Key Takeaways
- IRS issues notice on tip, overtime deduction.
- Treasury reclassification attempts to deny refundable credits to immigrants.
- Legality questioned.
- Kies blasts "armchair commissioners," says IRS prep for tax season is on track.
- Waves of guidance promised.
- IRS neglect across administrations.
- Congress goes home with no ACA tax credit fix.
- State taxes meet First Amendment.
- National Gingerbread Cookie Day.
Tune in today! for an ACA roundtable session featuring Eide Bailly ACA compliance specialists. "Whether you’re struggling with filing obligations, new and changing regulations, or incorrect completion of forms, there are many ways companies can leave themselves at risk for large penalties. In this webinar, you’ll gain access to accurate and timely information and the opportunity to get your ACA compliance questions answered." 1:00 p.m. central today! Register here. No charge, but no CPE offered.
Breaking: The IRS has just issued guidance (Notice 2025-69) for employees wishing to claim the qualified tips and overtime deductions: Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025.
The big news: Treasury will ignore the limitations on tips for "specified service trades or businesses" for now:
YouTube and TikTok influencers, rejoice. Link: IRS list of "Occupations that customarily and regularly received tips on or before December 31, 2024."
Treasury Moves to Limit Immigrant Refundable Credits
Treasury plans to change tax credit eligibility in a move critics say will hurt immigrant taxpayers - Fatima Hussein and Gisela Salomon, Associated Press via MSN:
Tax experts say immigrants brought to the U.S. illegally by their parents as children, known as DACA (Deferred Action for Childhood Arrivals) recipients, and immigrants with Temporary Protected Status are most likely to be affected by the planned change. Foreign workers and student visa holders as well as some families with children who are U.S. citizens could also be affected, depending on how the rule is written, they say.
The Treasury Department’s announcement was the latest sign of how the Trump administration has been taking a “ whole of government ” approach when it comes to immigration enforcement and looking to departments across the federal government — not just Homeland Security — to come up with ways to help carry out the president’s hardline immigration agenda.
Treasury to Issue New Regs as Part of Immigration Crackdown - Alexander Rifaat, Tax Notes ($):
...
Brandon DeBot of the Tax Law Center at New York University School of Law criticized the administration’s reading of the 1996 law and said it is overstepping congressional authority.
“The administration’s new interpretation directly contradicts decades of congressional understanding and administrative practice reflecting the statute’s best meaning. Denying tax credits to immigrant families requires Congress to act explicitly,” DeBot said in a statement.
Acting Chief Counsel Blasts "Armchair Commissioners," Says IRS On Track for Filing Season.
Kies Settles In as Acting Chief Counsel, Signals OBBBA Guidance - Benjamin Valdez and Jonathan Curry, Tax Notes ($):
Kies, speaking during a November 20 event hosted by the Tax Council, said he will remain in charge of the IRS’s legal division “until the president nominates my replacement and that person is confirmed,” following President Trump’s sudden withdrawal of his last choice for the job, Donald Korb.
Kies also pushed back against statements by what he called “armchair commissioners,” asserting that the IRS is on track to deliver a successful 2026 filing season and issue timely guidance for the OBBBA (P.L. 119-21), despite concerns to the contrary.
“I will absolutely stay the course at the IRS — I have staying power, and I’m not ‘passing through,’ just to be clear,” Kies said, appearing to reference recent remarks by former IRS Commissioner John Koskinen, who said the frequent turnover in leadership has hurt the agency.
Treasury, IRS to Release Wave of New Guidance in Coming Months - Erin Schilling, Bloomberg ($):
“Some reports have suggested that having an acting chief counsel at the IRS makes it harder to plan for regulatory and litigation strategy as well as to address compliance and other backlogs,” Kies said. “These concerns are all misplaced.”
Kies also renewed administration threats to tax-exempt status of disfavored organizations:
Related: Eide Bailly Exempt Organization Tax Services.
Labor Secretary Says Overtime Tax Break Guidance to Come in 2026 - Erin Slowey, Bloomberg ($):
“I would imagine that with those policies in place from the Working Families Tax Cut that we’ll start to see stuff in the first and second quarter,” said Chavez-DeRemer in an interview with Bloomberg TV. “But any specifics I don’t have on an actual release date.”
Notice 2025-62 waives penalties for employer reporting needed for employees to compute their 2025 deduction.
IRS Tech Dysfunction and its History
IRS Has a New Modernization Plan. Don’t Tell Congress. - Doug Sword, Tax Notes ($):
The tax collector is taking a new approach to modernization, according to news and government reports, pausing and canceling existing efforts and streamlining its approach to automating and boosting the functionality of the IRS’s systems.
The article - unfortunately paywalled - provides an eye-opening summary of the failure of the IRS to fix its obsolete systems in efforts dating back to the last century.
The bottom of the article shows that competent tax administration has been a red-headed stepchild of presidential priorities for some time:
But that board hasn’t functioned since 2015, which was the last year it had a quorum and the last year a president nominated anyone to serve on it.
President Trump didn’t nominate anyone to the nine-member board in his first term. Nor has he so far in 2025, though he has added a chief executive officer. President Biden made no nominations, either, while apportioning $79 billion in special funding to the IRS in 2022.
Congress Leaves For Thanksgiving With No ACA Tax Credit Plan
No Plan for Obamacare Price Hikes as Congress Exits for Holiday - Erin Durkin, Bloomberg ($):
Members of Congress on both sides of the aisle said pressure is mounting to get a fix in place before Americans see their premiums rise in January, but key Republicans working on alternate health proposals are unwilling to commit to a timeline with only three weeks left on the legislative calendar.
...
