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October 24, 2025
News
The IRS issued frequently asked questions in Fact Sheet 2025-08 regarding the dollar threshold for filing Form 1099-K under the One, Big, Beautiful Bill. The OBBB retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021 (ARPA) so that third party settlement organizations are not required to file Forms 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200. Form 1099-K is an IRS information return used to report certain payments to improve voluntary tax compliance. The requirement to file a Form 1099-K can be triggered when payments are received for goods or services through a payment settlement entity.
Tip of the Day
Time marches on . . . Shutdown or no shutdown, the IRS continues to relaese draft versions of new forms for the 2025 tax year. Most draft versions of forms will become the final version. You can view or download any draft versions at www.irs.gov/draft-tax-forms.
October 23, 2025
News
The IRS has issued new FAQs to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer's specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if a FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer's tax liability. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.
Tip of the Day
State of economy . . . There are a number of telltale signs some economists are looking at to predict the future. Consumer sentiment is down, which could indicate future spending, job movement has slowed, consumers are shopping more carefully at the grocery store, late payments on car loans are increasing, etc. While these may not, utlimately, be good predictors of the economy they could be very good forecasters of demand for goods and services in the low- to middle-income households. If your market is upper-income families you may be able to rest easy.
October 22, 2025
News
Notice 2025-57 provides transitional guidance with respect to returns relating to certain interest on specified passenger vehicle loans received in a trade or business from individuals, required to be filed under new Section 6050AA of the Code as enacted by the One, Big, Beautiful Bill Act (OBBBA). To ensure efficient administration of this new provision, section 3 of this notice provides that recipients of such interest may satisfy the reporting obligations under Section 6050AA for such interest received on a specified passenger vehicle loan in 2025 by making a statement available to the individual indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. For a more detailed summary, see IR-2025-105.
Tip of the Day
Transfer on death . . . Individuals put it, or a similar designation, payable on death (POD), transfer on death (TOD), on bank and brokerage accounts. These assets will transfer automatically to the named individual(s) without probate. That doesn't mean the assets escape estate taxes, but it can simplify transfers. This makes sense for small bank or brokerage accounts that could be a nuisance to transfer or costly if you have an attorney do so. In some cases most or all an individual's financial assets can be transferred this way. Of course it won't work for a large brokerage account where they may be multiple heirs, but it can simplify small accounts. Another plus. The income from the account the day after death belongs to the heir, making reporting income during an interum period on a trust return unnecessary.
October 21, 2025
News
Horses are an expensive activity and converting those expenses into a deductible loss isn't easy. In Mark P. Himmel and Deborah W. Himmel (T.C. Memo. 2025-35) the Court noted the taxpayers reported losses every year for a number of years and did not report any profits for the six years at issue. The Court used the nine factor test with seven factors outweighing two in the taxpayers' favor. The Court held the activity did not have a profit motive and disallowed the losses.
Tip of the Day
Mortgage just paid off? . . . Or refinancing? In either case you may no longer have your real estate taxes and homeowner's insurance included in your monthly payment and put in escrow. If so set up a date alarm in your phone, computer, tablet, etc. or use the old fashioned wall calendar to remind you of the payments. Check with your insurance company for options they provide. If you still have a mortgage and you let your homeowner's lapse, they may automatically sign you up for insurance and bill you. And the coverage they may provide could be far more expensive. If you have financial difficulty, talk to the lender as soon as possible. They will probably work with you and will definitely be happier than if they find out your taxes are in arrears or you haven't paid your insurance premiums. Got a rental property? Same advice applies, but in this case it's more likely they aren't collecting and paying the taxes and insurance premiums.
October 20, 2025
News
T.D. 10036 contains final regulations setting forth recordkeeping and reporting requirements for the average income test for purposes of the low-income housing credit. If a building ispart of a residential rental project that satisfies the average income test, the building may be eligible to earn low-income housing credits. These final regulations affect owners of low-income housing projects, State or local housing credit agencies that monitor compliance with the requirements for low-income housing credits, and, indirectly, tenants in low-income housing projects.T.D. 10034 contains final regulations that, with regard to the interest capitalization requirements for improvements constituting designated property, remove the associated property rule and similar rules from the existing regulations. In addition, this document contains final regulations that modify the definition of "improvement" for purposes of applying those existing regulations. Lastly, this document contains final regulations that modify other rules in those existing regulations in light of the removal of the associated property rule. The final regulations affect taxpayers making improvements to real or tangible personal property that constitute the production of designated property.
Tip of the Day
Exempt interest . . . Interest on bonds issued by state and local governments and their agencies (water authority, bridge, etc.) are usually tax exempt for federal purposes. They may be tax exempt at the state level. Interest on bonds issued by your home state are generally exempt on your state return. It's easy if you buy the bond. Income on a New York bond is exempt to a New York resident, but not a California resident. Things get trickier if you own a municipal bond fund. Unless the fund is devoted solely to one state (e.g., a fund holding only California bonds) you'll have to find the percentage of the income from your state of residence and apply it to the total income. One more point. U.S. government interest on obligations such as Treasury bills, notes, bonds is fully taxable for federal purposes but generally exempt on your state return.
October 17, 2025
News
Dameage awards for physical injury are generally nontaxable. Other settlements are. In Joseph J. Zajac, III (T.C. Memo. 2025-33) the taxpayer received an award for more than one reason. The Court determined that physical injuries and emotional distress as a result of his false arrest were not includable in income. But the taxpayer also received damages resulting from claims related to constitutional violations were not excludable.
Tip of the Day
Keep employees informed . . . If management is planning layoffs, closing a location, outsourcing a function, etc. employees should be told. It may have to be vaguely, but probably 98% of the time rumors are circulating even before a decision has been made. The rumors will weaken morale and could create impetus for some employees to start job hunting. And that could spread in the local community or the industry. It's hard to work when you think you may lose your job. You might want to consider getting professional advice.
October 15, 2025
News
Times up. If you're on extension your individual tax return is due today unless you're in a disaster area in which case you might have more time. File the return even if you can't pay. That will avoid additional penalties and preserve any elections.
October 10, 2025
News
The IRS has released the annual inflation adjusted data for 2026, reporting the tax bracket thresholds, standard deduction, phaseouts for credits and deductions, threshold for capital gains rates, modifications to the 2024 Rev. Proc. made by the One Big Beautiful Bill passed in July, and even the 2026 tax rate on arrow shafts. For a "brief" summary go to IR-2025-103. Or see the full text of Revenue Procedure 2025-32.< p>
October 9, 2025
News
The IRS Independent Office of Appeals is launching (IR-2025-100) a two-year pilot program to make Post Appeals Mediation (PAM) more attractive to taxpayers. Taxpayers can request PAM at the conclusion of an unsuccessful Appeals proceeding, and if the request is accepted, the parties meet in an accelerated mediation session where they make a final attempt to negotiate a mutually acceptable resolution. These sessions usually last one day. They are facilitated by an Appeals mediator with no connection to the underlying case, and taxpayers are invited to include a co-mediator at their own expense. The mediators promote settlement negotiations between the parties while helping them define the issues and identify common ground. Under the new PAM pilot, cases will be reassigned to an Appeals team unconnected with the underlying case who will represent Appeals in the mediation session. Otherwise, all aspects of PAM will remain the same.
