Tax News & Views Puts Down the Phone For Year-End Tax Moves Roundup

Publication note: Tax News & Views is taking the rest of the week off. We start a new year of tax shenanigans Monday, January 5. Happy New Year!

One Day to Rule Them All

It's still 2025. Today is the last chance to make many tax planning moves. While it's asking a lot of one day to cure a year's worth of neglected tax planning, here are some plays to consider:

– Paying for last-minute deductions. If you are a cash-basis taxpayer, you have until midnight tonight to spend some cash to get a deduction this year. How you do it matters.

– A credit card is as good as cash. Better, even, because if you incur a business expense before the end of the year, you have your credit card statement to prove it.

– If you mail a check for a deductible expense, the check needs to be in the mail and postmarked in 2025 to be a deductible 2025 expense. But a caution: a new postal service policy means that mailing a letter today doesn't necessarily get it postmarked today. If your deduction is important, spend a little extra to send it Certified Mail, Return Receipt Requested, so you can prove timely mailing.

– Consider an electronic transfer today for last minute deductions. Many charities and vendors accept payments through bank transfers, PayPal, Zelle or Venmo. These avoid any question over timely payment.

– If you receive a check in the mail and you are a cash-basis taxpayer, it’s taxable the day you receive it, even if you don’t deposit it.

– There is no “close is good enough” rule for cash basis taxpayers. Just because you could have paid a bill or made a contribution doesn’t get you a deduction if you didn’t pay it before year-end.

– Don’t overdo prepayments. If you prepay expenses more than a year out, you don’t get the deduction until the year to which the payment applies.

– If you are making a gift to a loved one to qualify for the $19,000 2025 annual gift tax exclusion, mailing a check isn’t good enough. A check has to be cashed for the gift to count against this year’s exclusion, unless you are delivering a cashiers check.

– Tax loss harvesting. If you had a good year in the stock market, you can sell some losing stocks today to offset capital gains you have incurred during the year. Remember to use a taxable account, and beware the wash sale rules.

– If you are a business opting into a SALT workaround pass-through entity tax, elect into the tax by the end of the day. If you are an accrual-basis taxpayer, this helps ensure you have met the "all-events" requirement for accruing deductions. For both cash and accrual basis taxpayers, making the election today helps ensure that the payments made this year are considered 2024 payments, rather than non-deductible "deposits."

Tax Policy in 2026: Expiring Provisions, Big Beautiful Deficits, Tariffs

These Expiring Tax Provisions Could Get Renewed in 2026 - Katie Lobosco and Cady Stanton, Tax Notes ($):

A handful of temporary tax provisions will expire after December 31, setting up the potential for a tax extender package in 2026.

Tax credits for employers that hire certain disadvantaged workers, a tax break for racetrack owners, and a tax deduction for 100 percent of gambling losses all have bipartisan support and could be contenders for a retroactive extension.

...

The Work Opportunity Tax Credit (WOTC), created in 1996, will expire after December 31. Employers are eligible for the section 51 tax credit if they hire individuals who have faced barriers to employment, including certain veterans, Supplemental Nutrition Assistance Program recipients, individuals with disabilities, and young adults living in low-income communities.

A retroactive extension of the WOTC wouldn’t be novel; the credit has expired 13 times since its creation nearly three decades ago.

New Deficit Projections to Hinge on Giant Tax Bill, Tariffs - Doug Sword, Tax Notes ($):

The biggest change to date in the CBO’s 10-year deficit estimate came in its February 2023 report, which projected that shortfalls would grow by $3.1 trillion compared with a 10-year estimate made just nine months before. That jump was largely tied to a trio of major legislative changes in 2022: the Inflation Reduction Act, the CHIPs and Science Act, and the Honoring Our PACT Act. The IRA and the CHIPs Act each contained major tax provisions.

But the OBBBA could top that figure all on its own, as it will add $3.4 trillion to deficits from 2025 to 2034, according to a July CBO estimate. When it comes to tax legislation, only the American Taxpayer Relief Act of 2012’s $3.9 trillion cost was higher.

The OBBBA’s cost is expected to be largely offset by the additional $2.5 trillion in revenue that the CBO projected will be collected through 2035 if tariff rates in place in November continue. However, the CBO noted that tariffs “have changed frequently throughout 2025,” as shown by its August forecast that tariffs would raise $3.3 trillion through 2035.

Top Federal Tax Decisions Of 2025 - Anna Scott Farrell, Law360 Tax Authority ($):

In August, the Third Circuit ruled that the IRS can go after a woman's unpaid taxes more than 20 years later because her return preparer committed fraud on her filings, even though it was without her knowledge.

The decision backed a Tax Court ruling and allowed the IRS to extend its three-year deadline to collect $65,000 worth of unpaid taxes from Stephanie Murrin going back to 1993 because the preparer intentionally placed false entries on her filings that caused the debt.

The normal three-year statute of limitations for assessment doesn't apply to fraudulent returns; the IRS has forever to audit them. This case holds that preparer fraud keeps the statute open, even if the taxpayer is unaware of the fraud.

This makes it more important than ever to avoid sketchy preparers who promise magically-large refunds. If the IRS catches up to them, their clients can face ruinous back taxes, interest, and penalties.

EU Carbon Border Tax Starts Tomorrow

EU to launch carbon border tax despite opposition from trade partners - Alice Hancock, Peter Foster, and Andres Schipani, Financial Times:

The EU’s landmark carbon border tax will come into force on January 1 despite fierce opposition from trading partners and warnings from European industry that it will increase costs and red tape.

The carbon border adjustment mechanism (CBAM), which covers six sectors including steel, cement, aluminium and electricity, is intended to prevent EU companies that have to pay for their emissions being undercut by cheaper, more heavily polluting competition.

