2025 Tax Updates
As of July 1, 2025, here are the latest tax law updates and developments relevant to individuals and businesses in the United States:
Federal Tax Law Updates (IRS)
1. 2025 Tax Reform Proposals Still Under Negotiation
- Congress is debating extensions or modifications to the 2017 Tax Cuts and Jobs Act (TCJA) provisions that are set to expire after 2025.
- Key topics under debate:
- Whether to extend the 20% QBI deduction (§199A) for passthrough businesses.
- Possible changes to the individual tax brackets and standard deduction amounts.
- Reinstatement of personal exemptions and broader child tax credits.
- State and Local Tax (SALT) deduction cap possibly being adjusted or eliminated.
2. IRS Final Regulations on Digital Assets
- Effective for tax year 2025, the IRS issued final regulations requiring:
- Crypto brokers and platforms to issue Form 1099-DA for digital asset transactions.
- Enhanced reporting rules for crypto-to-crypto trades and NFTs.
- Foreign asset disclosures now explicitly include certain crypto holdings under Form 8938.
3. IRS Penalty Relief and Processing Updates
- The IRS announced limited penalty relief for taxpayers affected by mail backlogs and delays in 2020–2021.
- Continued improvements in automated processing, especially for amended returns and Form 2848 (POA submissions).
California State Tax Updates
1. FTB Expands E-File and AI Audit Tools
- The Franchise Tax Board (FTB) has launched an AI-based system to flag high-risk returns, particularly for high-net-worth individuals and passthrough entities.
- More aggressive enforcement of nonresident sourcing rules (especially for tech and entertainment sectors).
2. 2025 CA Climate and Green Tax Credits
- California is increasing incentives for:
- EV purchases
- Solar installations (AB 712 credit)
- Green building retrofits for commercial property owners
Other Key Changes
1. Retirement Plan Changes (SECURE 2.0 Phase-In)
- Starting January 1, 2025, catch-up contributions for individuals earning $145,000+ must be made on a Roth basis.
- Automatic enrollment is now mandatory for most new 401(k) plans.
2. IRS Interest Rates
- As of Q3 2025, IRS interest rates remain at:
- 8% for underpayments (individuals and most corporations)
- 10% for large corporate underpayments
Targeted Tax Law Update – July 2025
🔹 Expiring TCJA Provisions – Advance Planning Required
- Top individual tax rate is still 37%, but expected to revert to 39.6% after 2025.
- Standard deduction and QBI (§199A) deduction phaseouts are under scrutiny.
- Recommendation: Begin multi-year income planning and Roth conversions now while rates are still low.
🔹 Digital Asset Reporting
- IRS finalized new crypto reporting rules (Form 1099-DA).
- Crypto-to-crypto trades and NFT gains are now reportable and taxable.
- Clients must be advised to track basis and report foreign-held digital assets on Form 8938.
🔹 IRS Enforcement
- IRS is hiring new agents focused on high-income taxpayers (income >$400,000).
- Increases in audit risk for stock option exercises, partnership K-1s, and complex deductions.
🔹 Pass-Through Tax Planning
- QBI deduction (§199A) still applies for 2025 but may expire in 2026.
- Consider S-corp elections, reasonable compensation adjustments, and aggregation strategies to preserve benefits.
🔹 Foreign Grant Compliance & Reporting
- IRS and Treasury are now actively auditing nonprofits with international operations.
- Must have:
- Written grant agreements
- Expenditure tracking systems
- Foreign activity disclosures on Form 990, Schedule F
🔹 Donor Acknowledgment Letters
- Enforcement tightening on substantiation rules.
- Letters must state:
- Whether goods/services were provided
- Description of donation
- Written contemporaneously (by tax return due date)
Tax Planning Guide
Welcome! This guide is designed to help you understand the tax preparation process and what you need to do to ensure a smooth, timely, and accurate filing. Whether you’re an individual, self-employed, or a small business owner, the following steps outline how to prepare for tax season.
✅ Step 1: Gather Your Documents
For Individuals:
- ❒ W-2s from employers
- ❒ 1099s for contract income, interest, dividends, or other income
- ❒ 1098 mortgage interest statements
- ❒ Property tax statements
- ❒ Charitable donation receipts
- ❒ Medical expenses (if itemizing)
- ❒ Childcare expenses and provider info
- ❒ Education expenses (Form 1098-T, student loan interest)
For Businesses/Self-Employed:
- ❒ Profit & loss (P&L) statement
- ❒ Balance sheet
- ❒ Business expenses (travel, supplies, meals, etc.)
- ❒ Mileage logs or vehicle expenses
- ❒ Payroll records (if applicable)
- ❒ 1099s issued to contractors
- ❒ Estimated tax payments made
✅ Step 2: Organize Your Tax Records
- Use folders or digital apps (like a cloud drive) to store records
- Group items by income, deductions, credits, and other categories
- Label documents clearly with the relevant tax year
✅ Step 3: Fill Out Your CPA’s Tax Questionnaire
Most CPAs, including Carlsen Partners, provide a brief annual tax questionnaire. It helps:
- Confirm basic info (address, dependents, bank account)
- Identify changes (new job, new home, marriage/divorce)
- Ensure eligible deductions and credits are captured
✅ Step 4: Schedule Your Tax Appointment
Depending on your tax situation, you may choose:
- A remote meeting (Zoom or phone)
- A secure client portal upload
- An in-person meeting
Earlier is always better—especially if you’re expecting a refund or need to make a payment.
✅ Step 5: Understand Your Tax Return
Your CPA will review the return with you and explain:
- Income and tax calculations
- Deductions taken
- Refund or amount due
- Any planning recommendations for next year
Before signing, make sure to ask questions and understand your return.
✅ Step 6: Pay & File
- Your CPA will e-file your return with your authorization
- If you owe taxes: options include check, credit card, or IRS Direct Pay
- Keep a copy of your filed return for your records
📅 Year-Round Tips for Next Tax Season
- Keep receipts and records in one place
- Track estimated payments if self-employed
- Adjust your W-4 if your refund was too large or too small
- Note big life changes (marriage, home purchase, kids, job change)
- Consider tax planning mid-year with your CPA
We’re Here to Help
Carlsen Partners – CPA Tax Strategy & Compliance
Rachel Carlsen, CPA
Let us handle the numbers—so you can focus on what matters most.
Rachel Carlsen CPA | Carlsen Partners LLP