Overview
Title
To amend the Internal Revenue Code of 1986 to exclude compensation from secondary employment for certain taxpayers from the income tax and payroll taxes.
ELI5 AI
H.R. 560, the "Second Job Tax Relief Act of 2025," is like a special rule that lets people not pay certain taxes on money they make from their second jobs, but only if their second job is not their main job and they earn less than a certain amount. This rule lasts for five years and makes sure that important government money for things like taking care of older people is still safe.
Summary AI
H.R. 560, titled the "Second Job Tax Relief Act of 2025," proposes changes to the Internal Revenue Code to allow certain taxpayers to exclude income earned from secondary employment from income and payroll taxes. It defines "secondary employment compensation" as earnings from an employer other than the taxpayer's primary employer, designated by the taxpayer as the one they worked for at least 2080 hours in a year. The exclusion phases out for individuals earning over $100,000 or $150,000 for joint filers, with the provision set to expire five years after enactment. Additionally, the bill ensures that various trust funds are financially protected from the reduced tax revenues resulting from this exclusion.
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AnalysisAI
General Summary
H.R. 560, titled the "Second Job Tax Relief Act of 2025," proposes amendments to the Internal Revenue Code of 1986. Its main objective is to allow certain taxpayers to exclude income from secondary employment from their gross income and payroll taxes. This exclusion is designed to provide tax relief for individuals juggling multiple jobs and is applicable for five years after enactment. The bill also outlines specific criteria for determining a taxpayer's primary employer and adjusts relevant payroll tax provisions.
Summary of Significant Issues
The bill presents several issues worthy of consideration. One key concern is the potential for loopholes in the definition of "secondary employment compensation," which could allow individuals to underreport income. Additionally, the phase-out formula for the exclusion is complex, possibly requiring the assistance of tax professionals, thus posing an accessibility issue for those with limited resources.
Another crucial issue relates to the designation of a "primary employer," requiring full-time hours with a single employer, which may not account for individuals who work multiple part-time jobs. Furthermore, the "sunset clause" indicates that the provisions will expire in five years, creating uncertainty in long-term financial planning. Finally, vague language regarding the appropriation of funds to Trust Funds and potential disparities arising from income thresholds could also present challenges.
Public Impact
Broadly, the bill aims to alleviate the financial burden faced by individuals working multiple jobs by reducing their taxable income, potentially increasing their disposable income. However, due to the complexity of the provisions and their temporary nature, the bill might only offer short-term relief and could result in administrative headaches or unintended consequences if not carefully managed.
For everyday taxpayers with secondary jobs, this bill could result in significant tax savings, encouraging more people to seek extra income without fearing additional tax burdens. However, understanding and applying the tax exclusions without professional guidance might be difficult for some, leading to unintentional misreporting or loss of benefits.
Stakeholder Impact
Positive Impacts:
- Double-Job Workers: Individuals juggling primary and secondary jobs could benefit from reduced taxable income, which can provide immediate financial relief.
- Employers of Secondary Job Holders: Employers might find it easier to attract part-time workers due to the combo of earnings and tax savings.
Negative Impacts:
- Taxpayers with Limited Resources: Those without the means to hire professional tax assistance may struggle to correctly apply the exclusions, potentially missing out on intended benefits.
- Tax Administration: The IRS and associated tax bodies may face challenges in monitoring compliance and preventing abuse due to the bill's complexity.
- Trust Funds: Unclear funding appropriations might create financial management issues for Social Security and Medicare Trust Funds, impacting their financial stability.
Overall, while the "Second Job Tax Relief Act of 2025" strives to support those with secondary employment, its implementation could be fraught with challenges that require careful consideration to ensure equitable and efficient application.
Financial Assessment
The bill titled "Second Job Tax Relief Act of 2025" aims to tweak the taxation landscape in a way that could significantly impact taxpayers who engage in secondary employment. The financial references in this legislation mainly center around the exclusion of certain forms of income from income and payroll taxes, and the mechanisms put in place to handle the potential loss in tax revenue.
Exclusion of Income from Secondary Jobs
The central financial provision in the bill is the exclusion of secondary employment compensation from gross income. This means certain individuals would not have to pay income or payroll taxes on the earnings they make from jobs defined as secondary. Such compensation is identified as income received from employers other than their primary employer. A primary employer, according to the bill, is one for whom the taxpayer has worked at least 2,080 hours in a year.
The financial impact on the individual taxpayer is considerable: for those who meet the bill's criteria, the tax savings could be significant. However, as highlighted in the issues, the complexity of the phase-out formula, which reduces this tax exclusion starting at $100,000 for individuals and $150,000 for couples filing jointly, might require professional assistance for correct application. This could introduce additional costs for taxpayers, especially those unfamiliar with tax regulations and unable to afford professional help.