Never mind the consumers who will pay more to protect politically-powerful industries in the name of saving the planet.

Vindicating the 401(k)

401(k)s Built America’s Wealth and Proved All the Critics Wrong - Judge Glock, The Daily Economy:

Around the time of the 401(k) tax code change, there were about 30 million defined benefit plan participants in the private sector, an all-time peak. That was nearly double the total in “defined contribution” or individual retirement plans, such as the 401(k).

Today, the number of active participants in defined benefit plans is down to about 10 million, but there are almost 90 million in defined contribution plans. Thanks to 401(k)s, the total number of workers with any retirement plan is at an all-time high, even accounting for population growth.

While many have lamented the decline of the defined benefit package, in one sense the market has spoken. People have moved away from stodgy jobs with strict defined benefits packages. One reason is that the government allows companies to wait up to five years before any of their defined benefits are vested, and companies often choose to vest such plans slowly, because the plans are quite risky for the companies themselves. Since the median length of a job in the US is about four years, defined benefit plans can leave employees at these companies without any savings at all.

Remember, front-loading your 401(k) contributions (or IRA, HSA, or other tax-favored retirement accounts) gets your savings to start earning tax-free returns that much sooner.

Buy, Borrow, Die - A Myth?

The role of unrealized gains and borrowing in the taxation of the rich - Edward Fox and Zachary Liscow, Journal of Public Economics (my emphasis):

We estimate that consumption by high-wealth-holders is smaller than their taxed income, explaining why these Americans do not need to borrow. This is partly because rich Americans enjoy large amounts of liquid, taxable income...The allure of “buy, borrow, die” is that taxpayers can consume unrealized gains without selling appreciated assets; they thus avoid paying income taxes. If, however, the taxpayer’s AGI exceeds her consumption, then she can fund her consumption from AGI, on which she has already paid taxes, and she does not need to borrow to avoid tax on unrealized gains. All she has to do to minimize taxes on unrealized gains is not sell the assets. This simpler—and, it appears, dominant—tax avoidance strategy is more like “buy, save, die.”

Blogs and Bits

Business mileage tax deduction rate goes up in 2026, but two others are cut - Kay Bell, Don't Mess With Taxes. "The standard optional mileage rate you can use in 2026 to claim eligible business road travel will go to 72.5 cents per mile. That’s a 2½-cent increase over the 2025 mileage rate."

Court treats corporate funds as personal income - Tax Coda. "If you spend corporate money like it is yours, the IRS will tax it like it is yours."

The Tax Hazards Of Whole Life Insurance Policies - Peter Reilly, Your Tax Matters Partner. "Whole life insurance is a tax favored vehicle. The build-up in value is income tax deferred. Proceeds paid on the death, actual or imminent, of the insured are income tax free. And distributions are not taxed until you get your basis back. Still people manage to get into tax disasters from the policies."

The 2025 Tax Offender of the Year - Russ Fox, Taxable Talk. A Swiss connection.

Executor Fails to Execute

Estate Executor Can Be Liable for Tax After Fraudulent Transfers - James Matheson, Bloomberg ($; executor name omitted, emphasis added.):

The IRS can seek to recover an estate’s tax liabilities from its executor because he fraudulently transferred the decedent’s estate to himself and rendered it insolvent, the US Tax Court held in a memo opinion Tuesday.

[Executor] is liable for a $4 million unpaid estate tax and penalties totaling more than $1.5 million for failure to file and a substantial tax valuation understatement, Judge Tamara W. Ashford said for the court.

[Executor] took possession of his deceased mother’s property and failed to file an estate tax return for nearly 11 years. Under Section 6901, the IRS may assess and collect unpaid estate tax from the transferee of a decedent’s property, including donees, heirs, devisees, and distributees, the opinion said. [Executor] is liable as transferee of the estate for both the tax deficiency and the additions, it said.

The taxpayer in this case died in 2005, when the lifetime exclusion was only $1.5 million. Starting tomorrow, it is $15 million. This will cause many executors to ignore the estate tax in administering the estate and not file a Form 706 with the IRS.

As this case shows, that can be a mistake, especially for taxpayers that are somewhere in the neighborhood of owing estate tax.

First, failing to file a return allows the IRS all the time in the world to examine the estate - the statute of limitations never starts. The taxpayer chose not to file a return after consulting an attorney and a tax preparer. He only filed when the IRS noticed that a return hadn't been filed when the executor filed for bankruptcy in 2013.

Second, failing to file on time forfeits the ability to make important elections on an estate tax return. Here the executor elected "alternative valuation" to claim reduced values of estate assets. This is only available on a timely return.

Third, the executor distributed estate assets to himself as residual beneficiary under the will. As a result, "transferee liability" law leaves him on the hook any estate tax liability that had not been paid to the extent of the assets he received.

The Moral? If an estate is anywhere near the ballpark of owing estate tax, it can be wise to file a Form 706. It limits the ability of the IRS to second-guess estate values to the three-year statute of limitations. It also allows the transfer of any unused lifetime exemption of the decedent to a surviving spouse. It also provides a reference for date-of-death values for beneficiaries receiving estate assets for their use when they sell them someday.

Link: T.C. Memo. 2025-134

What day is it?

You already know that today is New Year's Eve. Did you know it is also "No Interruptions Day?" "On December 31 every year, we celebrate No Interruptions Day in an effort to reduce the intrusion of electronic gadgets and devices in the workplace... By celebrating No Interruptions Day, people learn to redirect their focus towards completing their tasks and being more mindful about their actions."

Good luck with that, and best wishes for 2026!

Tax News & Views Puts Down the Phone For Year-End Tax Moves Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA