Small Business Taxes &
ManagementTM--Copyright
2025, A/N Group, Inc.
For the full text of new Revenue Rulings, Revenue Procedures,
Regulations, etc. go to:
Internal
Revenue Bulletins
For a Tax Court Case:
Tax
Court Cases
For IRS News Releases (current month):
News
Releases and Fact Sheets
For Fact Sheets:
Fact
Sheets
For Letter Rulings and Technical Advice
Memoranda:
IRS
Written Determinations
For IRS Forms and
Publications:
Forms
and Publications
December 5, 2025
News
Notice 2025-60 sets forth the 2025 Required Amendments List (2025 RA List). The Required Amendments List (RA List) applies to individually designed plans qualified under section 401(a) of the Internal Revenue Code (Code) (qualified individually designed plans) and individually designed plans that satisfy the requirements of Section 403(b) (section 403(b) individually designed plans). The RA List also applies to pre-approved plans with respect to interim amendments. Section 401(b) provides a remedial amendment period during which a plan may be amended retroactively to comply with the qualification requirements under section 401(a). Treas. Reg. § 1.401(b)-1 describes the disqualifying provisions that may be amended retroactively and the remedial amendment period during which retroactive amendments may be adopted.You can only deduct losses from an actual trade or business. In James M. Root and Valerie K. Root (T.C. Memo. 2025-51) the taxpayers sought to use a carryforward net operating loss to another year. The "loss" was generated by the taxpayers' attempt at starting a guest lodge. Soon after construction of the lodge was complete, the taxpayers discovered a host of problems with the building that remdered uninhabitable. The lodge never had a guest and the taxpayers abandoned the venture. The Court ruled the venture did not rise to the level of a trade or business and could not claim a net operating loss.
Tip of the Day
Multiple advisers . . . Even small businesses often have multiple advisers--an attorney, CPA, your banker, a personal financial advisor, an insurance agent, maybe more. Make sure that all concerned parties are on the same page. Most of the time, if there's any hint of tax or accounting concerns your lawyer will advise consulting your CPA--and vice versa. But others may not consider that. Setting up some insurance with your agent may require tax or regulatory filings, how the insurance is billed may affect the tax consequences. Your CPA is often one of the most knowledgeable about the broad implications of much of your business. And he'll defer to your attorney for legal implications. Talk to or email your CPA on a regular basis and keep him up to date on changes.
December 4, 2025
News
The IRS issued Notice 2025-68 announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account (IRA) for eligible children. Notice 2025-68 provides a general overview of how Trump Accounts work and addresses certain initial questions about creating initial and rollover Trump Accounts, the $1,000 pilot program contribution, other contributions--including qualified general contributions and Section 128 employer contributions--eligible investments, distributions, reporting, and coordination with the rules applicable to other types of IRAs. The Working Families Tax Cuts provides for establishing a Trump Account on behalf of every eligible child for whom an election is made, generally by a parent or guardian, and who has not turned age 18 before the end of the calendar year in which the election is made. Contributions to Trump Accounts cannot be made before July 4, 2026. Additionally, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom an election is made, who is a U.S. citizen and who is born on or after Jan. 1, 2025, through Dec. 31, 2028. Certain governmental entities and charities may also make qualified general contributions to Trump Accounts, if given to a qualified class of account beneficiaries. You can find more information at IR-2025-117 and Trump Accounts.
Tip of the Day
100% bonus depreciation . . . It's back! For qualified assets placed in service on or after January 20, 2025 can be fully written off in the year of purchase. But writing off the full purchase price in the year of purchase may not make sense in all situations. While taking a big deduction will reduce income and save taxes thus improving cash flow, there are drawbacks, particularly if the deduction is outsized. For example, your landscaping business, an S corporation, nets about $120,000 a year. In 2025 you purchase a skid-steer for $50,000 and a dump truck for $60,000. You have no other source of income. If you take the 100% bonus depreciation you'll have $10,000 of income. But your standard deduction is $31,500 resulting in no tax liability, but you've also wasted $21,500 in tax deductions. `You're income next year will be $120,000 again. Second, many benefits are phased out as your income increases so you could lose those benefits in future years. Meanwhile in 2025 may not provide any tax relief. Third, depending on your basis in the S corporation (or partnership) you might reduce your basis such that you may not be able to take some losses in future years (they may be carried forward). If you take a distribution you may have negative tax consequences. Finally, by spreading the deduction you may stay in a lower tax bracket. Also, keep in mind that not all states will follow the IRS depreciation rules for 100% bonus depreciation. Discuss the issue with your accountant.
