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Tax Newsletter – December 2024

Tax Newsletter: December 2024

1040 Shutdown begins November 30, 2024

In this Issue:

  • Proc. 2024-40 Inflationary Adjustments for 2025 – Issues 1-34
  • Notice 2024-80 – 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
  • Disclosure Issues When Sharing Partner Information with Partnership
  • IRS to Use IP PINs to Stop Refund Delays Due to Duplicate Dependent Returns
  • Lower Interest Rates for First Quarter of 2025
  • Applicable Federal Rates for December 2024, Rev. Rul. 2024 – 26

HOT Issue:

We discussed this briefly in our Quarterly Update and now we have some official information.  IRS has finally addressed Form 1099-K threshold for tax year ending 2024.

  • The Internal Revenue Service issued Notice 2024-85 providing transition relief for third party settlement organizations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during calendar years 2024 and 2025.
  • Under the guidance issued today, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than $5,000 in 2024; more than $2,500 in 2025; and more than $600 in calendar year 2026 and after. 
  • Notice 2024-85 also announces for calendar year 2024, that the IRS will not assert penalties under §§ 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year.
  • TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.
  • For the calendar year 2025 and after, the IRS will assert penalties under §§ 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax.

In addition: H.R. 190 the Saving Gig Economy Taxpayers Act is gaining increased action and comment – see Ways and Means Announcement below:

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Inflation Adjustments for 2025

a blue and white circle with a triangle in the center Issue 1: Standard Deduction 2025

  • For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024.
  • For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024.
  • For heads of households, the standard deduction will be $22,500 for tax year 2025, an increase of $600 from the amount for tax year 2024.

a blue and white circle with a triangle in the center Issue 2: Marginal Rates for 2025

For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:

  • 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
  • 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
  • 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
  • 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
  • 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
  • 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

a blue and white circle with a triangle in the center Issue 3: Alternative Minimum Tax Exemption Amounts 2025

For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.

a blue and white circle with a triangle in the center Issue 4: Exemption Amounts for Alternative Minimum Tax

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a blue and white circle with a triangle in the center Issue 5: Alternative Minimum Tax Exemption for a Child Subject to “Kiddie Tax”

For taxable years beginning in 2025, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55(d) and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $9,550

a blue and white circle with a triangle in the center Issue 6: Earned Income Tax Credits

For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.

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a blue and white circle with a triangle in the center Issue 7: Earned Income Credit – Investment Income Limitations

For taxable years beginning in 2025, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $11,950.

a blue and white circle with a triangle in the center Issue 8: Qualified Transportation Fringe Benefit

For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.

a blue and white circle with a triangle in the center Issue 9: Health Flexible Spending Cafeteria Plans

For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.

a blue and white circle with a triangle in the center Issue 10: Medical Savings Accounts

  • For tax year 2025, participants who have self-only coverage the plan must have an annual deductible that is not less than $2,850 (a $50 increase from the previous tax year), but not more than $4,300 (an increase of $150 from the previous tax year).
  • The maximum out-of-pocket expense amount rises to $5,700, increasing from $5,550 in tax year 2024.
  • For family coverage in tax year 2025, the annual deductible is not less than $5,700, increasing from $5,550 in tax year 2024; however, the deductible cannot be more than $8,550, an increase of $200 versus the limit for tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.

a blue and white circle with a triangle in the center Issue 11: Foreign Earned Income Exclusion

For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.

a blue and white circle with a triangle in the center Issue 12: Estate Tax Exclusions

Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.

a blue and white circle with a triangle in the center Issue 13: Annual Exclusion for Gifts Increase

  • $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
  • For calendar year 2025, the first $190,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.
  • For taxable years beginning in 2025, § 6039F authorizes the Secretary of the Treasury or her delegate to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $20,116.

a blue and white circle with a triangle in the center Issue 14: Adoption Credit

For tax year 2025, the maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024.

a blue and white circle with a triangle in the center Issue 15: Maximum Capital Gains Rates

 For taxable years beginning in 2025, the maximum zero rate amounts and maximum 15 percent rate amounts under § 1(j)(5)(B), as adjusted for inflation, are as follows:

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table for estates and trusts

a blue and white circle with a triangle in the center Issue 16: Unearned Income of Minor Child Subject to “Kiddie Tax”

