One Big Beautiful Bill: What It Means If You Owe the IRS

Written by Sam Brotman, J.D., LL.M. (Taxation), MBA — Managing Attorney, Brotman Law  ·  Updated May 2026

What Is the One Big Beautiful Bill Act?

The short version is that it's primarily a tax-cuts-forward bill. Most of what it does is prevent the 2017 TCJA provisions from expiring at the end of 2025 — so the individual rate brackets, the increased standard deduction, the estate tax exemption, and the qualified business income (QBI) deduction all remain in place rather than reverting to pre-2017 levels. That by itself is significant if you've been planning around a rate increase.

The areas that are genuinely new — the SALT cap increase, the 1099 threshold change, the gambling loss rule modification — get less press, but they matter for a meaningful number of California taxpayers. We'll cover each of those in turn.

One thing the OBBBA is not: a debt relief bill. If you owe the IRS money, this legislation does not create amnesty, modify the Offer in Compromise program, or change the IRS's authority to levy and lien. The collection machinery is intact.

IRS Collections: What Changed, What Didn't

The OBBBA does make some adjustments to IRS enforcement funding and staffing authorizations — rolling back some of the IRS budget expansion from the Inflation Reduction Act (IRA) of 2022. The practical effect on taxpayers currently in collections is difficult to predict with precision: a smaller IRS with fewer revenue officers may mean slower processing times and fewer field contacts, but it does not mean the IRS has relinquished its authority to collect.

A few specific things worth knowing:

• Installment agreements — the ability to set up a payment plan under IRC § 6159 is unchanged. Streamlined installment agreements (for balances under $100,000) and non-streamlined agreements both remain available. The IRS's determination of your ability to pay still runs through the Collection Financial Standards.
• Liens and levies — the IRS's right to file a Notice of Federal Tax Lien and issue levies is not modified. If you're in an active collection case, the OBBBA does not pause enforcement.
• Currently Not Collectible (CNC) status — no change. CNC is still available when your allowable expenses exceed your income under the Collection Financial Standards, and the IRS still reviews CNC status periodically.
• The CSED — the Collection Statute Expiration Date remains ten years from the date of assessment under IRC § 6502(a). The OBBBA does not extend or shorten it.

Offer in Compromise: No Changes to the Program

The three grounds for OIC acceptance remain:

1. Doubt as to collectibility — your RCP is less than the full tax liability. This is the most common basis for OICs. The IRS uses Form 433-A (OIC) or 433-B (OIC) to calculate RCP: quick-sale value of assets plus 12 or 24 months of future income, depending on the payment terms you elect.
2. Doubt as to liability — you dispute that you actually owe the assessed amount. This is essentially an audit dispute in a different procedural wrapper.
3. Effective tax administration (ETA) — collection of the full amount would create an economic hardship or would be inequitable based on exceptional circumstances.

That said, the IRS staffing reductions contemplated by the OBBBA could affect OIC processing timelines in practice. The IRS Automated Collection System (ACS) and the OIC unit are both affected by resource levels. An offer that currently takes 12–18 months to process may take longer in a leaner IRS — or the IRS's RCP calculations may shift as examiner practices evolve. We'll know more once implementation is underway.

One thing hasn't changed: the analytical framework for deciding whether to file an OIC. Before filing, you should run an honest RCP analysis and compare it against the alternatives — a partial-pay installment agreement, CNC status, or waiting out the CSED. An OIC that gets rejected does not reset the collection statute, but it does toll the CSED while it's pending, typically 12–18 months.

If you're considering an OIC and want us to run through the numbers, we're happy to do that on a free call. We handle Offer in Compromise cases regularly and can give you a realistic read on whether it makes sense for your situation.

SALT Deduction Cap: What Changed

Under the 2017 TCJA, the State and Local Tax (SALT) deduction was capped at $10,000 per household, regardless of what you actually paid in state income and property taxes. For many California taxpayers — especially in San Diego, Los Angeles, the Bay Area, and the Central Coast — actual SALT liabilities routinely exceed $10,000, sometimes substantially. The cap effectively eliminated most of the SALT deduction's value for this group.

The OBBBA raises that cap to $30,000 per household. For most California homeowners and high-W-2 earners, this means the SALT deduction becomes meaningful again. If your combined California income tax and property tax exceeds $30,000, you still hit the cap — but you get three times the deduction you had under the TCJA.

Who benefits from the SALT increase?

The benefit depends entirely on whether you itemize. The OBBBA also extends the higher standard deduction from the TCJA ($15,750 for single filers and $31,500 for married filing jointly in 2026, adjusted for inflation). If your itemized deductions — SALT, mortgage interest, charitable contributions — still don't exceed the standard deduction even with the higher SALT cap, you won't see a change in your tax bill.

The taxpayers most likely to benefit from the $30,000 SALT cap are those who:

• Own property in California with property tax assessments above $15,000 per year
• Have California state income tax liability above $10,000
• Already itemize (or are close to itemizing) because of mortgage interest or charitable deductions

Note that the higher cap phases out for higher-income households. The specific income threshold for the phaseout and the phase-out rate are set in the House-passed version of the bill, but may be modified in the Senate. We'll update this page once final numbers are confirmed.

Payroll Tax and Business Provisions

What does change on the business side is the extension of the qualified business income (QBI) deduction under IRC § 199A — the provision that allows pass-through business owners (S-corps, partnerships, sole proprietors) to deduct up to 20% of qualified business income at the federal level. That provision was set to expire after 2025; the OBBBA makes it permanent.

