Category: News (Page 1 of 12)

Even though the tax filing deadline for tax year 2025 passed a couple weeks ago, it’s not too early to start planning for next year so that you can avoid any unpleasant surprises. One easy thing you can do is check for proper tax withholding.

What is withholding?

Taxpayers need to pay their tax as they receive their income, and they do this through withholding. For employees, “withholding” refers to the federal income tax portion of each paycheck that an employer takes out for tax purposes. It can also be the amount from earnings self-employed people and others voluntarily set aside to pay their estimated taxes.

How to check your withholding

The IRS Tax Withholding Estimator is a free, easy-to-use tool that can help you estimate the amount of federal income tax you need to withhold from your paycheck now in order to pay for the taxes you will owe next year.

This estimator has been updated to reflect the changes to credits and deductions under the One, Big, Beautiful Bill. This includes the deductions for tips, overtime, car loan interest and enhanced deduction for seniors. It also accounts for updates tied to family-related credits, homeownership, and charitable giving.

Why check your withholding?

Checking your withholding now gives you a chance to stay on top of how your tax might change due to personal life changes, such as buying a home, changing jobs, having a child or changing your marital status.

It will also help you:

• Prevent owing money and potential penalties at tax time
• Adjust withholding to increase take-home pay instead of waiting for a refund

What else you need

Remember that your withholding estimate is only as accurate as the information you enter. So when estimating your withholding, be sure to have the following on hand:

• All income statements, including your spouse’s if filing jointly
• Data from other sources of earnings
• Your most recent income tax return

If all seems like too much, or if something seems confusing, we’re always here to help. Just contact our office and we can help you estimate your withholding for the upcoming year.

If you missed the April 15 filing deadline, you should submit your federal tax return as soon as possible. If you missed the deadline to file and owe taxes, it is important to file as soon as possible to avoid penalties and interest.

Requesting an extension allows for additional time to file but not to pay taxes owed. Interest and penalties will continue to accrue on the owed taxes until the balance is paid in full.

File and pay now to limit penalties and interest charges

If you can’t afford to pay the full amount of the taxes you owe, you should still file a tax return and pay as much as possible. The IRS offers options for taxpayers who need help paying their tax bill. You may qualify for penalty relief if you have filed and paid timely for the past three years and meet other important requirements. Contact our office for more information about these programs.

If a refund is owed, consider filing a tax return

There’s no penalty for filing after April 15, if the IRS owes you a refund. If you choose not to file a tax return because you don’t earn enough to meet the filing requirement, you may miss out on receiving a refund due to potential refundable tax credits, such as the Earned Income Tax Credit and Child Tax Credit.

The Department of the Treasury and the Internal Revenue Service has issued final regulations on the “No Tax on Tips” provision. The One, Big, Beautiful Bill final regulations provide the list of occupations that receive tips and define “qualified tips” that eligible taxpayers may claim as a deduction.

The final regulations list more than 70 separate occupations of tipped workers, from bartenders to water taxi operators. Additionally, the final regulations provide clarification on the definition of qualified tips, as well as guidance on other requirements under the section of the tax law defining qualified tips.

List of occupations that receive tips

The List of Occupations that Receive Tips is classified by the Treasury Tipped Occupation Code system, comprising a three-digit code and description for each of the occupations listed within the final regulations. As in the proposed regulations, the final regulations group the occupations into eight categories:

• 100s – Beverage and Food Service
• 200s – Entertainment and Events
• 300s – Hospitality and Guest Services
• 400s – Home Services
• 500s – Personal Services
• 600s – Personal Appearance and Wellness
• 700s – Recreation and Instruction
• 800s – Transportation and Delivery

The final regulations expand the list to include visual artists and floral designers in the personal services category and add gas pump attendants in the transportation and delivery category.

Definition of qualified tips

A worker may only claim the deduction for qualified tips. To be a qualified tip, the tip must be received by a worker in an occupation on the List of Occupations that Receive Tips. The final regulations follow the proposed regulations in further clarifying that qualified tips must satisfy certain requirements:

• Qualified tips must be paid in cash or an equivalent medium, such as check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash, or another form of electronic settlement or mobile payment application denominated in cash.
• Qualified tips must be received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool.
• Qualified tips must be paid voluntarily by the customer and not be subject to negotiation. Qualified tips do not include service charges unless the customer has an option to disregard or modify the service charge. For instance, in the case of a restaurant that imposes an automatic 18% service charge for large parties and distributes that amount to waiters, bussers and kitchen staff, if the charge is added with no option for the customer to disregard or modify it, the amounts distributed to the workers from this service charge are not qualified tips.

Importantly, workers can take the deduction only for qualified tips that are included on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or reported by the worker on Form 4137. Gig workers and other self-employed individuals can qualify for this deduction if their occupation is on the List of Occupations that Receive Tips and the other statutory and regulatory requirements are met.

The Department of the Treasury and the IRS have issued proposed regulations providing general requirements for Trump Accounts, certain definitions relating to Trump Accounts, election rules to open an initial Trump Account by an authorized individual for an eligible individual, and rules for who is the responsible party for the initial Trump Account once the account has been opened. These proposed regulations provide useful information for parents and guardians who may want to elect to open an initial Trump Account, and for prospective trustees of Trump Accounts.

