*****OBBBA is a very comprehensive tax with many changes affecting individuals and
businesses. Each client has different needs and needs various interpretations If desired, we
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would be happy to quote a fee for this service.****

On July 4, President Trump signed the One Big Beautiful Bill Act into law.This followed July 1 passage in the Senate and July 3 passage in the House. Enactment follows days of frantic activity in Congress, with day-long debates, record-setting voting sessions, and many deals to secure passage in the closely divided House and Senate.

COMMENT: One of the final changes to the bill before passage was to strip the name of the Act due to Senate reconciliation rules, so the official name is not the One Big Beautiful Bill Act. This has been done for other recent reconciliation bills, such as the Inflation Reduction Act of 2022 and the Tax Cuts and Jobs Act of 2017.

The Act includes a number of tax changes, including permanent and limited modification of many soon-to-expire tax provisions, new provisions promised by President Trump during his 2024 campaign, elimination or modification of most green energy provisions, and dozens of other changes affecting individuals and businesses. There are many differences outside the tax provisions that have been subject to disagreement within the GOP majority, though the dissenting voices seem to have accepted those changes in order to get the bill across the finish line.

Upon its passage, the majority of the provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) included expiration dates in order to satisfy budgetary requirements. Lower individual rate brackets, higher standard deductions, the elimination of the personal exemption, the cap on the deduction of state and local taxes (SALT), changes to the alternative minimum tax, and many other provisions are all set to expire at the end of 2025. Without legislation, the federal tax system would have largely reverted back to the rules applicable in 2017.

Throughout the 2024 campaign, Trump, as well as many GOP lawmakers, proposed making these soon-to-expire provisions a permanent part of the tax code. The Act does just that, but it comes at a high price tag (some estimates have it at $5 trillion over ten years). Much of this cost is balanced by reduced outlays in many government programs not related to taxation, and by the elimination of many of the "green" tax provisions from the Inflation Reduction Act.

COMMENT: This CCH Tax Briefing is not intended to comprehensively cover all provisions proposed in the approximately 400-page tax portion of the Act, but rather the highlights. See CCH® AnswerConnect for complete coverage of the One Big Beautiful Bill Act.

EXTENDED INDIVIDUAL PROVISIONS

Individual Extenders

Many of the provisions of the TCJA applicable to individuals are among those scheduled to expire at the end of 2025.

These include:

• 10, 12, 22, 24, 32, 35 and 37 percent brackets applicable since 2018;

• Elimination of personal exemptions;

• Increased alternative minimum tax exemption and threshold amounts;

• Lower limitation on the deduction of mortgage interest;

• Limitation on the casualty loss deduction;

• Termination of the miscellaneous itemized deduction; and

• Allowance of rollovers from qualified tuition programs to ABLE accounts.

The Act makes all of these provisions permanent, but does make some modifications. The Act permanently treats mortgage insurance premiums as qualified residence interest for which a deduction could be claimed and allows for unreimbursed educator expenses to be deducted as a miscellaneous itemized deduction. The Act also removes the last seven years of inflation adjustments from the AMT exemption phase-out threshold for joint filers, reverting the threshold to the 2018 amount.

COMMENT: Between 2008 and 2021, mortgage insurance premiums could be treated as qualined residence interest and deducted my homeowners. Also, under current law, teachers are allowed an above-the-line deduction for classroom expenses of up to $300 for 2024 and 2025, but the Act expands that beyond the dollar limitation.

Also, the Act does permanently eliminate the personal exemption amount, but provides a $6,000 deduction amount for seniors age 65 and older after 2024 and before 2029. This deduction would phase out for individuals whose modified adjusted gross income exceeds $75,000 ($150,000 for joint filers).

COMMENT: A similar provision was in the House-passed version of the bill, but was instead an expansion of the standard deduction, and capped at $4,000.

Standard Deduction

The TCJA nearly doubled the standard deduction for tax years beginning after 2017. For 2025 (prior to the Act), the inflation adjusted amounts were $30,000 for joint filers, $22,500 for heads of households, and $15,000 for single taxpayers and married taxpayers filing separately. These higher amounts were set to expire after 2025.

The Act increases the amount of the standard deduction for tax years beginning in 2025 and subject to inflation thereafter. Under the Act, the standard deduction amounts for 2025 are $31,500 for joint filers $23,625 for heads of households, and $15,750 for single taxpayers and married taxpayers filing separately.