Tip of the Day
Employee fraud . . . While internet scams get the headlines, employee fraud is a major concern. Small businesses can be particularly vulnerable because they don't have the internal accounting controls to make fraud more difficult. There are more than a few stories about how an employee in a small company managed to embezzle $200,000, $400,000 or more. And those are the ones where the perpretrator was caught. There are probably many times that number where the business just incurs losses, is sold, or goes bankrupt without ever discovering the theft. Some studies suggest a better than 25% chance a small business has been defrauded to a significant amount by an employee. Your CPA has ideas on ways to discourage fraud and ways to protect your business.
October 8, 2025
News
Notice 2025-55 provides relief from failure to deposit penalties under Section 6656 of the Code in connection with the new excise tax imposed on certain remittance transfers under Section 4475 (remittance transfer tax) for the first, second, and third calendar quarters of 2026. This notice also provides that a remittance transfer provider's ability to use the deposit safe harbor under Reg. Sec. 40.6302(c)-1(b)(2) will not be affected by a failure during the first three calendar quarters of 2026 to make deposits of the remittance transfer tax as required under part 40, provided the remittance transfer provider satisfies certain requirements.
Tip of the Day
Credit card benefits . . . Almost all credit cards provide benefits. Some relatively minor such as points that can be redeemed for gift cards or cash to substantial discounts on hotels and air travel. But remember the benefits are like life insurance--you're betting you're going to die and the insurance company is betting you'll make it to a ripe old age. And the odds are stacked against you. It's much the same with rewards. Some card companies keep the same rewards, some switch more frequently. Make sure you're able to utiiize the available rewards and can redeem them. That's especially true if you're paying an annual fee on the card.
October 7, 2025
News
Some items, even if related to the business are specifically identified as not deductible. The most frequently encountered example are fines and penalties. In Douglas E. Hampton (T.C. Memo. 2025-32) the taxpayer pleaded guilty to bribery, fraud, and money laundering in 2013, which ultimately led to the U.S. Marshals Service's seizing money from him and his S Corporation's bank accounts in 2016. The taxpayer deducted a flowthrough loss from the forfeiture of the S Corp's portion of seized funds. The IRS disallowed the loss deduction. Other issues in the case were abandoned by the taxpayer or are computational. The Tax Court held the forfeiture loss deduction disallowance sustained for public policy reasons.
Tip of the Day
Pay down debt? . . . Whether you have a business or are just an employee sooner or later you'll have some extra cash and have to pay down debt or keep the cash available for some unknown future purpose or just as a reserve. (Here by debt we mean long-term debt such as a building or home mortgage or an equipment loan, not credit card debt or a line of credit.) There's no rule of thumb here. Some people have no trouble surviving a month on $5,000: some can't get past a week. While paying down debt is a good idea, it's only true if the cash is truly "excess". There are two guiding factors to keep in mind. One, assuming now near-term plans for the funds, you should first have a cash reserve to get you through a rough patch. How much depends on your personal needs and outside factors. In good times that number may be low, say three months living expenses. But in tough times when finding a job could take the better part of a year, that reserved needs to be higher. And we may be heading into uncertain times. Second, paying down intermediate- or long-term debt is unlikely to decrease your monthly debt service or improve your credit rating. More importantly, securing new or additional financing is likely to be difficult once you start having cash flow problems or the economy turns sour. Talk to your accountant or financial.
October 6, 2025
News
In The David Aand Barbara Green 1993 Dynasty Trust, Mart D. Green, Trustee, et al. (165 T.C. No. 7) the petitioners were electing small business trusts and individuals who own shares of S, an S corporation. S's 2011 and 2012 federal income tax returns claimed charitable contribution deductions for donations of numerous artifacts. Each return included Form 8283, Noncash Charitable Contributions, which had been prepared by S. Each Form 8283 included a description of the group of contributed artifacts and reported an aggregate basis and fair market value and a range of acquisition dates for the group. Each return also included portions of an appraisal report describing and valuing each artifact. S used the services of an accounting firm to review each return before filing. Each petitioner deducted, on its 2011 and 2012 federal income tax returns, its pro rata share of the fair market value of the artifacts reported on S's information return for the same year. The IRS disallowed all the deductions in Notices of Deficiency a gross valuation misstatement penalty under Sec. 6662(a) and (h) or, in the alternative, a substantial valuation misstatement penalty under Sec. 6662(a) and (b)(3). The parties filed Cross-Motions for Partial Summary Judgment pertaining to (1) certain substantiation issues under Sec. 170 and (2) the rules governing charitable contribution deductions for trusts under Secs. 641, 642, 681, 512, and 170. The Court held that genuine issues of material fact existed as to the potential application of the reasonable cause defense under Sec. 170(f)(11)(A)(ii)(II), and summary adjudication on the substantiation issues is not warranted. The Court also held that neither side demonstrated it is entitled to the rulings it seeks with respect to the rules governing charitable contribution deductions for trusts and that both the IRS's Motions and petitioners' Motions were denied.
Tip of the Day
Thinking of playing the audit lottery? . . . While it appears that once again the odds will be in your favor with the reduction in agents and IRS personnel in general. But that may not be for long. The IRS has always used algorithms to flag returns for audit and some have been very effective. With AI becoming more mainstream every day, IRS computers may get even better at catching returns with a high probability of audit success. That, coupled with the speed of new computers may swing the odds in the favor of the IRS. And keep in mind that a return that you're filing next April may not be examined for a year or two (the IRS has three years). Moreover, the accuracy-related penalty can add 20% to any tax you owe on audit.
October 3, 2025
News
T.D. 10034 contains final regulations that, with regard to the interest capitalization requirements for improvements constituting designated property, remove the associated property rule and similar rules from the existing regulations. In addition, this document contains final regulations that modify the definition of "improvement" for purposes of applying those existing regulations. Lastly, this document contains final regulations that modify other rules in those existing regulations in light of the removal of the associated property rule. The final regulations affect taxpayers making improvements to real or tangible personal property that constitute the production of designated property.
Tip of the Day
Charitable contributions . . . Beginning in 2026 if you don't itemize (and many individuals don't) you'll be able to deduct $1,000 ($2,000 if married, filing joint) if from your taxable income (i.e., it won't affect your adjusted gross income). This only applies to cash, not property donations, and the same substantiation rules continue to apply. You might want to hold back on contributions that exceed this year's $300 ($600) limit and make them next year. For example, you're married and your only contribution is always $1,000 a year to your church. You and your spouse can give and deduct $600 this year. Assuming no change in tax brackets, contribute only the max, $600 this year, and give $1,400 (the usual $1,000 and the $400 you didn't make in 2025) next year.
October 2, 2025
News
Notice 2025-49 provides interim guidance regarding the application of the corporate alternative minimum tax (CAMT). Proposed regulations addressing the application of the CAMT and technical corrections to those regulations (together, the CAMT Proposed Regulations) were published in the Federal Register on September 13, 2024, and December 26, 2024, respectively. Sections 3-10 of Notice 2025-49 provide rules for certain adjustments to adjusted financial statement income (AFSI) and rules for proposed applicability dates and reliance on the CAMT Proposed Regulations.On August 29, 2024, FinCEN published the Residential Real Estate Rule, which requires reporting persons to report non-financed transfers of residential real property to legal entities and trusts. Most transfers of residential real estate are associated with a mortgage loan or other financing provided by financial institutions subject to AML/CFT program requirements. As non-financed transfers do not involve such financial institutions, such transfers can be and have been exploited by illicit actors of all varieties, including those that pose domestic threats, such as persons engaged in fraud or organized crime, and foreign threats, such as international drug cartels, human traffickers, and corrupt political or business figures. Non-financed transfers to legal entities and trusts heighten the risk that such transfers will be used for illicit purposes. The Financial Crimes Enforcement Network (FinCEN), grants temporary exemptive relief from the requirements of the regulation titled Anti-Money Laundering Regulations for Residential Real Estate Transfers (the "Residential Real Estate Rule"). The Residential Real Estate Rule is set to become effective December 1, 2025. This order exempts persons covered by the Residential Real Estate Rule ("reporting persons") from all requirements of that Rule until March 1, 2026. For more information, go to FinCEN Announces Postponement of Residential Real Estate Reporting Until March 1, 2026
Tip of the Day
Government shutdown , , , At this writing the Federal government is "shut down". If it's rectified within a few days the overall effect will be minor, unless the President fires workers permanently. But if the shutdown is entended, there will be at least short-term damage. What about the IRS? First, don't even think that that you'll get out of paying taxes. Most critical activities are automated and you'll be penalized for late payments. Same goes for returns. Relatively full operations will continue for five days with available funds. After that there are no plans at this time. Expect an update from the Service if it continues longer.