The proposed regulations request comments on all aspects of these proposed regulations.

Opening initial Trump Accounts

The proposed regulations provide that the election to open an initial Trump Account must be made by an authorized individual on Form 4547, Trump Account Election(s). An election to open an initial Trump Account must be made on or before Dec. 31 of the calendar year in which the eligible individual attains age 17. The election form also provides an opportunity for the authorized individual to request the $1,000 pilot program contribution from the Secretary for an eligible child.

If an election for the $1,000 pilot program contribution is being made at the same time as the election to open the initial Trump Account, the authorized individual is the individual able to make the election for a pilot program contribution.

If no election for a pilot program contribution is being made at the same time as the election to open an initial Trump Account, a different rule applies for determining who is an authorized individual. Under the proposed ordering rule for who may make the election, the authorized individual would be, in order of priority:

• a legal guardian,
• parent,
• adult sibling, then
• grandparent of the eligible individual.

Responsible party for the Trump Account

In general, the individual who makes the election to open an initial Trump Account for an eligible individual will be the responsible party of the initial Trump Account. The responsible party generally will have the authority, while the account beneficiary does not have legal capacity, to select among eligible investments (if more than one eligible investment is offered), request a qualified rollover contribution to a rollover Trump Account, request a transfer for a qualified ABLE rollover contribution, or select a successor responsible party for the account.

For more information about Trump Accounts, please contact our office.

The Internal Revenue Service published, for tax year 2025, a new schedule that you can use to take advantage of some tax benefits provided the “One, Big, Beautiful Bill” (OBBB), including no tax on tips, no tax on overtime, no tax on car loans, and no tax on seniors.

Schedule 1-A and its related instructions (included in the Form 1040 Instructions) allow taxpayers to deduct amounts for tips, overtime, car loans, and the enhanced deduction for seniors.

Part II of the new instructions explains how to determine the amount of qualified tips, how to claim the deduction, up to $25,000, and the phaseout for modified adjusted gross income greater than $150,000 ($300,000 for married taxpayers filing joint returns). Workers can claim this deduction whether they claim the standard deduction or itemize.

Part III of the new instructions explains how to claim a deduction for overtime compensation you may have received. To claim this deduction, you must file a joint return if you are married. Workers can claim this deduction whether they claim the standard deduction or itemize.

Part IV of the new instructions explains how taxpayers can claim a deduction for car loan interest. You can deduct qualified passenger vehicle loan interest whether you claim the standard deduction or itemize.

Part V describes the enhanced deduction for seniors, which can be claimed whether you take the standard deduction or itemize; to claim the deduction, married couples must file jointly.

To qualify for the enhanced deduction, the taxpayer (and/or the taxpayer’s spouse, if filing a joint return) must have been born before Jan. 2, 1961. The taxpayer must have a valid Social Security number; if married filing jointly, each spouse who is claiming the enhanced deduction for seniors must have a valid SSN.

The maximum enhanced deduction for seniors is $6,000 per person. For married filing jointly, if both spouses were born before Jan. 2, 1961, and both have a valid SSN, the enhanced deduction for seniors is $12,000. The $6,000-per-person amount is reduced if the MAGI exceeds $75,000 ($150,000 for married couples filing jointly).

For more information about these tax benefits, please contact our office.

There are some changes for the 2026 tax filing season that people who are 65 years of age and older should be aware of. The most recent being the enhanced deduction for seniors, which is provided for in recent legislation.

Enhanced deduction for seniors

This is a new deduction that is in addition to the current additional standard deduction for seniors under existing law.

• For tax years 2025-2028, taxpayers who are age 65 or older may be eligible to claim an additional $6,000 deduction per person ($12,000 if married filing jointly and both spouses are eligible)
• To be eligible, you must be 65 on or before the last day of the tax year
• It is available to eligible taxpayers who claim the standard deduction or itemize
• The deduction phases out if you have a modified adjusted gross income over $75,000 ($150,000 for joint filers)

Earned Income Tax Credit

• EITC helps low to moderate-income workers and families get a tax break
• The maximum income amount for claiming the credit for the 2025 tax year is $68,675. The amount of the credit may vary based on income, family size and filing status.

Check withholdings

Any earned wages you may have are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits.

There are several new tax deductions that have been introduced for the 2026 filing season. A deduction is an amount subtracted from the taxpayer’s income when filing. Deductions lower the taxable income resulting in lowering the federal income tax obligation.

New deductions for 2026 filing season

• Seniors age 65 and older may be eligible to claim an additional $6,000 deduction
• Tipped workers may be eligible to deduct up to $25,000 for qualified tips
• Individuals may be eligible to deduct up to $12,500 ($25,000 for joint filers) for qualified overtime
• Individuals may deduct up to $10,000 in qualified passenger vehicle loan interest

All new or enhanced deductions are available for both itemizing and non-itemizing taxpayers. Each of these deductions phase out based on income level for individual and joint filers and have specific eligibility requirements.