December 3, 2025
News
Be sure you do your homework if you're going to challenge the IRS's procedure. While taxpayers have won, it's generally rare. The IRS keeps a record of every outgoing mail such as deficiency notice on USPS Form 3877. In Jordan John O'Neill (T.C. Memo. 2025-49) the taxpayer argued that the IRS did not meet the burden of proving proper mailing because of the incomplete USPS Forms 3877. In addition to not listing the total number of items or including a signature, the taxpayer pointed out that the USPS Forms 3877 failed to identify the listed items as Notices of Deficiency and failed to list the associated taxable years. The Tax Court agreed with the taxpayer that these are defects and that as a result, the IRS is not entitled to a presumption of official regularity. However, the IRS may still prevail if the evidence of mailing is otherwise sufficient. The Court noted both USPS Forms 3877 bear a USPS date stamp reflecting the same date of issuance listed on the respective Notices, Also, each USPS Form 3877 lists taxpayer's name, his address, and the certified mail article number exactly as they are listed on the corresponding Notices. Importantly, the IRS is no longer relying solely on the USPS Forms 3877 to verify proper mailing of the Notices as he did in his prior Motion to Dismiss. The IRS has submitted multiple Exhibits into evidence, including certified USPS tracking records as well as internal records which confirm that the Notices were mailed on the claimed date to the taxpayer's last known address. While there is no evidence to establish any deliberate refusal of delivery of the Notices of Deficiency taxpayer's part, he cannot use the fact that the Notices went unclaimed to later assert that the Notices were never mailed to him. The Tax Court held the Notices of Deficiency were properly delivered and since the petition to the Tax Court was beyond the filing deadline and granted the IRS motiion to dismiss for lack of jurisdiction.
Tip of the Day
Look behind the numbers . . . Often the numbers speak the truth. Your sales are up 20% year over year as a result of a new product that's cheaper and better. Or you've introduced a new service boosting revenue and traffic. But before taking the numbers at face value, ask yourself if they make sense. Is it the new product that generated the sales or the fact that your competitor was shut down for three months because of a storm damage. If it's the former, you should take steps to take advantage of the new product. If it's the latter, you may still be able to take advantage of the situation, but in a much different way.
December 2, 2025
News
In 2012 the IRS published a notice of proposed rulemaking (REG-124791-11) in the under Section 6109 of the Code relating to the identifying number of tax return preparers (proposed regulations) (PTIN numbers). The proposed regulations would have provided for two additional categories of tax return preparers eligible for a PTIN under a regulatory scheme in which the IRS sought to impose minimum qualification requirements on who could be a tax return preparer. Following publication of the proposed regulations, on February 11, 2014, the United States Court of Appeals for the District of Columbia Circuit issued its opinion in Loving v. Internal Revenue Service, which upheld an injunction against the IRS from regulating tax return preparers. In light of Loving, the IRS is prohibited from regulating tax return preparers and, therefore, the IRS are withdrawing the proposed regulations.
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.
