Year-End Seminar Q&A Newsletter December 2025

All YE Q&As Focus Issues:

• Issue 1 – No Tax on Overtime
• Issue 2 – No Tax on Tips
• Issue 3 – Qualified Production Property
• Issue 4 – Charitable Donation Limits Under OBBBA
• Issue 5 – Retirement – Inherited IRS’s
• Issue 6 – Inherited Roth IRA Required Minimum Distribution (RMD) Requirements (as of 2025)
• Issue 7 – How do the RMD rules for an inherited Roth IRA differ between spousal and non-spousal beneficiaries under federal law?
• Issue 8 – Excess Business Losses
• Issue 9 – QBI
• Issue 10 – AI – Artificial Intelligence
• Issue 11 – Draft Instruction of Schedule 1-A - Comment
• Issue 12 – Refunds of 2025 Tax Year
• Issue 13 – Payment Issues for 2026 Tax Season – Can We Still Send in a Check as Payment?
• Issue 14 – Gambling Issues
• Issue 15 – IRS Installment Agreements
• Issue 16 – Kiddie Tax
• Issue 17 – Trump Accounts
• Issue 18 – State of Iowa Issues
• Issue 19 – Miscellaneous Issues

 Issue 1 – No Tax on Overtime

 Issue 2 – No Tax on Tips

 Issue 3 – Qualified Production Property

 Issue 4 – Charitable Donation Limits Under OBBBA

 Issue 5 – Retirement – Inherited IRA’s

• 10-Year Rule - You must withdraw the entire balance by the end of the 10th year after the original owner's death.
• Partial Withdraws - Yes, you can take smaller, partial withdrawals over the 10 years, or a lump sum, but the whole thing must be gone by year 10.
• Taxation - Qualified withdrawals (earnings) are tax-free, but if the account is less than 5 years old, earnings might be taxed.
• No-Step Up - Retirement accounts, including Roths, do not receive a "step-up in basis" like stocks do at death; the original contributions were already taxed, and earnings grow tax-free.

• You can take a partial amount (e.g., some money now).
• The remaining balance does not get a new stepped-up basis for its future value.
• You just continue withdrawing from the remaining balance, tax-free (if qualified), until the account is empty by the 10-year mark.

• It's a Real Thing: You do open an "inherited Roth IRA" (sometimes called a "beneficiary Roth IRA").
• Spousal Beneficiaries Have More Flexibility: A surviving spouse can roll it into their own IRA or treat it as their own, potentially avoiding RMDs and keeping the account for life, but earnings might be taxed until age 59.5 and the 5-year rule is met.
• Non-Spouse Beneficiaries Face the 10-Year Rule: Most non-spouses must withdraw the entire balance by the end of the 10th year after the original owner's death, regardless of age.
•  (EDBs): A few exceptions (minor children, disabled/chronically ill, or those <10 yrs younger) can "stretch" distributions over their lifetime, similar to old rules, but most heirs can't.
• Tax-Free Withdrawals: Withdrawals are tax-free if they are contributions or if they are earnings and the account (original owner's plus inherited) met the 5-year rule.

• No annual RMDs: Beneficiaries are generally not required to take annual distributions in years one through nine./li>
• Full distribution by year 10: The entire account balance must be withdrawn by the end of the 10th year after the original owner's death.
• Tax-free distributions: Qualified distributions from an inherited Roth IRA are tax-free, provided the original account met the five-year holding period.

• A surviving spouse (who also has the option to roll the funds into their own Roth IRA).
• A minor child of the original account owner (the 10-year rule applies once they reach the age of majority, generally age 21).
• A chronically ill or disabled individual.
• Someone not more than 10 years younger than the original account owner.

 Issue 6 – Inherited Roth IRA Required Minimum Distribution (RMD) Requirements (as of 2025)

• The relationship of the beneficiary to the decedent (spouse, non-spouse, entity, etc.)
• Whether the decedent died before or after January 1, 2020 (SECURE Act effective date)
• Whether the beneficiary is an "eligible designated beneficiary" (EDB) or not [2].

• Treat the inherited Roth IRA as their own (no RMDs required during their lifetime).
• Remain a beneficiary and delay distributions until the decedent would have reached age 73, then take RMDs over their own life expectancy.
• Use the 10-year rule (account must be emptied by December 31 of the 10th year after death).
• Roll over the account into their own Roth IRA [2].

• May take distributions over their own life expectancy (the "stretch" option).
• May also elect the 10-year rule if the owner died before their required beginning date [2].

• Must use the 10-year rule: the entire inherited Roth IRA must be distributed by December 31 of the 10th year following the year of the owner’s death. No annual RMDs are required within the 10 years, but the account must be fully distributed by the end of the 10th year [2].

• If the owner died before their required beginning date, the 5-year rule applies (account must be emptied by December 31 of the fifth year after death) [2].

• Required Beginning Date (RBD): For Roth IRAs, there is no RBD for the owner, but for inherited Roth IRAs, the RBD is relevant for determining which rules apply to non-Roth accounts and for certain EDBs [2].
• Life Expectancy Table: If the life expectancy method is available, beneficiaries use the Single Life Expectancy Table (Table I in IRS Pub. 590-B) to calculate annual RMDs [4].
• Multiple Beneficiaries: If there are multiple beneficiaries, separate accounts must be established by December 31 of the year following the year of death for each beneficiary to use their own life expectancy. Otherwise, the RMDs are based on the oldest beneficiary’s life expectancy [4].
• Successor Beneficiaries: If an EDB dies before the account is fully distributed, the successor beneficiary must distribute the remaining balance within 10 years of the EDB’s death [2].

• Distributions from an inherited Roth IRA are generally tax-free if the account has been open for at least five years. If the account is less than five years old, earnings may be taxable [2].

• Excise Tax: If a beneficiary fails to take an RMD, a 25% excise tax (reduced to 10% if corrected in a timely manner) applies to the amount not distributed [3].
• Relief: The IRS may waive the penalty if the shortfall was due to reasonable error and steps are being taken to remedy it. File Form 5329 and a letter of explanation to request a waiver [3].

• IRC § 401(a)(9)(H): 10-year rule for most non-spouse beneficiaries [5].
• IRC § 401(a)(9)(E): Eligible designated beneficiary definition [5].
• Publication 590-B (2024): Detailed RMD rules, life expectancy tables, and examples [4].
• IRS Retirement Topics – Beneficiary: Summary of beneficiary options and RMD rules [2].
• IRS RMD FAQs: Penalties and calculation details [3].

• Inherited Roth IRAs are subject to RMD rules for beneficiaries, even though the original owner was not.
• Most non-spouse beneficiaries must empty the account within 10 years of the owner’s death (10-year rule).
• Spouses and eligible designated beneficiaries may use the life expectancy method or the 10-year rule.
• Distributions are generally tax-free if the Roth IRA has been open for at least five years.
• Penalties apply for missed RMDs, but relief may be available for reasonable error [4].

• [1] Sec. 1.401(a)(9)-0 Required minimum distributions; table of contents.: BlueJ (login required)
• [2] IRS Retirement topics
• [3] IRS Retirement plan FAQs
• [4] Publication 590-B - Distributions from IRAs
• [5] Beneficiary IRAs: A guide to the RMD maze

• Publication 15-B (2024): Blue Jay (login required)
• Publication 590-B (2024): Blue Jay (login required)
• Publication 559 (2024): Blue Jay (login required)
• PLR 202519010: Blue Jay (login required)
• PLR 202348009: Blue Jay (login required)
• News Stories: Final Regs Cover Income, Gain, and Loss of Qualified Business Units: taxnotes

 Issue 7 – How do the RMD rules for an inherited Roth IRA differ between spousal and non-spousal beneficiaries under federal law?

• Roth IRAs are not subject to RMDs during the original owner's lifetime.
• After the Roth IRA owner's death, beneficiaries are subject to RMD rules, which depend on their relationship to the decedent and the date of death (before or after 2020, due to the SECURE Act) [2]. Note – this is the general rule regarding distribution from inherited (the death of the own).

1. Options for Spousal Beneficiaries
   A surviving spouse who inherits a Roth IRA has the most flexibility. The spouse may:
   1. Treat the Inherited Roth IRA as Their Own
      • The spouse can elect to treat the inherited Roth IRA as their own by designating themselves as the account owner or by rolling it over into their own Roth IRA.
      • This option is available only if the spouse is the sole beneficiary and has an unlimited right to withdraw amounts from the IRA [2].
      • Once treated as their own, the spouse is not subject to RMDs during their lifetime.
   2. Treat the Account as an Inherited IRA
      • The spouse can keep the account as an inherited IRA, in which case the RMD rules for beneficiaries apply.
      • The spouse can delay distributions until the decedent would have reached age 73 (or 72/70½, depending on the decedent’s date of birth) [2].
      • After that, the spouse can take distributions over their own life expectancy.
   3. Rollover to Their Own Roth IRA
      • The spouse can roll over the inherited Roth IRA into their own Roth IRA, which is treated the same as option 1 above [3].
2. RMD Requirements for Spousal Beneficiaries
   • If Treated as Own: No RMDs are required during the spouse’s lifetime.
   • If Treated as Inherited:
   • The spouse may delay distributions until the decedent would have reached age 73.
   • After that, RMDs are calculated using the spouse’s life expectancy, recalculated each year [2].
   • If the spouse dies before RMDs begin, the spouse’s beneficiaries are treated as if they were the original beneficiaries of the IRA owner [2].
3. Impact of the SECURE Act
   • The SECURE Act did not significantly change the options for spousal beneficiaries. Spouses retain the ability to treat the IRA as their own or as an inherited IRA, with the associated RMD rules [5].

1. Types of Non-Spousal Beneficiaries
• Eligible Designated Beneficiaries (EDBs): Includes minor children of the decedent, disabled or chronically ill individuals, and individuals not more than 10 years younger than the decedent.
• Designated Beneficiaries (DBs): Any individual named as a beneficiary who is not an EDB.
• Non-Designated Beneficiaries: Estates, charities, or certain trusts.
2. RMD Rules for Non-Spousal Beneficiaries (Post-SECURE Act, Deaths in 2020 or later)
1. Eligible Designated Beneficiaries (EDBs)
• May take distributions over their own life expectancy (the "stretch" option).
• Upon the EDB’s death, the successor beneficiary must withdraw the remaining balance within 10 years [5].
• Must withdraw the entire account by the end of the 10th year following the year of the account owner’s death (the "10-year rule").
2. Designated Beneficiaries (Not EDBs)
• No annual RMDs are required during the 10-year period, but the account must be fully distributed by the end of the 10th year [2].
3. Non-Designated Beneficiaries
• If the account owner died before their required beginning date, the account must be distributed within 5 years.
• If the account owner died after their required beginning date, distributions may be made over the remaining life expectancy of the decedent [2].
3. Special Rules for Minor Children
• Minor children of the decedent (not grandchildren) are EDBs and may use the life expectancy method until they reach the age of majority (age 21 under the final regulations).
• After reaching majority, the 10-year rule applies [5].
4. Impact of the SECURE Act
• The SECURE Act eliminated the "stretch IRA" for most non-spousal beneficiaries, replacing it with the 10-year rule for designated beneficiaries who are not EDBs [5].
• EDBs retain the ability to stretch distributions over their life expectancy.

• Qualified Distributions: If the Roth IRA has been open for at least 5 years, distributions (including earnings) are tax-free to the beneficiary.
• Non-Qualified Distributions: If the Roth IRA has not met the 5-year holding period, earnings may be taxable, but contributions are always tax-free [2].

