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November 14, 2025
News
The IRS has announced (Rev. Rul.2025-22) interest rates will remain the same for the calendar quarter beginning Jan. 1, 2026. For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. The rates are as follows:
Note that the interest rates on over-and underpayments are based on the yields of marketable obligations of the U.S. These rates are only indirectly affected by the Federal Reserve rates. Moreover, the yields are rounded. As a result these rates don't change in lock step with actions by the Federal Reserve.
The IRS has issued (Notice 2025-67) technical guidance regarding all cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items. Highlights of changes for 2026 include:
The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government's Thrift Savings Plan is increased to $24,500, up from $23,500 for 2025. The limit on annual contributions to an IRA is increased to $7,500 from $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment is increased to $1,100, up from $1,000 for 2025. The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $8,000, up from $7,500 for 2025. Therefore, participants in most 401(k), 403(b), governmental 457 plans and the federal government's Thrift Savings Plan who are 50 and older generally can contribute up to $32,500 each year, starting in 2026. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2026, this higher catch-up contribution limit remains $11,250 instead of the $8,000 noted above. Click on the link above for additional changes.
Tip of the Day
Don't believe it . . . You've been there. Your buddy tells you about a deduction that businesses in your line can take. It might be true. It might not. Talk to your accountant. Give him as many details as possible. The same is true for articles on the internet and AI searches. And you've got to provide your complete fact pattern. There often are special rules for specific industries, small businesses, etc. For example, income averaging was killed in a 1986 law change for almost everyone. But it's still available to farmers. And there are strict limitations on like-kind exchanges for real estate. But more liberal rules are available for property that's condemned by a municipality or destroyed in a disaster. A short AI answer is unlikely to cover all the bases.S
November 13, 2025
News
You can be held personally responsible for unpaid employment taxes if you have the authority to pay bills, hire, etc. You're not absolved of liability if the business is a corporation or LLC. Nor do you have to be an officer or shareholder of the entity. In United States of America, Plaintiff v. Kathryn S. Flaim, Defendant (U.S. District Court, E.D. Pennsylvania) the company provided homemaking and personal care services in conjunction with Visiting Nurses. The Court found the defendant comingled employment taxes with other funds, signed Forms 941, she continued to make payments to creditors other than the IRS including utilities, rent, payroll and her personal compensation, as well as pay personal expenses. On several occasions she was appraised of her outstanding tax liabillities. She had signature authority over the bank account as well as authority to final managerial authority, sign leases, set employee salaries and make IRS payments. The Court found the defendant was a responsible person and that she willfully failed to deposit the taxes. The Court also noted that in a case involving a willful attempt in any manner to defeat or evade tax, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. Where the assessment of a tax has been made within the period of limitation properly applicable thereto, such tax may be collected by a court proceeding that commences within 10 years after the assessment of the tax.
Tip of the Day
Don't get personal . . . Mixing business and personal feelings rarely improves business results. Make your decisions based upon business factors. You may not like the vendor or the customer, but if it's a good business deal you should accept it. One business owner died and left his wife to dispose of the business. She was offered $250,000 by an employee (a fair price overall, but without that employee the business was worth far less). For personal reasons she refused the offer. Six months later her best offer was $50,000 for a portion of the business. The former employee started his own business and brought a high percentage on board his new entity, getting them basically for free..
November 12, 2025
News
Revenue Procedure 2025-31 describes a safe harbor for trusts that otherwise qualify as investment trusts under Reg. Sec. 301.7701-4(c) and as grantor trusts to stake their digital assets without jeopardizing their tax status as investment trusts and grantor trusts for Federal income tax purposes. This revenue procedure also provides a limited time period for an existing trust to amend its governing instrument (trust agreement) to adopt the requirements of the safe harbor.
Tip of the Day
Buying a vacation property? . . . If you expect rent the property when you're not using it and turn a profit, think again. Some owners do turn a tidy profit on a vacation rental but there's usually something special about the property--the Hamptons on Long Island, Cape Cod, lake and ocean front properties in many areas all command top dollar. But move down a notch even in the same area and rental prices can drop significantly. You've also got to provide special services with short-term rentals. The space has to be cleaned after every tenant and wear and tear can be higher. If you use the property for personal purposes you'll have to allocate your expenses on the property. If you need income from the property to help with the mortgage, taxes and other expenses, get good advice. In addition, talk to your CPA or financial advisor.
November 10, 2025
News
The proper year for a deduction isn't disputed very often, but it does happen. In Corning Place Ohio, LLC; Corning Place Ohio investment, LLC; Tax Matters Partner, Petitioners-Appellants (U.S. Court of Appeals, Sixth Circuit) the taxpayer challenged the Tax Court holding (T.C. Memo. 2024-72) the Court affirmed the Tax Court's decision that the deduction was claimed in the wrong year. Here a charitable contribution of an easement was made on May 25th of the year at issue. But at that time a partnership did not exist because there was only one owner. The partnership began on July 7 of that year when it had multiple partners. And that's when the first tax year of the partnership began. The Court also upheld the Tax Court's decision involving the valuation of the easement which the Tax Court found to be grossly exaggerated. The Court of Appeals agreed on the valuation misstatement citing a number of unrealistic assumptions.
Tip of the Day
Ready to sell? or buy? . . . Consider who's going to draft the contract. If there's an ambiguity in the contract most courts will side with the party who did not draft the contract, reasoning that the drafter had the opportunity to clarify the issue. That can be an advantage if there is a dispute. Another point. As the non-drafting party you have the chance to avoid an issue that might not be caught or to add a clause. Discuss the issue with your attorney.
November 7, 2025
News
When dealing with the IRS and the Tax Court most deadlines are absolute. In >i> North Wall Holdings, LLC, Schuler Investments, LLC, a Partner other than the Tax Matters Partner (165 T.C. No. 9) the IRS mailed a Notice of Final Partnership Administrative Adjustment (FPAA) to the tax matters partner (TMP) of PS, a limited liability company treated as a partnership for federal income tax purposes and subject to the TEFRA unified audit and litigation procedures. The petitioner, a notice partner, filed a Petition for readjustment of partnership items 168 days after the IRS mailed the FPAA to the TMP. The IRS moved to dismiss the Petition for lack of jurisdiction (here late filing). The petitioner objected. The Court noted a TMP may file a petition for readjustment within 90 days of the IRS's mailing of an FPAA to the TMP. A partner or group of partners entitled to notice may file a petition within 60 days after the close of the 90-day TMP petition period. The text, context, and relevant historical treatment of the TEFRA petition period establish that the period within which to file a petition is a jurisdictional limit. The text places the petition period within the jurisdictional grant. In the context of the broader TEFRA provisions, allowing equitable tolling would render the TEFRA statutory scheme unworkable. Historically, courts have treated the TEFRA petition deadlines as jurisdictional, and Congress has amended TEFRA to specifically account for the effect of the petition deadlines' being jurisdictional. Even setting aside the jurisdictional question, the complex TEFRA statutory scheme indicates that Congress did not intend for the equitable tolling doctrine to apply to untimely TEFRA petitions. The Court held the petition was untimely and that equitable tolling does not apply to hold open the prescribed periods set forth in Sec. 6226(a) or (b) for filing a TEFRA petition.
Tip of the Day
Selling your vacation home? . . . You're not going to get that $250,000 ($500,000 if married filing joint) exclusion since it's not your principal residence. But what if you decide to move into your vacation home and make it your principal residence for at least two years. That technically qualified you for the exclusion. There's a catch here. That used to work but a change in 2008 puts a crimp in that. Now only the gain that's applicable for the years it was your principal residence qualifies for the exclusion. For example, you bought the home in 1988 but have used it as your principal residence the last three years. Only the appreciation for the last three years qualifies.
November 6, 2025
News
Notice 2025-62 provides penalty relief from the new information reporting requirements for cash tips and qualified overtime compensation under the OBBB to employers and other payors for not filing correct information returns and not providing correct payee statements to employees and other payees. Specifically, employers and other payors will not face penalties for failing to provide a separate accounting of any amounts reasonably designated as cash tips or the occupation of the person receiving such tips. In addition, employers and other payors will also not face penalties for failing to separately provide the total amount of qualified overtime compensation. The relief is limited to returns and statements filed and provided for tax year 2025 and applies only to the extent that the person required to make the return or statement otherwise files and provides a complete and correct return or statement. The IRS is aware that employers and other payors may not currently have the information required to be reported under the OBBB, or the systems or procedures in place to be able to correctly file the additional information with the IRS, or SSA in the case of a Form W-2, and provide it to employees and other payees. Moreover, the IRS has announced that Forms W-2 and 1099 for tax year 2025 will not be updated to account for the OBBB-related changes. Therefore, tax year 2025 will be treated as a transition period for IRS enforcement and administration of the new information reporting requirements for cash tips and qualified overtime compensation under the OBBB. Click on the link above or go to IR-2025-110 for additional information.