  • For taxable years beginning in 2025, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,350. This $1,350 amount is the same as the amount provided in § 63(c)(5)(A), as adjusted for inflation
  • The same $1,350 amount is used for purposes of § 1(g)(7) to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.”
  • For example, one of the requirements for the parental election is that a child’s gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2025 must be more than $1,350 but less than $13,500.

a blue and white circle with a triangle in the center Issue 17: Refundable Credit for Coverage Under a Qualified Health Plan

 For taxable years beginning in 2025, the limitation on tax imposed under § 36B(f)(2)(B) for excess advance credit payments is determined using the following table:

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 a blue and white circle with a triangle in the center Issue 18: Expenses of Elementary and Secondary School Teachers

For taxable years beginning in 2025, under § 62(a)(2)(D) the amount of the deduction allowed under § 162 that consists of expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $300

a blue and white circle with a triangle in the center Issue 19: Dependent Standard Deduction

For taxable years beginning in 2025, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,350, or (2) the sum of $450 and the individual’s earned income.

a blue and white circle with a triangle in the center Issue 20: Additional Standard Deduction for Aged and Blind

For taxable years beginning in 2025, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,600. The additional standard deduction amount is increased to $2,000 if the individual is also unmarried and not a surviving spouse.

a blue and white circle with a triangle in the center Issue 21: Income from United States Savings Bonds for Taxpayers Who Pay Qualified Education Expenses

For taxable years beginning in 2025, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $149,250 for joint returns and $99,500 for all other returns. The exclusion is completely phased out for a modified adjusted gross income of $179,250 or more for joint returns and $114,500 or more for all other returns.

a blue and white circle with a triangle in the center Issue 22: Gross Income for a Qualified Relative

For taxable years beginning in 2025, the exemption amount referenced in § 152(d)(1)(B) is $5,200.

a blue and white circle with a triangle in the center Issue 23: Election to Expense Certain Depreciable Assets

  • For taxable years beginning in 2025, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,250,000 and under § 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $31,300.
  • Under § 179(b)(2), the $1,250,000 limitation under § 179(b)(1) is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2025 taxable year exceeds $3,130,000.

a blue and white circle with a triangle in the center Issue 24: Qualified Business Income

For taxable years beginning in 2025, the threshold amounts under § 199A(e)(2) and phase-in range amounts under § 199A(b)(3)(B) and § 199A(d)(3)(A) are:

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a blue and white circle with a triangle in the center Issue 25: Eligible Long Term Care Premiums

For taxable years beginning in 2025, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care”, as adjusted for inflation, are as follows:

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a blue and white circle with a triangle in the center Issue 26: Interest on Education Loans

For taxable years beginning in 2025, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B), as adjusted for inflation, for taxpayers with modified adjusted gross income in excess of $85,000 ($170,000 for joint returns) and is completely phased out for taxpayers with modified adjusted gross income of $100,000 or more ($200,000 or more for joint returns).

a blue and white circle with a triangle in the center Issue 27: Limitation on the Use of Cash Method of Accounting

For taxable years beginning in 2025, a corporation or partnership meets the gross receipts test of § 448(c) for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $31,000,000.

a blue and white circle with a triangle in the center Issue 28: Threshold for Excess Business Losses

For taxable years beginning in 2025, in determining a taxpayer’s excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $313,000 ($626,000 for joint returns).

a blue and white circle with a triangle in the center Issue 29: Failure to File a Partnership or S Corporation Return

  • In the case of any return required to be filed in 2026, the dollar amount used to determine the amount of the penalty under § 6698(b)(1) is $255.
  • Failure to File S Corporation Return. In the case of any return required to be filed in 2026, the dollar amount used to determine the amount of the penalty under § 6699(b)(1) is $255.

a blue and white circle with a triangle in the center Issue 30: Revocation or Denial of Passport in Case of Certain Tax Delinquencies

For calendar year 2025, the amount of serious delinquent tax debt under § 7345 is $64,000.

a blue and white circle with a triangle in the center Issue 31: Qualified Small Employer Health Reimbursement Arrangement

For taxable years beginning in 2025, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $6,350 ($12,800 for family coverage).

a blue and white circle with a triangle in the center Issue 32: Unchanged for tax year 2025