• Internal Revenue Code § 401(a)(9), § 408(a)(6), § 408A(c)(5)
• SECURE Act (P.L. 116-94)
• IRS Publication 590-B (2024) [2]
• IRS Notice 2022-53 (transition relief for missed RMDs under the 10-year rule) [4]
• Final Regulations under the SECURE Act [5]

• Spouses should carefully consider whether to treat the inherited Roth IRA as their own or as an inherited IRA, as this affects the timing of RMDs and the ability to name new beneficiaries.
• Non-spousal beneficiaries must be aware of the 10-year rule and plan distributions accordingly to avoid large taxable distributions in the final year if the Roth IRA is not qualified.
• All beneficiaries should ensure that the Roth IRA has met the 5-year holding period to maximize tax-free treatment of distributions [2].

• Spousal beneficiaries have the option to treat the inherited Roth IRA as their own (no RMDs required) or as an inherited IRA (with RMDs based on their life expectancy or the 10-year rule).
• Non-spousal beneficiaries who are EDBs may use the life expectancy method; all others must use the 10-year rule.
• The SECURE Act significantly limited the "stretch" option for most non-spousal beneficiaries, but not for spouses or EDBs.

• [1] Sec. 1.401(a)(9)-9 Life expectancy and Uniform Lifetime tables.: BlueJ (login required)
• [2] Publication 590-B (2024): BlueJ (login required)
• [3] PLR 202227005: BlueJ (login required)
• [4] IRS Retirement topics
• [5] Practice Articles: Final Regulations Under the SECURE Act: taxnotes

• Publication 15-B (2024):
• Publication 559 (2024):
• PLR 202348009:
• Pub 590-B - Distributions from IRAs
• Notice 2022-53 - Certain Required Minimum Distributions for 2021 and 2022

1. The trust is valid under state law.
2. The trust is irrevocable (or becomes irrevocable at death)
3. All beneficiaries are identifiable individuals.
• No charities, estates, or non-persons as beneficiaries
4. Trust documentation is provided to the IRA custodian by October 31 of the year following death.

1. Conduit Trusts
• All IRA distributions must immediately pass out to the beneficiary
• No accumulation inside the trust
• Stretch period (or 10-year rule) is based on the conduit beneficiary
• Most common historically
→ Under SECURE Act rules, many conduit trusts now force full payout by year 10 unless the beneficiary is an EDB.
2. Accumulation Trusts
• Trustees may retain IRA distributions inside the trust.
• Used for asset protection or control.
• Stretch period depends on the oldest trust beneficiary.
• More restrictive and complex under SECURE
→ Accumulation trusts often lose lifetime stretch unless drafted specifically for an EDB.
3. Special EDB Trusts (Post-SECURE)
These are still “certain trusts,” but with enhanced treatment:
• Trusts for:
• Disabled beneficiaries
• Chronically ill beneficiaries
→ May qualify for lifetime stretch, even after SECURE.
→ Must meet additional statutory requirements.
Trusts that are NOT “Certain Trusts”
These are treated as non-designated beneficiaries:
• Estate-as-beneficiary
• Charitable trusts (e.g., CRUTs)
• Trusts with charities or estates as remainder beneficiaries
• Trusts failing documentation or identifiability rules
→ These typically follow the 5-year rule or ghost-life expectancy (if owner died after RBD).
Why beneficiary tables use the term “Certain Trusts”?
Because the payout rule depends on whether the trust qualifies:

• Valid Under State Law: The trust must be a valid legal entity under the state law where it was established.
• Irrevocable: The trust must be irrevocable, or by its terms become irrevocable, upon the death of the original retirement account owner.
• Identifiable Beneficiaries: The underlying beneficiaries of the trust must be individuals;5 could apply and 10 could apply.

Continue RMDs: The husband must continue to take annual Required Minimum Distributions (RMDs) based on the deceased spouse's (the first beneficiary's) remaining life expectancy, using the IRS Single Life Expectancy table.
• No New 10-Year Period: The husband does not get a new 10-year payout period. He must continue the RMD schedule already in place for his late spouse.
• Account Depletion: The account must be fully distributed over the original beneficiary's (the spouse's) remaining life expectancy period.

• Adult child
• Grandchild
• Most trusts that don’t qualify as see-through EDB trusts

• Owner dies at age 68
• They had not yet started RMDs
• Under current law, their RBD would have been age 73

• Owner dies at 68 → before RBD.
• Beneficiary has maximum flexibility.
• Can take nothing for 9 years and drain it in Year.

• The IRS assumes you are.
• Custodians often:
• Mis-code the account.
• Give generic RMD notices.
• Or give no notice at all.

• Form 5498 (account value)
• Form 1099-R (distributions)
• Automated matching

• Owner died after RBD
• Beneficiary must:
• Take annual “life expectancy” RMDs in years 1–9
• Empty the account by end of year 10

• ❌ Beneficiary does not start RMDs at the owner’s hypothetical age 73
• ✅ No annual RMDs required
• ✅ Entire IRA must be distributed by 12/31 of the 10th year
• ⚠️ The beneficiary is responsible for compliance — not the custodian

 Issue 8 – Excess Business Losses

 Issue 9 – QBI

 Issue 10 – AI – Artificial Intelligence

 Issue 11 – Draft Instruction of Schedule 1-A - Comment

• New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)
• Maximum annual deduction is $10,000.
• Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
• Qualified interest: In order to qualify for the deduction, the interest must be paid on a loan that is:
• originated after December 31, 2024,
• used to purchase a vehicle, the original use of which starts with the taxpayer (used vehicles do not qualify),
• for a personal use vehicle (not for business or commercial use) and
• secured by a lien on the vehicle.

• Qualified vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.
• Final assembly in the United States: The location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer's premises. Alternatively, taxpayers may rely on the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN) to determine whether a vehicle has undergone final assembly in the United States.
• The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information. Taxpayers can follow the instructions on that website to determine if the vehicle’s plant of manufacture was located in the United States.
• Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.
• The taxpayer must include the Vehicle Identification Number (VIN) of the qualified vehicle on the tax return for any year in which the deduction is claimed.
• Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year.
• Guidance: The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements.

 Issue 12 – Refunds of 2025 Tax Year

• Direct Deposit to a Bank Account: This is the fastest and most common method. You will need to provide your bank account's routing and account numbers on your tax return. You can deposit your refund into a checking account, savings account, or even certain retirement accounts. You can also split your refund into up to three different accounts using .
• Prepaid Debit Cards: If you do not have a traditional bank account, many reloadable prepaid debit cards have associated routing and account numbers that you can use for direct deposit.
• Digital Wallets: Some mobile apps and digital wallets can accept direct deposits. You should check with your provider to ensure you have the correct routing and account numbers to enter on your tax return.

• IRS Direct Pay: A free service that allows you to schedule payments directly from your bank account.
• Electronic Federal Tax Payment System (EFTPS): A free service best for individuals or businesses making large or recurring payments. Enrollment is required.
• Debit or Credit Card/Digital Wallet: You can pay online, by phone, or through the  using an authorized third-party payment processor (which may charge a fee).
• Electronic Funds Withdrawal (EFW): This option is available only when you file your tax return electronically using tax software or a tax professional.

 Issue 13 – Payment Issues for 2026 Tax Season – Can We Still Send in a Check as Payment?

• IRS Direct Pay: This free service allows you to pay directly from your checking or savings account without any fees or registration required. You can schedule payments up to 365 days in advance and receive email confirmations.
• Electronic Federal Tax Payment System (EFTPS): This is a free service, ideal for individuals and businesses making large or frequent payments (e.g. estimated taxes, federal tax deposits). Enrollment is required, and payments can be scheduled up to 365 days in advance.
• Debit or Credit Cards/Digital Wallets: You can pay online, by phone, or via the IRS2Go app through authorized third-party payment processors. Note that these processors charge a convenience fee.
• Electronic Funds Withdrawal (EFW): If you file your taxes electronically (using tax software or a tax professional), you can authorize a direct debit from your bank account as part of the e-filing process.
• IRS Online Account: You can create or sign in to your individual or business  to view your balance, payment history, and make payments directly from your bank account.

