Introduction
With the recent passage of the One Big Beautiful Bill Act (OBBBA), the Treasury Department and the IRS will now need to update or create forms and their corresponding instructions, create processing systems for new taxpayer information, educate employees and the public, and issue guidance and regulations. Provisions such as the new individual income tax deductions for tip and overtime income and international tax changes will require detailed regulations to implement.
Concerns are growing about how the IRS will implement the law, with former IRS communications chief Terry Lemons stating that implementing OBBBA “is going to require a lot of changes across really the whole swath of IRS operations.” Yet the fact that most of the tax cuts are extensions of current policy should make implementation of OBBBA easier than some past major changes to the tax code. Additionally, the Administration can draw on lessons learned during past instances where the IRS implemented major changes to the tax code in a relatively short time period. To build upon our proposals for the IRS to enhance customer service, modernize its technology, close the tax gap, and safeguard taxpayer rights, this paper identifies several key best practices for implementing OBBBA.
Taxpayers need the Treasury Department and the IRS to communicate tax law changes early, put everything online, and issue guidance that is clear, fair, and timely.
Communicate early and often.
While the mantra, “communicate early and often” is typically used in interpersonal situations, the necessity of communicating tax law changes with taxpayers as early and as often as possible cannot be overstated. This is especially important with OBBBA, as it makes retroactive changes to tax law and revises eligibility criteria for existing credits and deductions. Communicating tax law changes in plain language, even before formalizing regulations and guidance, can go a long way toward helping taxpayers understand how the changes impact them.
Make Information about When Policy Changes Go into Effect Accessible
Tax law changes that apply to the current 2025 tax year may present administrative challenges, but the IRS has had to cope with them several times before. The most wide-ranging example in recent history is the American Rescue Plan Act (ARPA) of 2021, which made several retroactive changes to key individual income tax provisions including the Child Tax Credit, the Earned Income Tax Credit, and unemployment taxation.
Some of OBBBA’s most novel and complex provisions are retroactive to the beginning of the current 2025 tax year. These provisions include deductions for tip and overtime income, the deduction for car loan interest payments, and the additional standard deduction for seniors.
Yet, because little information has been conveyed yet to the broader public, tipped workers may not know that the tips they earn today are eligible for the new deduction. Tipped workers could benefit by proactively standardizing their record keeping, since tipped income can be more difficult to document than overtime income recorded by employers or car loan interest payments recorded by lenders.
Communicate Changes to Eligibility Criteria
Several elements of OBBBA change eligibility requirements for existing tax provisions or introduce eligibility criteria for new provisions. Specifically, the Child Tax Credit now requires Social Security numbers from child and taxpayer (and where the taxpayer is a married couple, both of them). The Premium Tax Credit (PTC) can now only be taken by U.S. citizens, green card holders, and certain refugees.
These changes could affect millions of taxpayers. If U.S. citizens or otherwise eligible individuals have not taken the steps to get required documentation, early communication could help them prepare in time to receive the credits they lawfully qualify for. The IRS must ensure information about eligibility changes is relayed to Taxpayer Assistance Centers (TAS), Low-Income Tax Clinics (LITC), and other local offices that meet taxpayers where they are.
Provide Plain Language Explanations
OBBBA includes many tax law changes that are applicable to generalized groups of taxpayers including college students and graduates, non-citizens, small business owners, and more. Describing OBBBA’s changes for these taxpayers in plain language would provide a clear and reliable source of information for taxpayers, helping to counteract politically charged misinformation about the bill. The IRS has already started this by providing plain language explanations of new individual tax deductions.
Put everything online.
It is a simple fact that meeting taxpayer needs in the modern age means allowing them to find the information they need easily and quickly online. OBBBA implementation is an opportunity for the Trump Administration to deliver on its promises to modernize the IRS and the federal government more broadly. An effective online strategy should include changes to the IRS.gov website to increase navigability, enhance the usefulness of Online Accounts, and increase digital taxpayer service options.
Enhance Website Navigability
The IRS website is often not intuitive, contains duplicative pages, and can be difficult to navigate. The new Administration recognizes this issue and made some changes to the website earlier this year. While some of these changes were very helpful, such as moving the Login button to a more noticeable part of the site, the rushed rollout led to typos and other minor errors that undermined the improvements.
