2025 Basics & Beyond Tax Newsletter – January 2025

December 26, 2024, Update

BOI Reporting Put on Hold Yet Again – We are back to wait and see!!!!!!

The Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA) have been temporarily halted following recent court rulings.

On Dec. 26, 2024, the 5th Circuit Court reversed an earlier stay, reinstating a preliminary injunction that prevents the Financial Crimes Enforcement Network (FinCEN) from enforcing the BOI filing requirements:

“However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED”

This ruling concludes that, while the court considers the appeal, the injunction stands, and BOI reporting is not required until a court decision is reached, providing a clear status update.

We’ll continue to provide updates on this evolving issue.

Here is the recent history on this extremely evolving issue in case you’re interested.

Updates to Beneficial Ownership Information Reporting Deadlines – Beneficial Ownership Information Reporting Requirements Now in Effect, with Deadline Extensions

In light of December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline as follows:

• • Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
  • Reporting companies created or registered in the United States on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN.
  • Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
  • Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
  • Reporting companies that are created or registered in the United States on or after January 1, 2025, have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
  • As indicated in the alert titled “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”, Plaintiffs in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)—namely, Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN at this time.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction enjoining the Corporate Transparency Act (CTA) entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. Texas Top Cop Shop is only one of several cases that have challenged the CTA pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024, and separately sought of stay of the injunction pending that appeal with the district court and the U.S. Court of Appeals for the Fifth Circuit.

In this Issue:

• New Draft of Fringe Benefit Guide Released
• IRS Increasing Enforcement of Gambling Income Filing Requirements
• Navigating the Complex Tax Rules for Day Care
• TCJA Sunset
• Court Bars FinCEN from Enforcing BOI Rules – Note OVERTURNED
• New IRS Leadership Announced Amidst Shift in Administration
• Regs on Partnership Recourse Liability Finalized
• TIGTA Looks at Refund Anticipation Product Fees
• Tax Professional Tips for Creating a Data Security Plan
• CFPB Proposes Rule to Stop Data Brokers from Selling Sensitive Personal Data to Scammers, Stalkers, and Spies
• IRS-CI Releases 2024 Annual Report; Notes Agency’s Billion-dollar Impact, Global Reach
• Tax Professionals Can Access Useful Tools on their IRS Tax Pro Account IRS Tax Tip 2024-94
• Business Tax Account Available Now for Corporate Designated Officials
• 1099 K Threshold Announced by IRS
• The Tax Offset Program Continues to Allow Millions of Dollars to Be Erroneously Refunded to Taxpayers December 2, 2024, Report Number: 2025-400-002
• IRS to Use IP PINs to Stop Refund Delays Due to Duplicate Dependent Returns
• Some EAs Must Renew Status by Jan. 31
• FTC Fines H&R Block for Deceptive Claims
• Millions Not Paying Tax on Early Distributions
• TIGTA Lists 2025 IRS Management Challenges
• IRS Releases 2025 Standard Mileage Rates
• Applicable Federal Rates for January 2025, Rev. Rul. 2025-1

Issue 1: New Draft of Fringe Benefit Guide Released

The IRS has released a new draft of Publication 15-B, The Employer’s Tax Guide to Fringe Benefits, for the 2025 tax year. The updates include information on the qualified parking exclusion and commuter transportation benefits as well as guidance on the contribution limit on health flexible spending arrangements. Because it is a draft, some information has yet to be updated for 2025.

Issue 2: IRS Increasing Enforcement of Gambling Income Filing Requirements

Based on a TIGTA report dated September 30, 2024 (2024-300-064) TIGTA discovered the IRS has not applied tax filing requirements related to reported gambling winnings, the IRS is beginning to take enforcement actions and conduct a review of the reasons non-filers have not been identified. TIGTA found the IRS has not enforced income tax return filing requirements for the recipients of millions of Forms W-2G, Certain Gambling Winnings, that reported millions of dollars in gambling winnings.

