Small Business Taxes & Management

News and Tip of the Day

For the full text of new Revenue Rulings, Revenue Procedures, Regulations, etc. go to:
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January 29, 2026

News

In years past an employee could deduct unreimbursed employment expenses such as work clothes, tools, travel, etc. The Tax Cuts and Jobs Act of 2017 stopped that and the change was made permanent by the One Big Beautiful Bill. In Sohail S. Hussaini (T.C. Memo. 2025-82) the taxpayer was working on site for a military contractor. He was classified as an employee and was not reimbursed for his travel expenses. The taxpayer claimed the expenses under the category for military reservists, performing artists, and fee based government officials. The Court held the taxpayer did not qualify under these specifically limited classifications and denied the taxpayer a deduction.

IRS Tax Tip 2026-7 reminds taxpayers they must report the sale or disposal of digital assets. If you receive a Form 1099-DA the form may or may not include your basis (basis is not yet required to be reported). If there's no basis reported you must calculate your own basis. And you must report the sale even if you do not receive a Form 1099-DA. Click on the link above for links to additional resources.

Tip of the Day

Disregarded entities . . . For most taxpayers that means a single member LLC. If you're the only owner in an LLC the IRS considers it a disregarded entity and, instead of reporting the income from a sole proprietorship on a separate return, you report it on Schedule C of your personal return. If the LLC's only activity is the holding of rental real estate, you report the income on your Schedule E of your 1040. Most, but not all states, follow the same rule. Check the rules for the states in which you do business. And check to make sure you don't have to file another form. New York state requires all LLCs to file a one-page report and most will be liable for a fee. Check the rules in your state.

January 28, 2026

News

The IRS has issued (IR-2026-13) frequently asked questions in Fact Sheet 2026-02 to help taxpayers, businesses, and other stakeholders understand the changes under Executive Order 14247: Modernizing Payment To and From America's Bank Account. These changes apply to:

Payments sent by the federal government, including tax refunds, benefits, grants, and vendor or contractor payments; and
Payments made to the federal government, including tax balances due, fees, penalties, and other payments from individuals, businesses, nonprofit organizations, and state or local partners.

Electronic payments are generally processed faster, cost less to handle, and reduce errors compared to paper payments. Limited exceptions to electronic payment requirements will be available in specific situations, such as those involving hardship and/or legal or procedural requirements.

Tip of the Day

Watch for frequency changes in filing requirements . . . In many states filing frequency for sales tax is dependent on sales volume or taxable sales. In New York you may only have to file annually, or you may have to file quarterly or monthly. Employment tax deposits may be due monthly or within a certain number of days of the payroll. Check the rules regularly, but more frequently if you're approaching a break point.

January 27, 2026

News

Notice 2026-09 provides guidance relating to amendments under the Consolidated Appropriations Act, 2023, known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act) for an individual retirement arrangement (IRAs) under Section 408(a), (b), or (h) of the Code, an employer's SEP arrangement under section 408(k), and an employer's SIMPLE IRA plan under Section 408(p). This notice provides that the IRS has extended the deadline to make certain amendments for IRAs, SEP arrangements, and SIMPLE IRA plans to December 31, 2027 because the Treasury Department and the IRS are still developing model language that may be used by IRA trustees, custodians, and issuers to amend an IRA for compliance with the Acts.

Tip of the Day

Form 1099-K reporting . . . Payment card companies, payment apps, and online marketplaces will be required to send you a Form 1099-K only if the amount of your business transactions during the year is more than $20,000 and the total number of your transactions is more than 200.

January 26, 2026

News

The IRS has issued (IR-2025-10) frequently asked questions in Fact Sheet 2026-01 related to the new deduction for qualified overtime compensation under the One, Big, Beautiful Bill. For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the amount that exceeds their regular rate of pay (generally, the "half" portion of "time-and-a-half" compensation) and is reported on a Form W-2 or Form 1099. These FAQs contain additional information about the deduction, provide resources for employees (including federal employees) to assist them in determining whether they received qualified overtime compensation under the Fair Labor Standards Act, and contain useful information regarding the differences in reporting requirements for tax year 2025 and 2026-2028. Treasury and IRS previously issued Notice 2025-62 providing penalty relief to employers and other payers for tax year 2025 regarding new information reporting requirements for qualified overtime compensation; and issued Notice 2025-69 for workers eligible to claim the deduction for overtime compensation for tax year 2025.

January 23, 2026

News

Setting up a captive insurance company and payimg the premiums to an affiliate sounds like a way to save taxes, but it's not that easy. In Curtis K. Kadau and Lori A. Kadau, Deceased, Curtis K. kadau, Personal Representative (T.C. Memo. 2025-81) the taxpayer was a shareholder of an S corporation that incurred expenses for purported insurance coverage provided through an arrangement with its affiliated captive insurance company. The IRS attacked the arrangement, claiming it did not provide actual insurance and that the taxpayers could not deduct the amounts paid to the captive insurance company. To be deductible the amounts paid must be for true insurance. The Court looked at four factors to see if (1) the arrangement involves an insurance risk; (2) the arrangement shifts the risk of loss to the insurer; (3) the insurer distributes its risk among its policyholders; and (4) the arrangement is insurance in the commonly accepted. The Court noted there was a lack of risk distribution, the captive insurer was undercapitalized, and the contracts were not at arm's length (they were 2.5 to 3.5 times more per dollar of coverage than comparable commercial policies). The Court found the payments were not for insurance and therefore were not deductible. In addition, the Court sustained the accuracy-related penalties imposed by the IRS.

Tip of the Day

The box approach . . . Some people are excellent recordkeepers; some are just good. And some are terrible. If you fall in the latter category, just throw the documents you receive in the mail, required receipts, etc. into a box. Having unorganized documentation is far better than no documentation. Email statements? Create a directory in which to save the statements. You should also ask your accountant what he prefers. Many don't want to look at paper and prefer a PDF file.