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

  • Personal exemptionsfor tax year 2025 remain at 0, as in tax year 2024. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
  • Itemized deductions.There is no limitation on itemized deductions for tax year 2025, as in tax year 2024 and preceding, to tax year 2018. The limitation on itemized deductions was eliminated by the Tax Cuts and Jobs Act of 2017.
  • Lifetime learning credits.The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in Sec. 25A(d)(1) of the Internal Revenue Code is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

a blue and white circle with a triangle in the center Issue 33: 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost of Living

  • Effective January 1, 2025, the limitation on the annual benefit under a defined benefit plan under 415(b)(1)(A) of the Code is increased from $275,000 to $280,000.
  • For a participant who separated from service before January 1, 2025, the participant’s limitation under a defined benefit plan under 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2024, by 1.0262.
  • The limitation for defined contribution plans under 415(c)(1)(A) increased in 2025 from $69,000 to $70,000.

The Code provides that various other amounts are to be adjusted at the same time and in the same manner as the limitation of § 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2025 are as follows:

  • The limitation under 402(g)(1) on the exclusion for elective deferrals described in § 402(g)(3), which includes elective deferrals made to the Thrift Savings Plan, is increased from $23,000 to $23,500.
  • The limitation on deferrals under 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $23,000 to $23,500.
  • The limitation under 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) that generally applies for individuals aged 50 or over remains $7,500. The limitation under § 414(v)(2)(E)(i) for catch-up contributions to an applicable employer plan other than a plan described in § 401(k)(11) or § 408(p) that applies for individuals who attain age 60, 61, 62, or 63 in 2025 is $11,250. The Roth catch-up wage threshold for 2024, which under § 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in § 408(k) or (p)) for 2025 must be designated Roth contributions, remains $145,000.
  • The limitation under 408(p)(2)(E)(i)(III) that generally applies to salary reduction contributions under a SIMPLE retirement account or elective contributions under a SIMPLE 401(k) plan is increased from $16,000 to $16,500. The limitation for certain of those accounts or plans under § 408(p)(2)(E)(i)(I) or (II) remains $17,600.
  • The limitation under 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in § 401(k)(11) or § 408(p) that generally applies for individuals aged 50 or over remains $3,500. The limitation under § 414(v)(2)(E)(ii) for catch-up contributions to an applicable employer plan described in §401(k)(11) or § 408(p) that applies for individuals who attain age 60, 61, 62, or 63 in 2025 is $5,250. The limitation under § 414(v)(2)(B)(iii) for catch-up contributions to certain accounts or plans described in § 401(k)(11) or section 408(p) that generally applies for individuals aged 50 or over remains $3,850.
  • The limitation under 401(k)(16)(D)(i)(II) and § 403(b)(16)(D)(i)(II) that generally applies for elective contributions made to a starter 401(k) deferral-only arrangement described in § 401(k)(16)(B) or a safe harbor deferral-only plan described in § 403(b)(16)(B), respectively, remains $6,000. This limitation is increased for individuals who attain age 50 before the end of the taxable year by $1,000.
  • The threshold used in the definition of “highly compensated employee” under 414(q)(1)(B) is increased from $155,000 to $160,000.
  • The threshold under 416(i)(1)(A)(i) concerning the definition of “key employee” for top-heavy plan purposes is increased from $220,000 to $230,000.
  • The annual compensation limitation under§ 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $345,000 to $350,000. The annual compensation limitation under § 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation under the plan under § 401(a)(17) to be taken into account, is increased from $505,000 to $520,000.
  • The limitation under 402A(e)(3)(A)(i) concerning pension-linked emergency savings accounts that may be included in certain types of defined contribution plans remains $2,500.
  • The compensation threshold under 408(k)(2)(C) regarding simplified employee pensions remains $750.
  • The amount under 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period is increased from $1,380,000 to $1,415,000, while the dollar amount used to determine the lengthening of the 5-year distribution period is increased from $275,000 to $280,000.
  • The limitation on the aggregate amount of length of service awards accruing with respect to any year of service for any bona fide volunteer under 457(e)(11)(B)(ii) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains $7,500.
  • The limitation under 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains $60,000.
  • The compensation amount under § 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from $135,000 to $140,000. The compensation amount under § 1.61-21(f)(5)(iii) is increased from $275,000 to $285,000.
  • The limitation on premiums paid for a qualifying longevity annuity contract under § 1.401(a)(9)-6(q)(2)(ii) is increased from $200,000 to $210,000.
  • The $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under § 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under § 432(e)(9)(H)(v)(III)(aa) is increased from $1,369,000,000 to $1,441,000,000.