• Check or Money Order: You can pay by check or money order through the U.S. mail. For income tax liabilities, you should include the appropriate payment voucher (e.g., Form 1040-V) and ensure you mail it to the correct IRS address.
• Cash: Cash payments can be made at participating retail stores through a service called Official Payments or similar IRS retail partners. A processing fee and a $500 limit per payment apply.
• Same-day wire transfer: You can arrange for a financial institution to initiate a same-day wire payment, though bank fees may apply.

• Payment Plan (Installment Agreement): Most taxpayers who owe less than $50,000 (individuals) or $25,000 (businesses) can apply for a long-term payment plan (monthly payments for up to 72 months) online through the Online Payment Agreement tool.
• Short-Term Payment Plan: If you owe less than $100,000, you may qualify for a short-term plan that gives you up to 180 additional days to pay the balance in full.
• Offer in Compromise (OIC): If you are experiencing significant financial hardship, you may be able to settle your tax debt for less than the full amount owed. You can use the IRS's Offer in Compromise Pre-Qualifier tool to check your eligibility.
• Temporary Delay of Collection: In cases of financial inability to pay, you can contact the IRS to request a temporary delay of the collection process.

 Issue 14 – Gambling Issues

• Login/Logout Activity: Many platforms define a session as the continuous period an "authorized participant is logged on to an internet sports betting platform". The session ends when the user logs out or is automatically logged out after a period of inactivity.
• Time Limits: Users can often set voluntary "session limits" (timeouts) which automatically end their current session and lock them out for a set period (e.g., 1 to 23 hours) once the time limit is reached.
• Bet Settlement is Not the Deciding Factor: The outcome or settlement of a long-span bet does not typically end a "session" in a technical, platform-enforced sense. The session is focused on the user's active presence on the platform.

• Individual Wagers: Based on current interpretations of IRS guidance, each individual sports wager is often considered a separate taxable event or "session".
• Continuous Activity: For other forms of gambling (like slot machines), a "session method" is used, which involves netting wins and losses during a continuous period of play (e.g., from buy-in to cash-out on a single day).
• Lack of Clarity for Sports Betting: Because sports bets can span days or weeks, applying a "continuous play" model is difficult. Tax experts generally believe that the IRS is likely to interpret each specific sporting contest as its own session for settlement purposes, rather than allowing an entire season of betting to be counted as one long session.

• Platform usage defines a session (login to logout) for responsible gaming limits.
• Each individual game/wager is likely a separate session for tax reporting purposes.

• Any work of art,
• Any rug or antique,
• Any metal or gem,
• Any stamp or coin,
• Any alcoholic beverage, or
• Any other tangible personal property specified by the Secretary for purposes of this subsection.

1. Are Gaming Cards a "Work of Art"?
• The term "work of art" is generally interpreted as an item created primarily for its aesthetic value, such as paintings or sculptures.
• While gaming cards may feature artistic designs, their primary purpose is functional—as game pieces, not as art objects. The value of a gaming card is typically based on its utility in gameplay and rarity, not solely on its artistic merit [3].
2. Are Gaming Cards "Antiques"?
• An "antique" is generally defined as an object at least 100 years old.
• Most gaming cards, including Magic: The Gathering and Pokémon cards, are not old enough to qualify as antiques. Even older baseball cards may only qualify if they meet the age threshold [3].
3. Are Gaming Cards "Other Tangible Personal Property Specified by the Secretary"?
• The IRS has not issued regulations or guidance specifying gaming cards as collectibles under this catch-all provision.
• Proposed regulations from 1984 (never finalized) would have expanded the definition to include musical instruments and historical objects, but not gaming cards [3].
4. Are Gaming Cards "Stamps" or "Coins"?
• Gaming cards are not stamps or coins.
5. Are Gaming Cards "Metals" or "Gems"?
• Gaming cards are not metals or gems.