COMMENT: In the bill passed by the House, the amounts would have been temporarily increased for tax years 2025 through 2028 by $2,000, $1,500, and $1,000 respectively. The bill originally proposed by the Senate also increased the deduction by the same amounts, but made them permanent and subject to inflation. The lower amounts ultimately passed reflect an attempt to lower the cost of the provision.

SALT Deduction

One of the most controversial provisions of the CJA was the imposition of a $10,000 cap on the deduction for state and local taxes. Before the ink was dry on the 2017 legislation, lawmakers in higher tax states on both sides of the aisle (the so-called "SALT Caucus") were introducing legislation intended to increase or outright repeal the cap.

The Act increases the cap to $40,000 for 2025, with a one percent increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced by 30% of the amount by which the taxpayer's modified adjusted gross income exceeds a threshold amount. That threshold amount is generally $500,000 for 2025, with a one percent increase each year through 2029.

COMMENT: This had proven to be one of the stickier points for legislators in their negotiations in both the House and Senate. Members of the SALT Caucus were still outwardly unhappy with the $40,000 limit agreed to in the House bill, but ultimately decided to vote in favor of it. The initial Senate proposal made no increase in the cap, but was eventually increased to match the House bill. In the days leading up to passage in the Senate, members of the SALT Caucus have accepted this final framework.

Child Tax Credit

The TCJA increased the amount of the child tax credit from $1,000 to $2,000 for tax years 2018 through 2025, as well as nearly quadrupling the phaseout thresholds to $400,000 for joint filers and $200,000 for other filers.

The Act permanently increases the base amount of the credit to $2,200, subject to annual inflation increases. The post-2017 base amount of the refundable portion of the child tax credit (the "additional child tax credit") remains at $1,400, and continues to be adjusted for inflation ($1,700 for 2025).

The Act requires the taxpayer claiming the credit, the taxpayer's spouse (if married), and the child for whom the credit is claimed to have Social Security numbers.

Estate Taxes

The estate tax basic exclusion amount, which the TCJA doubled for decedents dying through 2025 (inflation adjusted to $13.99 million in 2025) would revert back to 2017 amounts if the TCJA is allowed to expire.

Under the Act, the basic exclusion amount is increased again to a base amount of $15 million for decedents dying in 2026, adjusted for inflation thereafter.

COMMENT: The $15 million amount is probably not far off from where inflation would have taken the exclusion amount for 2026 if the TCJA was not scheduled to expire.

NEW INDIVIDUAL PROVISIONS

No Tax on Tips

One of the big talking points for President Trump during the campaign was the elimination of the tax on tip income. Historically, tip income was not subject to tax until the early 1980s when legislation passed during the Reagan administration treated it like regular income. The deduction is capped at $25,000, and the deduction begins to phase out when the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028. The Act also extends the employer credit for Social Security taxes on employee cash tips to the beauty service industry (the credit currently only applies to the food and beverage industry).

No Tax on Overtime

During his campaign, President Trump also proposed making overtime compensation tax free. Under the Act, taxpayers are able to claim a deduction for the amount of overtime pay received as required under section 7 of the Fair Labor Standards Act of 1938. Like the deduction for tip income, taxpayers do not have to itemize deductions to claim the deduction, but are required to provide a Social Security number. The deduction is capped at $12,500 ($25,000 for joint filers), and the deduction begins to phase out when the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). The deduction is not allowed for tax years beginning after 2028.

COMMENT: The Act does not provide extensive rules for the application of this provision, leaving the rules of application up to Treasury Regulations.

Social Security Income

During his campaign, President Trump also proposed making Social Security income tax free. However, at no point has the Senate bill, nor the version that passed the House, included a provision to eliminate the tax on or provide a deduction for Social Security income.

COMMENT: It is possible that the special personal exemption available for seniors is intended to accomplish the same goal as making Social Security income tax-free.

Itemized Deduction Limitation

Prior to the TCJA, the itemized deduction limitation was subject to a phaseout at higher incomes (the "Pease" limitation). The Act includes a return of the limitation on itemized deductions for taxpayers in the 37 percent income tax bracket, effective after 2025.