October 1, 2025
News
The IRS has issued guidance (Notice 2025-50) on Qualified Opportunity Zone investments in rural areas as provided for under the One, Big, Beautiful Bill. In 2018, certain economically distressed census tracts in the United States and its territories were designated as Qualified Opportunity Zones by the Treasury Department. Taxpayers who invest in QOZs receive certain tax benefits for their investments as an incentive to improve economic growth and job creation in these underserved communities. Notice 2025-50 provides clarification on two important One, Big, Beautiful Bill provisions: the definition of "rural area" and the application of the substantial improvement threshold for certain improvements to property located in a QOZ that is comprised entirely of a rural area.
These changes are intended to offer enhanced QOZ tax incentives for investing in underserved rural areas. There are currently 8,764 QOZs in the United States, many of which have experienced a lack of investment for decades. The notice identifies 3,309 of those QOZs as comprised entirely of a rural area. A list of all current, designated QOZs is found in Notice 2018-48.
Tip of the Day
Exchange of life insurance contract . . . You may have purchased a life insurance policy years ago for a specific purpose such as paying estate taxes on your death and find that purpose no longer exists or that you could put the funds to better use. Simply cashing in a whole life policy can have tax consequences, some of them significant if held for some time. There are some options available. You can do a tax-free exchange of one life insurance policy for another, or exchange a life insurance policy for an endowment or annuity contract or for a qualified long-term care insurance contract. You can also exchange one annuity contract for another or for a qualified long-term care insurance contract. As always there are some fine points and selling, terminating or exchanging one of these contracts is a significant financial decision. Get good, independent, advice.
September 30, 2025
News
The IRS has issued interim final regulations and a notice of proposed rulemaking to reduce the amount of the user fee imposed on tax professionals who apply for or renew a preparer tax identification number (PTIN). The IRS Return Preparer Office conducted a biennial review of the PTIN user fee in 2025 and determined that the full cost of issuing or renewing a PTIN should be reduced from $11 to $10, plus $8.75 payable directly to a third-party contractor. This newly established $10 user fee will be effective for the start of the next PTIN renewal cycle beginning on Oct. 16, 2025. The PTIN fee is non-refundable. Failure to have and to use a valid PTIN may result in penalties. The IRS projects that over 900,000 individuals will apply for an initial or renewal PTIN during each of the next three PTIN renewal cycles. For more information, go to IR-2025-95.Revenue Procedure 2025-30 provides procedures for taxpayers requesting private letter rulings from the IRS regarding certain issues pertaining to transactions intended to qualify under Section 355 of the Code, including representations, information, and analysis that taxpayers requesting these rulings should submit to the IRS. This revenue procedure revokes Notice 2024-38, supersedes Rev. Proc. 2024-24, and modifies Rev. Proc. 2025-1, and Rev. Proc. 2017-52.
Tip of the Day
Looking to save on homeowners insurance? . . . Instead of reducing coverage to save money take a closer look at the features on your policy and your deductible. First, make sure you're covered for the potential threats in your area--especially catastrophic ones. But you can raise your deductible and eliminate an unneeded feature such as payment for a hotel during the time your home is unavailable. Policies are often standardized so you get personal liability coverage if someone falls on your stoop. But if visitors are rare or limited to family, you may not need as much coverage. And most policies cover personal belongings. You may need to up that coverage if you have significant amounts of jewelry, a book or artwork collection, etc. On the other hand, you might be able to decrease it if you work from home or are retired and all that's in your closet is one suit.
September 29, 2025
News
The qualifications for a dependent can be confusing, in part because several factors can be involved. In Melissa Correll (T.C. Memo. 2025-31) the taxpayer was the noncustodial parent of child but claimed the child tax credit. Noncustodial parents may be able to claim a child as a dependent if the custodial parent (1) signs a written declaration that the custodial parent will not claim the child and (2) the declaration is attached to the noncustodial parent's return. That was not the case here. The couple had switched dependents among the two children they had claimed as dependents in prior years and the dependent the taxpayer now had exceeded the qualifying age for claiming the child tax credit.Tip of the Day
Another scam . . . The latest scam involves your state or federal government. People receive a text message informing them they have two (or a few more) days to reply with additional information to get their tax refund. Three key tipoffs here. First, neither the IRS or state governments will contact you by text message. Your first point of contact will be by mail. Second, no agency will give you only a few days to reply. You usually have thirty days or more. Third, urgency. It seems a cornerstone of all scams is that you must respond quickly.
September 26, 2025
News
If you're making a charitable contribution of property (other than publicly traded securities) valued at over $5,000 you'll need a qualified appraisal. In WT Art Partnership LP, Lonicera LLC, Tax Matters Partner (T.C. Memo. 2025-30) the taxpayer got an appraisal but, unfortunately, the appraiser was not qualified because his education and experience could not be verified and he did not prepare appraisals of this kind of property on a regular basis. The IRS disallowed the deduction in its entirety. The Court found that the appraisals were not "qualified appraisals" because none of the individuals involved in preparing those documents was a "qualified appraiser." However, it held that deductions are nevertheless allowable because the failure to secure qualified appraisals was due to reasonable cause and not to willful neglect. There were a number of reasons for the Tax Court's conclusion including the acceptance by the IRS of a prior appraisal by one of the appraisers.
Tip of the Day
Get detailed bills . . . If you're hiring a professional to do work for your business but the same professional provides services to individuals, get a detailed breakdown of the work performed. You don't want the IRS claiming that some or all of the work performed was personal in nature if it really was business related. That may be even more true now that most miscellaneous itemized deductions are no longer allowed.
September 25, 2025
News
The IRS has announced (IR-2025-94) that paper tax refund checks for individual taxpayers will be phased out beginning on Sept. 30, 2025, as required by Executive Order 14247, to the extent permitted by law. This marks the first step of the broader transition to electronic payments. The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until further notice, taxpayers should continue using existing forms and procedures, including those filing their 2024 returns on extension of a due date prior to Dec. 31, 2025. Most refunds will be delivered by direct deposit or other secure electronic methods. Options such as prepaid debit cards, digital wallets or limited exceptions will be available. Taxpayers should be careful to check the account number.Tip of the Day
Gimmicks not the solution . . . Gimmicks such as a loyalty program or special deals will increase sales but they won't make up for a poorly run business. The first step is to have a competitive product or service. The second is to service the customer--on time delivery, refund or replacement of damaged product, etc. Whatever is appropriate for your business. The third is customer assistance. Respond to complaints and questions, make it easy to order, etc. If you've got that under control, you can work on the loyalty program, special sales, etc.