January 22, 2026

News

Awards or compensation for physical injury and sickness are generally not taxable (under Sec. 104). In Adrienne Mennemeyer (T.C. Memo. 2025-80) the taxpayer received a monetary settlement in an arbitration case from a former employer in compensatory and punitive damages for defamation and related economic claims. The Court noted that damages are on account of personal physical injuries or physical sickness if there is a direct causal link between the action giving rise to the damages and the physical injury or physical sickness. Personal injuries are not enough. Only physical personal injuries qualify. When damages are received pursuant to a settlement agreement, the nature of the claim that gave rise to the settlement controls whether the damages are excludable under Sec. 104. While the taxpayer claimed she had a physical aliment arising from a difficult work environment with the employer, the settlement agreement did not mention personal injuries, nor was there any indication that the settlement was for physical injuries. Moreover the Court did not find the settlement agreement ambiguous. The Court found the entire settlement taxable.

Tip of the Day

Annual reports, statements, etc. . . . This is not only the time of the year to file income taxes, if you own a business you may also have to file an annual report. Many states require a report that includes officers, board members, shares outstanding, etc. plus a fee. The rules vary widely as does the required information. In some cases the report is due on the anniversary of the corporation or creation of the entity. Failure to file the report can jeopardize the entity's legal standing with serious consequences.

January 21, 2026

News

In Abdul Khaliq Mustafa Muhammad (T.C. Memo. 2025-77) was found to have underreported income and failed to substantiate his deductions. The Court reviewed the record and found the taxpayer engaged in repeated underreporting of income, claimed numerous deductions and expenses beyond receipts, failed to keep adequate records, and failed to cooperate with tax authorities. Considering the taxpayer's background (degrees in business and taxation and was and IRS employee) and his refusal to provide any testimony to reconstruct records, the existence of several badges of fraud in this matter was persuasive circumstantial evidence of fraud. The Court was continually frustrated by the taxpayer's failure to provide adequate explanations despite having been provided opportunities to do so. The Court concluded that the IRS has established, by clear and convincing evidence, that the taxpayer's underpayments of tax for the years in issue were attributable to fraud.

Tip of the Day

Contributions to a governmental paid family leave program . . . Beginning in 2025, if you made contributions to a governmental paid family leave program, you will now include the fullamount of those contributions in your income. If you itemize your deductions on Schedule A, you can include the amounts contributed as part of the state and local taxes that you paid.

January 20, 2026

News

The IRS has confirmed (IR-2026-09) that supplemental basic allowance for housing payments made to members of the uniformed services in December 2025 are not to be included in income by those who received the payments; they are not taxable. In the One, Big, Beautiful Bill enacted last July, Congress appropriated $2.9 billion to supplement the basic allowance for housing payable to members of the uniformed services. In December, the President announced that 1,450,000 military service members would receive a special "Warrior Dividend" before Christmas. The resulting one-time supplemental payments of $1,776 made primarily to active-duty members of the uniformed services in the pay grades of O-6 and below and eligible Reserve Component members as of Nov. 30, 2025, of the Army, Air Force, Navy, Marine Corps and Space Force were funded by this appropriation. Federal tax law specifically excludes from gross income a "qualified military benefit." The basic allowance for housing payments are qualified military benefits and, therefore, are not taxable.

Tip of the Day

What's the threshold for reporting income? . . . Basically all gross income is reportable unless excluded. And the exclusions are few. Some online posts have suggested that if the income isn't reported on a 1099, it doesn't have to be reported on a tax return. That's not true. Technically if you mow a couple of yards in the neighborhood the gross amount has to be reported and the net amount is taxable. There is no lower limit. Talk to your tax adviser when preparing your return.

January 16, 2026

News

Notice 2026-13 provides guidance for certain retirement plan administrators, updating safe harbor explanations to reflect tax law changes made after Aug. 6, 2020. Notice 2026-13 provides a safe harbor explanations that may be used by plan administrators when they provide written explanations to retirement plan participants about eligible rollover distributions, satisfying their requirements under section 402(f). In the notice, the first safe harbor explanation applies to non-Roth accounts and the second safe harbor explanation applies to Roth accounts. The notice also addresses, among other things, changes to the 10% additional tax on early withdrawals from retirement plans, the required minimum distribution rules for surviving spouses, and the increased age for determining required beginning dates for required minimum distributions. Plan administrators may customize these safe harbor explanations as appropriate. For instance, if the plan does not hold after-tax employee contributions, the plan administrator could eliminate that section of the safe harbor explanation. This guidance modifies the safe harbor explanations previously provided in Notice 2020-62.

Tip of the Day

Need to file a gift tax return? . . . If you made any gifts to relatives or others over the $19,000 exclusion amount in 2025 you have to file a gift tax return. It's due at the same time as your individual return and an extension of your individual return applies to the gift tax return too. If you made a gift of cash or marketable securities the return isn't that complicated. Things get tricker if you made a gift of property. While there's unlikely to be any current tax liability, each gift will reduce your estate tax exclusion. If your state has an estate tax it probably has a gift tax and you'll probably have to file return there too.

January 15, 2026

News

The IRS has issued Notice 2026-11 that provides taxpayers with guidance on the permanent 100% additional first year depreciation deduction for eligible depreciable property acquired after Jan. 19, 2025, provided by the One, Big, Beautiful Bill (OBBB). The notice also provides guidance on certain qualified sound recording productions that the OBBB added as property that may be eligible for the additional first year depreciation deduction. Generally, when taxpayers acquire property for business use, they must depreciate it over several years based on various depreciation schedules. The notice also provides interim guidance to taxpayers that they may generally rely on the existing additional first year depreciation deduction regulations. The notice provides rules for determining whether depreciable property is eligible for the additional first year depreciation deduction and for determining the amount of such deduction allowable under the OBBB. In general, the OBBB provides a permanent 100% additional first year depreciation deduction for qualified property acquired, or specified plants that are planted or grafted, after Jan. 19, 2025. The notice also provides interim guidance on elections taxpayers can make for certain property to be eligible for the additional first year depreciation deduction. Under the OBBB, taxpayers may elect:

To deduct 40-percent (60-percent for certain property having longer production periods or certain aircraft) instead of the 100-percent additional first year depreciation deduction for qualified property placed in service during the first tax year ending after Jan. 19, 2025,
To deduct additional first year depreciation for one or more specified plants,
To treat certain acquired or self-constructed components of larger self-constructed property as generally eligible for the additional first year depreciation deduction, and
Not to deduct the additional first year depreciation for a qualified sound recording production.