Standard deduction amounts for tax year 2025

The standard deduction is a flat amount based on federal income tax filing status (single, married filing separately, married filing jointly, head of household, or qualifying surviving spouse). The IRS adjusts the standard deduction annually for inflation.

• $15,750 for single or married filing separately
• $31,500 for married couples filing jointly or qualifying surviving spouse
• $23,625 for head of household

Most people take the standard deduction. However, some may not be eligible to take it or if deductible expenses and losses are more than the standard deduction, taxpayers have the option to itemize deductions. Itemized deductions are subject to certain dollar limitations. They can include amounts paid during the taxable year for: state and local income or sales taxes, real property taxes, personal property taxes, mortgage interest, disaster losses, gifts to charities, certain gambling losses, and medical and dental expenses.

The One, Big, Beautiful Bill (OBBB) has a significant effect on federal taxes, credits and deductions. Millions of taxpayers reported earning tips and overtime on their tax returns, many of them are veterans and people working in lower wage jobs. This relief will impact most of these taxpayers and they can start taking advantage of the deduction this filing season.

No tax on tips

Both employees and self-employed individuals may deduct qualified tips received in certain qualified occupations, such as wait staff, bartenders, salon workers, personal trainers, gig economy workers, and many more who customarily and regularly receive tips might qualify.

You may be able to claim a deduction for qualified tips paid to you in 2025 that are included on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or reported directly by you on Form 4137.

• “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing
• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income, without regard to this deduction, from the trade or business in which the tips were earned
• The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)

No tax on overtime

If you receive qualified overtime compensation, you may deduct the pay that exceeds your regular rate of pay, generally the “half” portion of the “time-and-a-half” compensation that’s required by the Fair Labor Standards Act.

• Maximum annual deduction is $12,500 ($25,000 for joint filers)
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)
• The deduction is available for both itemizing and non-itemizing taxpayers

The Internal Revenue Service has announced that the optional standard mileage rate for business use of automobiles will increase by 2.5 cents in 2026, while the mileage rate for vehicles used for medical purposes will decrease by half a cent.

Optional standard mileage rates are used to calculate the deductible costs of operating vehicles for business, charitable, and medical purposes. Additionally, the optional standard mileage rate may be used to calculate the deductible costs of operating vehicles for moving purposes for certain active-duty members of the Armed Forces, and certain members of the intelligence community.

Beginning Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

• 72.5 cents per mile driven for business use, up 2.5 cents from 2025.
• 20.5 cents per mile driven for medical purposes, down a half cent from 2025.
• 20.5 cents per mile driven for moving purposes for certain active-duty members of the Armed Forces and the intelligence community, reduced by a half cent from last year.
• 14 cents per mile driven in service of charitable organizations, equal to the rate in 2025.

The rates apply to fully-electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.

While the mileage rate for charitable use is set by statute, the mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes, meanwhile, is based on only the variable costs from the annual study.

Under the law, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses, except for certain educator expenses. However, deductions for expenses that are deductible in determining adjusted gross income remain allowable, such as for certain members of a reserve component of the Armed Forces, certain state and local government officials, certain performing artists, and eligible educators. Alternatively, eligible educators may claim an itemized deduction for certain unreimbursed employee travel expenses. In addition, only taxpayers who are members of the military on active duty or certain members of the intelligence community may claim a deduction for moving expenses incurred while relocating under orders to a permanent change of station.

Use of the standard mileage rates is optional. Taxpayers may instead choose to calculate the actual costs of using their vehicle.

Taxpayers using the standard mileage rate for a vehicle they own and use for business must choose to use the rate in the first year the automobile is available for business use. Then, in later years, they can choose to use the standard mileage rate or actual expenses.

For a leased vehicle, taxpayers using the standard mileage rate must employ that method for the entire lease period, including renewals.

The Department of the Treasury and the Internal Revenue Service has issued a notice announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account (IRA) for eligible children.

The Working Families Tax Cuts provides for establishing a Trump Account on behalf of every eligible child for whom an election is made, generally by a parent or guardian, and who has not turned age 18 before the end of the calendar year in which the election is made. Contributions to Trump Accounts cannot be made before July 4, 2026.

Additionally, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom an election is made, who is a U.S. citizen and who is born on or after Jan. 1, 2025, through Dec. 31, 2028.

Certain governmental entities and charities may also make qualified general contributions to Trump Accounts, if given to a qualified class of account beneficiaries. Other persons are also able to make contributions up to an aggregate limit of $5,000 per year. Furthermore, an employer may contribute to a Trump Account of the employee or the employee’s dependent up to $2,500 per year (which counts against the $5,000 annual limit) under an employer’s Trump Account contribution program, and the contribution will not count toward the employee’s taxable income. The annual contribution limits are indexed to inflation and will adjust starting after 2027.

The funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index of primarily American equities.

Amounts generally cannot be withdrawn from Trump Accounts before January 1st of the calendar year in which the child turns 18 years old. After that point, the account generally is treated as a traditional IRA and generally is subject to the same rules as other traditional IRAs.