TIGTA reached its conclusions after reviewing all the Forms W-2G issued to individuals during tax years 2018 through 2020 and found 148,908 individuals with gambling winnings totaling $15,000 each who were issued Forms W-2G, but did not file a tax return. In total, these nonfilers were associated with approximately $13.2 billion in total gambling winnings.

Following TIGTA’s review, the IRS analyzed 17,436 high-income nonfilers with a total positive income of $100,000 or more for the 2018 tax year and calculated that it could increase tax revenue by roughly $1.4 billion by addressing 139,045 nonfilers with gambling winnings that were included in the agency’s non-filer case creation process inventory. The IRS also said it will begin appropriate enforcement actions for nonfilers with gambling winnings for the 2018 through 2020 tax years, including against the top 100 non-filer cases identified by TIGTA.

The IRS also agreed to review and profile the population of nonfilers with gambling winnings for the 2018 through 2020 tax years that were not identified by the agency’s Individual Master File Case Creation Non-Filer Identification Process (IMF CCNIP). The research will determine potential reasons why non-filer returns were not identified and assess the current state of the returns to determine whether filing requirements have been satisfied. If a taxpayer has not satisfied the filing requirement and enforcement is applicable, then the Collection or Exam divisions will consider manual enforcement.

While TIGTA found hundreds of the Forms W-2G it reviewed did not include the taxpayer identification numbers (TINs) necessary to trace income to the recipient, the IRS disagreed with TIGTA’s recommendation that it conduct an analysis of forms missing TINs. IRS officials maintained that Forms W-2G that were issued with missing or invalid TINs do not contribute significantly to the tax gap. Additionally, it said the percentage of Forms W-2G filed without TINs were an insignificant percentage of the total annual volume of Forms W-2G it receives.

Issue 3: Navigating the Complex Tax Rules for Day Care

Day cares have unique income and expense categories, such as meals, educational supplies and home office deductions, that significantly impact allowable deductions and credits.

With a proper understanding of how to handle these taxes, you can ensure compliance with IRS rules, maximize tax savings and reduce the risk of costly audits or penalties, allowing your clients to focus on their business operations with peace of mind.

A recent webinar was held by the National Association of Tax Professionals, and they shared some of the top questions from participants.

• Q: Can the taxpayer count expenses for the children of the day care owner?
  • A: The owner’s children’s expenses are not part of the business.
• Q: For calculating meal expenses for the day care children, can the standard or actual meal method be changed every year, or must the same method be used?
  • A: The method used to calculate meal expenses can be changed every year.
• Q: For in-home day care, do most expenses go on Form 8829, Expenses for Business Use of Your Home?
  • A: Office-in-home expenses are reported on Form 8829, while other expenses go directly on Schedule C, Profit or Loss from Business.
• Q: If you go grocery shopping and buy items for both the day care and your family, do you need to purchase these separately?

• • A: It would be easier for tracking purposes to purchase separately for the day care. If purchased together, you would need to separate the business and personal items.

Issue 4: TCJA Sunset

What happens when the clock strikes 2025, and the Tax Cuts and Jobs Act (TCJA) of 2017 hits its expiration date for key provisions?

Congress is gearing up to make some big moves that could shape the financial future of millions of Americans. Back in 2017, the TCJA was kind of a big deal—it overhauled the U.S. tax system, trimmed tax rates, and gave the economy a little extra oomph.

The administration has expressed interest in securing provisions like the Qualified Business Income Deduction (QBID) and introducing new measures, such as eliminating taxes on tips for hospitality workers.  However, these proposals come with fiscal challenges, as permanently extending certain provisions may increase the national deficit. Additionally, discussions about IRS funding and its role in enforcement and taxpayer services add another dimension to the debate.

The TCJA introduced sweeping changes that benefitted households and businesses alike. For individuals, it lowered tax rates, nearly doubled the standard deduction, and simplified the process by reducing itemized deductions. Businesses saw a permanent corporate tax rate cut to 21%, alongside temporary perks like 100% bonus depreciation and R&D expensing. Small businesses benefited from a 20% pass-through deduction, while international tax rules were revamped to discourage profit-shifting.