Tip of the Day
Keep good records . . . That's always good advice. But it can be critical in the case of sales tax. Some states are famous for using the one-day observation test of restaurants and many other establishments if the business doesn't keep good records for sales tax purposes. The issue can be a real problem if the day the auditor picks is one of your best days of the week. It can get worse if sales have been growing over the last few years. The auditor could simply take the sales for the day and multiply by 313 (365 days less 52, assuming the business is closed one day a week) then multiply by 3 for a 3-year period. That's a real problem if sales two years ago were significantly less than today. Contesting the assessment could be difficult. You may have to have an expert witness show the test was not statistically correct. In some cases, even that won't get you off the hook. You're fighting from a poor position because you didn't maintain the required records.
November 5, 2025
News
Compuer Sciences Corporation (165 T.C. No. 8) is a U.S. entity engaged in the information technology business. During 2012 and 2013 it implemented a series of restructuring steps that allegedly generated a capital loss of $651,200,000. The taxpayer reported that loss on its 2013 Federal income tax return. The IRS commenced an examination of the company's return and an IRS agent recommended disallowance of the capital loss deduction and assertion of a 20% penalty for an underpayment due to a substantial understatement of income tax. The agent's immediate supervisor approved the initial determination to assert this penalty. The IRS subsequently issued a 30-day letter and a Notice of Deficiency disallowing the capital loss deduction and determining a 20% penalty with respect to that adjustment. The taxpayer timely petitioned this Court. The parties have filed Cross-Motions for Partial Summary Judgment seeking a ruling as to whether the IRS complied with the requirements of Sec. 6751(b)(1) by securing timely supervisory approval of the penalty. The taxpayer contended that the IRS did not engage in "reasoned decision making" under the Administrative Procedure Act (APA) because the agent's supervisor failed to consider whether the company had a "reasonable basis" defense available to it, based on adequate disclosure of the relevant facts. The taxpayer urged that the supervisor's approval of the penalty should be set aside as agency action that is "arbitrary, capricious, or an abuse of discretion" under 5 U.S.C. Sec. 706(2)(A). The Court held the IRS satisfied the requirements of Code Sec. 6751(b)(1) because the IRS's agent secured written supervisory approval of the initial determination to assert the penalty before the 30-day letter and the Notice of Deficiency were issued and that the APA provisions the taxpayer cited do not apply to determinations made by this Court in the exercise of its deficiency jurisdiction under Code Secs. 6213 and 6214(a), including determinations regarding the IRS's compliance with Code Sec. 6751(b)(1).
Tip of the Day
Changing tax software? . . . If you're using the same tax software as last year there are a number of items that are automatically carried forward. For example, unused capital losses, foreign tax credit, passive activity losses, depreciation information, etc. As a return increases in complexity, it's not unusual for the number of carryover items to increase. If you're switching software those items may not be carried forward automatically. Check last year's return carefully and be sure you enter the carryovers in the right spot on the return.