Impact on Government Revenue and Trust Funds
The bill provides a mechanism aimed at safeguarding the federal trust funds from any shortfall in revenue caused by these exclusions. Specifically, amounts equal to the revenue reduction will be appropriated to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund. This ensures that the shortfall does not impact these funds' operation, which are critical components of the country’s social safety net.
However, the appropriations method for these trust funds is vaguely described, lacking details on how and when the funds will be transferred. This could potentially lead to financial management issues within these funds, a concern that emphasizes the need for clearer methodologies and timelines in the bill's language.
Conclusion
The bill aims to provide tax relief for certain taxpayers engaged in secondary employment while trying to protect federal trust funds. However, operational complexities, especially the handling of transfer methods and the phase-out characteristics, might lead to implementation challenges. Furthermore, the sunset clause, which states that the provisions expire after five years, could create uncertainty in long-term financial planning and might require adjustments or reauthorizations based on outcomes and data gathered over that period. Overall, while the financial incentives in the bill are designed to assist individuals, they also bring about several practical and administrative challenges.
Issues
The definition of 'secondary employment compensation' in Section 139J could lead to abuse if not properly monitored. This allows certain taxpayers to exclude income from additional jobs, potentially creating loopholes for underreporting income, affecting tax revenue and fairness in taxation.
The phase-out formula in Section 139J(b) is complex and may require taxpayer assistance from tax professionals. This complexity might disproportionately affect taxpayers with limited resources, posing an accessibility issue for understanding and compliance.
The definition of 'primary employer' in Section 139J(c)(2) requires at least 2080 hours of work annually. This criterion might not consider multiple part-time jobs that collectively exceed this threshold, making the provision inapplicable or unfair to such individuals.
The 'sunset' clause in Section 139J(d) specifies that the provisions expire after 5 years. The short-term nature of this clause may create uncertainty for financial planning for both employers and employees and might require extensions or revisions without adequate data to assess its long-term impact.
The complex language regarding the 'phase-out' under section 139J(b) might be difficult for taxpayers to understand without guidance, leading to potential confusion and misapplication of the bill's benefits.
The appropriations method for the Trust Funds under subsection (b)(1)(B) is vague, not specifying the exact method or schedule of funds transfer, potentially leading to financial management issues with those funds.
There are concerns about disparities resulting from the $100,000 threshold for phase-out and the definition of modified adjusted gross income, which could affect how different taxpayers experience the bill's provisions.
The clerical amendment section doesn't fully address potential discrepancies in implementation or numbering conflicts, leading to administrative challenges that might arise as the bill's provisions are put into practice.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the act specifies that the official name of this legislation is the "Second Job Tax Relief Act of 2025."
2. Exclusion of compensation for certain secondary employment from income and payroll tax Read Opens in new tab
Summary AI
This section of the bill introduces a new tax provision that allows certain taxpayers to exclude income earned from secondary jobs from their gross income and payroll taxes for up to five years. It outlines who qualifies for this exclusion, how the phase-out of this exclusion works based on income levels, and how this affects Social Security, unemployment, and wage withholding taxes.
Money References
- “(b) Phase-Out.—The amount of compensation excluded from gross income under subsection (a) (determined without regard to this subsection) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so excludable as— “(1) the excess (if any) of— “(A) the taxpayer’s modified adjusted gross income (as defined in section 36(b)(2)(B)) for such taxable year, over “(B) $100,000 ($150,000 in the case of a married couple filing jointly), bears to “(2) $50,000.
139J. Earned income from additional employment Read Opens in new tab
Summary AI
In this section of the bill, qualifying taxpayers can exclude income from secondary jobs from their gross income, subject to a phase-out if their adjusted gross income exceeds set limits. To benefit, taxpayers must elect a secondary employer, distinguishing it from their main employer for whom they've worked at least 2080 hours in a year. This benefit expires five years after the law is enacted.
Money References
- (b) Phase-Out.—The amount of compensation excluded from gross income under subsection (a) (determined without regard to this subsection) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so excludable as— (1) the excess (if any) of— (A) the taxpayer’s modified adjusted gross income (as defined in section 36(b)(2)(B)) for such taxable year, over (B) $100,000 ($150,000 in the case of a married couple filing jointly), bears to (2) $50,000. (c) Secondary employment compensation.— (1) IN GENERAL.—For purposes of this section, the term “secondary employment compensation” means compensation received for employment during a taxable year with respect to which an individual has made an election under paragraph (2) for an employer other than the primary employer of such individual.