The expiration of the TCJA’s provisions comes with serious consequences. For individuals, reverting to pre-2017 tax rules means higher rates and narrower brackets, which could increase tax burdens and complicate filing. The expanded standard deduction will shrink, and personal exemptions will return, reversing the simplifications many Americans enjoyed.

For businesses, the stakes are equally high. The expiration of 100% bonus depreciation and changes to R&D expensing rules could reduce incentives for investment. Small businesses stand to lose the pass-through deduction, and international corporations could face higher costs as key reforms roll back. Beyond these individual challenges lies a broader issue: the fiscal impact.

Extending all TCJA provisions without adjustments could cost over $4 trillion in revenue over the next decade, worsening deficits and the national debt. Balancing economic benefits with fiscal responsibility will be critical.

• The United States is home to over 207 million total taxpayers.
• The average taxpayer would see a 22% tax hike if the Trump Tax Cuts expire.
• A family of 4 making $80,610, the median income in the United States, would see a $1,695 tax increase if the Trump Tax Cuts expire.
  • This is worth about 9 weeks of groceries to a typical family of 4 across the country.

Impact on American Families and Workers by the Numbers

• 40 million Families would see their household’s Child Tax Credit cut in half.
• 90 % of all taxpayers would see their Guaranteed Deduction slashed in half.
• 26 million Small Businesses would be hit with a 43.4% tax rate if the 199A Small Business Deduction expires.
• 7 million Taxpayers would be impacted by the return of the Alternative Minimum Tax.
• 2 million Family-Owned Farms would have their Death Tax

Issue 5: Court Bars FinCEN from Enforcing BOI Rules  – Old News

A federal district court in Texas issued a preliminary injunction temporarily barring the federal government from enforcing the Corporate Transparency Act (CTA) and its beneficial ownership information reporting (BOI) requirements. The plaintiffs in the lawsuit claimed Congress exceeded its authority under the U.S. Constitution and the judge for the U.S. District Court for the Eastern District of Texas agreed. The judge enjoined the federal government from enforcing the provisions of the CTA after finding the plaintiffs were likely to succeed in trial based on the merits of their claims.

Under the court order, neither the CTA nor the implementing rules adopted by Treasury’s Financial Crimes Enforcement Network (FinCEN) may be enforced and reporting companies are not required to comply with the Jan. 1 deadline for filing BOI reports. The preliminary injunction is not a final decision on the case, and it is likely the government will appeal the injunction. FinCEN has yet to issue any guidance addressing the ruling.

Based on the decision, it appears that FinCEN can’t penalize entities that do not file BOI reports. However, questions related to the constitutionality of the CTA and BOI reporting are still being litigated and they are unlikely to be resolved soon.

Issue 6: New IRS Leadership Announced Amidst Shift in Administration

President-elect Donald Trump has announced his intention to appoint former Republican congressman Billy Long of Missouri to lead the IRS. This decision breaks with the longstanding tradition of allowing IRS commissioners to complete their full five-year terms.

Current IRS Commissioner Danny Werfel, appointed by President Joe Biden in 2022, had planned to serve until 2027. If the Long appointment proceeds, Werfel’s term may conclude earlier than anticipated, signaling a potential shift in the tax agency’s leadership priorities.

Issue 7: Regs on Partnership Recourse Liability Finalized

The IRS has issued final regulations addressing the treatment of a partner’s share of recourse partnership liability. With some modifications, the regulations finalize proposed regulations issued in 2013 and offer guidance regarding the extent to which a partner is treated as bearing the economic risk of loss for a liability of the partnership when multiple partners bear the risk for the same partnership liability. The final regulations apply to any liability subject to a binding contract provision that is incurred or assumed on or after Dec. 2.

The regulations also address situations where a partner has a payment obligation for a partnership liability or where a partner who is related to another person in the partnership makes a nonrecourse loan and no other partner bears the economic risk of loss.