September 24, 2025
News
Notice 2025-54 announces the special per diem rates effective October 1, 2025, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. This notice provides the special transportation industry rate, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. For purposes of the high-low substantiation method, the per diem rates are $319 for travel to any high-cost locality and $225 for travel to any other locality within CONUS. The amount of the $319 high rate and $225 low rate that is treated as paid for meals for purposes of Sec. 274(n) is $86 for travel to any high cost locality and $74 for travel to any other locality within CONUS (continential U.S,). These rates are effective for for amounts paid to employees after October 1, 2025. Rev. Proc. 2019-48 provides the rules for using per diem rates, rather than actual expenses, to substantiate the amount of expenses for lodging, meals, and incidental expenses for travel away from home.
Tip of the Day
Property transfers subject to sales tax . . . Most states that impose a sales tax have rules regarding the transfer of property outside of a purchase from a retailer. For example, you give your used truck to an old friend. The truck is valued at $4,000. In most states the transfer is subject to sales tax. On the other hand, many states have a exemption for the transfer to a relative. Had you given the truck to your daughter, tax may not have been due. Most states have an exemption for assets transferred to a corporation or partnership in exchange for an interest in the entity. You contribute a truck you own personally along with tools in exchange for all the stock of Madison Inc. Generally, that transaction is exempt from sales tax. Not infrequently, the exception is narrowly worded, so you've got to check the rules carefully. On the other hand, fewer states exempt a transaction going the other way, when the business transfers assets to the shareholders or partners. Again, check the rules. A mistake here could be costly.
September 23, 2025
News
The IRS has announced (IR-2025-03) guidance Notice 2025-52 that provides tax relief for farmers and ranchers in applicable states and regions who sold or exchanged livestock because of drought conditions. Under the guidance, farmers and ranchers may take more time to replace their livestock and defer tax on any gains from the forced sales or exchanges. Notice 2025-52 lists the applicable areas, by county or other jurisdiction, that qualify for federal assistance. The list includes 49 states, the District of Columbia and other regions that reported exceptional, extreme or severe drought during the 12-month period ending on Aug. 31, 2025. The tax relief generally applies to capital gains realized by eligible farmers and ranchers from sales or exchanges of livestock held for draft, dairy or breeding purposes. Sales of other livestock--such as those raised for slaughter or held for sporting purposes--and sales of poultry do not qualify. Eligible farmers and ranchers must show that drought prompted the sales or exchanges, and that the area received a federal drought designation. Generally, livestock must be replaced within a four-year period, instead of the usual two-year period. The IRS is authorized to further extend this replacement period if the drought persists. The replacement period extension announced in the notice gives eligible farmers and ranchers until the end of their first tax year after the first drought-free year after the four-year replacement period to replace the sold or exchanged livestock. As a result, eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire at the end of 2025 will have until the end of their next tax year to replace the sold or exchanged livestock. The IRS provides this extension to eligible farmers and ranchers if the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2024, and Aug. 31, 2025. This determination is made by the National Drought Mitigation Center.
Tip of the Day
Negotiating . . . . Don't underestimate your adversary. If you're buying, used equipment, real estate or a business keep in mind that the seller will almost assuredly have better information than you. One Fortune 100 company was buying a smaller business in a different industry in the rural south. The buyer came with top lawyers and business analysts and thought they were going to make a killing. The seller came with fewer resources, but knew his business. The seller got top dollar. Not two years later the market for the product soured and stayed that way for three years. The seller agreed to buy the business back for far less than the original selling price. Within two years the market recovered sharply.
September 22, 2025
News
The Department of the Treasury and the IRS is providing guidance on "no tax on tips" provision. The One, Big, Beautiful Bill proposed regulations identify occupations customarily and regularly receive tips and define "qualified tips" eligible taxpayers may claim as a deduction. The proposed regulations list nearly 70 separate occupations of tipped workers, from bartenders to water taxi operators. Treasury and IRS request comments from the public within 30 days to be made through Regulations.gov. Complete instructions on submitting comments can be found in the proposed regulations. Comments on the proposed regulations are due by Oct. 23, 2025. For a summary of the provision, go to IR-2025-92.
Tip of the Day
State employment tax credits . . . Employment tax credits for hiring individuals from targeted groups such as Supplemental Security Income recipients, veterans, etc. have been available on the federal level for a number of years. But many states provide credits for hiring based on similar criteria. While the rules are often similar to the federal ones, some individuals may be qualified for state but not federal purposes. There may be employment related credits in your state. And a credit is worth more than a deduction. It's a dollar-for-dollar reduction in taxes.
September 19, 2025
News
A partnership Blomquist Holdings, LLC, Crestlawn Investors, LLC, Tax Matters Partner (165 T.C. No. 6) subject to the audit and litigation procedures of the TEFRA, donated a conservation easement and claimed a charitable contribution deduction. P, the tax matters partner, timely petitioned this Court challenging the IRS's Notice of Final Partnership Administrative Adjustment. The partnership and the IRS subsequently entered into a settlement agreement under Tax Ct. R. Prac. & P. 248(b). The IRS, consistent with Tax Ct. R. Prac. & P. 248(b), filed a Motion for Entry of Decision along with a Proposed Decision. Thirty-nine Nonparticipating Partners (NPs) each filed and subsequently amended a Motion for Leave to File Notice of Election to Participate pursuant to Tax Ct. R. Prac. & P. 248(b)(4), seeking to avoid the settlement and proceed with the Tax Court case. NPs contend that they have an absolute right to participate in this case pursuant to Sec. 6226(c)(2) and, even if not, they have made the requisite substantial showing as to why the Court should permit their participation at this late stage of the litigation. The Tax Court held that the nonparticipating partners' rights to participate in a TEFRA proceeding under Sec. 6226(c)(2) are not absolute but are subject to the requirements of the Tax Court Rules of Practice and Procedure and that nonparticipating partners that request leave to file an election to participate pursuant to Tax Ct. R. Prac. & P. 248(b)(4) must make a substantial showing as to why they should be permitted to participate. The Court ruled that the NPs have not made a substantial showing as to why they should be permitted to participate in this case pursuant to Tax Ct. R. Prac. & P. 248(b)(4).
Tip of the Day
State scams . . . We've discussed internet scams frequently because one mistake can be so costly. The IRS has seen a number of scams attacking tax professionals as well as individuals and businesses. Apparently the states are not immune. Massachusetts is warning taxpayers of a scam were taxplayers receive a purported text from the Massachusetts Department of Revenue indicating they are due a refund and asking them to click on a link to provide bank information. We know of at least one other state that has issued warnings.
September 18, 2025
News
The IRS has released a draft of a new form Schedule 1-A-- Additional Deductions for the new deductions--No Tax on Tips, No Tax on Overtime, No Tax on Car Loan Interest, and Enhanced Deduction for Seniors. There a five compuational parts to the form and a summary part.The IRS announced (WV-2025-04) tax relief for individuals and businesses in parts of Wisconsin affected by severe storms, straight-line winds, flooding, and mudslides that began on August 9, 2025. These taxpayers now have until Feb. 2, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by FEMA, individuals and households residing or having a business in Milwaukee, Washington, and Waukesha counties qualify for tax relief. As a result, affected individuals and businesses will have until Feb. 2, 2026, to file returns and pay any taxes that were originally due during this period. he IRS will waive the usual fees for requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned FEMA declaration number (4892-DR), in bold letters at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS. For more information, click on the link above.