December 1, 2025
News
The IRS has strict rules for many situations and many are not commonly known. In John Joseph Bauche (T.C. Memo. 2025-48) the taxpayer reported income tax liabilities that were not paid. The IRS secured the collection of those liabilities with the filing of a Notice of Federal Tax Lien (NFTL). On August 12, 2024, the IRS filed a Motion for Summary Judgment (Motion) asking the Tax Court to sustain the NFTL filing, which the taxpayer opposed in his Opposition to Motion for Summary Judgment (Opposition) filed October 1, 2024. The taxpayer argued that the IRS should be deemed to have accepted his effective tax administration (ETA) offer-in-compromise (OIC) pursuant to Section 7122(f). Alternatively the taxplayer argued that the IRS inadequately considered his ETA OIC. The Tax Court (1) granted the IRS's Motion in part as it related to Section 7122(f), (2) denied the IRS's Motion in part as it related to the merits consideration of the taxpayer's ETA OIC, and (3) remanded the case to the IRS Independent Office of Appeals (Appeals) for a second supplemental hearing. (Note. This case had a complicated fact pattern which was important to the outcome.)
Tip of the Day
Required minimum distributions . . . Or, as many say, RMD. If you have to take a distribution from your IRA or pension plan this year, don't wait until the last minute. You may have trouble getting the distribution counted in this year. And, while the penalties for failure to take a distribution have been reduced, they are still significant.
November 26, 2025
News
Notice 2025-70 announces the IRS intends to issue proposed regulations (forthcoming proposed regulations) to implement new Sec. 25F of the Code as added by the One, Big, Beautiful Bill Act (OBBBA). Section 25F provides a new credit for an individual's qualified contribution to a scholarship granting organization (as defined in Sec. 25F(c)(5)) (SGO) that provides qualified elementary and secondary scholarships. In anticipation of issuing the forthcoming proposed regulations, this notice requests comments regarding issues arising under Sec. 25F that should be addressed in guidance, emphasizing issues on which guidance is most quickly needed, including issues relating to the annual certification by a State and SGO requirements. Comments detailing factual situations that differ from those addressed in this notice, and the application of the statute to these factual situations, would be especially helpful in the development of the forthcoming proposed regulations.You can deduct interest on a business loan or income producing property such as a rental and the money doesn't have to be borrowed from a bank or other financial institution, but the debt must be bona fide. In Kirk Stevens and Shannon Stevens (T.C. Memo. 2025-45) a third party (Dermody) had designed a transaction for the use of his clients. The Dermody transaction had two parties: (1) an investor, who was a Dermody client; and (2) an issuer. As part of the Dermody transaction, the issuer would ostensibly lend a large sum of money to the investor. The investor would simultaneously apply the proceeds of that loan to buy an option from the issuer. The option would, upon exercise, entitle the investor to a payment from the issuer equal to the balance of the loan. The option also had a feature that would, upon exercise, require the issuer to make a payment to the investor if the market rate of interest at various times exceeded certain thresholds. The investor paid for this feature of the option using cash financing that was separate from the loan. Except for this feature of the option, the Dermody transaction had no economic effect. The Court found the promissory notes weere not true indebtedness because they lacked economic substance. As a result the Court denied the interest deduction.
November 25, 2025
News
T.D. 10037 contains final regulations that provide guidance regarding the application of the excise tax on repurchases of corporate stock made after December 31, 2022. The regulations affect certain publicly traded corporations that repurchase their stock or whose stock is acquired by certain specified affiliates.The IRS announced it has resumed normal operations following the conclusion of the government shutdown, including reopening the agency's Taxpayer Assistance Centers. As full operations recommence, tax professionals should be aware of several key pieces of information in multiple areas--
Taxpayer services to individuals. Taxpayers and tax professionals who opted to receive email and/or text notifications concerning their appointment will be notified they have the opportunity to use the SMART Scheduler feature on IRS.gov to self-schedule previously cancelled Taxpayer Assistance Center appointments, if they meet certain criteria. Otherwise, taxpayers and their representatives may call to reschedule appointments the IRS canceled due to temporary office closures. Tax professionals may refer to the Processing status for tax forms page for current processing status and what to expect for certain tax form types.Audits. Tax professionals with questions about examinations affected by the shutdown should see the Exam resumption FAQs.
Collections. Tax professionals with a collection issue affected by the shutdown should see the Collections resumption FAQs. This section includes information related to liens, levies, notices of deficiency, penalties, passports and private debt collection.