Issue 8: TIGTA Looks at Refund Anticipation Product Fees

Taxpayers paid more than $842 million in fees to receive refund anticipation checks for the 2023 tax year, according to a Treasury Inspector General for Tax Administration (TIGTA) report. That amount was determined based on a review of the top seven providers of refund products by the agency, which did not disclose the names of the providers. TIGTA could not estimate the taxpayer cost of refund anticipation loans because the terms and conditions of the products vary among providers and the IRS does not capture the amount of the refund subject to a loan.

TIGTA found that 21.9 million of 138 million 2023 tax returns that were electronically filed used a refund product, or about 16% of returns. Of those returns using a refund product:

• 96% used a refund anticipation check
• 4% used a refund anticipation loan

While the providers of refund products are largely complying with the applicable IRS guidance regarding fee disclosure, TIGTA found the fees and costs of some products were not clearly advertised and required the reading of fine print or multiple pages to find the information. TIGTA also encouraged the IRS to update its website to better educate taxpayers regarding fees related to refund anticipation checks and loans.

Issue 9: Tax Professional Tips for Creating a Data Security Plan

We covered how to create a WISP for your practice in our Year-End Webinar and we identified resources you can use in creating the WISP Plan.

Tax professionals are required by law to create a Written Information Security Plan – or WISP – to protect their clients’ data. The IRS and the Security Summit partners have created an easy-to-follow Written Information Security Plan that outlines the basics and walks tax professionals through how to get started on a plan and understand security compliance requirements and professional responsibilities.

Creating a WISP

A WISP protects client information most effectively when tailored to the size, scope, complexity and sensitivity of the customer data it handles. A WISP should focus on:

• Employee training and management.
• Information systems.
• System failure detection and management.

WISP Requirements

Tax professionals are required by law to have a WISP in place to protect customer data.  As a part of their security plan, each tax professional needs to:

• Designate one or more employees to coordinate its information security program.
• Identify and assess risks to customer information in each relevant area of the company’s operation.
• Evaluate the effectiveness of the current safeguards for controlling those risks.
• Design and implement a safeguards program and regularly monitor and test it.
• Contract a service provider that maintains safeguards and handling of customer information.

Tax professionals should always be evaluating and adjusting their WISP based on relevant circumstances, changes in the firm’s business or operations or the results of security testing and monitoring.

• Publication 5708, Creating a Written Information Security Plan for your Tax & Accounting Practice
• Publication 5709, How to Create a Written Information Security Plan for Data Safety
• Publication 5293, Data Security Resource Guide for Tax Professionals

Issue 10: CFPB Proposes Rule to Stop Data Brokers from Selling Sensitive Personal Data to Scammers, Stalkers, and Spies

Rule seeks to protect Americans from crime and illegal foreign surveillance

The Consumer Financial Protection Bureau (CFPB) today proposed a rule to rein in data brokers that sell Americans’ sensitive personal and financial information. The proposed rule would limit the sale of personal identifiers like Social Security Numbers and phone numbers collected by certain companies and make sure that people’s financial data such as income is only shared for legitimate purposes, like facilitating mortgage approval, and not sold to scammers targeting those in financial distress.

The proposal would make clear that when data brokers sell certain sensitive consumer information they are “consumer reporting agencies” under the Fair Credit Reporting Act (FCRA), requiring them to comply with accuracy requirements, provide consumers access to their information, and maintain safeguards against misuse.

The data broker industry collects and sells detailed information about Americans’ personal lives and financial circumstances to anyone willing to pay. The CFPB’s proposal would ensure data brokers comply with federal law and address critical threats from current data broker practices, including:

• National security and surveillance risks: Countries of concern, like China and Russia, can purchase detailed personal information about military service members, veterans, government employees, and other Americans for pennies per person. This enables the creation of detailed dossiers for potential espionage, surveillance, or blackmail operations, allowing relatively small investments to be leveraged into mass surveillance operations.
• Criminal exploitation: Identity thieves and scammers purchase detailed financial profiles to target vulnerable consumers, particularly seniors and financially distressed individuals. These criminals can use this data to execute sophisticated fraud schemes and steal retirement savings, often targeting Americans who can least afford the losses.
• Violence, stalking, and personal safety threats to law enforcement personnel and domestic violence survivors: The availability of sensitive contact information poses risks to those who are targeted for their profession, such as judges, police officers, prosecutors, and other government employees. Domestic violence survivors also face grave dangers when their current addresses and phone numbers are readily available for purchase through data brokers. Several states have already had to take action to protect judges and law enforcement officers after violent incidents, including the 2020 murder of a federal judge’s son by an attacker who purchased her home address.