Automobile Loan Interest

Previously, interest on an individual's automobile loan was treated as nondeductible personal interest. The Act includes a deduction of up to $10,000 for interest paid on an automobile loan in 2025 through 2028 for a car purchased after 2024. The deduction is available for both itemizers and non-itemizers.

Trump Accounts

The Act also includes provisions for the creation of tax-favored accounts for newborn children, called "Trump Accounts." The accounts are seeded with $1,000 for newborn children. From a tax standpoint, they operate under rules similar to those applicable to individual retirement accounts, but are available to children.

Additional Provisions

The Act also includes:

• A tax credit for contributions to scholarship-granting organizations;

• An expansion of 529 programs to include elementary, secondary, and home schooling expenses; and

• The resurrection of the COVID-era allowance of a charitable contribution deduction for non-itemizers.

BUSINESS PROVISIONS

Bonus Depreciation

The TCJA provided for 100 percent expensing of certain business property through 2022, with a 20 percent stepdown each year after before reaching 0 percent in 2027 (currently set at 40% in 2025). The Act makes 100 percent bonus depreciation permanent for property acquired after January 19, 2025.

Research and Experimental Expenditures

Under prior law, taxpayers are required to amortize research and experimental expenditures. Prior to 2022, a direct expense election was available. The Act permanently reinstates the deduction for domestic research and experimental expenditure costs incurred after 2024. Taxpayers can elect whether to deduct or amortize the expenditures, though the requirement to amortize under prior law is suspended while the deduction is available. Additionally, small businesses with average annual gross receipts of $31 million or less would be able to elect to claim the deduction retroactively to 2022.

Qualified Business Income Deduction

The TCJA's qualified business income deduction under Code Sec. 199A is set to expire for tax years beginning after 2025.

Under the Act, the qualified business income deduction is made permanent. Additional changes expand qualification for the deduction.

Additional Provisions

The Act also includes:

• An increase in the 179 deduction limitations after 2024

• An exclusion of interest received by qualified lenders secured by rural or agricultural real property

• Modifications to the low-income housing credit.International Extensions

The Act makes permanent many international and foreign-related provisions under the CJA, including the:

• Deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI); and

• Base erosion minimum tax amount.

However, the Act changes the FDIl rate to 33.34 percent (currently 37.5 percent) and the GILTI rate to 40 percent (currently 50 percent) after 2025.

COMMENT: Under TCJA, these rates were scheduled to drop to 21.875 percent and 37.5 percent, respectively, after 2025. So this actually represents a tax increase for 2026 and beyond. The Act also changes the base erosion minimum tax amount to 10.5 percent from its current 10 percent rate after 2025.COMMENT. Under TCJA, this rate was scheduled to increase to 12.5 percent after 2025, so this represents a tax decrease for 2026 and beyond. The Act also makes changes to the treatment of "tested" CFC income and the foreign tax credit.

GREEN ENERGY TERMINATIONS

The Inflation Reduction Act of 2022 created dozens of new tax credits intended to promote the manufacture and adoption of alternative energy sources. The elimination of these credits by the One Big Beautiful Bill Act is a key method of paying for many of the new taxpayer-friendly provisions. However, the timing of the termination had been another sticking point throughout negotiations, and as the Senate amended its bill, House leaders were pleading for changes to be included to look more like the House bill.

The major difference between the two chambers largely centered on when credits for "clean" energy producers will be eliminated. The House took the approach that for producers that have already invested in construction costs, the credits should be terminated in 2026 or later.The Senate initially took a much more aggressive approach, with some credits terminating immediately but nearly all terminating before the end of 2025.

Ultimately, the Senate relented and included a longer run-out for energy producers to claim credits, in some cases allowing for construction to begin in 2026.

Where the Senate Act did agree with the House was on the termination of many credits applicable to the consumer side of green energy. Under the Act, the affected credits include the following (termination generally after 2025):

• Previously owned clean vehicle credit;

• Clean vehicle credit;

• Qualified commercial clean vehice credit;

• Alternative fuel refueling property credit;

• Energy efficient home improvement credit;

• Residential clean energy credit; and

• New energy efficient home credit.

IRS PROCEDURAL PROVISIONS

Perhaps the most widely applicable operations provision of the Act is the termination of the IRS Direct File program.

The Act requires the termination of the program within 30 days after passage and appropriates funding for the IRS to research a public-private partnership to replace the current "free file" program.The Act includes specified penalties for fraudulent promoters of retention credit schemes, but at a much lower limit of $1,000 per failure to comply with due diligence requirements (though without a cumulative limit). The Act also includes the termination of the Direct File program.