• Tax articles and scholarly commentary confirm that, absent further IRS guidance, gaming cards are not considered collectibles for tax purposes unless they fall into one of the enumerated categories (work of art, antique, etc.)
• The IRS has not issued any notice, regulation, or other guidance specifically classifying gaming cards as collectibles.

• If a gaming card is not a collectible item, long-term capital gains from its sale are taxed at the standard long-term capital gains rates (0%, 15%, or 20%, depending on income)
• If a gaming card were classified as a collectible, long-term capital gains would be taxed at a maximum rate of 28%

• If a gaming card is at least 100 years old, it may qualify as an "antique" and thus be a collectible. In that case, gains would be subject to the 28% rate.

• [1] Sec. 408 Individual retirement accounts: BlueJ (login required)
• [2] Sec. 1 Tax imposed: BlueJ (login required)
• [3] Viewpoint: Taxation of Collectibles and Other Actual Physical Things: taxnotes

• Notice 2023-27: BlueJ (login required)
• Publication 550 (2024): BlueJ (login required)
• PMTA 01809: BlueJ (login required)
• Practice Articles: Tax Considerations for Transactions of Non-Fungible Tokens: taxnotes
• Taxes on Collectibles: What You Need to Know

• Gross income from a slot machine wagering transaction is determined on a session basis.
• A session of play begins when a patron places the first wager on a particular type of game and ends when the same patron completes his or her last wager on the same type of game, before the end of the same calendar day (midnight to 11:59 p.m.).

 Issue 15 – IRS Installment Agreements

 Issue 16 – Kiddie Tax

• Under age 18 at the end of the tax year.
• Age 18 at the end of the tax year, provided their earned income was not more than half of their support.
• A full-time student at least age 19 and under age 24 at the end of the tax year, provided their earned income was not more than half of their support.

 Issue 17 – Trump Accounts

1. What Counts: Interest, dividends, and capital gains from the invested gifted money are "unearned income".
2. Kiddie Tax Thresholds (Approximate):
• First portion (e.g., $1,350) is tax-free.
• Next portion (e.g., $1,350) taxed at the child's rate.
• Anything above that is taxed at the parents' higher rate.
3. The $1,000 Government Contribution: This initial deposit is not considered taxable income to the child, but the money it earns is subject to Kiddie Tax rules.
4. Trump Account Specifics: The key rule for Trump Accounts is that they must be invested in U.S. equity index funds with low fees, and distributions are restricted until age 18.
5. Reporting: If the child's unearned income is high enough, you'll file IRS Form 8615 with the child's tax return.

• Tax-Free Withdrawals: Basis is the after-tax money you put in, which is not taxed again when withdrawn.
• Different Contribution Types: Employer/government contributions don't create basis, while parent contributions do, requiring separate tracking.
• Post-Growth Period Rules: After the "growth period" (around age 18), standard IRA rules apply, but basis tracking is still necessary to differentiate between taxed (employer) and untaxed (parent) funds.

• Parent Contributions: You must track these as they form the basis.
• Employer/Govt Contributions: These are generally taxable upon withdrawal and don't add to basis, per IRS Guidance.
• Rollovers: Basis from an initial account carries over to a rollover account.

• Financial institutions (trustees) must have systems to track contribution sources and manage basis for compliance with IRS notices.
• Expect more detailed guidance from the  and Treasury/Labor Departments on these administrative aspects.

 Issue 18 – State of Iowa Issues

• Mandatory Hours: A tax return preparer must complete a minimum of 15 hours of CE courses each calendar year.
• Subject Matter: The hours must include at least two hours on professional ethics, with the remainder pertaining to federal or state income tax.
• Provider: All courses must be taken from an IRS-approved provider of continuing education.
• Reporting Deadline: The completed hours for a calendar year must be reported to the Iowa Department of Revenue by February 15 of the following year.
• Record Retention: Preparers must retain records, such as certificates of completion, for a minimum of five years.