To address these risks, the proposed rule would:

• Treat data brokers just like credit bureaus and background check companies: Companies that sell data about income or financial tier, credit history, credit score, or debt payments would be considered consumer reporting agencies required to comply with the FCRA, regardless of how the information is used.
• Protect consumers’ personal identifiers from abuse and misuse: When consumer reporting agencies collect information like names, addresses, or ages for credit reports, any subsequent sale of that information would be covered by the FCRA’s protections.
• Require clear consumer consent for data sharing: Under the proposed rule, companies relying on consumers’ consent to obtain or share a consumer’s credit report would need separate, explicit authorization to do so, rather than burying permissions in fine print.

These changes would significantly limit the ability of data brokers to sell sensitive contact information that could be used to target, harass, or dox individuals seeking privacy protection, including domestic violence survivors. The proposed rule would preserve existing pathways created by the FCRA for government agencies to access consumer report information for legitimate law enforcement, counterterrorism, and counterintelligence purposes.

Congress enacted the FCRA, one of the first data privacy laws in the world, in 1970 to, among other things, strictly limit the use of personal data by a growing data surveillance industry. The CFPB’s proposed rule would ensure that the FCRA’s strong privacy protections safeguard consumers from modern data brokers that rely on emerging technologies and newer business models to collect and sell consumer data.

The CFPB developed this proposed rule based on extensive market monitoring that revealed widespread evasion of consumer protections. The agency found that data brokers routinely sidestep the FCRA by claiming they aren’t subject to its requirements – even while selling the very types of sensitive personal and financial information Congress intended the law to protect. This proposed rule would further Congress’s goal of protecting Americans’ privacy and financial information.

The proposed rule is part of a broader government-wide initiative to protect Americans’ sensitive personal data, complementing recent Executive Orders and actions by other federal agencies. In October, the Department of Justice proposed a rule to prevent access to Americans’ sensitive personal data by Russia, Iran, China, and other countries of concern.

Issue 11: IRS-CI Releases 2024 Annual Report; Notes Agency’s Billion-dollar Impact, Global Reach

The IRS Criminal Investigation (IRS-CI) published its Fiscal Year 2024 (FY24) Annual Report, which includes investigative statistics, improved domestic and international partnerships and noteworthy cases involving crimes ranging from tax fraud to cybercrime.

Issue 12: Tax Professionals Can Access Useful Tools on their IRS Tax Pro Account IRS Tax Tip 2024-94

As part of 2024 National Tax Security Awareness Week, , the IRS and Security Summit partners remind tax professionals that their IRS Tax Pro Account, a digital self-service portal, lets them manage authorized relationships with their clients and view clients’ tax information while keeping client data secure.

The IRS Tax Pro Account lets qualified tax professionals send power of attorney and tax information authorization requests directly to a client’s individual IRS Online Account. This shortens processing times and eliminates the need to fax, mail or upload documents.

To approve a tax professional’s authorization request in IRS Online Account, the taxpayer simply checks a box and submits the authorization request to the IRS. Most authorizations are processed immediately, though some may take up to 48 hours.

Requirements of Tax Pro Account
To use Tax Pro Account, a tax professional needs:

• A Centralized Authorization File number in good standing that’s assigned to them as an individual. Tax professionals can request a CAF number when using Tax Pro Account for the first time.
• A CAF address that’s in the 50 states or the District of Columbia.

Features of Tax Pro Account
Tax professionals can also use their Tax Pro Account to:

• View clients’ tax information, including balance due amounts.
• Send a POA or TIA request to an individual’s IRS Online Account for approval.
• View and withdraw active POAs and TIAs.
• Manage and withdraw active client authorizations on file with the CAF database.