Tip of the Day

Estimated tax due . . . Estimated taxes for the last quarter of 2025 are due today. You can't avoid a penalty for underpaid taxes in earlier quarters, but you can stop the running of penalties. For example, if you were underpaid for the first three quarters but made up the shortfall in the final quarter, there wouldn't be any additional penalties from January 15th to April 15th. Most state estimated taxes are also due today and their rules are similar.

January 14, 2026

News

Everyone is entitled to a $15 million estate tax exclusion (2026). A married couple can get up to $30 million if the first spouse to die passes his or her spousal unused exclusion (DSUE) to the surviving spouse, sometimes known as "porting." But passing the usused excluion is not automatic. In Estate of Billy S. Rowland, Deceased, James A. Park, Executor (T.C. Memo. 2025-76) the wife predeceased the husband. A return for her was filed but it was filed late and did not specify the fair market value of the assets, just a gross amount for the estate. When the husband died the estate attempted to use the spouses DSUE. The Court held that in order to use the DSUE the estate tax of the wife had to be timely filed and did not qualify for the safe harbor in Rev. Proc. 2017-34.

Tip of the Day

Mind the store . . . You've seen the headlines from time to time--rouge bond trader creates $8 billion loss for bank--or some similar catastrophe. While the magnitude may be less, the impact may be just as significant for a small firm. The bookkeeper who embezzled $280,000 from a 10-person consulting firm over 18 months, the salesman who inflated his numbers to increase his commissions, etc. Don't assume the numbers from your bookkeeper are automatically correct. There are number of fairly simple tests that can be done to insure that the numbers represent the actual results. One of the easiest steps is to make sure your bank statement is reconciled each month--by someone other than the bookkeeper. Use a special bank account for electronic deposits and/or a special address for incoming checks. There are a number of relatively inexpensive steps that can be taken. Talk to your CPA. And use common sense. If sales are up and your margins are the same you should be making more money. If not, why not?

January 13, 2026

News

If you overvalue a charitable contribution by more than 200 percent the IRS can impose a gross valuation misstatement penalty. The penalty is equal to 40% of the additional tax attributable to the misstatement. In the case of Sand Valley Holdings, LLC, Sand Valley Investors, LLC, Tax Matters Partner (T.C. Memo. 2025-74) that penalty was significant. The taxpayer argued that the penalty was not correctly approved. The law requires that no penalty under shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination. In a TEFRA case, "the IRS must secure written supervisory approval for the penalty before issuing an FPAA (final partnership administrative adjustment) to the partnership." The record showed that the revenue agent (RA) consulted with Chief Counsel about the technical requirements for the FPAA package, but the advice he received did not constitute the initial determination of a penalty assessment. The Court found the penalty was properly assessed.

Tip of the Day

IRS Free File available . . . The IRS direct file is no longer around, but IRS Free File has begun accepting individual tax returns, giving eligible taxpayers an early opportunity to prepare and file their federal income tax returns ahead of the official start of the 2026 filing season later this month. IRS Free File Guided Tax Software allows taxpayers to prepare and submit returns now and hold them for electronic filing once the season officially begins. For 2026, eight private-sector partners are offering guided tax software products through IRS Free File to taxpayers with an Adjusted Gross Income of $89,000 or less in 2025. Taxpayers with an AGI above $89,000 can use the Free File Fillable Forms, available beginning Jan. 26. These electronic versions of IRS paper forms are ideal for individuals who are comfortable preparing their own taxes using IRS instructions and publications. While most business owners won't be able to use the system, younger relatives or employees of your business might use it and avoid a fee for a commercial preparer.

January 12, 2026

News

In Mission Organic Center, Inc. (165 T.C. No. 13) the taxpayer was a state-legal marijuana dispensary. Section 280E disallows a deduction for expenses related to the sale of federally illegal drugs. The IRS tried to collect past due taxes and the taxpayer requiested a collection due process hearing and made an offer-in-compromise. In calculating its earning potential the taxpayer reduced its income by related expenses. The revenue officer (RO) disregarded such expenses when calculating the taxpayer's reasonable collection potential and the settlement officer rejected the offer-in-compromise because it was substantially lower than the reasonable collection potential the revenue officer had calculated. The IRS relied on guidance in the Internal Revenue Manual. The Tax Court held that the settlement officer did not abuse her discretion in relying on the Internal Revenue Manual provisions regarding how to compute the taxpayer's reasonable collection potential and the IRS did not abuse its discretion in adopting a policy of disregarding expenses rendered nondeductible by Sec. 280E for purposes of calculatinga taxpayer's reasonable collection potential.

Tip of the Day

No tax on tips, overtime, etc. . . . So how do you handle the new no tax on tips and overtime, auto loan interest deduction, and the $6,000 senior deduction? They all get entered on Schedule 1-A, Additional Deductions. The form is needed to calculate your modified adjusted gross income, the limitations on the exclusions and to enter the vehicle identification number of the car.

January 9, 2026

News

The IRS announced (IR-2026-02) that Monday, January 26, 2026, as the opening of the nation’s 2026 filing season. This year, several new tax law provisions of the One, Big, Beautiful Bill become effective, which could impact federal taxes, credits and deductions. Taxpayers have until Wednesday, April 15, 2026, to file their 2025 tax returns and pay any tax due. The IRS expects to receive about 164 million individual income tax returns this year, with most taxpayers filing electronically. For more information and links to IRS resources, click on the link above.