COMMENT: The version of the bill that was passed by the House included the provision imposing the penalty on ERC promoters with much higher penalty amounts. However, in a subsequent vote on a recissions bill on June 11, a rule adopted in passage struck that provision from the House-passed bill. It isn't clear how that recissions bill will impact this provision.

The White House is looking to lower the Internal Revenue Service budget by $1.4 billion in fiscal year 2027.

The White House is looking to lower the Internal Revenue Service budget by $1.4 billion in fiscal year 2027.

The budget request, released April 6, 2026, says the overall budget request for the agency will “streamline IRS operations utilizing technology improvements to help focus the IRS on providing high-quality customer service while ensuring the tax laws are fairly administered.”

The request highlighted two areas where it is currently saving money – ending the Direct File program and reducing staffing by 27 percent total – since January 2025.

The decrease accounts for most of the White House’s overall decreased budget request for the Department of the Treasury. The Trump Administration is an $11.5 billion budget for fiscal year 2027, a 12-percent decrease ($1.5 billion) from the budget enacted for fiscal year 2026.

The Office of the Inspector General would see a $4 million decrease to $44 million from the $48 million level in 2026, while the Treasury Inspector General for Tax Administration would see a decrease from $220 million to $206 million.

The IRS has issued final regulations for the "no tax on tips" deduction under Code Sec. 224, which was enacted as part of the the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). The final regulations adopt proposed regulations that were issued in September 2025 ( NPRM REG-110032-25), with modifications and clarifications in response to comments received.

The IRS has issued final regulations for the "no tax on tips" deduction under Code Sec. 224, which was enacted as part of the the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). The final regulations adopt proposed regulations that were issued in September 2025 ( NPRM REG-110032-25), with modifications and clarifications in response to comments received.

Background

Under Code Sec. 224, an eligible individual can claim an income tax deduction for qualified tips received in tax years 2025 through 2028. The deduction is limited to $25,000 per tax year, and starts to phase out when modified adjusted gross income is above $150,000 ($300,000 for joint filers). An employer must report qualified tips on an employee‘s Form W-2, or the employee must report the tips on Form 4137. A service recipient must report qualified tips on an information return furnished to a nonemployee payee (Form 1099-NEC, Form 1099-MISC, Form 1099-K).

A "qualified tip" is a cash tip received in an occupation that customarily and regularly received tips on or before December 31, 2024. An amount is not a qualified tip unless (1) the amount received is paid voluntarily without any consequence for nonpayment, is not the subject of negotiation, and is determined by the payor; (2) the trade or business in which the individual receives the amount is not a specified service trade or business under Code Sec. 199A(d)(2); and (3) other requirements established in regulations or other guidance are satisfied.

The proposed regulations provided eight broad categories of occupations that customarily and regularly received tips on or before December 31, 2024. For each occupation, the list provided a numeric Treasury Tipped Occupation Code (TTOC), an occupation title, a description of the types of services performed in the occupation, illustrative examples of specific occupations, and the related Standard Occupation Classification (SOC) system code(s) published by the Office of Management and Budget (OMB).

List of Occupations that Receive Tips

The final regulations made several modifications to the list of the occupations set forth in the proposed regulations. Three new occupations were added:

• "Visual Artists" and "Floral Designers" were added to the Personal Services category; and
• "Gas Pump Attendants" was added to the Transportation and Delivery category.

The final regulations also made changes and clarifications under several of the occupation categories, including:

• Beverage & Food Service – For the "Wait Staff" occupation, "banquet staff" has been added as an illustrative example, and the occupation's description has been modified to include catered events. The "Food Servers, Non-restaurant" occupation has been changed to "Food and Beverage Servers, Non-restaurant," to clarify that winery tasting room servers are covered by this category.
• Entertainment and Events – The preamble to the final regulations states that "table game supervisors" are covered by the "Gambling Dealers" occupation. The IRS also clarified that individuals dressed up as Santa Claus, as well as other characters or celebrities, are covered by the "Entertainers and Performers" occupation.
• Hospitality and Guest Services – "Doorman" has been added to the list of illustrative examples for the "Baggage Porters and Bellhops" occupation.
• Personal Services – To clarify that resident care is included in the "Personal Care and Service Workers" occupation, the description in the list provides that "work is performed in various settings depending on the needs of the care recipient and may include locations such as their home, place of work, out in the community, at a daytime nonresidential facility or a residential facility." The "Pet Caretakers" occupation has been renamed as the "Pet and Show Animal Caretakers" occupation, and "horse groomer" has been added to the list of illustrative examples.
• Personal Appearance and Wellness – The "Eyebrow Threading and Waxing Technicians" occupation has been renamed as the "Eyebrow and Eyelash Technicians" occupation, and additions were made to the description in the list to include eyelash technicians.
• Recreation and Instruction – The "Travel Guides" occupation now includes a parenthetical noting that both indoor and outdoor locations are covered.
• Transportation and Delivery - "App/platform based delivery person" has been added to the illustrative list in both the "Goods Delivery People" occupation and the "Taxi and Rideshare Drivers and Chauffeurs" occupation. Also, the phrase "over established routes or within an established territory" has been removed from the description of the "Goods Delivery People" occupation.

The final regulations clarify that apprentices and assistants qualify under the applicable TTOC occupation category if they perform the same services as those listed in the TTOC occupation description.

Chiropractors, accountants, tax preparers, concert merchandise sellers, and "low bono" legal service providers were not added to the occupations list, despite requests in the comments to add these to the list.

No occupations included on the occupations list in the proposed regulations were removed from the list in the final regulations.

Voluntary Tips

Regarding the requirement that qualified tips must be voluntary, it is clarified that the customer must have the option to reduce the tip amount to zero. Tip selection methods such as Point-of-Sale (POS) systems with a tip slider that goes to zero or an option for the customer to select "other" and input zero are voluntary. Examples in the final regulations have been modified to clarify that these methods are considered voluntary tipping practices.

Further, the final regulations state that situations where nonpayment of a tip is "without consequence" include situations where nonpayment of the tip does not have any impact on the scope or cost of the service. The final regulations also contain a new example where the tip is part of a contract that is entered into before the services are provided. The example concludes that the tip is a qualified tip because it is paid without consequence. If the customer had chosen to not pay the tip, then the scope or cost of the service would not have been affected.

The final regulations include two new examples to help clarify when payments to digital content creators are tips and when they are compensation. It is also clarified that tipping digital content creators through audience engagement mechanisms that result in superficial digital rewards, such as highlighted messages or other digital tokens of appreciation from the tip recipient that are negligible in value, do not disqualify an otherwise qualified tip.

Other Matters

The final regulations state that amounts received as a tip that are not separately reported to an individual on a statement furnished to the individual pursuant to Code Secs. 6041(d)(3), 6041A(e)(3), 6050W(f)(2), or 6051(a)(18), or reported by the taxpayer on Form 4137 (or successor) are not eligible for the tips deduction. (The preamble recognizes, however, that Notice 2025-69 provides transition rules for this for 2025.)

It is also clarified that "cash tips" include amounts paid in foreign currency. Rules are also provided for tips received by digital tipping systems.

Regarding abuse of the tips deduction, the final regulations replace the provision prohibiting ownership in or employment by a payor with a provision stating that an amount is not a qualified tip, and thus not eligible for the deduction if, based on all relevant facts and circumstances, the amount represents a recharacterization of wages or payments for goods or services for purposes of claiming the deduction.

Effective Date

The final regulations are effective on June 12, 2026, the date that is 60 days after publication in the Federal Register.

T.D. 10044

IR 2026-49

The IRS issued updated frequently asked questions (FAQs) addressing educational assistance programs under Code Sec. 127. The FAQs provide general guidance on eligibility, tax treatment of benefits, and recent legislative updates.

The IRS issued updated frequently asked questions (FAQs) addressing educational assistance programs under Code Sec. 127. The FAQs provide general guidance on eligibility, tax treatment of benefits, and recent legislative updates.

General Background

The FAQs explained that a Code Sec. 127 educational assistance program is a written employer plan that provides benefits exclusively to employees. The program must satisfy nondiscrimination requirements that prevent preferential treatment for highly compensated employees, shareholders or owners.

Exclusion Limits and Tax Treatment

The FAQs clarified that employees could exclude up to $5,250 per year in educational assistance benefits for the tax years at issue. The limit applied to combined benefits, including tuition and qualified education loan repayments. Amounts exceeding this limit were taxable and unused amounts could not be carried forward. Expenses covered under Code Sec. 127 could not be used for other credits or deductions.