Appeals. Tax professionals with cases in Appeals affected by the shutdown should see the Appeals resumption FAQs.
Taxpayer Advocate Service (TAS). All TAS offices are now open. TAS will need some time to sort through cases, calls and faxes so they can address the most critical emergencies first.
Calls to TAS offices may go to voicemail. Leave your name, phone number, case number (if applicable) and detailed information about the case.
November 24, 2025
News
The IRS has issued (IR-2025-114) and guidance for workers eligible to claim the deduction for tips and for overtime compensation for tax year 2025. Notice 2025-69 clarifies for workers how to determine the amount of their deduction without receiving a separate accounting from their employer for cash tips or qualified overtime on information returns such as Form W-2 or Form 1099, as those forms remain unchanged for the current tax year. It also provides transition relief to workers who receive tips in the course of a specified service trade or business. The IRS is in the process of updating income tax forms and instructions for taxpayers to use this filing season that will assist them in claiming these deductions. Under the One, Big, Beautiful Bill, workers may be eligible for new deductions for tax years 2025 through 2028 if they received qualified tips. For tipped workers, the maximum annual deduction is $25,000, which phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). It is estimated that there are about 6 million workers who report tipped wages.
Tip of the Day
Statute of limitations . . . If you don't file a return and are required to do so in most cases there is no statute of limitations. That means the IRS or the state or other jurisdiction can go back as far as they want (but obviously no further than the beginning of the law). Usually it's pretty obvious when you're required to file and pay tax. But not always. Your home state is Virginia but you've made some sales in another state. Are you liabile for sales taxes in that other state? Do you have to file income taxes? It can depend on a number of factors and the factors aren't uniform from state to state. Be on the safe side. Talk to your accountant. You can also ask the state in a formal request. If you do so be sure to provide an accurate description of your operations in the state.
November 21, 2025
News
In the case of Norwich Commercial Group, Inc. (T.C. Memo. 2025-43) the taxpayer overreported more than $7 million in income on its 2007 through 2013 federal income tax returns. The overreported income was related to accounting and other errors in connection with the company's warehouse lending business supported by lines of credit (LOC) at banks L and F. The errors resulted in severe undercollateralization of the LOC at bank L. In 2014 the taxpayer discovered the errors and signed an agreement providing additional collateral and agreeing to reduce the LOC balance with L by the amount of the mistaken undercollateralization of that LOC. It then claimed a “CLAIM OF RIGHT DOCTRINE ADJUSTMENT” deduction of $7,580,507 on its 2014 return. In 2014 the company repaid L $1.2 million and received an interest credit from L of $599,112. It also paid F $626,388. In 2015 the company repaid $5,476,577, representing the remaining balance due L under the agreement. The IRS disallowed the 2014 deduction and the 2015 NOL carryover stemming from the claim of right doctrine but allowed the related income adjustments for open years, some of which were before the Court. The Court held that the taxpayer's inclusion of phantom income from 2007–13 was in accordance with the claim of right doctrine entitling it to a deduction for 2014, the year the errors were discovered and the collateralized obligation to reduce its LOC balance with L was executed. The Court also held that the IRS's reduction of the taxpayer's income for 2012 is upheld only in the amount of $383,728 to correct for accounting errors related to an LOC with F.Notice 2025-71 announces that the IRS intends to publish a notice of proposed rulemaking (forthcoming proposed regulations) addressing the exclusion of interest on loans secured by rural or agricultural real property under Sec. 139L of the Code. Section 139L was added to the law by the One, Big, Beautiful Bill Act (OBBBA). OBBB added Section 139L to the Code, which allows certain lenders to exclude from gross income 25% of the interest they receive from loans secured by rural or agricultural real property. The interim guidance provided today defines key terms from section 139L, establishes standards for determining whether a loan is secured by rural or agricultural property, and provides rules regarding refinancings.
