Key Takeaways
- Blanket 2024 tax filing deadline relief covers all of Los Angeles County.
- Filing season set to open January 27.
- Partnership basis-shift disclosure regulations go final; six-year lookback.
- Microcaptive insurance disclosure rules finalized.
- Commercial clean vehicle credit guidance.
- SALT deduction foes meet with Trump.
- IRS highlights top 10 2024 criminal cases.
- Rubber Ducky Day!
California wildfire victims qualify for tax relief; various deadlines postponed to Oct. 15 - IRS:
These taxpayers now have until Oct. 15, 2025, to file various federal individual and business tax returns and make tax payments.
The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, individuals and households that reside or have a business in Los Angeles County qualify for tax relief.
...
This means, for example, that the Oct. 15, 2025, deadline will now apply to:
- Individual income tax returns and payments normally due on April 15, 2025.
- 2024 contributions to IRAs and health savings accounts for eligible taxpayers.
- 2024 quarterly estimated income tax payments normally due on Jan. 15, 2025, and estimated tax payments normally due on April 15, June 16 and Sept. 15, 2025.
- Quarterly payroll and ex-cise tax returns normally due on Jan. 31, April 30 and July 31, 2025.
- Calendar-year partnership and S corporation returns normally due on March 17, 2025.
- Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025.
- Calendar-year tax-exempt organization returns normally due on May 15, 2025.
In addition, penalties for failing to make payroll and excise tax deposits due on or after Jan. 7, 2025, and before Jan. 22, 2025, will be abated as long as the deposits are made by Jan. 22, 2025.
Additional Coverage:
L.A. Fires: Extensive Tax Relief Available - Thomas Gorczynski, Tom Talks Taxes.
IRS & California FTB Give Tax Relief To California Wildfire Victims - Robert Wood, Forbes.
IRS Extends California Fire Disaster Area Deadlines Until October 15th - Russ Fox, Taxable Talk.
The IRS expects more than 140 million individual tax returns for tax year 2024 to be filed ahead of the Tuesday, April 15 federal deadline. More than half of all tax returns are expected to be filed this year with the help of a tax professional, and the IRS urges people to use a trusted tax pro to avoid potential scams and schemes.
...
On the first day of the filing season, Direct File will open to eligible taxpayers in 25 states to file their taxes directly with the IRS for free: 12 states that were part of the pilot last year, plus 13 new states where Direct File will be available in 2025. During last year’s pilot, Direct File was available in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State and Wyoming. For the 2025 tax filing season, Direct File will also be available in Alaska, Connecticut, Idaho, Illinois, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania and Wisconsin.
Direct File will include new features this year to make filing taxes quicker and easier. Similar to commercial tax software, a data import tool will allow taxpayers to opt-in to automatically import data from their IRS account, including personal information, the taxpayer’s IP PIN and some information from the taxpayer’s W-2.
Regulation Rush - Partnership Basis Shifts
IRS Finalizes Partnership Basis-Shifting Anti-Abuse Rules - Anna Scott Farrell, Law360 Tax Authority ($).
The rules are meant to affect large partnerships, with dollar-amount thresholds unlikely to affect small businesses, the agency said. Affected distributions or transfers are those that generate an increase in the basis of distributed property of $10 million or more, or $25 million or more in the case of transactions occurring before 2025, but for which no congruent tax is paid, the IRS said.
Final Regs Narrow Scope of Basis Shifting Reporting Rules - Kristen Parillo, Tax Notes ($):
”Thus, if a transaction has the effect of shifting the specified amount of basis among related parties during the applicable period — even if it arises from an ordinary business transaction — the final regs generally treat it as a reportable transaction, Dance said.
“And it’s not just for stuff we’re doing today, because there are lookback rules that will force us to consider whether we’re reporting things on a current year tax return that relate to basis adjustments arising out of transactions we may have innocently executed years ago — for example, as part of a business separation transaction or family partnership dispute resolution,” Dance said.
IRS Finalizes Rules on Partnership Basis-Shifting Maneuver - Michael Rapoport, Erin Slowey, and Rebecca Chen, Bloomberg ($):
Regulation Rush: Microcaptives
IRS Finalizes Rules Defining Reportable Microcaptive Deals - Chandra Wallace, Tax Notes ($):
...
Captive insurers are owned by the companies they insure; small captives can elect tax treatment under section 831(b), which allows them to exclude from their taxable income the premiums they receive from the owner-insured companies. The insured company can still deduct the cost of the premiums, however, creating the potential for abuse.
Regulation Rush: Commercial Clean Vehicles
IRS Looks to Rev Up Commercial Car Credits With New Guidance - Mary Katherine Browne, Tax Notes ($):
The proposed regulations (REG-123525-23), released January 10, provide taxpayers with information on how to determine the credit amount for the section 45W commercial clean vehicle credit and clarify requirements for qualifying vehicles and eligibility, special rules for certain transactions, and recapture methods.
