours/day) Weekly breakdown: - Four 8-hour days - One 8-hour holiday	- 40 hours regular time - 8 hours holiday premium	- 0 hours of FLSA defined overtime - $0	Although the employee received premium pay for working on a holiday, they only worked 40 hours in the week. Since no hours were worked beyond 40, no qualified overtime can be reported.
Union, non-exempt employee works 36 hours/week at $20/hour (normal shift is 12 hours/day) Weekly breakdown: - Two 12-hour days - One 12-hour PTO day - One 12-hour special overtime day	- 24 hours regular time - 12 hours PTO - 12 hours overtime (union special OT)	- 0 hours of FLSA defined overtime - $0	Although the employee received overtime due to the union contract, they only worked 36 hours in the week. PTO does not count toward the 40-hour FLSA threshold. Since the employee did not work more than 40 hours, there is no qualified overtime.

 

Additional Questions Related to Tax Forms

1. How do I get my Form W-2?
   1. Current Employees
      1. Log in to Workday using your CNetID and password.
      2. Select Menu in the top-left corner, then choose the Benefits and Pay App under the Personal category.
      3. Under Tasks and Reports, select My Tax Documents.
      4. Select the View/Print button under the Employee Copy column for the relevant document and tax year.
      5. Please note that it can take 1-2 minutes for the document to download. Adobe Reader is required to view and print the tax document.
   2. Terminated employees have access to view/print W-2 forms directly from Workday until April 30 of the year following their termination. If a former employee cannot log into Workday:
      1. Individual should first attempt to reset their CNetID password in MyAccount.
      2. If unable to access after resetting the password, they should submit a Tax Form Request.
2. The Name or Social Security Number is wrong on my W-2, what should I do?
   1. Your name and SSN must match the information on your Social Security Card. Please upload a copy of your Social Security card to Workday and submit an Ask a Payroll Question indicating you have done so. You will receive a corrected W2 (W-2c) within 5-7 business days.
      1. Refer to the Uploading Documents to Your Profile in Workday Knowledge Base Article for additional information on uploading a copy of your SSN card.
3. My address on the W-2 is incorrect, what should I do?
   1. A corrected W-2 is not required for a change in address. If you are a current employee and need to change your address, please update this in Workday following guidelines established in the Updating Personal Information in Workday Knowledge Base Article.
   2. The current address in Workday will be generated on all W-2 forms (even past ones).
4. My wages on my W-2 do not match my final check stub of the year.
   1. The W-2 reflects taxable earnings while the check stubs reflect total earnings. To convert from total earnings to taxable earnings, you need to subtract the pretax deductions, including parking deductions, FSA deductions (medical and dental deductions, flexible spending account deductions, and dependent care deductions) and retirement deductions.
   2. Contributions toward retirement plans do not reduce your Social Security (OASDI and Medicare) tax withholding.
   3. Your Form W-2 is a summary of the taxable earnings received in a calendar year.
5. I’m a biweekly paid employee. Will the check for the last week of 2025 be included on my 2025 W-2?
   1. No. Only compensation paid to you in 2025 is considered 2025 income. The final week of December will be paid on January 9, 2026, and will therefore not considered income for 2025. It will be part of your 2026 Form W-2.
6. My W-2 does not reflect my current salary. How come?
   1. Your W-2 does not reflect your fiscal year salary; it reflects taxable, calendar year wages. See question 4 for a description of taxable wages.
7. I have questions regarding the information reported in the boxes.
   1. Visit W-2 instructions for more information on W-2 Box information.
8. What if I didn’t have any federal or state taxes withheld according to my W-2?
   1. You would not have had any federal and state withholding taxes if you claimed an exemption from federal/state withholding on your W4 form for the year (Employee’s Withholding Allowance Certificate). Check your tax withholding elections in Workday. In addition, if your earnings are under a certain threshold, you may not have been subject to any federal and state withholding taxes. You can change your withholding elections in Workday to adjust your federal and state withholdings at any time. Please refer to the Updating Withholding Elections in Workday Knowledge Base Article for detailed instructions.
9. I am a nonresident alien on a treaty, what tax forms will I receive?
   1. Nonresident aliens who both qualified for a treaty exemption and completed the necessary paperwork, may receive a Form 1042-S and/or a Form W-2 showing their treaty exempt earnings/other wages and taxes. The Form 1042-S is required before you can complete your income tax return. Forms 1042-S are required to be delivered by March 15th. For additional information, refer to the Inside UChicago | Foreign Taxes page.
10. My state wages listed on my W-2 do not match my federal wages. Why?
    1. If you have elected to work from a state where the University is not registered, taxable earnings and tax withholding have not been reported. You are responsible for reporting and remitting necessary information and taxes to that state’s revenue office. For additional information, refer to the Inside UChicago | State Tax Withholding page.
11. I am a student that is only receiving non-wage payments (grants, stipends, or reimbursements) from the university. Will my payments be taxed? Will I receive a tax document?
    1. Domestic students, foreign national students with tax treaties, and foreign national students considered “residents for tax purposes” will not have taxes withheld from their non-wage payments.
       1. This is reportable income, and taxes may need to be remitted directly to the IRS and/or State of Illinois (or state of physical presence).
       2. Domestic students will not receive any tax documents for grants, stipends, or reimbursements; this information is self-reported.
       3. Foreign national students with tax treaties will receive Form 1042-S.
       4. Foreign national students considered “residents for tax purposes” receive a memo from Payroll Services; this is not an official tax document.
    2. Foreign national students considered “non-residents for tax purposes” without a tax treaty are subject to a 14% or 30% federal withholding from their non-wage payments.
       1. Will receive Form 1042-S.