Tip of the Day
Interest rates . . . The Fed just reduced it's interest rate by 1/4 point and is expected to make two more, probably equally small, cuts through the end of the year. But that doesn't mean interest rates on car loans, mortgages, or credit cards will drop by the same amount. There are a number of other factors including credit risk that determine the actual interest rate of a loan or other debt. And, the longer the length of the loan, the less the interest rate is tied to the Fed rate which is inherently a short-term rate. To be sure, drops in the Fed rate decrease pressure on most interest rates. The downside is that the reason the Fed lowered the rate is that the economy is weaker than expected.
September 17, 2025
News
Section 280E denies business deductions for amounts paid in carrying on a trade or business that is in the business of trafficking controlled substances prohibited by Federal or state law. Basically if you're in the business of cnnabis sales, no deduction is allowed for costs, including wages. In Ayla A. Savage; Patricia A. Torres (165 T.C. No. 5) the taxpayers sought to claim the Sec. 199A deduction (the 20% of qualified business income deduction for unicorporated businesses) based on the wages paid in their cannabis business. The IRS determined that, under Sec. 199A(b)(4)(B) and (c), the computation of the taxpayer's Sec. 199A deductions should take into account only wages that were deductible after the application of Sec. 280E, and reduced Ps' section 199A deductions accordingly. The Tax Court sustained the IRS's with respect to the wages at issue.
Tip of the Day
Check credit reports regularly . . . Even if you're not looking for a new credit card, car loan, etc., you should check your credit report at least once a year. That means review the report, not just your credit score. A lot more gets reported than you might think. Besides your payment history on a mortgage, credit card, or car loan. It could show up and reduce your credit score. Late payments on utility bills, or any open account could affect your score. Those negative marks could affect your score for some time--and they may be in error. You did pay that $500 doctor bill, the receptionist didn't record the receipt. Issues like that are much easier to correct when they're young.
September 16, 2025
News
The DIRS has issued final regulations (T.D. 10033)_ addressing several SECURE 2.0 Act provisions relating to catch-up contributions. The final regulations include final rules related to a SECURE 2.0 Act provision requiring that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions. The final regulations provide guidance for plan administrators to implement and comply with the new Roth catch-up rule and reflect comments received in response to the proposed regulations issued in January. The final regulations also provide guidance relating to increased catch-up contribution limits under the SECURE 2.0 Act for certain retirement plan participants, in particular employees between the ages of 60-63 and employees in newly established SIMPLE plans. While the final regulations generally follow the proposed regulations, changes were made in response to comments received on the proposed regulations. For example, the final regulations permit a plan administrator to aggregate wages received by a participant in the prior year from certain separate common law employers in determining whether the participant is subject to the Roth catch-up requirement.
September 15, 2025
News
With assets it's their "placed in service date" that determines when depreciation starts, credits can be taken, etc. In Artena Moon and Kenneth Moon (165 T.C. No. 4) the taxplayers purchased and began driving a new plug-in electric drive motor vehicle. Sec. 30D provides a onetime credit of up to $7,500 for new qualified plug-in electric drive motor vehicles placed in service by the taxpayer during the taxable year. On returns relating to 2013 through 2019, the taxpayers claimed the maximum $7,500 one-time Sec. 30D credit. The IRS disallowed the credit relating to 2019 and sent the taxpayers a Notice of Deficiency. They filed a Petition contending that they were entitled to the credit relating to 2019. The Court held they were not entitled to the Sec. 30D credit relating to 2019 because the vehicle was placed in service in 2013.
Tip of the Day
Returns and estimates due . . . If you've got a business tax return on extension--S corporation, or partnership, they're due today. Many states have the same deadline. Estimated taxes are due for individuals and trustsand estimated taxes for corporations. Again, many state estimates are also due today.
September 12, 2025
News
The IRS has released a preliminary list of occupations that qualify for the "no tax on tips" provisions of the One Big Beautiful Bill Act. The offical proposed list will be published in the Federal Reister, but the IRS anticipates the final list will be substantially the same as the proposed one. The list is fairly broad and doesn't contain much in the way of surprises. For example, the list includes food service workers and gambling dealers and certain other employees at gaming establishments, but also included are event planners and photographers, recreational and tour pilots, tour guides and sports instructors, and home electricians, plumbers, air conditioning and heating mechanics and installer. Click on the link above for the list of occupations and examples.
Tip of the Day
Bank mergers . . . Deposits in banks are insured up to $250,000 for each account with a single owner or $250,000 per co-owner. IRA accounts are insured for $250,000, regardless of the number of beneficiaries. Corporate or partnership accounts are also insured for $250,000. Things can get trickier if your bank merges with another where two banks merge and you have substantial deposits in each bank You may have options, talk to the bank. The FDIC puts out a pamphlet. Go to www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance for general information and other sources.
September 11, 2025
News
Gifting or leaving a business in your will requires valuing it and that will require an appraisal and, most likely, scrutiny from the IRS if the dollar amount is significant. The IRS will frequently challenge a valuation and both the appraisal and defending it can be costly. In Kaleb J. Pierce (T.C. Memo. 2025-29) the owner of S corporation shares transferred some of his interests to trusts for his children. Fortunately, both the IRS and the taxpayer agreed the cash flow method to be the best method. Both parties agreed on a discount rate of 18% based on the weighted cost of capital. Both agreed that a discount factor should be applied for both control and marketability. The Tax Court sided with the taxpayer settling on a lack of control discount of 5% and a lack of marketability discount of 25%.
Tip of the Day
Note as wages . . . If you're working for a startup you may receive a note instead of a check for part of your services. If the note is secured you've got to include the fair market value of the note (discounted by an amount that depends on the payment terms) in income. Later payments on the note will be partly nontaxable and partly taxable. On the other hand, if the note is unsecured and nonnegotiable, only when you receive payments on the note are they includible in income as compensation.
September 10, 2025
News
The passive activity rules deny a deduction for net losses from passive activities. There's an exception for rental real estate rentals if you actively participate. Here you can deduct up to $25,000 if your modified adjusted gross income is less than $100,000. The $25,000 allowance is phased out if your AGI exceeds $100,000. The same rules apply to tax credits. In Kelly M. Strieby and Jan E. Sharon-Strieby (T.C. Memo. 2025-28) the taxpayers invested in a solar farm in Arizona and claimed energy tax credits related to their share of the cost of the energy property. The IRS found the taxpayers did not materially participate in the activity as their involvement was very limited. The taxpayers argued that the material participation rules did not apply to credits under Sec. 48. The Court reasoned otherwise, holding that the in order to secure the credits material participation was required.
Tip of the Day
Year-end thoughts . . . It's not too early to start thinking about year-end planning, particularly if you have a business. There's still time to make sure you have enough hours in a business to claim material participation, to make any large equipment purchases for a write-off and to sell off that old inventory to write it off. You may also want to make any special charitable contributions such as a qualified charitable distribution from an IRA, to get into a donor advised fund, and do a like-kind exchange of real estate.