• Cannot prepare tax returns: They become ineligible to prepare Iowa income tax returns or claims for refund for the remaining duration of that tax season until they complete and report the required hours.
• Must make up hours: The Department may require the preparer to complete any uncompleted hours and submit the appropriate form before resuming preparation activities.
• Must provide explanation: The preparer must attach a statement to their reporting form explaining that the failure was due to reasonable circumstances and not willful or reckless conduct.

 Issue 19 – Miscellaneous Issues

• A U.S. citizen
• A foreign citizen
• Someone living in the U.S. or abroad
• A friend, child, parent, or anyone else

• Missing or Incorrect Taxpayer Identification Number (TIN):
• Notification from the IRS of an Incorrect TIN:
• Underreported Interest or Dividend Income
• Failure to Certify: The payee fails to certify that they are not subject to backup withholding when required (e.g., when opening a new account or starting a contract job).

1. Check your notice: Look for a link or QR code and a unique 10-digit alphanumeric access code in your notice. The notice will explicitly state if you can use this tool.
2. Gather documentation: Collect all the supporting documents requested by the IRS. Acceptable file formats are JPG, PNG, or PDF, with a maximum size of 15MB per file (up to 40 files total).
3. Access the tool: Go to the official IRS Document Upload Tool page or use the specific link provided in your notice.
4. Provide information: Enter your access code, name, and identifying number (SSN, ITIN, or EIN). An IRS account is not required to use this specific tool.
5. Upload and confirm: Upload your files, including a copy of the notice itself. You will receive an immediate confirmation that your documents have been received.

• Mail: Complete and sign the response form (if included) and mail it with copies of your supporting documents to the address provided in the notice. The notice should include a return envelope.
• Fax: Some notices may provide a fax number as an option.
• Phone: You can call the phone number in the upper right-hand corner of the notice if you have questions or need to dispute the notice informally.

• An access code (if provided) or the notice or letter number or title
• The first and last name or business name on the notice or letter
• Social Security, individual taxpayer identification or employer identification number

• Upload scans, photos, or digital copies of documents such as JPGs, PNGs or PDFs
• Get confirmation that we received your documents

• Credit, not a deduction.
• Dollar-for-dollar reduction of federal income tax liability
• Nonrefundable → limited to tax owed
• Per-taxpayer cap: $1,700
• Contribution must be to a state-certified SGO
• No double benefit (no charitable deduction for the same dollars)

1. Owes at least $1,700 in federal income tax, and
2. Make a $1,700 contribution to a qualifying SGO, and
3. Is not otherwise limited by AMT or other credit ordering rules,

1. Nonrefundable means tax liability matters
If a taxpayer only owes $900 in federal income tax:
• $1,700 contribution
• $900 usable credit
• $800 credit lost
→ Effective cost = $800
2. Annual dollar cap
• The credit is capped at $1,700 per taxpayer.
• MFJ ≠ automatically $3,400 unless each spouse separately qualifies under the statute and contribution structure.
• $800 credit lost
You cannot:
• Take the $1,700 credit and
• Deduct the contribution as a charitable gift
So compared to a traditional charitable gift, the benefit is capped and binary.
3. State interaction is unpredictable
States may:
• Treat the contribution as non-deductible.
• Disallow any state credit.
• Or decouple entirely.
This affects the net benefit materially depending on where the taxpayer lives.
4. Credit ordering / AMT effects
If a taxpayer is:
Subject to AMT, or
Using multiple non-refundable credits, the scholarship credit may be partially or fully crowded out.
Bottom line
✔️ Yes — for some taxpayers, this is effectively a 100% federally reimbursed contribution.
❌ No — it is not universally free money.
🎯 It works best for:
• Middle- and upper-income taxpayers
• With predictable federal tax liability
• Who already supports private K-12 education initiatives.