Tip of the Day
Can't always believe the numbers . . . Sales last year were up 35%. And the first quarter is looking just as good.. But you can't extrapolate that for years going forward unless you're starting from a small base or you've got a product or service that can go national. A 35% annual increase would mean sales would be 3.5 times as much in 5 years and 19 times as much in 10. After running any numbers sit back for a while and consider the results. Do they make sense logically.
November 20, 2025
News
For eight taxable years the taxpayer, a tax professional, failed to file tax returns or pay estimated taxes. In Peter Joseph Isaiah Gibbons O'Connor (T.C. Memo. 2025-42) taxpayer advanced four main legal arguments contesting the authority of the IRS to assess tax. He concedes that, should those arguments fail, for all taxable years at issue he is liable for the deficiencies and additions to tax as stipulated. His only remaining argument, raised for the first time on brief, is that with respect to the additions to tax he had reasonable cause as a matter of law. The Tax Court found the taxpayer's arguments frivolous and noted that since the failure to file was not an isolated case but a pattern of misconduct over eight years it also imposed a penalty for advancing frivolous arguments.You can be guilty of tax fraud under two sections of the law, one for civil fraud and one for criminal fraud. In Thomas S. Miller (T.C. Memo. 2025-41) the taxpayer had previously entered into a plea agreement, admitting to willfully committing an affirmative act constituting an attempt to evade or defeat a tax due and owing (Sec. 7201) for his 2014 tax year. The Court found that he could not now escape a civil fraud penalty under Sec. 6651. The Court granted a motion for partial summary judgment.
Tip of the Day
Charitable contributions for nonitemizers . . . Starting this year you can deduct $1,000 ($2,000 for married filing jointly) in charitable contributions even if you don't itemize. To make the most out of this and assuming you come close to the max every year, make contributions such that you don't break the maximum in any one year.
November 19, 2025
News
Net operating losses can be carried forward to offset losses in future years. (Under prior law you had to first carry back any losses unless and election to relinquish the loss was made.) Farmers can still carry back losses two years.) In Apache Corporation and Subsidiaries (165 T.C. No. 11) the taxpayer reported a net operating loss that consisted in part of a "specified liability loss\" within the meaning of Sec. 172(f)(1). The taxpayer's return for each year included an election under Reg. Sec. 1.1502-21(b)(3)(i) to waive the entire carryback period pursuant to Section 172(b)(3) for the consolidated net operating loss of the consolidated group of which the taxpayer was the common parent. The taxpayer expressly stated that it did not elect to relinquish the carryback period with respect to the specified liability loss incurred in each year. The taxpayer received a tentative refund for each of 2006 and 2007 from the carryback of the specified liability losses it reported for 2016 and 2017, respectively. The IRS then determined deficiencies for 2006 and 2007 based on the disallowance of the carrybacks. The taxpayer moved for partial summary judgment that its election for each year relinquished the carryback of only that portion of its net operating loss that exceeded its reported specified liability loss. The IRS sought partial summary judgment that the taxpayer's election for each of 2016 and 2017 relinquished the carryback of its entire net operating loss for the year. The Court held that the taxpayer's election for each year relinquished the carryback of only that portion of its net operating loss that exceeded its reported specified liability loss. The Court also granted the taxpayer's motion for partial summary judgment.
Tip of the Day
Profit vs. cash flow . . . The danger of measuring your success by your cash flow is that ultimately profits are paramount. Cash flow doesn't take into account depreciation and other noncash charges. The machine or other property that's generating that cash flow will have to be replaced at some time in the future. At that point, cash flow will be negative. On the other hand, a venture that's not profitable may be generating cash that can be used to finance other activities. And an operation that's profitable could be a big cash drain because it requires constant cash infusions. Before considering acquire or dispose of a business, analyze both the profit and the cash flow from it and how it relates to your business.
November 18, 2025
News
The IRS announced (MO-2025-03) tax relief for individuals and businesses in parts of Missouri affected by severe storms, straight-line winds, tornadoes, and flooding that began on March 30, 2025. These taxpayers now have until March 30, 2026, to file various federal individual and business tax returns and make tax payments. Following the disaster declaration issued by FEMA, individuals and households that reside or have a business in Bollinger, Butler, Cape Girardeau, Carter, Cooper, Douglas, Dunklin, Howell, Iron, Madison, Maries, Mississippi, New Madrid, Oregon, Ozark, Pemiscot, Reynolds, Ripley, Scott, Shannon, Ste. Genevieve, Stoddard, Texas, Vernon, Washington, Wayne, and Webster Counties qualify for tax relief. As a result, affected individuals and businesses will have until March 30, 2026, to file returns and pay any taxes that were originally due during this period. The March 30, 2026, deadline applies to individual income tax returns and payments normally due on or after March 30, 2025, and before March 30, 2026, and 2025 contributions to IRAs and health savings accounts for eligible taxpayers. This relief also applies to the estimated tax payments normally due on or after March 30, 2025, and before March 30, 2026. Penalties on payroll and excise tax deposits due on or after March 30, 2025, and before April 14, 2025, will be abated as long as the tax deposits were made by April 14, 2025. In addition, quarterly payroll and excise tax returns normally due on July 31, 2025, Oct. 31, 2025, and Jan. 31, 2026, are postponed until March 30, 2026, for affected businesses. For more information, click on the link above.You can go to Tax Court and represent yourself. But maybe you shouldn't. The Court will grant you some leeway, but there are some procedural requirements that they won't ignore. In Shirley Coleman Burl (T.C. Memo. 2025-40) the taxpayer had an outstanding balance. She submitted financial documentation and the Settlement Officer (SO) found that her allowable expenses exceeded her income. As a result the SO placed her account in currently not collectible status (CNC) and did not proceed with the levy, the relief the taxpayer sought. Despite this the taxpayer petitioned the Court but did not specify an error on the part of the IRS. The Court dismissed the petition because the taxpayer did not claim an error on the part of the IRS.
Tip of the Day
Retailer with pinched margins? . . . If you do business through stores and sales and/or margins are under pressure a discussion with your landlord could help. Depending on your location--free standing building, strip center, large mall--you may be able to negotiate a better deal either through a reduction in base or percentage rent or by giving up some space or moving into a smaller space in the center. If you're paying percentage rent it might be easier to negotiate a change in the percentages or breakpoint. A simple cut in the base rent may have a number of negative implications for the landlord. Consider getting professional help in the negotiations.
November 17, 2025
News
Just because you've conformed with the letter of the law doesn't mean the transaction will be allowed for tax purposes. The transaction must pass an economic substance test. In Sunil S. Patel and Laurie McAnally Patel, et al. (165 T.C. No. 10) the taxpayers claimed deductions on their tax returns for amounts paid to purported captive insurance companies A and B and to entity C, which purported to reinsure a portion of A and B's risk. The IRS denied the deductions and determined that the taxpayers were liable for accuracy-related penalties including penalties under Sec. 6662(b)(6), which applies the economic substance doctrine as codified under Sec. 7701(o). In an earlier decision, Patel T.C. Memo. 2024-34, the Court held that amounts paid to insurance companies A and B were not insurance premiums for federal income tax purposes. The Court held the codified economic substance doctrine requires a relevancy determination within the meaning of Sec. 7701(o). The Court also held the codified economic substance doctrine is relevant in these cases, and that the taxpayers were liable for penalties under the codified economic substance doctrine pursuant to Sec. 6662(a) and (b)(6) and the increased rate under Sec. 6662(i), for the relevant tax years at issue.
Tip of the Day
Run all the numbers . . . You're ready to sell your vacationo home for $550,000. You remember you only paid $260,000 five years ago and you put almost nothing into it but some repairs and paint. You're not going to walk away with $550,000. You've got a gain of $290,000; all of which is taxable. (And many states now withhold tax at closing on nonresidents to insure getting their tax money.) And don't forget you've got to pay off the mortgage to the bank.
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. 2025-38) 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.
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