September 9, 2025
News
The IRS is alerting (IR-2025-90) taxpayers about a growing number of fraudulent tax schemes circulating on social media that promote the misuse of credits such as the Fuel Tax Credit and the Sick and Family Leave Credit. These scams have led thousands of taxpayers to file inaccurate or frivolous returns, often resulting in the denial of refunds and steep penalties. Since 2022, the IRS has seen a surge in questionable refund claims fueled by misleading social media posts and bad actors posing as tax experts. Many of the posts falsely claim that all taxpayers are eligible for credits they do not actually qualify for, such as those meant for self-employed individuals or businesses. The IRS routinely publishes and updates a list of frivolous positions on IRS.gov that could lead to the imposition of penalties. So far, the IRS has imposed over 32,000 penalties costing taxpayers more than $162 million. Click on the link above for more information.Proposed REG-129260-16 withdraws a notice of proposed rulemaking that has been determined to be unnecessary. The notice of proposed rulemaking proposed to authorize the Department of State (State Department) to disclose returns and return information to its contractors who assist the State Department in carrying out certain responsibilities related to revoking or denying a passport of any individual certified to have a seriously delinquent tax debt.
Tip of the Day
Accounting for business assets . . . Whether you expense business assets under Sec. 179 or depreciate them over a number of years, if you're audited by the IRS there's a good chance you'll have to show the details surrounding the acquisition such as an invoice, costs to install (if appropriate), etc. You may also have to show details of any disposition or be able to show you still own the asset. The higher the asset's value, the greater the chance documentation may be requested. Ideally each asset of significance should be tracked and a file kept. That may also be required for accounting purposes. It's also a good way to check on assets from time to time to make sure they don't grow "legs".
September 8, 2025
News
REG-108822-25 contains proposed regulations modifying information reporting obligations with regard to sale or exchanges of certain interests in partnerships owing inventory or unrealized receivables. Under Sec. 6050Ka partnership is required to filea return if ather is an exchange described in Sec. 751(a) of any interest in the partnership during the year. Sec. 741 provides tht gain or loss recognized by a transferor partner upoin sale or exchange of a partnership interest is considered as gain or loss from the sale or exchange of a capital asset, except as provided in Sec. 751. In the case of the transfer of a partner's interest in partnership assets attributable to unrealized receivables or inventory items those items will be considered as an amount realized from the sale or exchange of property other than a capital asset. The proposed regulations would eliminate Part IV of Form 8308 by the January 31 filing deadline and require the completed 8308 including Part IV as an attachment to the Form 1065.
Tip of the Day
Second nondisclosure agreement? . . . You should have new employees sign nondisclosure and, if appropriate, noncompete agreements when starting employment. But you should also consider signing a second nondisclosure agreement when leaving the firm. The second agreement may just reiterate the provisions in the original, but it could have been some time since the original was signed and the second one will reinforce the first. It will be hard for the employee to argue that he didn't remember the first one or come up with some other excuse for not complying. Another reason is to make sure the agreement covers the current bases. This is especially true for anyone who has accesse to client, customer or patient information, or to any electronic records. Talk to your attorney.
September 5, 2025
News
IRS Tax Tip 2025-60 is reminding business taxpayers about the Work Opportunity Tax Credit. The credit can provide significant benefits if you hire an individual from one of the qualifying groups such as one on long-term unemployment, qualified unemployed veteran, formerly incarcerated individuals, etc. But the individual must be certified as a member of a qualifying group before hiring. The credit, unfortunately, expires at the end of the 2025 so if you were planning on qualifying for the credit, you should do so as soon as possible.The statute of limitations is normally limited to three years. But that limitation doesn't apply if fraud can be shown. In Stephanie Murrin, Appellant (U.S. Court of Appeals, Third Circuit) fraud was involved, but it wasn't the taxpayer who was accused but the return preparer. The Court held that it didn't make any difference who committed he fraud, the taxpayer, the preparer or some other party involved with the return, the tax may be assessed or a proceeding in court for the collection of the tax may be begun without assessment at any time.
Tip of the Day
Charitable contributions . . . It sounds like a good idea. You rent your vacation home during the season, but just after peak you've got a week vacancy. So you donate a week's use to your church for use in a raffle. Bad move--for two reasons. First, the use of the home is deemed personal, not business. That means you won't be able to deduct the expenses during that time. Second, you'll get no charitable contribution deduction. That's because the gift of the right to use property doesn't qualify as a deductible contribution.
September 4, 2025
News
The IRS announced (TX-2025-04) that it has added the Uvalde County to those that qualify for tax relief for individuals and businesses in parts of Texas affected by severe storms, straight-line winds. and flooding that began on July 2, 2025. These taxpayers now have until Feb. 2, 2026, to file various federal individual and business tax returns and make tax payments. The complete list of counties that qualify for relief now includes Burnet, Coke, Concho, Edwards, Hamilton, Kendall, Kerr, Kimble, Lampasas, Llano, Mason, McCulloch, Menard, Real, Reeves, San Saba, Schleicher, Sutton, Tom Green, Travis, Uvalde and Williamson. For more information, click on the link above.In a report issued by Treasury Inspector General for Tax Administration (TIGTA) found that nearly 1.1 million employers deferred approximately $133 billion in Social Security taxes for Tax Year 2020. An estimated $131 billion (98 percent) was paid. However, 167,373 employers had approximately $2 billion (2 percent) in unpaid deferrals. According to the IRS, as of May 2025, there were approximately 10,000 employers remaining who had not paid their deferral, and the IRS had yet to manually adjust their account which would subject the unpaid amounts to standard collection processes. Employers that did not timely pay their deferred Social Security taxes by the December 2021 and December 2022 due dates, or by the time the IRS manually adjusts their account, are subject to the IRS’s standard collection processes. Accounts with unpaid deferrals are also subject to the assessment of penalties such as failure to pay tax and failure to make deposit of taxes penalties. TIGTA found that the IRS incorrectly assessed manual Failure to Deposit penalties totaling $73.7 million on 9,548 business tax accounts. These employers had credits, such as payments or refund offsets available, but these transactions did not post timely to their tax accounts. The delay in posting these transactions caused the employer to have a delinquent deferral and resulted in the penalty being overstated. For the full report, go to www.tigta.gov/sites/default/files/reports/2025-09/2025406049fr.pdf.
Tip of the Day
Back property taxes may not be deductible . . . You buy a home, commercial property, etc. with delinquent back taxes (and other charges such as interest, etc.) at a foreclosure sale. Can you deduct all the taxes? No. Your deduction is limited to the portion of the taxes attributable to the time since you owned the property. Those prior accumulated taxes are part of the purchase price. If the property includes a building, a portion of the taxes, interest, etc. should be allocated to the building for which you can claim depreciation.
September 3, 2025
News
In order to claim a businesa deduction there must either be an out-of-pocket expenditure or one financed by debt for which the business is liable. In David Nwafor (T.C. Memo. 2025-27) the taxpayer was the sole proprietor of an bengineering firm operated as a single-member LLC. In calculating the firm's net profits on his tax returns, the taxpayer took into account (1) the value of the time he spent in developing a mathematical modeling program to be used in his engineering work, (2) payments to contract labor, (3) expenditures to buy office equipment and a car, and (4) adjustments and discounts given to customers. The IRS disallowed these expenses and the Tax Court sustained the disallowance. The taxpayer lacked documentation for some expenses which can sometimes be overcome with the Cohan which allows the Court to allow a deduction despite a lack of documentation if it's clear that expenditures where made but there is no record. Here the Court noted that it would not estimate a deductible expense unless the taxpayer presents a sufficient evidentiary basis on which an estimate can be made. Finally, the Court a denied amounts for the time the taxpayer spent in developing a software model because there was no amounts paid or incurred by the taxpayer and he could not deduct the value of his labor.Tip of the Day
Where'd the money go? . . . Fred was a major league athlete made $8 million a year for his 10 best years. He had other jobs after his professional career, but none paid as well. At 65 he was living in a two-bedroom, one bath home in a suburb that cost $300,000 and having trouble making ends meet. What happended? The Ferrari and the Lambroghini new every couple of years, the parties, charter aircraft, the three homes each costing over $3 million, and a couple of servants add up quickly. Add in custom suits and a wardrobe for his wife along with jewelry. Drilling down to less expensive items reveals $1500 meals for four at exclusive restaurants, expensive furniture and dishes for all the homes, and thousands a year just for pool maintenance. Unlimited cable for all three homes is close to $30,000 a year. The first step is to realize the money is not unlimited and some items should be relinquished. Expensive toys cost a lot to purchase and a lot to maintain. And insurance is not cheap. More high earners have ended up broke because of overspending than for lack of income.