The IRS has issued (REG-112829-25) proposed regulations that would revise the threshold for when certain third-party settlement organizations are required to perform backup withholding to comply with changes made in the One, Big, Beautiful Bill. The proposed regulations provide clarity on backup withholding and would provide that third party settlement organizations generally are not required to backup withhold on payments settled through third party payment networks unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200

Tip of the Day

Rent property to your business? . . . If you do, make sure you have a lease with standard commercial terms. If your business or you get audited there's a high probability the agent will ask to see the lease. If the terms aren't similar to what's commercially available in the area, he could make an adjustment. And that applies not only to you, but also to a relative or related party that might be renting property to you.

January 8, 2026

News

One of the critical elements in a charitable contribution of any property valued at $5,000 or more or easement is a qualified appraisal. In the case of larger contributions that appraisal must be attached to the return. In Rock Cliff Reserve, LLC, Five Rivers Conservation group, LLC, Tax Matters Partner, et al. (T.C. Memo. 2025-73) the taxpayers made a contribution of conservation easements of land. The IRS challenged the appraisal because of the significant increase in the valuation over the recent purchase price. The Court found the appraisals to be defective. Comparables chosen to value the properties were not comparable for a number of reaaons. The Court also noted that Reg. Sec. 1.170A-13(c)(5)(ii) provides that an appraiser will be disqualified if "the donor and the appraiser make an agreement concerning the amount at which the property will be valued and the donor knows that such amount exceeds the fair market value of the property." This example is silent about the knowledge of the appraiser; it focuses on whether the donor actually or constructively knows that the agreed amount exceeds the FMV of the property. Because the appraisal was not qualified, no qualified appraisal was attached and the Court disallowed the deduction in its entirety. In addition, the Court sustained the imposition of the gross valuation misstatement penalty and the accuracy-related penalty.

Tip of the Day

Credit fixing services . . . You've seen or heard the ads. Companies that can raise your credit score. There are honest companies out there, but there are a number of dishonest credit repair services. There are a number of things you can do to fix your credit report and save the money. There are also non-profit services that can help. For more information and links to other resources, go to the Federal Trade Commission.

January 7, 2026

News

In Arden Row Assets, LLC, Natural Aggregates Partners, LLC, Partnership Representative (T.C. Memo. 2025-71) made a charitable contribution of a conservation easement which the IRS disallowed completely. During this proceeding the parties engaged in settlement discussions and exchanged letters for the purpose of reaching a settlement. The taxplayer filed a Motion to Enforce Settlement asserting that the exchange of letters resulted in a binding agreement. The IRS argued that the exchanged letters did not result in a binding agreement. The Court held that the parties did not enter into a binding agreement.

Tip of the Day

Contemporaneous records . . . The IRS and the courts give more value to diary entries, etc. made near the time of the action. For example, a car log entry regular made at the time of the trip has more value than one made at the end of the week and much more value than one made at the end of the month. The IRS and the courts can usually spot a log you made the night before you saw the IRS agent. But the IRS and courts also look at other aspects such as do you regularly keep such records. A single entry in your diary for a six-month period showing the detail of a certain transaction carries less weight than if you made regular entries. Finally, sometimes a well-kept diary or log can substitute for missing receipts. But there are some areas of tax law where strict recordkeeping rules won't allow that, e.g., in the case of travel and meal receipts, car logs, charitable contributions, etc. The law requires a receipt and the neither the IRS nor the courts can waive that rule.

January 6, 2026

News

The civil fraud penalty is equal to 75% of the deficiency attributable to fraud. But it's not easy for the IRS to assess the penalty. The IRS must prove fraud and that's not always easy. In Remus Beleiu and Naomi J. Beleiu (T.C. Memo. 2025-70) The taxpayers owned and operated two businesses--one was reported on a Schedule C, the other was not reported. The wife as a financial analyst for a hospital and had an accounting degree and an M.B.A. She prepared the accounting records for the entities. The Court looked at the 11 "badges of fraud". The Court noted the lack of adequate books and records, the tax returns reported significant discrepancies in gross income and in deductions and explanations of the discrepancies were self-contradictory and implausible in light of the wife's education and training. The Court also noted the concealment of the second business as well as a failure to cooperated with the tax authorities and the failure to provide complete tax information to the counsel and accountants representing the taxpayers to the IRS. The Court held that the IRS carried its burden of proving fraud by clear and convincing evidence. The Court sustained the IRS's determination that taxpayer-wife was liable for Section 6663(a) civil fraud penalties for the years at issue.

Tip of the Day

New deductions . . . The new deductions--no tax on tips, no tax on overtime, no tax on auto loan interest and the $6,000 deduction for seniors are all applied after computing your adjusted gross income. As a result these items won't reduce your income for computing the phaseout of most benefits. And, because states that rely on IRS income to start use your adjusted gross income it means that these items won't reduce your state income unless the state specifically allows them. Check the rules carefully when completing your state return.

January 5, 2026

News

The IRS has updated frequently asked questions in Fact Sheet 2025-10 related to changes to the Premium Tax Credit made under the One Big, Beautiful Bill and to related provisions that no longer apply. The Premium Tax Credit is a refundable tax credit that helps eligible individuals and families with low or moderate income with the cost of their health insurance purchased through the Health Insurance Marketplace, also known as the Exchange. OBBB made a number of changes to the Premium Tax Credit, including removing the limitations on repayment of excess advance payments of the premium tax credit for tax years beginning after Dec. 31, 2025. The FAQs have been updated to delete the questions about certain Premium Tax Credit rules that do not apply after tax years 2020 and 2021. More information, please see One, Big, Beautiful Bill Provisions.