More information:

• Publication 5533-A, How to Submit Authorizations Using Tax Pro Account and Online Account
• Publication 947, Practice Before the IRS and Power of Attorney
• Power of Attorney and Other Authorizations
• Tax Pro Account Accessibility Guide
• Tax pros Can Use Their IRS Tax Pro Account to Simplify Authorization Requests

Issue 13: Business Tax Account Available Now for Corporate Designated Officials

IRS Business Tax Account (BTA) beneficial characteristics continue to expand as the IRS makes this account accessible to an increasing number of business taxpayers. A recent expansion makes this online self-service tool for business taxpayers available to C corporations.

A person who can legally bind the corporation, known as a Designated Official, can now access BTA on behalf of their S corporation or C corporation. In addition, Designated Officials and sole proprietors can now use BTA to approve or reject a tax transcript authorization request from a lender through the IRS Income Verification Express Service (IVES). Through IVES, mortgage companies, banks, credit unions and other lenders can easily access a taxpayer’s tax records to verify the income of those applying for mortgages and other loans. The IRS can only provide a lender access to this information if a taxpayer authorizes it.

Issue 14: 1099 K Threshold Announced by IRS

We discussed this briefly in our Quarterly Update and now we have some official information.  IRS has finally addressed Form 1099-K threshold for tax year ending 2024.

The Internal Revenue Service issued Notice 2024-85 providing transition relief for third party settlement organizations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during calendar years 2024 and 2025.

Under the guidance issued today, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after. 

Notice 2024-85 also announces for calendar year 2024, that the IRS will not assert penalties under §§ 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year.

TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.

For the calendar year 2025 and after, the IRS will assert penalties under §§ 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax.

In addition: H.R. 190 the Saving Gig Economy Taxpayers Act is gaining increased action and comment.

Issue 15: The Tax Offset Program Continues to Allow Millions of Dollars to Be Erroneously Refunded to Taxpayers December 2, 2024, Report Number: 2025-400-002

Procedural and programming errors continue to result in overpayments not being applied to outstanding tax debt. Thus, the IRS needs to reevaluate its processes and programming.

TIGTA identified 2,093 individual and business tax accounts with overpayments totaling more than $8 million that were not offset because employees manually processed a refund or credit elect but did not correctly identify those taxpayers had outstanding tax debt.

In addition, the review identified 287 individual tax accounts with overpayments totaling more than $2.5 million, and 2,139 business tax accounts with overpayments totaling $68.1 million for which overpayments were not applied to outstanding tax debt due to programming errors.

Also, available data is still not being used to identify related sole proprietorships with tax debt. Our analysis identified 11,206 individual taxpayers who were issued more than $9.1 million in refunds since Calendar Year 2017 that should have been offset to outstanding sole proprietorship tax debt.

In March 2016, TIGTA reported that the IRS needed to revise its identification processes to include sole proprietorship information from Form SS-4, Application for Employer Identification Number, to identify when an individual taxpayer is liable for outstanding business tax debt.

The IRS agreed; however, it has not implemented the necessary programming changes. Moreover, due to continued manual processing errors, some overpayments were not applied to Non-Master File tax debt.

TIGTA identified more than $8.4 million in refunds that should have been applied to outstanding tax debt on the Non-Master File; and more than $357.9 million in outstanding Non-Master File tax debt that was not protected from erroneously refunding.

Finally, taxpayers were NOT notified of erroneous offsets to outstanding Limited Liability Company tax debt. The analysis identified 441 taxpayers that were not sent Letter 3064C, Integrated Data Retrieval System Special Letter, providing them the opportunity to correct an erroneous offset.

TIGTA made 11 recommendations that will help the IRS improve the tax offset program. These recommendations include:

• Updating internal guidance and developing more robust training for employees.
• Requesting necessary programming changes.
• Issuing alerts to advise IRS functional areas not to reverse freezes or issue refunds on accounts with outstanding debt on the Automated Non-Master File and
• Sending letters to the taxpayers with an erroneous offset.