There are many ways the IRS can improve the navigability of its website in its implementation of OBBBA, in part by mirroring the approach taken during implementation of the Tax Cuts and Jobs Act of 2017 (TCJA). After TCJA became law, the IRS created an entirely new landing page titled “tax reform” where it housed summaries of the provisions affecting individuals, businesses, and tax-exempt entities along with Frequently Asked Questions (FAQs) pages for various topics. The tax reform page remains active under the “News” menu option on the site alongside pages for the Inflation Reduction Act (IRA) and the Taxpayers First Act.
The IRS should not only create a separate page for updates regarding OBBBA, it should also make it prominent on the front landing page as soon as taxpayers go to the site. With the website currently having two menu bars, one with left-justified bold text and one with smaller right-justified text, taxpayers may not notice the “News” button which would lead them to updates on specific laws passed. Consolidating the two menu bars and adding a link to where taxpayers can find information specifically about OBBBA would reduce the number of times taxpayers click through the site before finding the page they are looking for.
In addition, to make it easier for taxpayers and tax professionals to be apprised of updates, the IRS should adopt RSS-compatible formatting for its index of data and publication releases at irs.gov/downloads. That index also lacks clear explanations of the available information, so NTUF put together a resource to help users navigate it more easily: A Guide to the IRS’s Index of Documents and Data. The IRS could incorporate this into its website.
Improve Functionality of Online Accounts
The IRS currently has limited digital self-service options available to taxpayers, and the tools that are available fall short of taxpayer needs. Many private companies, utility providers, and state tax departments allow customers to create online accounts to manage their balance and interact with the business or agency.
Currently, individuals can create Individual Online Accounts through the IRS website that allow them to view or request tax transcripts, pay tax due, and view some notices. Tax professionals can create Tax Pro accounts and the IRS recently expanded the availability of Business Tax Accounts. Yet these accounts lack important features when compared with online accounts available to taxpayers through local tax agencies in 41 states, Washington, D.C., and Puerto Rico.
The National Taxpayer Advocate’s “Most Serious Problems” identified return processing and challenges using Online Accounts as the second Most Serious Problem for taxpayers in 2023. The report found that the inability for taxpayers to respond to notices online across all available accounts, even if these notices are some of the few that are accessible via accounts, makes these accounts a less effective tool. The report also explained that documents that taxpayers upload to the IRS are actually still manually routed by an IRS agent, which increases processing time and can lead taxpayers to call phone lines anyway.
As part of its effort to modernize its technology, the IRS is updating Online Accounts for individuals and businesses. Earlier this year, the IRS announced that it added the ability to view and download W-2, 1099-NEC, and other forms. Taxpayers now have access to over 200 different notices via Online Accounts.
The new forms and notices likely to be created and existing ones needing to be updated because of OBBBA should all be accessible via Online Accounts. In addition, Online Accounts must be overhauled on the backend to allow for seamless processing of taxpayer information to truly create a two-way communication experience.
Issue clear, timely, and fair guidance.
The most critical step to implement any new tax law is issuing guidance and regulations. The IRS recently failed to provide clear, timely, and fair guidance in its regulatory implementation of the American Rescue Plan Act (ARPA) of 2021 and the Inflation Reduction Act (IRA) of 2022.
ARPA lowered the threshold for reporting third-party financial transactions on platforms like eBay or Etsy or using vendors such as PayPal or Venmo. Instead of $20,000 and 200 transactions to trigger filing of a Form 1099-K, ARPA reduced it to $600. Year after year, the IRS issued statements at the eleventh hour that it was delaying or changing implementation of new 1099-K requirements, seemingly without the legal authority to do so. If the IRS thought the ARPA threshold was unworkable, it never sought legislative action to address it. Ultimately, OBBBA repealed the ARPA changes to the 1099-K threshold.
Failure to implement the law in a timely fashion also occurred with the Corporate Alternative Minimum Tax (CAMT, or book tax) enacted by IRA. For the CAMT, the IRS proposed a 600 page rule for its implementation on September 12, 2024, two years after the law was enacted. This unnecessary complexity, delay, and injustice to taxpayers cannot happen again.
Guidance and rules are most needed for new tax provisions included in OBBBA such as the “no tax on . . .” provisions and the remittances tax. OBBBA does some work in the bill itself, defining certain food service and cosmetic services as generally being qualified tipped lines of business. But the law directs the Secretary of the Treasury to provide guidance to “prevent abuse of the deduction.”
The law also includes substantial changes to TCJA provisions that will surface more prominently in the regulatory process than they did during debate of the bill. For example, the Opportunity Zones program underwent significant eligibility changes with OBBBA and will need regulatory guidance to determine which areas qualify for the tax incentive. International tax changes will also need extensive clarification due to the complexity of international tax law and interactions with other provisions.
Prioritize Clarity When Crafting Guidance
Clarity, readability, and accuracy are essential for IRS guidance. Unfortunately, the IRS has bungled this task in the recent past. In 2022, the IRS sent letters containing errors to millions of taxpayers receiving the Child Tax Credit. The IRS then encouraged taxpayers to rely on information in their Online Accounts rather than the information from the letters.
Notices are so frequently unclear that legislation has been introduced to improve clarity of the most common type of notice, the so-called math error notice that 2.2 million taxpayers receive to adjust their tax paid after filing.
Release Information in a Timely Manner
Timely issuance of guidance will be essential in implementing OBBBA, especially in light of provisions effective this tax year and those that affect large corporations. The Administration claims that teams within the IRS are already being put together to implement the law, so hopefully we can expect guidance to be issued shortly.
Ensure Fairness in the Regulatory Process
New regulations need to respect taxpayers’ rights, involving taxpayers throughout the duration of the regulatory process and listening to their concerns. The new Administration is currently updating or withdrawing regulations proposed during the Biden Administration. Regulations that put an undue burden on taxpayers, such as digital asset regulations proposed by the last Administration and withdrawn recently, are quite simply not fair.
There are a few steps the Treasury Department and the IRS can take to make its regulatory process more fair when implementing OBBBA. First, it should have open comment periods for regulations with an adequate amount of time for taxpayers to submit concerns alongside public hearings for contentious policies. Second, if an overwhelming majority of taxpayers express concern about proposed guidance, the IRS must make changes to address these concerns in its final rule. Finally, the IRS must communicate lengthy guidelines in a clear and concise manner so taxpayers can understand their obligations.
Earlier this year, the IRS solicited public input on items to be included in its Priority Guidance Plan. We look forward to reviewing the plan when it is released.
Flexible Regulatory Approaches
For OBBBA’s other most complex provisions, the IRS should utilize regulatory sandboxes and safe harbors to guide taxpayers through compliance. The IRS has already announced that it plans to provide transition relief for taxpayers and employers while implementing new individual income tax deductions. Safe harbors are effective methods to protect taxpayers who make an earnest effort to meet their obligations under the new law. For example, the IRS has provided a simplified option for taking the home office deduction so taxpayers do not have to calculate the cost basis for individual assets. Similarly, the IRS could create an employer safe harbor for the tip income deduction that relies on previously issued tip income guidance.
Using a regulatory sandbox approach would allow the IRS to conserve resources by relying on private sector expertise to assist with development of sensible regulations at a time when the IRS staff count is declining. This approach may be especially useful for complex business tax provisions such as international tax changes. After passage of TCJA, the IRS received input on proposed regulations for global intangible low-taxed income (GILTI) for nearly one year, finalizing rules in June 2019. Even so, in July 2020 errors in the regulations were identified that required corrections to be issued. With OBBBA’s overhaul of TCJA’s international tax provisions, the IRS should prioritize working with taxpayers to minimize the burden of compliance.
Conclusion
OBBBA implementation will benefit from considering all of these elements together holistically. When the IRS puts out new information on a tax law change, it should do so as early as possible using online methods and ensure the information is clear, timely, and fair.
Many elements of OBBBA will require a bevy of changes. Some are relatively simple, such as the addition of lines or checkboxes in existing tax forms, and others are more complex, involving new regulations to define the terminology in the law that does not yet exist in the tax code. Keeping taxpayers at the front of mind during the entire process will prove the Trump Administration intends to keep its promise to make the federal government more effective and efficient.