For a San Diego business owner running an S-corp or partnership with, say, $500,000 in qualified business income, that 20% deduction — $100,000 — could mean the difference between a marginal federal rate of 37% and an effective rate closer to 29.6% on that income. It's a meaningful provision for business owners.

Two other business-relevant changes worth noting:

• 1099-NEC reporting threshold — the OBBBA raises the threshold for filing Form 1099-NEC from $600 to $2,000 for payments made in calendar year 2026 and beyond. This affects how you document contractor payments. The threshold will be indexed for inflation in $100 increments starting in 2027. For more detail on this change, see our guide on paying contractors in cash.
• Bonus depreciation — the OBBBA restores 100% bonus depreciation under IRC § 168(k), which had phased down to 60% in 2024. Businesses that purchase qualifying equipment or property can again deduct the full cost in the year of acquisition. This matters for capital-intensive businesses looking to reduce their taxable income in the year of purchase.

Nothing in the OBBBA affects the Trust Fund Recovery Penalty (TFRP) under IRC § 6672. If you are a responsible person who willfully failed to collect or remit payroll taxes, that penalty — 100% of the unpaid trust fund taxes — remains fully in force. Employment tax issues are some of the most serious collection matters the IRS pursues, and the OBBBA does not soften that posture.

Gambling Loss Deductions Under the OBBBA

Under prior law, IRC § 165(d) allowed you to deduct gambling losses — but only up to the amount of gambling winnings. So if you won $50,000 and lost $50,000, your net taxable gambling income was $0. The losses fully offset the winnings.

Under the OBBBA, that deduction is limited to 90% of winnings. Using the same example: $50,000 in winnings, $50,000 in losses — under the new rule, you can only deduct $45,000 (90% of $50,000). You owe tax on $5,000 in net gambling income, even though your actual net position was break-even.

This change affects:

• Gamblers who receive W-2Gs from casinos and slot jackpots
• Poker players, sports bettors, and horse racing participants who track winnings and losses
• Professional gamblers who report gambling income on Schedule C (the professional gambling rules interact with this change in ways that are still being analyzed)

For California purposes, the state has its own rules on gambling income — California does not allow a deduction for gambling losses at all under California Revenue and Taxation Code § 17155. If you're a California resident, gambling winnings have always been fully taxable to the FTB regardless of your losses. The OBBBA change applies at the federal level; it doesn't affect your California return in any new way, because California was already more restrictive.

What California Taxpayers Specifically Need to Know

Here's how the major OBBBA provisions interact with California's Franchise Tax Board (FTB):

The practical implication for California business owners: you may see a lower federal tax bill from bonus depreciation or QBI, but your California taxable income could remain higher because the FTB doesn't recognize those same deductions. This creates a larger federal-state differential that needs to be managed in your estimated tax payments. If your California Q2 estimates are based on prior-year numbers, it may be worth revisiting them given the new federal landscape.

California has historically been slow to conform to federal tax changes that reduce revenue. The state conformed selectively to portions of the TCJA, and we'd expect a similar pattern here. Until conformity legislation is enacted, treat your California and federal returns as operating under separate rules.

If You Currently Owe the IRS

Here's the actual issue: a lot of people reading news coverage of the OBBBA have a reasonable question — does this change anything about my IRS problem? The answer is almost entirely no for people with existing balances. The bill is forward-looking. It shapes tax liability going forward; it does not retroactively adjust what people owe from prior years.

What your options look like right now, regardless of the OBBBA:

1. Installment agreement (IA) — if you can't pay in full, the IRS will generally accept monthly payments. The interest rate on unpaid balances is the federal short-term rate plus 3 percentage points (currently in the 7–8% range). The IRS charges a one-time user fee for setting up an IA; reduced fees apply for direct debit.
2. Offer in Compromise — as discussed above, OIC is available if your RCP is less than the full balance. The 20% deposit (for lump-sum offers) is non-refundable if the offer is rejected. Before filing, run the numbers honestly.
3. Currently Not Collectible status — if your income does not exceed your allowable expenses under the Collection Financial Standards, the IRS can place your account in CNC status, which suspends active collection. The balance doesn't go away; the CSED continues to run. The IRS will revisit your status when your income changes.
4. Penalty abatement — if you have a history of compliance, First-Time Penalty Abatement (FTA) under Rev. Proc. 2020-54 is often available for the failure-to-file and failure-to-pay penalties. Abatement does not reduce the underlying tax or interest. On a significant balance, it can still mean real savings.
5. Waiting out the CSED — in some circumstances, where the balance is old and collection is unlikely, waiting for the ten-year collection statute to expire is actually the right strategy. This requires careful analysis because of the ways the statute is tolled — OIC pending, installment agreement, bankruptcy, and other events all pause the clock.

If you have a current IRS balance, the OBBBA changes nothing about these options. What it might change, over time, is the IRS's internal resource levels — which could affect how aggressively your file is worked and how quickly offers get processed. But that's a practice observation, not a legal change, and we can't rely on it as a strategy.

We've been handling IRS tax debt resolution since 2013. If you'd like a straightforward assessment of where you stand — which option fits your situation, what your RCP looks like, whether an OIC makes sense — book a free 15-minute call and we'll work through it.