The IRS agreed with all recommendations and has taken or plans to take corrective actions.

Issue 16: IRS to Use IP PINs to Stop Refund Delays Due to Duplicate Dependent Returns

The IRS will begin accepting certain e-filed tax returns claiming dependents who have already been claimed on another taxpayer’s return to prevent refund delays for tax credits, including the earned income tax credit (EIC) and the child tax credit (CTC).

Beginning with the 2025 filing season, the IRS will accept Forms 1040, 1040-NR and 1040-SS, even if a dependent listed on the return has been claimed on someone else’s previously filed return, so long as the primary taxpayer on the second return includes a valid identity protection personal identification number (IP PIN).

The change allows the IRS to accept tax returns with duplicate dependent returns more quickly and accelerate the issuance of tax refunds related to the duplicate returns. In previous years, the second return needed to be paper-filed. The IRS will continue to reject e-filed returns without an IP PIN if they claim a dependent who appears on a previously filed return.

Using an IP PIN will also help protect taxpayers from someone else fraudulently claiming the taxpayer’s dependent on their return. However, if the taxpayer obtains an IP PIN and e-files again with the IP PIN on their return, the IRS will accept the return if there are no other issues. Taxpayers claiming dependents for the 2022 and 2023 tax years must still file by mail if their dependent has been claimed on another return.

The IRS encourages taxpayers to sign up for IRS Online Account, which provides a quick and easy way to obtain an IP PIN. The IRS’s IP PIN system will be down for scheduled maintenance from Nov. 23 until early 2025, so the IRS is encouraging taxpayers who plan on filing early to sign up for their IP PIN before the shutdown.

Issue 17: Some EAs Must Renew Status by Jan. 31

Enrolled agents (EAs) with Social Security numbers ending in 0, 1, 2 or 3 have until Jan. 31 to renew their status with the IRS. EAs must renew their status every three years to remain eligible to practice before the IRS. Failure to renew by the deadline will result in an EA’s status becoming “inactive.”

Issue 18: FTC Fines H&R Block for Deceptive Claims

The Federal Trade Commission (FTC) agreed to a proposed settlement that will require H&R Block to pay $7 million for deceptive practices related to its online tax filing products.

The proposed settlement would stop H&R Block from unfair practices, including requiring customers seeking to downgrade to one of its cheaper online tax filing products to contact customer service, deleting users’ previously entered data and making deceptive claims about “free” tax filing. H&R Block has agreed to make a number of changes for the 2025 tax filing season and to make longer-term changes.

Issue 19: Millions Not Paying Tax on Early Distributions

An analysis of 2021 tax return information conducted by the Treasury Inspector General for Tax Administration (TIGTA) found that roughly 2.8 million taxpayers who received approximately $12.9 billion in early retirement distributions did not pay the additional 10% tax. The taxpayers also failed to file Forms 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, related to their distributions. The IRS could have collected approximately $322 million in penalties based on taxpayers’ failure to file Forms 5329, according to TIGTA.

Additionally, TIGTA found that an estimated 2.3 million of the 2.8 million who did not pay the additional tax did not properly report $11.4 billion in early distributions as taxable income. It found that 880 of those taxpayers did not report distributions of more than $200,000.

The IRS disagreed with TIGTA’s determination that the agency could have collected an additional $322 million from failure to file penalties for Form 5329. The IRS contended that a number of those who did not file the form would late-file their Forms 5329 claiming exceptions to the tax. In those cases, the tax owed would be zero and there would be no penalty.