September 2, 2025
News
Married taxpayers generally may elect to file a joint return for a taxable year although their right to do so may be limited after either spouse has filed a separate return. After the filing of a separate return, a joint filing status election is generally prohibited if either spouse has timely filed a petition for redetermination of a deficiency. In the case of Gina Jaha; Bob Anderson (T.C. Memo. 2025-26) the taxpayers hadn't filed and the IRS prepared substitutes for returns (SFR) in this case the return electing separate filing status is an SFR filed by the IRS, the taxpayer may still elect joint filing status by filing a joint return with his or her spouse before the case is submitted for decision. The record fails to establish that petitioners properly elected joint filing status. No party contends that petitioners filed their returns for the years at issue in the manner specified by regulation. The Court could not conclude that the taxpayers properly elected to change their filing status for the years at issue. The taxpayers lived in a community property state and married taxpayers who do not file joint returns are generally each liable for federal income tax on half of their community property income for a taxable year. The Court also found the taxpayers had income from a multi-level marketing program and denied the taxpayers deduction in excess of that allowed by the IRS because the taxpayers lacked documentation. The Court rejected the taxpayers' estimates of expenses for the years at issue and found the taxpayers' testimony lacking in specificity..
Tip of the Day
Critical checklist . . . In any substantial, unusual transaction there are usually many issues you don't normally deal with. You can't make a checklist to cover all of them, but you should make a checklist of the items that are most important. That goes for both business and personal transactions. Some items you probably don't even have to list--you'll definitely remember them. For example, you're buying a new home--four bedrooms and two baths are absolutely essential. That you won't forget. But will you remember to check for 500 gallons of oil storage, underground sprinklers, age of the roof, etc. Not enough outlets in the garage? That's not a big deal, you can put them in yourself. That's not something you need on the checklist. In business situations, the checklist can be much more important because you may be signing up for things that can't be easily changed. One business owner thought his attorney would check a purchase and sale agreement for a business being acquired. As a result the allocation of the purchase price was wrong and the purchase price wasn't contingent on certain employees remaining. The buyer considered both important.
August 28, 2025
News
The IRS is advising tax professionals should always remain alert to any scams and protect their client data. A common scam geared towards tax pros aims to collect their Electronic Filing Identification Numbers. Review this Tax Tip 2025-57 for details about how this scam works and how to protect your clients and your business. In an EFIN scam the scammer poses as a tax software provider and emails the tax pro with a request to provide their EFIN information by fax. When the tax pro faxes back their EFIN information, the scammer uses the information to steal client data and file fraudulent tax returns for refunds. Click on the link for more information.The IRS is inviting the public to provide anonymous feedback on tax preparation and filing options, which will run through Sept. 5, 2025. This survey is being conducted as part of the Department of Treasury and IRS efforts to fulfill a reporting requirement to Congress under the OBBB. Treasury will deliver a report to Congress by Oct. 2, 2025, on several key issues related to free tax filing options for the public.
Tip of the Day
Investment tax credit . . . There's no longer a federal investment tax credit. While it was big in the first half of 1980's it was repealed and replaced by faster depreciation. But some states have an investment tax credit, often aimed at specific segments of the economy such as farming or manufacturing. Check the rules in your state.
August 27, 2025
News
https://assets.msn.com/staticsb/statics/latest/slideshow-wc/icons/flipper-next.svg The IRS has relaeased (Rev. Rul. 2025-16) the interest rates under the Farm Credit System to be used to compute the special use value of real property used as a farm for which an election is made under Sec. 2032A for estate that value farmland under Sec. 2032A in 2025.The IRS has lost about a quarter of its employees since the beginning of the year and now finds itself deficient in some mission critical positions and is now looking to fill some slots. Some employees who signed up for deferred resignations are being offered to rescind the decision and remain with the Service.
Tip of the Day
Thermal paper . . . Heat sensitive paper was a staple in the early days of the fax machine. While even fax machines seem to be long gone, thermal paper is still in frequent use in store cash registers. There are several reasons for the use, but permanency isn't one of them. The info on the paper will fade in time--faster the higher the temperature. That may not mean much on your grocery store tape, but not so much if you need a record for tax purposes. If you can get an email receipt, request it. If thermal is your only option, consider scanning or copying the receipt before it fades.
August 26, 2025
News
The IRS announced (IR-2025-87) that interest rates will remain the same for the calendar quarter beginning Oct. 1, 2025. For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. Here is a complete list of the rates:
The IRS has updated (NM-2025-03) the locales where individuals and businesses in parts of New Mexico affected by severe storms, flooding, and landslides that began on June 23, 2025 are eligible for relief. The areas now include Dona Ana County. As a result the complete list of counties that qualify for relief now includes Chaves, Doña Ana, Lincoln, Otero, and Valencia. Click on the link above for more information.
Tip of the Day
Scams and more scams . . . The internet has brought us untold conveniences, savings, speed, etc. It has also brought us untold scams. And, unfortunately, they're getting more convincing. There are some tricks that can help you avoid getting scammed. First, look carefully before you click on any emails or text messages. Do you know the person they're coming from? If it's a business, do you deal with them? Same is true of government agencies. Keep in mind that scammers will use the name of a business or organization that is common to many people. If it's a bank, it'll be a big one with many customers, not your local credit union. Second, check the email address. Most businesses use their web address as part of their email address. For example Fred Flood at Madison Paper will have an email address like FFlood@madisonpaper.com. This isn't a foolproof test, but if it's FFlood@gmail.com it's probably a scam. Third, only scammers want to deal in gift cards or crypto or similar "currencies". The reason? They're harder or impossible to trace. Fourth, forget caller ID. Scammers can easily spoof a phone number to come up as something else. Fifth, a scammer may not be after money, but your information. Credit card info, medicare and social security numbers, personal info such as age, etc. can be readily sold, often frequently on the web. Finally, if there is urgency involved you should be suspicious. That goes for legitimate deals as well as scams. Act today for your 20% discount. Chances are it's an overpriced offer. They want you to sign immediately so you don't have time to compare prices.
August 25, 2025
News
In Silver Moss Properties, LLC, Silas Mine Investments, LLC, Tax Matters Partner (165 T.C. No. 4) the partnership claimed a charitable contributions for a donated a conservation easement. The IRS denied the deduction and the taxpayer sought relief in the Tax Court. The IRS amended its answer to include the civil fraud penalty. The taxpayer contended that the Tax Court is barred from adjudicating the civil fraud penalty because U.S. Const. amend. VII guarantees a right to trial by jury in such actions, which is not an option in this Court. The Court held U.S. Const. amend. VII does not apply to suits against the sovereign, and Congress has not otherwise consented to trial by jury in TEFRA partnership-level actions and that the "public rights" exception to U.S. Const. amend. VII applies to a civil fraud penalty under Sec. 6663(a). Finally, the Court held it could adjudicate a Sec. 6663 civil fraud penalty.
Tip of the Day
Late filing penalties for business returns . . . For individual returns filed late the most costly penalties are based on the amount of tax owed. But for S corporations and partnerships, there's usually no tax due. Here the penalty for late filing is $245 per month, per shareholder or partner. For example, during 2024 Fred owned 50 percent of Madison for the full year; Sue owned 50 percent for the first six months of the year but sold her shares to Sharon in early July. The penalty for filing one month late would be $735; three months late would be $2,205. There's also a good chance your state (or states if you do business in more than one state) will also impose a penalty.
August 22, 2025
News
The IRS has issued frequently asked questions (FAQs) in Fact Sheet 2025-05 relating to the modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D under the One, Big, Beautiful Bill Act (OBBBA). These FAQs provide guidance on several energy credits and deductions that are expiring under OBBBA and their termination dates. The FAQs also provide clarification on the availability of the new clean vehicle credit, the energy efficient home improvement credit and the residential clean energy credit, among others. Click on the link above for more information.
Tip of the Day
Making decisions under stress . . . Making important decisions under many stressful conditions can lead to poor judgment. For example, bidding on a job after losing an important bid or job can make you want to low ball the next bid. You can still make a bid, jusr make sure you're doing so with a clear head.
August 21, 2025
News
Notice 2025-44 announces that Treasury and the IRS intend to issue proposed regulations withdrawing the disregarded payment loss ("DPL") rules under Sec. 1.1503(d)-1(d)(consolidate return regulations). The DPL rules were finalized on January 14, 2025 and are applicable with respect to losses incurred in taxable years beginning on or after January 1, 2026. In addition, this notice announces an extension of the transition relief initially announced in Notice 2023-80 with respect to the interaction of the dual consolidated loss ("DCL") rules and the model rules published by the OECD/G20 Inclusive Framework on BEPS (the "GloBE Model Rules"). The notice extends the transition relief such that the DCL rules would generally be applied without respect to the GloBE Model Rules for losses incurred in taxable years beginning before January 1, 2028.The Treasury Inspector General for Tax Administration (TIGTA) has issued a report concerning the termination of IRS probationary employees earlier this year. TIGTA noted that the termination letters notified employees that they were terminated for performance reasons and current mission needs. TIGTA was advised that probationary employees did not have documented performance issues. TIGTA's evaluation focused on the actions and processes that the IRS followed when it sent termination notices in February and March 2025 to probationary employees. For the full report, go to www.tigta.gov/sites/default/files/reports/2025-08/2025ier028fr.pdf.
Tip of the Day
Pick a partner carefully . . . Picking a business partner, or even a rental property partner, depends on a number of factors such as their business skills, their attitudes, etc. But one factor that's often overlooked is their financial stability. Say Sue and Fred go 50-50 on a service business. The business is doing well, but Fred's a gambler and not only exhausted all his funds but got debt in debt. On declaring bankruptcy Fred has to give up his interest in your combined business. This isn't a problem if the partner has only a 5 or 10% interest. Talk to your attorney. There can be ways to protect yourself if you're concerned.
August 20, 2025
News
Notice 2025-45 announces that the Internal Revenue Service intend to issue proposed regulations under Sections 897(d) and (e) that modify the application of the rules described in Reg. Secs. 1.897-5T and 1.897-6T, Notice 89-85, and Notice 2006-46, to certain transactions involving the transfer of United States real property interests ("USRPIs"). The regulations will propose to revise the rules that apply to inbound asset reorganizations under section 368(a)(1)(F) that constitute a "covered inbound F reorganization" as defined in section 3.02 of the notice.
Tip of the Day
Check credit reports regularly . . . Even if you're not looking for a new credit card, car loan, etc., you should check your credit report at least once a year. That means review the report, not just your credit score. A lot more gets reported than you might think. Besides your payment history on a mortgage, credit card, or car loan, many businesses report late or failures to pay. Didn't pay that bill for $500? It could show up and reduce your credit score. Late payments on utility bills, or any open account could affect your score. Those negative marks could affect your score for some time--and they may be incorrect. You did pay that $500 bill, the vendor didn't properly record the receipt. Issues like that are much easier to correct when they're young.
August 19, 2025
News
If you're converting personal property to a rental property you need to start taking depreciation. Normally depreciation is equal to your cost (or with reference to your basis in an exchanged property). But it's more complicated if you owned the property for a time and then converted it to a rental or business property. In that case your basis for depreciation is the lesser of your cost or the fair market value at the time of conversion to rental or business. In Sherman Derell Smith (T.C. Memo. 2025-24) the propeety was first held for rent in 2017 but the taxpayer did not file his return for 2018 until 2024. The taxpayer took depreciation but could not show the fair market value of the property at the time of conversion. The Tax Court found the sources the taxpayer used were far too inaccurate the meet the standards required by the law. In addition, because the property was acquired as a result of a loan to a relative that transformed into a tenant-in-common situation and finally ownership, the taxpayer did not prove his cost basis to the satisfaction of the Court. The Court disallowed any deductions for depreciation.
Tip of the Day
Jurisdiction . . . From time-to-time when discussing Tax Court the Court has declined to rule on an issue because of jurisdiction. Jurisdiction is a general term regarding the power of a court. In the case of the Tax Court it can refer to an issue that was not properly brought up originally but it's more likely that subject matter jurisdiction is a result of the Tax Court's authority is limited to tax cases and then not all tax issues..
August 18, 2025
News
If you get a Form 1099 for income, you've got to report it unless you can dispute the amount. In Charlie Campana (T.C. Memo. 2025-23) the taxpayer failed to report a Form 1099 reporting a distribution from a qualified plan. Moreover, the taxpayer was not yet 59-1/2 and did not qualify for any of the exceptions to a penalty. The taxpayer argued that he was owed a refund from a prior year that would offset the liability. However, the Tax Court held it could not rule on the issue because it lacked jurisdiction.
Tip of the Day
Rental property lease . . . It's imperative you have a lease on any rental property--even if you're renting to your best friend. The law with respect to real property can be different so you would do well to consult an attorney for your first lease and any future ones with changes. Make sure you have a prohibition against subleasing without your express written permission. You should also prohibit a home office or business out of the home without permission. Why? Sue may use the home office for her consulting work, but Fred may by using it as for chemistry experiments. Finally, the lease should include a clause where the tenant will advise you of any planned absences of 30 days or more. A house that appears empty for too long invites squatters or other issues.
August 15, 2025
News
The IRS is warning tax professionals to remain alert to any scams and protect their client data. A common scam geared towards tax pros aims to collect their Electronic Filing Identification Numbers (EFIN). The scammer poses as a tax software provider and emails the tax pro with a request to provide their EFIN information by fax. When the tax pro faxes back their EFIN information, the scammer uses the information to steal client data and file fraudulent tax returns for refunds. Preparers who receive these emails should not respond to the email or follow the directions in the email. They should report it immediately. For more information, go to Tax Tiop 2025-57 at IRS.gov.
Tip of the Day
Home equity loans . . . Use home equity loans cautiously. Interest isn't deductible unless the proceeds are used to improve your principal residence (or the funds taken down are used in certain other ways). And the interest on only the first $750,000 of your principal amounts on your total home debt is deductible. Using home equity to pay off bills can lead to more spending. Make sure your reasons for getting the home equity loan are sound.S
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