Tip of the Day

New postal procedures . . . For years the IRS rule (and most state rules) was that the postmark date counted as the date a bill was paid or a return filed. That may still be true but the post office may not be postmarking your mail on the date you drop it into the letter box or at the post office. The postmark now is affixed on ther date a piece of mail is first processed by an automated sorting machine. Thus, you go to the post office on January 15, the deadline for mailing your estimated taxes. But the postmark is not printed until January 17th. Your estimated taxes are late. The cheapest and easiest solution is to take the mail to the postal clerk and ask him or her to hand cancel the item. That will guarantee the postmark is the 15th. Using certified mail will also work, but costs money. Switching to electronic filing makes the most sense. The IRS has not indicated how it will handle the situation and may not make any changes to the rules (it wants to reduce mail volume). This may also be an issue for other time sensititve mailings such as lease options, contracts, payment due dates, etc.

January 2, 2026

News

The IRS is providing guidance on the "No Tax on Car Loan Interest" provision enacted under the One, Big, Beautiful Bill. The proposed regulations relate to a new deduction for interest paid on vehicle loans incurred after Dec. 31, 2024, to purchase new made-in-America vehicles for personal use. This new tax benefit applies to both taxpayers who take the standard deduction and those who itemize deductions. Who can take a deduction for interest on car loans. Important eligibility criteria, include:

Providing rules relating to new vehicles eligible for the deduction, including for determining if the final assembly of a vehicle occurred in the United States;
Providing rules for determining which vehicle loans qualify and the amount of interest paid on a loan that may be deductible;
Providing rules for determining if a new vehicle is purchased for personal use; and
Identifying taxpayers who can take the deduction and clarifying the $10,000 annual deduction limit. What lenders need to know.

The IRS previously announced transition guidance for certain lenders and other taxpayers receiving interest for vehicle loans in 2025. In general, those persons must file information returns with the IRS to report interest received during the tax year and other information related to the loan. These information returns enable taxpayers to claim the benefits of the vehicle loan interest deduction. To help lenders implement these information reporting requirements, the proposed regulations clarify:

Which lenders and other interest recipients are required to report and the time and manner for this reporting; and
What information must be included on the form provided to the IRS and to taxpayers. More information.

Tip of the Day

Financial control . . . In some households it's the husband; in some the wife. It should be both. You may write the checks, but your spouse should review the outflow periodically to know what's going on. Should something happen to your spouse the survivor should know when the insurance premiums are due, how the mortgage is paid, etc. The same is true for investments. Your spouse can be the one who picks the stocks, but you should have an idea of what you're invested in, where the accounts are, etc. And you both should have signatory authority over the accounts. If one spouse has a business, the other should have an idea of the operations and be able to sign checks, tax returns, etc. Your wife doesn't have to know the plumbing business, but should be familiar with the finances, where the customer information is, etc. And not only in the case of death but if one of you is incapacitated. That's especially important if one of you owes a small business. Single? Work with a relative, trusted friend, colleague.

December 30, 2025

News

The IRS announced (Notice 2026-10) that the optional standard mileage rate for business use of automobiles will increase by 2.5 cents in 2026, while the mileage rate for vehicles used for medical purposes will decrease by half a cent, reflecting updated cost data and annual inflation adjustments. Optional standard mileage rates are used to calculate the deductible costs of operating vehicles for business, charitable, and medical purposes. Beginning Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

72.5 cents per mile driven for business use, up 2.5 cents from 2025.
20.5 cents per mile driven for medical purposes, down a half cent from 2025.
20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces (and now certain members of the intelligence community), reduced by a half cent from last year.
14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.

The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles. (These rates are optional. You can still use the actual expenses if you decide to.)

Tip of the Day

IRA catchup . . . You can make an extra $1,000 catchup contribution to your IRA in the year you reach age 50. Fred will turn 50 on December 30, 2025. In addition to his regular $7,000 contribution he can put an extra $1,000 into his IRA for 2025.

December 29, 2025

News

Any gain from the sale or exchange of qualified farmland to a qualified farmer can be paid in four equal annual installments. An election and first installment must be made to do so and must be made by the due date of the return. The rule applies to sales in tax years beginning after July 4, 2025. Notice 2026-3 provides relief from the additions to tax under Sections 6654 and 6655 of the Code for underpayment of estimated income tax by a taxpayer that makes a valid election under Section 1062(a).

The IRS has updated (IR-2025-126) frequently asked questions in Fact Sheet 2025-09 regarding changes to the limitation on the deduction for business interest expense (Section 163(j)) under the One, Big, Beautiful Bill.For tax years beginning after December 31, 2024, OBBB amended Section 163(j) by allowing taxpayers to add back deductions for depreciation, amortization, or depletion when calculating Adjusted Taxable Income and expanding the definition of floor plan financing interest to treat, as a motor vehicle, any trailer or camper designed to provide temporary living quarters for recreational, camping or seasonal use and designed to be towed by, or affixed to, a motor vehicle. For tax years beginning after December 31, 2025, OBBB amended Section 163(j) by clarifying that business interest expense subject to Section 163(j) includes any interest incurred and capitalized during the tax year, except for interest capitalized under Sections 263(g) and 263A(f).

Tip of the Day

One size doesn't fit all . . . The internet is a great source of knowledge--and misinformation. We've seen articles about whether or not you should convert your traditional IRA to a Roth, how much money you need for retirement, etc. There's no rule of thumb for either, or a number of other "formula". Should you convert an IRA to a Roth? Depends on your age, your current income, your income at retirement, when you're going to retire, how much you're going to convert, how you're going to pay the taxes, etc. Even something as simple as whether or not and how much life insurance to have requires understanding a number of factors.

December 23, 2025

News

The IRS announced (WA-2005-03) tax relief for individuals and businesses in the State of Washington affected by severe storms, straight-line winds, flooding, landslides, and mudslides that began on Dec. 9, 2025. These taxpayers now have until May 1, 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 Benton, Chelan, Clallam, Grays Harbor, Jefferson, King, Kittitas, Lewis, Mason, Pierce, Samish, Skagit, Snohomish, Thurston, Wahkiakum, Whatcom, and Yakima counties 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 Dec. 9, 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. The May 1, 2026, deadline applies to individual income tax returns and payments normally due on or after Dec, 9, 2025. The May 1, 2026, deadline also applies to 2025 contributions to IRAs and health savings accounts for eligible taxpayers. This relief also applies to the estimated tax payments normally due on Jan 15, 2026, and April 15, 2026. Penalties on payroll and excise tax deposits due on or after Dec. 9, 2025, and before Dec. 29, 2025, will be abated as long as the tax deposits are made by Dec. 29, 2025.

Tip of the Day

New Year, new rules . . . The new year will bring new tax rules, some state, some federal. Make sure you're up on new minimum wage rules, property and sales tax rates, as well as a number of other requirements. And in 2026 you'll have to track overtime pay and tips for employees if you do your own payroll. Check for other changes such as electronic filing of state returns and deposit requirements. Now is also a good time to make a list of current requirements

December 23, 2025

News

Announcement 2026-01 provides general information to interested taxpayers and potential claimants on claiming a payment under a new OBBB provision related to dyed fuel. The new law allows a taxpayer to recover federal excise taxes paid on clear diesel fuel or kerosene if that taxpayer later removed the fuel from a terminal as dyed fuel for nontaxable use. The announcement notes that absent a statutory change, the IRS lacks the authority to pay the claims to anyone other than the person that paid the original tax on the dyed fuel to which the claim relates.

The IRS has announced the opening of a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice, including a more streamlined penalty framework. The proposed revisions reflect the IRS's commitment to improve its processes, and to further incentivize non-compliant taxpayers to come into compliance. Under the proposed framework, taxpayers conditionally approved to participate must, within three months after being conditionally approved to participate must file amended or delinquent income tax returns, international information returns, and Reports of Foreign Bank and Financial Accounts, as applicable, information returns, and Reports of Foreign Bank and Financial Accounts, as applicable, pay all applicable taxes, penalties, and interest in full; and execute required agreements to finalize participation. Click on the link above for more information.

Tip of the Day

Employee whistleblowers . . . More often than not employees know or suspect if other employees are committing fraud but they're often reluctant to inform management. You should make it clear that management encourages the information that could reveal a fraud and that their identity will be protected.

December 22, 2025

News

You can fully deduct business bad debts. However, the IRS will frequently challenge the loss, claiming it was not a bona fide debt, but equity which can only be deducted as a capital loss. In Anaheim Arena Management, LLC, H&S Investments I, LP, A Partner other than the Tax Matters Partner (T.C. Memo. 2025-68) partnership advanced funds to a building the taxpayers were to manage. However, the building was a physical asset of a city, not a distinct legal entity with the legal capacity to borrow money. The Court noted the taxpayer could not sue the city to enforce repayment of the notes, repayment of the notes was to be from the profits of the venture which indicates equity, the creditor could participate in and management of the borrower, and several other factors indicated the advances were equity, not debt.

Tip of the Day

Income and expense . . . In a normal business venture expenses offset some or all of the income. But that may not be true if you can't take advantage of the expenses. The best example is a rental property. You borrowed $100,000 at 5% to finance the property but because of the phase-out rules you can't deduct any of the rental losses. Meanwhile the sale of some stock results in $100,000 of cash which you invest in a 5% CD. While the interest income and expense evens out, the income is taxed but you can't deduct the expense, at least not currently. If the rental is expected to produce taxable income in the near term, that might be an issue. But rental properties frequently have losses for an extended period. Unless you expect to sell the rental in the near term, the best thing to do may be to use the free cash to pay off the loan. There may be other factors to consider such as is the cash needed elsewhere. Think it through.

December 19, 2025

News

Your address is important when a deficiency notice is sent. In Cuis Carlos Ibarra Cano (T.C. Memo. 2025-65) the IRS claimed the taxpayer filed his Tax Court petition was filed late. The Court noted the taxplayer's last known address when the Notice of Deficiency was mailed was 220 6th Street. The Notice was erroneously addressed to him at 2206 TH St. (the city was correct). The Court found that the IRS failed to prove that a valid Notice of Deficiency wasd mailed to the taxpayer's last known address.

In order to be valid, any penalty has to be approved by the revenue agent's (RA) immediate supervisor. In Ivey Branch Holdings, LLC, Ivey Branch Investors, LLC, Tax Matters Partner (T.C. Memo. 2025-63) the IRS denied the taxpayer a deduction for a charitable conservation easement and assessed penalties. The record established that the RA's supervisor timely approved the penalties. She affixed her electronic signature to the penalty lead sheet on August 12, 2019, using Adobe software. She stated that she was providing "written managerial approval for all penalties determined in the FPAA". The Court noted the supervisor had the discretion to approve or disapprove of the penalties. The taxpayer challenged the status of the RA who made the initial determination to assert the penalties. The taxpayer contended that a different employee made the intial determination. The Court noted that employee just provided technical assistance on TEFRA cases. When that employee reviewed the penalty had already been approved. The Court found that and another similar argument as frivolous and that the requirements of supervisory approval were met.

Tip of the Day

Negotiating? . . . If you're negotiating an important deal don't introduce petty requests. If you want to do the deal you may be causing problems that can ruin it. Yes some things may be agreed to easily, but some things can be real sticking points. And, if the other party senses too may such requests they may decide the deal isn't worth it.

December 18, 2025

News

In Inga I. Kramarenko (T.C. Memo. 2025-61) worked full time as a "post-doc"-a trained Ph.D. with high technical skills—in laboratories at a university's medical institution. In that capacity she performed work in the laboratory. In return she received further training in laboratory techniques at the direction of her scientist supervisors and received a salary and various other benefits incidental to employment. The taxpayer contended that her salary was in the nature of a "grant" and was therefore exempt from taxation pursuant to Article 18 of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and Capital, Russ.-U.S., June 17, 1992 (U.S.-Russia Tax Treaty). On her income tax returns for 2010 and 2011 she reported the salary as tax exempt. The IRS determined that the salary was payment for her work and was therefore ineligible for the Article 18 exemption, and also determined accuracy-related penalties. The Tax Court held that Under Baturin the taxplayer's salary was earned through an employer-employee relationship as part of a substantial "quid pro quo" for her labor, not as a "grant, allowance, or other similar payment" under the U.S.-Russia Tax Treaty, and is therefore not exempt from U.S. income tax. The Court also held that the taxpayer was liable for the accuracy-related penalties under Secs. 6662(a) and (b)(2) on the underpayments resulting from reporting that income as tax exempt.