Issue 20: TIGTA Lists 2025 IRS Management Challenges

The Treasury Inspector General for Tax Administration (TIGTA) has released its annual list of management challenges the IRS faces for the 2025 fiscal year. Each year, TIGTA evaluates IRS programs, operations and management functions to identify the most vulnerable areas in the federal tax system. The challenges for 2025 include:

• Managing transformation efforts using funding provided through the Inflation Reduction Act (IRA) when some of the funding has already been rescinded and more cuts may follow.
• Protection of taxpayer data and IRS resources with effective security controls when much of the data is stored in different computer systems.
• Implementing tax law changes that require the IRS to update its computer programs in a short time frame.
• Improving taxpayer service using funds provided by the IRA when funding from the legislation is expected to run out by the 2026 fiscal year.
• Attract, retain and empower a highly skilled, diverse workforce that delivers results for taxpayers.
• Modernizing the IRS’s information technology and business systems to provide taxpayers with top quality service, help taxpayers understand and meet their tax responsibilities, and enforce the law with integrity and fairness.
• Tax compliance and enforcement when the rising complexity of tax administration and sophisticated tax evasion schemes have outpaced the IRS’s ability to close the tax gap.
• Help taxpayers meet their obligations and receive the tax incentives for which they are eligible with fewer fraudulent payments, improper payments and inadvertent errors.
• Ensure taxpayers are treated equitably and protect their rights

Issue 21:   IRS Releases 2025 Standard Mileage Rates

The IRS has released the 2025 optional standard mileage rates used in calculating the deductible costs of operating a vehicle for business, charitable, medical or moving purposes. The rates apply to electric and hybrid-electric vehicles as well as vehicles powered by gasoline and diesel fuel. Beginning Jan. 1, 2025, the standard rate for the use of a car, van, pickup truck or panel truck will be:

• 70 cents per mile driven for business use, up 3 cents from 2024
• 21 cents per mile driven for medical purposes or for moves by qualified active-duty members of the armed forces, unchanged from last year

14 cents per mile driven in service of charitable organizations, the rate is set by statute and unchanged from 2024.

Issue 22: Applicable Federal Rates for January 2025, Rev. Rul. 2025-1

Frequently Asked Questions (FAQs)

General Tax Updates

1. What are the standard mileage rates for 2025?
   • Business use: $0.70 per mile.
   • Medical or moving purposes (for qualified active-duty military): $0.21 per mile.
   • Charitable service: $0.14 per mile (unchanged).
2. When is the new deadline for filing Beneficial Ownership Information (BOI) reports?
   • January 13, 2025, for companies created before January 1, 2024.
   • Companies registered after January 1, 2025, must file within 30 days of creation or registration.
3. What is the IRS doing to address refund delays caused by duplicate dependent claims?
   • Taxpayers must use an IP PIN for e-filing to prevent delays when claiming dependents already listed on another return.
4. What are the inflation adjustments for retirement plans in 2025?
   • Elective deferrals limit: $23,500.
   • Catch-up contributions (age 50+): Remains at $7,500.

Specific Tax Issues

5. What are the changes for Form 1099-K reporting thresholds?
   • $5,000 for 2024, $2,500 for 2025, and $600 starting in 2026.
6. How is the IRS addressing gambling income reporting?
   • The IRS is increasing enforcement for non-filers with Forms W-2G, targeting high-income individuals and others with unreported gambling winnings.
7. What is the Earned Income Tax Credit (EITC) maximum for 2025?
   • $8,046 for taxpayers with three or more qualifying children.
8. What changes are coming with the expiration of the Tax Cuts and Jobs Act (TCJA)?
   • The TCJA’s expiration in 2025 will result in higher individual tax rates, reduced standard deductions, and changes to small business deductions.

Data and Security

9. What are the requirements for a Written Information Security Plan (WISP)?
   • Identify risks to customer data.
   • Train employees on data security.
   • Regularly test and monitor safeguards.
10. What is the CFPB doing to protect sensitive personal data?
    • Proposing rules to classify data brokers as consumer reporting agencies and requiring explicit consumer consent for data sharing.

Professional Practice

11. What resources are available for tax professionals on the IRS Tax Pro Account?
    • View client tax info.
    • Submit and manage POAs.
    • Approve or reject lender transcript requests.
12. How can tax professionals create a WISP?
    • Use IRS resources like Publications 5708, 5709, and 5293.
13. When must enrolled agents (EAs) renew their status?
    • EAs with SSNs ending in 0, 1, 2, or 3 must renew by January 31, 2025.

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