Eligible and Non-Eligible Benefits

Eligible benefits included tuition, fees, books, supplies, equipment and payments of principal or interest on qualified education loans. These benefits could be provided for undergraduate or graduate courses and did not need to be job-related. However, meals, lodging, transportation and equipment that employees could retain were not eligible. Courses involving hobbies or sports were not eligible unless required for a degree or related to the employer’s business.

Eligibility and Other Provisions

The FAQs emphasized that benefits were limited to employees and included restrictions on owners and shareholders to ensure compliance with nondiscrimination rules. Other provisions, such as working condition fringe benefits, could allow additional exclusions depending on the facts.

FS-2026-10

IR 2026-55

The IRS has issued procedures for nominating population census tracts that would be designated as qualified opportunity zones (QOZs). The tracts would designated as QOZs effective on January 1, 2027. The guidance was directed at Chief Executive Officers (CEO) of States, territories of the United States and the District of Columbia. The procedures fell under Reg. §§1400Z-1 and Code Sec. 1400Z-2, as amended by the One, Big, Beautiful Bill Act (OBBBA) (P.L. 119-21).

The IRS has issued procedures for nominating population census tracts that would be designated as qualified opportunity zones (QOZs). The tracts would designated as QOZs effective on January 1, 2027. The guidance was directed at Chief Executive Officers (CEO) of States, territories of the United States and the District of Columbia. The procedures fell under Reg. §§1400Z-1 and Code Sec. 1400Z-2, as amended by the One, Big, Beautiful Bill Act (OBBBA) (P.L. 119-21).

Background

A QOZ is an economically distressed area in which select new investments could be eligible for preferential tax treatment. The OBBBA makes the QOZ tax incentive permanent. The first round of QOZ designations following the enactment of the OBBBA will take effect on January 1, 2027. New rounds would follow every 10 years. Additionally, the OBBBA added tax benefits specific to investments made into QOZs that are comprised entirely of a rural area.

Identities of LICs

The Treasury and IRS identified 25,332 population census tracts that are low-income communities (LIC) eligible for nomination as a 2027 QOZ. Out of said tracts, 8,334 tracts are comprised entirely of a rural area. Beginning July 1, 2026, and lasting a period of 90 days, subject to a single 30-day extension, State CEOs would begin nominating eligible census tracts to be designated as QOZs.

The number of population census tracts in a State that may be designated as QOZs may not exceed 25 percent of the number of LICs in the State. This limitation is determined based on the 2020-2024 American Community Survey (ACS) 5-Year and the 2020 Decennial Census of Island Areas (DECIA) data sets. The tracts were identified using said data sets.

Further, boundaries established for the 2020 decennial census are controlling. They would not be subject to change during the 2027 QOZ designation period.

Nomination Tool

The Treasury has been developing a nomination tool. This would be accessible online and available for the benefit of State CEOs that nominate census tracts for designation as 2027 QOZs.

The QOZ designation period will begin on January 1, 2027, and end on December 31, 2036. Any request to modify such a nomination after October 28, 2026, would be denied. Finally, nominations of tracts not mentioned in this document would be considered, provided they satisfy Code Sec. 1400Z-1(c)(1).

Effective Date

This revenue procedure is effective on April 6, 2026.

Rev. Proc. 2026-14

IR 2026-45

The IRS has provided a waiver of the addition to tax under Code Sec. 6654 for the underpayment of estimated income tax by qualifying farmers and fishermen.

The IRS has provided a waiver of the addition to tax under Code Sec. 6654 for the underpayment of estimated income tax by qualifying farmers and fishermen. Under Code Sec. 6654(i)(1), a qualifying farmer or fisherman has only one required installment payment (instead of four quarterly payments) due on January 15 of the year following the taxable year if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either the tax year or the preceding tax year. For a qualifying farmer or fisherman who does not make the required estimated tax installment payment by January 15 of the year following the tax year, Code Sec. 6654(i)(1)(D) provides that the taxpayer is not subject to an addition to tax for failing to pay estimated income tax if the taxpayer files the return for the tax year and pays the full amount of tax reported on the return by March 1 of the year following the tax year.

Difficulty in Electronic Filing of Form 8995

The IRS has noted that some qualifying farmers and fishermen were unable to electronically file Form 8995, Qualified Business Income Deduction Simplified Computation, which was required to be included in their 2025 tax returns. Due to this inability, farmers and fishermen may have had difficulty filing their 2025 tax returns electronically by the March 2, 2026 due date. Accordingly, the IRS has determined to waive certain penalties for qualifying farmers and fishermen due to these unusual circumstances.

Waiver of Underpayment of Estimated Income Tax

The IRS has waived the addition to tax under Code Sec. 6654 for failure to make an estimated tax payment for the 2025 tax year for any qualifying farmer or fisherman who files a 2025 tax return and pays in full any tax due on the return by April 15, 2026. The waiver will apply to any taxpayer who is a qualifying farmer or fisherman for the 2025 tax year and fulfills the conditions stated in the previous sentence. Further, the waiver will apply automatically to any taxpayer who qualifies for the waiver and does not report an addition to tax under Code Sec. 6654 on the 2025 tax return.

In addition, taxpayers who otherwise satisfy the criteria for relief under the IRS’ notice, but have already filed a return and reported an addition to tax, may request an abatement of the addition to tax by filing Form 843, Claim for Refund and Request for Abatement, in accordance with the prescribed instructions.

Notice 2026-24

State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures.

State and local housing credit agencies that allocate low-income housing tax credits and states and other issuers of tax-exempt private activity bonds have been provided with a listing of the proper population figures to be used when calculating the 2026:

• calendar-year population-based component of the state housing credit ceiling under Code Sec. 42(h)(3)(C)(ii);
• calendar-year private activity bond volume cap under Code Sec. 146; and
• exempt facility bond volume limit under Code Sec. 142(k)(5).

These figures are derived from the estimates of the resident populations of the 50 states, the District of Columbia and Puerto Rico, which were released by the Bureau of the Census on January 27, 2026. The figures for the insular areas of American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands are the 2025 midyear population figures in the U.S. Census Bureau’s International Database.

Notice 2026-22

Internal Revenue Service CEO Frank Bisignano promoted some of the highlights of the 2026 tax filing season before a congressional committee while deflecting questions about data leaks and other issues.

Internal Revenue Service CEO Frank Bisignano promoted some of the highlights of the 2026 tax filing season before a congressional committee while deflecting questions about data leaks and other issues.

Testifying April 15, 2026, during a Senate Finance Committee hearing, Bisignano used his opening statement to promote the highlights of the tax filing season, including:

• 134 million individual returns filed, with 98 percent filed electronically;
• 80 million refunds issued with 98 percent of funds sent electronically; and
• An average refund of more than $3,400 (up 11 percent from last year), with more than 90 percent received by taxpayers in less than 21 days.

He also stated that 53 million American have taken advantage of new tax breaks found in the One Big Beautiful Bill Act, including the No Tax On Tips (6 million filers), No Tax On Overtime (25 million filers), and No Tax On Car Loan Interest provision (1 million filers), as well as the deduction for seniors (30 million filers).

“When you look at all this, it’s the reason we talk about the historic refunds,” Bisignano testified.

These, along with the increase to the standard deduction and the child tax credit, along with the full expensing for capital investments being made permanent “prevented a tax increase of over $5 trillion on American families and small businesses,” Bisignano testified.

Bisignano defended the decision to end the Direct File program, noting that 2 million Americans have used a free file option, adding that “Direct File was a costly, unnecessary, and less popular duplicate of programs that already are in place.”

He continued: “Despite heavy promotion by the Biden Administration, Direct File was the by far the least used free filing option.”

When faced with questions regarding data breeches, including information given to ICE by Treasury and other data breeches, Bisignano refused to answer, stating that ongoing litigation was preventing him from commenting in the case of the information given to ICE, and that ongoing investigations in other data breeches precluded him from discussing them.

He also refused to express even a general opinion on the lawsuit filed by President Trump on the leaking of his tax information.

When challenged on the tax gap, Bisignano challenged assertions that it more than $1 trillion. Bisignano said the last published number was $650 billion and added that it was “big enough so we don’t have to debate the trillion.” He said the agency was working on a plan to address it but did not offer any specifics as to what the IRS had planned to close the tax gap. He did say the agency has increased the dollar amount of money recovered from compliance activities.