November 4, 2025
News
Receive more than $10,000 in cash in your trade or business? If so you've got to file a Form 8300 (statement to payer of cash of more than $10,000). The $10,000 threshold is met if you receive that amount in the aggregate. That is, the customer deposits $6,000 in cash for the property at one time and $4,500 in cash at a later time for the same property. (Check the instructions for the form for additional details.) In Dealers Auto Auction of Southwest LLC (T.C. Memo. 2025-37) the LLC received cash payments that exceed $10,000, either singly or in related transactions. The company implemented software to assist it in meeting this reporting requirement. But for reasons not clear on the record, it did not file and furnish all the required information returns. The IRS assessed penalties for failure to file and furnish the required information returns for the year at issue and then pursued collection of those penalties. The company challenged the collection activity and, in doing so, challenged its underlying liability for the penalties, asserting that it had reasonable cause for its failure to file the required information returns. The Code does not define reasonable casue but a taxpayer can show reasonable cause for failure to file information returns when either (1) there are significant mitigating factors with respect to the failure or (2) the failure arose from events beyond the filer's control. To have reasonable cause, the filer must also establish that the filer acted in a responsible manner before and after the failure occurred. Significant mitigating factors generally refer to first-time offenses. They include but are not limited to situations in which the filer either was never previously required to file that particular type of return or has an established history of complying with the information reporting requirement with respect to which the failure occurred. The Court held that the company did not meet either of the specific mitigating factors. Other potential mitigating factors were not present. The Court sustained the penalties which amounted to over $115,000.
Tip of the Day
Premium credit cards . . . There's a cost and some can be expensive, but you get a number of perks. But before signing up add up the benefit of the perks you'll get to determine if it's worth it. Most perks revolve around travel. If you're a heavy flyer you'll come out ahead. But things can change over time. If that's the case the card might not be worth it. And that's true of many other things. High mileage driver and do a lot of traveling? Towing and similar benefits make sense. Retired and staying at home or taking the plane for trips? Consider dropping those benefits.
November 3, 2025
News
You may be able to escape joint and several liability with your spouse if you can show certain facts or you may be able to qualify for equitable relief. In Joanne Salvi Vanover, Petitioner, and Michael D. Vanover, Intervenor (T.C. Memo. 2025-37) the petitioner claimed the understatements were related to her ex-spouse's business activity. The Court looked deeply into the couple's finances and what the petitioner knew about those finances and the expenses each party paid. The Court noted that in considering whether a requesting spouse had reason to know of an understatement, we consider various factors, including the requesting spouse's level of education, involvement in the family finances, the presence of lavish or unusual expenditures, and the nonrequesting spouse's evasiveness or deceit about the family's finances. The Court concluded the petitioner had resona to know of the erroneous items attributable to her ex-husband during one of the years. The Court also noted that the surrounding facts and circumstances support a conclusion that the petitioner had, at a minimum, a duty to investigate the veracity of the information presented on the return, a duty she did not fulfill. The petitioner knew in a prior year ber ex-husband's financial condition. The Court denied relief in part and granted relief in part.
Tip of the Day
Work with your vendors . . . While keeping close contact with your customers can be vital to a business, maintaining close ties to your suppliers and subcontractors can be just as important. They may provide you with new trends in the industry, an early warning on products that may be discontinued or changed, product information, etc. Often when you just put in an order you simply get what you ask for. But if you talk to the vendor he may have suggestions on how to reduce costs or increase quality, etc.
October 31, 2025
News
AK-2025-04 announces tax relief for individuals and businesses in the Lower Kuskokwim Regional Educational Attendance Area, Lower Yukon Regional Educational Attendance Area, and Northwest Arctic Borough affected by severe storms, flooding and remnants of Typhoon Halong that began on Oct. 8, 2025. These taxpayers now have until May 1, 2026, to file various federal individual and business tax returns and make tax payments. Individuals and households that reside or have a business in the designated area qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Oct. 8, 2025, and before May 1, 2026, are granted additional time to file. As a result, affected individuals and businesses will have until May 1, 2026, to file returns and pay any taxes that were originally due during this period. For more information and links to other resources, click on the link above.
Tip of the Day
Plan ahead . . . Sounds like obvious advice? Then why are so many business owners and managers not doing it? Every day we see people sending documents or checks by overnight express when they knew about the deadline weeks earlier. Or ordering product at the last minute and paying an expedite fee or upcharge. Asking for a rush job is almost always more expensive, often by a significant factor. And even if there's no cost, you know your vendor isn't happy and may not respond as well in the future. The same is true for employees. Many will put in the extra time when there's a true emergency, but will soon tire of having to always put in overtime to extinguish fires. Not planning ahead can be costly.
October 30, 2025
News
The IRS announced (ND-2025-01) tax relief for individuals and businesses in the Sisseton-Wahpeton Oyate Tribal Nation affected by severe storms and flooding that began on June 12, 2025. These taxpayers now have until Feb.2, 2026, to file various federal individual and business tax returns and make tax payments. Individuals and households that reside or have a business in the designated area qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after June 12, 2025, and before Feb. 2, 2026, are granted additional time to file. The same relief applies to the Sisseton-Wahpeton Oyate Tribal Nation in South Dakota. Click on the link above and SD-2025-01 for additional details.
Tip of the Day
Don't cry wolf . . . Some bosses, customers, etc. always seem to demand priority service when they really don't need it. That could backfire. Known for accommodating clients, a consulting firm threw extra resources on a "rush" project, only to have the customer ask to discuss it over a month after it was delivered. Clearly there was no rush necessary. The consulting firm had qualifications that were difficult to match in the region. The firm decided the client wasn't worth the extra work and refused to do any more rush jobs for the client.
October 29, 2025
News
Pay taxes up front on income you may never get? In Robert L. Beavis, et al. (U.S. Court of Federal Claims). Here a number of retired airline pilots sought refunds of Federal Insurance Contribution Act ("FICA") taxes. The taxes were paid at the time each of the pilots retired and began receiving retirement benefits under the airline's nonqualified deferred compensation plan. Pursuant to the special timing rule of Sec. 3121(v)(2), the tax for each pilot was paid in a lump sum when each pilot began receiving benefits under the plan. The amount of the tax paid for each pilot was based on the calculated present value of each pilot's benefits package. After the pilots retired, the airline entered bankruptcy. At the conclusion of the bankruptcy proceedings, the pilots' deferred compensation plan was terminated, and the pilots stopped receiving benefits under the plan. Because the plan was terminated, the total amount that each pilot actually received in benefits under the plan was less than the value of the expected benefits at the time they retired. As a result the amount each pilot paid in FICA taxes was greater than each would have paid if the FICA tax had been paid only on benefits actually received. The pilots individually sought refunds of what they characterized as overpayments of the FICA taxes from the IRS. The Court noted that the FICA tax on wages is not an income tax but an excise tax and that the retirement benefits qualify under the definition of wages. The Court held the petitioners could not recover the taxes.
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.
October 28, 2025
News
The Social Security Administration has released the cost of living adjustments for 2026. Benefits generally increase 2.8%. The retirement earnings test exempt amounts are $24,480 ($2,040/month) for those under full retirement age and $65,160 ($5,430/month) for individuals above the limit in the year an individual reaches full retirement age (one dollar of benefits will be withheld for every $2 in earnings above the limit). The maximum taxable earnings for Social Security (OASDI only) will be $184,500, up from $175,100. There is no earnings limit on Medicare taxes (1.45% of earnings). For the complete list go to www.ssa.gov/news/en/cola/factsheets/2026.html.A bill on President Trump's desk will require the IRS to improve the information on taxpayer notices where there's a math error and instructions on how to request an abatement. The notice must also provide a clear description and information on how to contact the IRS. The bill has substantial bipartisan support and the President is expected to sign it.
Tip of the Day
First step in cost control . . . Find out what you're spending your money on. That's the same for both personal and business finances. For business you may have to dig past your summary financial statements or tax return. Controllable expenses may be buried in a category. For example, "office expense" can include many expenses that may be frivolous or personal. "Rent" on the other hand isn't an item you can do much about, particularly in the short run.
October 27, 2025
News
This notice of proposed rulemaking (REG-110032-25) contains proposed amendments that would add new regulations related to the deduction for qualified tips. The One Big Beautiful Bill Act (OBBBA) requires that, not later than 90 days after the date of the enactment of the OBBBA, the Secretary of the Treasury must publish a list of occupations that customarily and regularly received tips on or before December 31, 2024, for purposes of Section 224(d)(1) of the Code. The proposed regulations are also issued under the authority in Sec. 224(d)(2)(C), which provides that "qualified tips" do not include any amount received by an individual unless such other requirements as may be established by the Secretary in regulations or other guidance are satisfied, and Section 224(g) of the Code, which instructs the Secretary to prescribe such regulations or other guidance as may be necessary to prevent reclassification of income as qualified tips, including regulations or other guidance to prevent abuse of the deduction allowed by Sec. 224. In addition, REG--110032-25 provides a detailed list of which occupationms qualify alon with a description of the jobs.
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.
Copyright 2025 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536