...
Under section 45W, businesses and tax-exempt organizations can claim a tax credit for purchasing qualifying commercial clean vehicles. The credit is equal to the lesser of (1) 15 percent of the basis in the vehicle or (2) the incremental cost of the vehicle. The credit is capped at $7,500 for qualifying vehicles with weight ratings of under 14,000 pounds and $40,000 for all other vehicles. The credit expires after 2032.
Tax Legislation Tea Leaves
Trump Discusses Tax Cuts for New Yorkers With G.O.P. Lawmakers - Andrew Duehren, New York Times:
...
Some have called for raising the limit for the deduction as high as $200,000. Others have more modest ambitions, including a smaller increase in the deduction’s limit that would be paired with gradual hikes over time that match the pace of inflation. Right now, the $10,000 cap applies to both individuals and married couples, and the group seems in agreement that couples should take a larger deduction than individuals.
SALT Deduction Cap Talk With Trump ‘Positive,’ Lawmakers Say - Nacha Cattan and Billy House, Bloomberg via MSN. "Lifting the cap is unpopular among some conservative Republicans from lower-tax states and nonpartisan analysts, who say the change would benefit mostly high-income households in largely Democratic states."
Trump’s tax-cut obstacle course - Aris Folley and Taylor Giorno, The Hill:
...
“If you were to put a lot of stuff together, it would be very difficult for Chip Roy to vote against border security and energy,” he said, explaining Johnson’s desire to move border security and tax relief in the same bill.
Mullin warned there are also potential defections on tax legislation in the House GOP conference from “the New York guys that are very serious about SALT.”
A delay in GOP’s tax plans could push up costs by hundreds of billions - Brian Faler, Politico:
...
There’s a number of reasons why Treasury’s price tag is much higher but a big one is that its analysis begins in 2026, not 2025, like CBO’s.
That may not sound like a big deal, but when budget analysts estimate the price of legislation, they look at the anticipated expenses over a decade, and it makes a huge difference when the cost-counting clock starts.
Blogs and Bits
Free File 2025 is open with 8 familiar software options - Kay Bell, Don't Mess With Taxes. "The main difference this year is that the Internal Revenue Service/Free File Alliance partnership can be used by taxpayers whose adjusted gross income (AGI) is $84,000. That’s five grand more than last year’s AGI threshold, but it still applies to all filers, regardless of filing status."
IRS Issues Proposed Regulations on Catch-Up Contributions to Address SECURE 2.0 Act Changes - Ed Zollars, Current Federal Tax Developments. "Proposed §1.414(v)-2 details the implementation of the Roth catch-up requirement. It clarifies that if a participant’s prior year FICA wages (as defined by section 3121(a)) from the employer sponsoring the plan exceed $145,000, any catch-up contributions must be designated Roth contributions. The regulations also clarify that this determination is based on the FICA wages of the common law employer."
Tax Breaks: The Open To The 2025 Tax Season Is Coming Edition - Kelly Phillips Erb, Forbes. "You can find organizations in your community with IRS-certified volunteers who provide free tax help for eligible taxpayers, including seniors, people with disabilities, and those who speak limited English."
The Case for Trump’s 15 Percent Corporate Tax Rate - Adam Michel and Joshua Loucks, Liberty Taxed. "At a combined rate of 25.6 percent, the United States’ corporate tax rate is still above the non-US OECD average of 24 percent."
Tax Crime Top Ten
IRS-CI reveals top 10 cases of 2024 - IRS:
The cases range from drug money laundering and embezzlement to ID theft and flaky tax shelters. A common thread is luxury goods:
"The bribery scheme sought nearly $2 million in bribes from real estate developers and their proxies, including cash bribes, casino gambling chips, prostitution services, political contributions, flights on private jets and commercial airlines, stays at luxury hotels and casinos, expensive meals, tickets to concerts and sporting events, and other things of value."
"He used the proceeds of this scheme to place bets with online gambling websites, purchase a condominium in Florida, pay for personal travel for himself and friends, acquire new vehicles, purchase digital assets and more."
"...she deposited it into her bank account and then spent it on clothing, jewelry, vehicles and real estate. Her lavish spending that drew the attention of IRS-CI special agents, and the IRS-CI investigation helped stop the final multimillion dollar grant payment to her."
"He was paid more than $50 million for his money laundering services, which he used to purchase luxury watches, vehicles and homes in New England."
If I were running the IRS, I might encourage a few agents to hang out at jewelry stores, Ferrari dealerships, and sports memorabilia shops.
What day is it?
We're Here to Help