At stake are enhanced Affordable Care Act premium tax credits, which if allowed to expire, will become inaccessible for enrollees making more than 400% of the federal poverty limit, while lower income enrollees will have to contribute more of their paycheck toward premium payments.
Inside the Obamacare subsidy talks - Andrew Desiderio, Samantha Handler, Laura Weiss and Jake Sherman, Punchbowl News:
Complicating matters further, Trump has gone on tirades against the Obamacare subsidies recently, and Republicans have mimicked his posture.
“I’m not opposed to bipartisan deals. The problem is, Obamacare was never a bipartisan deal. Democrats seem to be saying you need to swallow this partisan bill that was sold under false pretenses,” Sen. John Cornyn (R-Texas) told us. “That’s unacceptable.”
Meanwhile, Senate Democrats seem to be hardening their position and downplaying the chances of securing enough GOP votes for even a pared-back Obamacare subsidy extension.
In The States
State Tax Pass-Through Limits Face Potential First Amendment Test - Richard Tzul, Bloomberg ($):
Washington state and Texas both tax companies that do business within their borders, with limits on whether and how taxpayers can pass along those added expenses to their customers.
...
Washington’s business and occupation tax only allows companies to indirectly factor the levy into the price charged to consumers as an overhead cost. But it can’t be separately listed on an invoice or directly charged to consumers, he said.
That could make the law susceptible to a First Amendment challenge.
Year-End Planning for State Taxes: Don't be Caught Off Guard! - Melissa Menter, Colette Sutton, and Sarah Weintraub, Eide Bailly. "Verify that all tax accounts are accurate and up to date. Confirm ending balances (credit vs. debit) and ensure they align with your payment and filing frequency—for example, quarterly estimates or monthly sales tax prepayments with true-ups."
Finance Committee rejects Johnson’s $600M tax package - Fran Spielman, Chicago Sun Times:
“The corporate [head] tax is in this budget. It will stay in this budget. Is that clear enough?” he said.
...
The die for Monday’s humiliating defeat was cast last week, when Finance Chair Pat Dowell (3rd), a member of Johnson’s handpicked leadership team, rejected the mayor’s offer to impose a $21 a month per-employee head tax on companies with 200 or more employees and declared her opposition to the corporate head tax “at any level.”
Tariff Rebate Outline, Brazil Backtrack
$2K tariff rebates: Trump outlines when proposed checks could be sent out - Addy Bink, The Hill:
Trump previously wrote on Truth Social that “a dividend of at least $2,000 a person” funded by the tariff revenue that the U.S. has collected this year would be sent out. He has since said “high income people” would not qualify for the payments, which would be issued to “our middle income people and lower income people.”
...
Trump’s proposal is expected to face roadblocks, including one major hiccup: a lack of tariff revenue.
Donald Trump lifts 40% tariff on some Brazilian food products - Michael Pooler and Aime Williams, Financial Times:
...
Trump had slapped a 40 per cent tariff on Brazil, which has a trade deficit with the US, in a failed bid to save its former right-wing president Jair Bolsonaro from prosecution over charges of plotting a coup d’état.
That duty combined with a 10 per cent reciprocal tariff brought the headline rate to 50 per cent, sparking the worst diplomatic crisis in memory between the two largest nations in the Americas.
Blogs and Bits
IRS Has Significant Backlogs Following The Shutdown: What's Moving And What's Still Stuck - Kelly Phillips Erb, Forbes. "If you're currently under audit, you should expect delays as IRS examiners work through backlogged mail, messages, and case files."
IRS Provides Penalty Relief for Tip and Overtime Reporting in 2025 - Parker Tax Pro Library. "Specifically, the notice provides relief from the penalty under Code Sec. 6721 for failure to file correct information returns and the penalty under Code Sec. 6722 for failure to furnish correct payee statements."
Foreign Digital Services Taxes Are Bad, but the Alternatives Are Worse - Adam Michel, Liberty Taxed. " The right path forward is not to revive Pillar One but to let DSTs face the scrutiny of domestic politics. Countries that adopt them will eventually learn the costs, and the international system will remain more flexible and competitive as a result."
An Accountant Who Should Have Known Better
Sudbury CPA charged with and pled guilty to conspiring to defraud the IRS and pandemic relief fraud - IRS (Defendant name omitted, emphasis added):
The owner of a Sudbury accounting firm and a real estate company has been charged and has agreed to plead guilty to paying an executive more than $1.6 million in compensation and fringe benefits under the table, and to making a fraudulent application for more than $179,000 in pandemic relief, through a multi-year scheme.
According to the charging documents, Defendant and an employee, who served as the Director of Corporate Services at Defendant’s accounting firm and as Chief Operating Officer at Defendant’s real estate firm, allegedly agreed that Defendant would pay the employee off the books so that the employee would have tax-free income and so that Defendant’s firms, CD Defendant LLC and Gebsco Realty Corporation, would have lower employment taxes. Over time, Defendant allegedly paid the employee’s family, provided rent-free housing to the employee’s ex-wife, paid college tuition for the employee’s children, and paid personal expenses that the employee and the employee’s ex-wife charged on corporate credit cards. All told, it is alleged that Defendant paid the employee at least $1,668,487 in unreported income and avoided taxes of at least $835,105. It is also alleged that in 2020, Defendant and the employee fraudulently applied for Paycheck Protection Program loans for both of Defendant’s firms and obtained $179,900 which Defendant used in part to fund the under-the-table compensation he paid the employee.
That clever plan seems to have worked out badly. Any "off-the-books" compensation scheme assumes that the other party won't turn on you in a pinch. That's a flawed assumption.
What day is it?
The holidays loom, so National Gingerbread Cookie Day is timely.
Make a habit of sustained success.
