Robert Duquette on Tax Changes from the One Big Beautiful Bill Act

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In this episode of Lehigh University’s College of Business ilLUminate podcast, host Stephanie Veto speaks with Robert Duquette about some of the recent tax changes resulting from the One Big Beautiful Bill Act. Duquette is a teaching full professor in the accounting department, and his research and presentations focus on misconceptions and misleading information surrounding the topic of the national debt and tax reform. 

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Below is an edited excerpt from the conversation. Read the complete podcast transcript [PDF]. 

Veto: You recently co-authored an article in the Pennsylvania CPA Journal about the One Big Beautiful Bill Act and what tax filers need to know. Which tax changes in the legislation stood out most to you? 

Duquette: I want to make sure I give more credit to my outstanding TA, Michael Pinette, one of the students at Lehigh University. He co-authored this with me. This is the first time I integrated a student in some of my practical guides of tax law published works. Without him, I don't think we would have gotten this done. 

You're asking what tax changes stood out the most. There were so many. And, there are so many exceptions to every rule. They're brand new. They're not even in any of the 2025 textbooks because they were published early in '25. 

Even though he signed it in July, most of the provisions are retroactive to the beginning of 2025. Many taxpayers don't know that part. That's the first pearl of wisdom I want to make sure your audience hears: the president wanted immediate impact for taxpayers, for Americans. I've seen that happen in my career where it's retroactive. So they'll pass it in January or February, retroactive. This was passed in July. 

For individuals, there's a provision that allows you to have a deduction on tips. By the way, this entire podcast, whatever I say, there's terms, conditions, exceptions, phase-outs that would take more podcasts. So, I'll stick to the headliners. Generally, with tip income, retroactive to the beginning of the year, a taxpayer will be able to deduct up to $25,000 of tips. There's a lot of details as to how this gets reported on a married filing joint return versus a different return, and how does it phase out as you have higher levels of income? And I'd go into the phase-out rules, but they're complex. And every provision has its own phase-out rules. 

That's another thing that stood out to us, that the headline is great, but when you get to have moderately high income, you won't be able to use the deduction. 

Veto: I was reading that middle income households may receive larger tax refunds. Can you sum up what changes are driving that and what taxpayers might expect? 

Duquette: Let me clarify what the administration, I think, is trying to really say here. Because the withholding schedules for employees in 2025 had not caught up early enough when the legislation was signed in July, and because it was retroactive. Usually, employers need a few weeks working with the IRS to get new withholding tax tables and that sort of thing. And then they would adjust your withholding. That didn't happen for an extra protracted period of time. I think there was a government shutdown. There was a lot of disruption. So many companies didn't change the withholding schedule. Most employees ended up having over withholdings. And it makes sense, especially considering the law was signed mid-year and made retroactive. And then those withholdings can't be corrected, at least the way most people would think. If you've underpaid by July, you can correct it by having more withholding before the end of the year if the law had been retroactive against you. There's no way you're going to get the IRS to give you money back during 2025 just because the law was retroactive. They've got your money until you file a return and settle up with them and show them what you really have for tax liability versus what you paid in. 

The point is the bigger refunds are going to be for the people who had their withholding taxes not corrected timely enough. And you have a lot of taxpayers who aren't employees. They're business owners and they're making estimated tax payments. If they didn't adjust their estimated payment schedule early enough, then they overpaid. So we are probably going to see a lot of individuals-- and I've read some statistics where the IRS is saying the refunds are well ahead of schedule in terms of the amount. They're millions of dollars ahead of where they were a year ago. So that seems to confirm that people had significantly more withheld from their earnings and self-employed business owners also had paid in more than they needed to. 

The point is, your estimates are going to be based on what your true tax obligations are for 2025 and projected changes in 2026. You probably shouldn't count on the same kind of refund a year from now. And that's important for budgeting purposes.