“Collections and enforcement is up 12 percent, and this is year to date,” he testified, adding that more than $2 billion has been collected in the top five audits.

By Gregory Twachtman, Washington News Editor

The Taxpayer Advocacy Panel (TAP) has released its 2025 Annual Report. The report highlighted accomplishments and ongoing efforts to (1) strengthen IRS delivery; (2) improve communications with taxpayers; (3) reduce taxpayer burden; and (4) support continued modernization of tax administration. The TAP project committees submitted 20 project referrals to the IRS, including 188 recommendations for improving IRS operations and enhancing taxpayer experience.

The 2025 cost-of-living adjustments (COLAs) that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. In general, many of the pension plan limitations will change for 2025 because the increase in the cost-of-living index due to inflation met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.

The IRS reminded individual retirement arrangement (IRA) owners aged 70½ and older that they can make tax-free charitable donations of up to $105,000 in 2024 through qualified charitable distributions (QCDs), up from $100,000 in past years. 

The IRS reminded individual retirement arrangement (IRA) owners aged 70½ and older that they can make tax-free charitable donations of up to $105,000 in 2024 through qualified charitable distributions (QCDs), up from $100,000 in past years. For those aged 73 or older, QCDs also count toward the year's required minimum distribution (RMD). Following are the steps for reporting and documenting QCDs for 2024:

• IRA trustees issue Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., in early 2025 documenting IRA distributions.
• Record the full amount of any IRA distribution on Line 4a of Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors.
• Enter "0" on Line 4b if the entire amount qualifies as a QCD, marking it accordingly.
• Obtain a written acknowledgment from the charity, confirming the contribution date, amount, and that no goods or services were received.

Additionally, to ensure QCDs for 2024 are processed by year-end, IRA owners should contact their trustee soon. Each eligible IRA owner can exclude up to $105,000 in QCDs from taxable income. Married couples, if both meet qualifications and have separate IRAs, can donate up to $210,000 combined. QCDs did not require itemizing deductions. New this year, the QCD limit was subject to annual adjustments based on inflation. For 2025, the limit rises to $108,000.

Further, for more details, see Publication 526, Charitable Contributions, and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

IR-2024-289

For 2025, the Social Security wage cap will be $176,100, and social security and Supplemental Security Income (SSI) benefits will increase by 2.5 percent. These changes reflect cost-of-living adjustments to account for inflation.

For 2025, the Social Security wage cap will be $176,100, and social security and Supplemental Security Income (SSI) benefits will increase by 2.5 percent. These changes reflect cost-of-living adjustments to account for inflation.

Wage Cap for Social Security Tax

The Federal Insurance Contributions Act (FICA) tax on wages is 7.65 percent each for the employee and the employer. FICA tax has two components:

• a 6.2 percent social security tax, also known as old age, survivors, and disability insurance (OASDI); and
• a 1.45 percent Medicare tax, also known as hospital insurance (HI).

For self-employed workers, the Self-Employment tax is 15.3 percent, consisting of:

• a 12.4 percent OASDI tax; and
• a 2.9 percent HI tax.

OASDI tax applies only up to a wage base, which includes most wages and self-employment income up to the annual wage cap.

For 2025, the wage base is $176,100. Thus, OASDI tax applies only to the taxpayer’s first $176,100 in wages or net earnings from self-employment. Taxpayers do not pay any OASDI tax on earnings that exceed $176,100.

There is no wage cap for HI tax.

Maximum Social Security Tax for 2025

For workers who earn $176,100 or more in 2025:

• an employee will pay a total of $10,918.20 in social security tax ($176,100 x 6.2 percent);
• the employer will pay the same amount; and
• a self-employed worker will pay a total of $21,836.40 in social security tax ($176,100 x 12.4 percent).

Additional Medicare Tax

Higher-income workers may have to pay an Additional Medicare tax of 0.9 percent. This tax applies to wages and self-employment income that exceed:

• $250,000 for married taxpayers who file a joint return;
• $125,000 for married taxpayers who file separate returns; and
• $200,000 for other taxpayers.

The annual wage cap does not affect the Additional Medicare tax.

Benefit Increase for 2025

Finally, a cost-of-living adjustment (COLA) will increase social security and SSI benefits for 2025 by 2.5 percent. The COLA is intended to ensure that inflation does not erode the purchasing power of these benefits.