Tip of the Day

Phone phishing . . . It's like email phishing, but using the phone. Old fashioned? Yes, but it does work. One scam involves a phone call from a large national bank with the caller asking if you just applied for a new credit card. Sounds legit because the caller can provide some information. But the information is very broad and could apply to a number of other people such as zip code. When a bank or other financial institution calls they should be able to provide you with specific information about your account. If you're still uncertain, hang up and call the bank directly.

December 17, 2025

News

The IRS reported it is withdrawing Notice of proposed rulemaking 132251-11 and 134219-06. The regulations provided relief from joint and several tax liability and relief from Federal income tax liability resulting from the operation of State community property laws. The proposed regulations would have affected married individuals who filed joint returns and later seek relief from joint and several liability.

Tip of the Day

Basis in LLC, S corporation, etc. . . . You have to report any income from a pass-through entity (you may be able to offset carryforward losses) but you can't deduct losses unless you "materially participate" in the business have sufficient basis and you're "at risk" with respect to that amount. If you're unsure of the rules, check with your tax advisor.

December 16, 2025

News

T.D. 10038 contains final regulations relating to the imposition of a user fee on authorized persons requesting the issuance of IRS Letter 627, also referred to as an estate tax closing letter. The final regulations adopt without change the text of the interim final rule and proposed regulations that reduced the amount of the user fee imposed on a request for the issuance of an estate tax closing letter from $67 to $56.

The IRS Criminal Investigation released its Fiscal Year 2025 Annual Report on Dec. 11, 2025, showcasing banner investigative results fueled by new partnerships and innovative financial investigative techniques. The report details how IRS-CI's approximately 3,000 employees worked to safeguard the global financial system and identify $10.59 billion in financial crimes during FY25, which took place from Oct. 1, 2024, to Sept. 30, 2025. Click on the link above for the report.

Tip of the Day

Tax forms . . . The IRS is releasing final and draft versions of 2025 tax forms fast and furious. There are usually few changes between the draft and final versions of the forms but if you download draft versions any don't use them for filing. Only the current copy of final versions are posted to the "final" link above, but you can find forms for prior years (yes, at least back into the 1940's).

December 15, 2025

News

The IRS has issued Revenue Procedure 2026-6) allowing States, including the District of Columbia, to make an Advance Election to participate in a new tax credit for calendar year 2027. This new credit, established under the One, Big, Beautiful Bill, is for contributions to Scholarship Granting Organizations that serve elementary and secondary school students from low- and middle-income families. Beginning Jan. 1, 2027, individual taxpayers may claim a nonrefundable federal tax credit for cash contributions to SGOs providing scholarships for elementary and secondary education expenses. The credit allowed to any taxpayer is limited to $1,700. However, for contributions to an SGO to be eligible for this credit, the SGO must be listed on a State list of one or more covered states for the applicable calendar year. A covered state is defined as one of the States, or the District of Columbia, that, for a calendar year, voluntarily elects to participate in the credit and identifies SGOs in the State. Rev. Proc. 2026-6 provides that a State may choose to be a covered State for calendar year 2027 before it provides the IRS with a list of the SGOs located in the State, allowing SGOs additional time to prepare for the commencement of this new credit in 2027. For more information, click on the link above and/or go to IR-2025-121.

Tip of the Day

Adoption credit . . . It can be a big number. The IRS is reminding taxpayers that if they finalized an adoption in 2025 or started the adoption process before 2025, they may qualify for the Adoption Tax Credit. Additionally, there have been significant changes to the tax credit under the One, Big, Beautiful Bill. For more information, see IRS Tax Tip 2025-71.

December 12, 2025

News

The IRS announced (MN-2025-01) tax relief for individuals and businesses in the Leech Lake Band of Ojibwe Tribal Nation affected by severe storms and straight-line winds that began on June 21, 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 the Federal Emergency Management Agency (FEMA), individuals and households that reside or have a business on the Leech Lake Reservation in Minnesota 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 21, 2025, and before Feb. 2, 2026, are granted additional time to file. 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. Click on the link above for additional information.

If anyone has told you that wages aren't included in taxable income under some theory, don't believe them. In Michael Austin French and Dawn Michelle French (T.C. Memo. 2025-57) argued that wage and interest payments received by the wife were not income. The Court shot down the argument and assessed a frivolous return penalty of $1,000.

Tip of the Day

Rent out property? . . . If you rent out property, either residential or commercial, include advance rents in income in the year received. Security deposits may or may not be rent. If you intend to return the deposit to the tenant, it's not income. However, if you intend for the deposit to cover the last month's rent (e.g., you don't bill the tenant for the last month, you let him use his security deposit) the amount is income. You don't have to receive cash to have rental income. The tenant may pay in goods or services. In that case you need to include the fair market value of the goods or services as rental income. If the goods or services provided benefit the property, you can deduct a corresponding amount as an expense. For example, in lieu of one month's rent the tenant the tenant, a licensed plumber, installs a new hot water heater. The fair market value of the work is income and can be taken as deduction, or, in this case, capitalized and depreciated.

