Key Takeaways
- Draft Schedule 1-A.
- Final Regs for Secure Act 2.0 Catch-Up Contributions.
- Enhanced Tax Credits debated in funding bill.
- Comments on IRS Direct File.
- Tribal Tax Credits.
- World Ozone Day!
Schedule 1-A
The Draft Schedule 1-A (Form 1040) for 2025 introduces several new "Additional Deductions" related to qualified tips, overtime compensation, car loan interest, and an enhanced deduction for seniors. Each of these deductions is subject to specific conditions and MAGI-based phase-out rules, requiring careful calculation. Tax professionals should pay close attention to the draft status of this form and monitor for any subsequent revisions. The placement of these deductions on Form 1040, specifically at line 13b, definitively classifies them as below-the-line deductions, impacting taxable income but not the computation of Adjusted Gross Income.
Penalty Approval
W&M to Mark Up Bills on IRS Penalty Approval, Tax Court Reform - Wesley Elmore, Tax Notes ($):
The House Ways and Means Committee has scheduled a September 17 markup of two bills meant to address circuit court splits on IRS penalty approvals and on equitable tolling for deficiency petitions filed with the Tax Court.
The Fair and Accountable IRS Reviews Act (H.R. 5346) and the Tax Court Improvement Act (H.R. 5349) are scheduled to be marked up alongside seven other bills concerning healthcare and Social Security, as well as the committee’s “views and estimates” letter to the House Budget Committee.
The Fair and Accountable IRS Reviews Act (H.R. 5346) and the Tax Court Improvement Act (H.R. 5349) are scheduled to be marked up alongside seven other bills concerning healthcare and Social Security, as well as the committee’s “views and estimates” letter to the House Budget Committee.
On Capitol Hill
Capitol agenda: Republicans to reveal funding bill, testing Democrats in shutdown showdown - Mia McCarthy, Politico:
The big problem: Democrats in both chambers insist they will not accept any funding agreement without bipartisan talks, and Republicans are going it alone. They also say they need the CR to include an extension of enhanced tax credits for Affordable Care Act insurance premiums, which are due to expire at the end of the year. Republicans are still figuring out how to proceed on that one.
Why Dems want Obamacare deal now - Laura Weiss and Samantha Handler, Punchbowl News:
GOP leadership won’t touch the issue in their CR this week, though they’ve expressed some openness to discussing extending the enhanced tax credits that expire at year’s end. But Democrats are demanding that the stopgap funding bill address health care now.
...
CBO has estimated that 1.5 million more people would go uninsured if Congress permanently extends the tax credits on Dec. 31 compared to an earlier enactment date, according to analysis provided to House Democratic leadership and reviewed by Punchbowl News.
...
CBO has estimated that 1.5 million more people would go uninsured if Congress permanently extends the tax credits on Dec. 31 compared to an earlier enactment date, according to analysis provided to House Democratic leadership and reviewed by Punchbowl News.
Tribal Credits
Legal Opinion Describes Tribal Credits as ‘Real and Recognized’ - Lauren Loricchio, Chandra Wallace, and Benjamin Valdez, Tax Notes ($):
In an unsigned legal opinion letter dated April 19, 2024, Texas attorney Brian S. Ettinger said, “To date, Department of Treasury and Internal Revenue Service have not issued a blanket legal opinion but have considered approval of these sovereign tax credits under a third-party individual or business federal tax filings or amended tax filings.”
The IRS says otherwise. It released five updates in July and August to the Internal Revenue Manual in response to a Freedom of Information Act request.
...
Meanwhile, taxpayers that file requests for tax credits in an “egregious, irresponsible manner” can’t rely on the opinion, the opinion letter states.
The IRS says otherwise. It released five updates in July and August to the Internal Revenue Manual in response to a Freedom of Information Act request.
...
Meanwhile, taxpayers that file requests for tax credits in an “egregious, irresponsible manner” can’t rely on the opinion, the opinion letter states.
Blogs and Bits
How to Shrink—or Even Eliminate—Capital Gains on Your Home Sale - Robin Friedman, Wall Street Journal:
Dennis said that one of the most common ways homeowners can reduce taxes on the sale of their primary residence is the exclusion authorized by the Internal Revenue Code that allows single taxpayers to exclude $250,000 of gain and married taxpayers who file jointly to exclude $500,000. Surviving spouses can still take the entire $500,000 exclusion as long as they sell the home within two years of the death of their spouse.
The Fall Into Tax Season With New Forms And Numbers Edition - Kelly Phillips Erb, Forbes:
Also happening soon? The IRS has announced plans to close nine Taxpayer Assistance Centers (TACS) in six states—California, Iowa, Kentucky, New York, Pennsylvania, and West Virginia. In fiscal year 2023, the IRS had 1.6 million face-to-face meetings with taxpayers at these TACs. Unless changes are made, the closures will be effective November 30, 2025.
IRS Issues Applicable Federal Rates (AFR) for October 2025 - Bailey Finney, Eide Bailly:
The Section 382 long-term tax-exempt rate used to compute the loss carryforward limits for corporation ownership changes during October 2025 is 3.65%.
The Section 7520 rate for October 2025 is 4.60%. Higher Sec. 7520 rates benefit Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). Lower Sec. 7520 rates benefit Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs) and Private Annuities.
The Section 7520 rate for October 2025 is 4.60%. Higher Sec. 7520 rates benefit Qualified Personal Residence Trusts (QPRTs) and Charitable Remainder Annuity Trusts (CRATs). Lower Sec. 7520 rates benefit Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs) and Private Annuities.
Tax Trouble
Identical twins who moonlighted as golf tee-time brokers charged with failing to report more than $1.1 million in income to IRS - IRS (defendant names omitted):
As part of their business, the brothers reserved thousands of tee times for resale at numerous golf courses nationwide, including at least 17 different public courses across Southern California. The brothers created a monopoly of Los Angeles and Orange County area golf course tee times by securing the most sought-after early morning slots, often within seconds of their release to the public. As a result, the brothers made it more difficult and more expensive for members of the public to reserve tee times at these courses without paying them an additional booking fee, particularly during the COVID-19 pandemic.
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In total, between 2021 and 2023, the brothers earned nearly $700,000 from their tee time brokering business. Despite earning substantial income and owing taxes from this business, and from their job as MRI technicians, the brothers willfully failed to report a combined total of more than $1.1 million in income to the IRS for tax years 2022 and 2023.
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In total, between 2021 and 2023, the brothers earned nearly $700,000 from their tee time brokering business. Despite earning substantial income and owing taxes from this business, and from their job as MRI technicians, the brothers willfully failed to report a combined total of more than $1.1 million in income to the IRS for tax years 2022 and 2023.
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