December 11, 2025

News

In Joanne A. Horsham (T.C. Memo. 2025-56) the taxpayer failed to pay taxes for several years. The taxpayer submitted an offer in compromise (OIC), but the offer was rejected because her Form 466-A, Collection Information Statement for Wage Earners and Self-Employed Individuals indicated she was capable of fully paying the tax owed. The offer specialist explained that petitioner could "withdraw her offer, waiving her appeal rights, and apply for an installment agreement." In that event, taxpayer was informed that "liens would be filed on all offer year(s)." The taxpayer formally withdrew the OIC and indicated she would apply for an installment agreement. The offer specialist recommended that NFTLs (Notice of Federal Tax Lien) be filed for all three years. The IRS accepted her offer and established a direct debit installment agreement (DDIA). The IRS mailed the taxpayer a standard letter confirming acceptance of the installment agreement (IA). This letter advised (among other things) that, if the taxpayer defaulted on the IA, the IRS "could take enforcement action which could include filing a Notice of Federal Tax Lien." The IRS employee who issued that letter was apparently unaware that the OIC unit had already made the decision to file an NFTL for the tax years at issue and had informed the taxpayer of that fact. The taxpayer requested a CDP hearing and claimed she was informed a NTFL would not be filed. The Settlement Officer (SO) asked the taxpayer whether the existence of the NFTL had any adverse impact on her employment. She replied that she did not believe there would be any adverse impact. The case had been remanded to IRS Appeals which issued a Notice of Determination that the NFTL be sustained citing that the taxpayer "did not provide any information that would indicate that [she qualified] for withdrawal." The Court found no abuse of discretion by the IRS and granted the IRS's motion for summary judgment sustaining the NFTL filing.

Tip of the Day

Note as wages . . . If you're working for a startup you may receive a note instead of a check for part of your services. If the note is secured you've got to include the fair market value of the note (discounted by an amount that depends on the payment terms) in income. Later payments on the note will be partly nontaxable and partly taxable. On the other hand, if the note is unsecured and nonnegotiable, only when you receive payments on the note are they includible in income as compensation.

December 10, 2025

News

Notice 2026-05 providing guidance on new tax benefits for Health Savings Account participants under the One, Big, Beautiful Bill. These changes expand HSA eligibility, which allows more people to save and to pay for healthcare costs through tax-free HSAs.

Telehealth and Remote Care Services: The OBBB made permanent the ability to receive telehealth and other remote care services before meeting the high-deductible health plan (HDHP) deductible while remaining eligible to contribute to an HSA, effective for plan years beginning on or after Jan. 1, 2025.
Bronze and Catastrophic Plans Treated as HDHPs: As of Jan. 1, 2026, bronze and catastrophic plans available through an Exchange are considered HSA-compatible, regardless of whether the plans satisfy the general definition of an HDHP. This expands the ability of people enrolled in these plans to contribute to HSAs, which they generally have not been able to do in the past. Notice 2026-05 clarifies that bronze and catastrophic plans do not have to be purchased through an Exchange to qualify for the new relief.
Direct Primary Care Service Arrangements: Beginning Jan. 1, 2026, an otherwise eligible individual enrolled in certain direct primary care (DPC) service arrangements may contribute to an HSA. In addition, they may use their HSA funds tax-free to pay periodic DPC fees.

Tip of the Day

IRS return data published . . . The IRS provides a wealth of information about returns. Not by individual, but broken down by certain line items on returns, by income level, by industry, by type of return and by county. The publications are a cheap source of marketing information. The IRS just released SOI Tax Stats - Program documentation data items by forms and schedules and SOI Tax Stats - Unincorporated business state and county data. Additional information can be found at Tax Statistics at IRS.gov.

December 9, 2025

News

A charitable contribution of property can save significant tax dollars, but there are plenty of pitfalls. In Beaverdam Creek Holdings, LLC, Beaverdam Creek Investors, LLC, Tax Matters Partner (T.C. Memo. 2025-53) the petitioner donated a conservation easement on property it owned. Previous to the ownership by petitioner the property had been used for a number of years as a granite quarry and an area of other granite quarries. The appraisal valued the property at $21,100,000 before the contribution and only $128,000 after the granting of the easement. The IRS valued the easement at $0. The Court spent considerable time, and 64 pages, to describe the transaction and valuation methods. While normally a discounted cash flow process would be used special economic and market circumstances were present and the quarry, rather than an operational one, had been shut for a number of years. The petitioner's appraiser used a number of assumptions including the cost of restarting the operation of the quarry that included hiring staff, purchasing equipment, etc. The Court found a comparable sales approach would produce the more accurate value. The Court also noted that the petitioner purchased the property and rather than begin operations soon thereafter began steps to make the charitable contribution. The Court valued the contribution of the easement at $193,250 and sustained the 40% gross valuation misstatement penalty to the deficiency.

Tip of the Day

Too many brands? . . . Often having a number of brands or varieties for your customer to select from increases your total sales. But you can get carried away. And each version requires some expense--package design, formulation, marketing, etc. In some cases you could be spending more to differentiate a product than you're making in gross profit. That's when deleting some of those choices can increase profits. The first step is a profit analysis. Are you making money on the option or is it just taking shelf space? The second is to do a test to see if customers will switch to one of your other options or go to a competitor. Sometimes marketing an offbrand can cannibalize sales from more profitable items.

December 8, 2025

News

The IRS has updated Frequently Asked Questions (FS-2025-07) on Employee Retention Credits under ERC compliance provisions of the One, Big, Beautiful Bill.

If you do business as a sole proprietorship your net earnings are subject to the self-employment income tax. Partners in a partnership that materially participate in the business receive the treatment. Limited partners generally aren't subject to the same rules. In Soroban Capital Partners LP, Soroban Capital Partners GP LLC, Tax Matters Partner (T.C. Memo. 2025-52) the partnership earned income from managing investments and the limited partners played an essential role in generating the income. The partnership acknoweledged that the limited partners' unique skills and experience were indispensable to the business. The Court found the limited partners were such in name only. They worked for the business full time and held themselves out to the public as essential to the business. The capital accounts made it clear that their earnings were not of an investment nature. Thus, their earnings weere net earnings from self-employment.

Tip of the Day

Stopping a business? . . . It's usually not as simple as turning off the lights and locking the door for the last time. There's a final tax return, possible sales tax returns due, etc. If you're doing business as a corporation, LLC, or partnership you have to legally dissolve. Often not a big deal, but an important one. And there could be expenses after you close. Talk to your accountant and/or attorney about closing bank accounts, notices to vendors, etc.

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.

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

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