The Code also provides that several retirement-related amounts are to be adjusted using a variation of the methodology used for the cost-of-living adjustments under § 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2025 are as follows:

  • The adjusted gross income limitation under 25B(b)(1)(A) for determining the retirement savings contributions credit for married taxpayers filing a joint return is increased from $46,000 to $47,500; the limitation under § 25B(b)(1)(B) is increased from $50,000 to $51,000; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $76,500 to $79,000.
  • The adjusted gross income limitation under 25B(b)(1)(A) for determining the retirement savings contributions credit for taxpayers filing as head of household is increased from $34,500 to $35,625; the limitation under § 25B(b)(1)(B) is increased from $37,500 to $38,250; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $57,375 to $59,250.
  • The adjusted gross income limitation under 25B(b)(1)(A) for determining the retirement savings contributions credit for all other taxpayers is increased from $23,000 to $23,750; the limitation under § 25B(b)(1)(B) is increased from $25,000 to $25,500; and the limitation under §§ 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $38,250 to $39,500.
  • The deductible amount under 219(b)(5)(A), which limits the amount of an individual’s deductible qualified retirement contributions for a taxable year remains $7,000. The increase in the deductible amount pursuant to § 219(b)(5)(B)(ii) for individuals who have attained age 50 before the close of the taxable year remains $1,000.
  • The applicable amount under 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $123,000 to $126,000. The applicable amount under § 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) is increased from $77,000 to $79,000. If an individual or the individual’s spouse is an active participant, the applicable amount under § 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable amount under § 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $230,000 to $236,000.
  • In light of the changes to the applicable amounts, under 219(g)(2)(A), the deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of household who are active participants in a qualified plan (or another retirement plan specified in § 219(g)(5)) and have adjusted gross incomes (as defined in § 219(g)(3)(A)) between $79,000 and $89,000, increased from between $77,000 and $87,000. For married couples filing jointly, if the spouse who makes the IRA contribution is an active participant, the income phase-out range is between $126,000 and $146,000, increased from between $123,000 and $143,000. For an IRA contributor who is not an active participant and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $236,000 and $246,000, increased from between $230,000 and $240,000. For a married individual filing a separate return who is an active participant, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The adjusted gross income limitation under 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $230,000 to $236,000. The adjusted gross income limitation under § 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $146,000 to $150,000. The applicable amount under § 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
  • In light of the changes to the adjusted gross income limitations, under 408A(c)(3)(A), the adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is between $236,000 and $246,000 for married couples filing jointly, increased from between $230,000 and $240,000. For singles and heads of household, the income phase-out range is between $150,000 and $165,000, increased from between $146,000 and $161,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
  • The aggregate amount of qualified charitable distributions that are not includible in gross income under 408(d)(8)(A) is increased from $105,000 to $108,000. The amount of qualified charitable distributions made directly to a split interest entity that are not includible in gross income under § 408(d)(8)(F)(i)(II) pursuant to a one-time election is increased from $53,000 to $54,000.
  • The annual compensation limitation under 45E(f)(2)(C) for employees excluded from the calculation of the additional small employer pension plan startup cost credit for certain employer contributions is $105,000.
  • The limitation under 72(t)(2)(K)(ii)(I) for eligible distributions to victims of domestic abuse from applicable eligible retirement plans is increased from $10,000 to $10,300.
  • The limitation under 401(a)(39)(B)(i)(III) on a qualified long-term care distribution from a qualified defined contribution plan with respect to certified long-term care insurance applicable for distributions made after December 29, 2025, is $2,600.
  • The limitation under 408(p)(2)(A)(iv) for additional nonelective contributions for an employee to a SIMPLE retirement account or a SIMPLE 401(k) plan is increased from $5,000 to $5,100.

a blue and white circle with a triangle in the center Issue 35: Disclosure Issues When Sharing Partner Information with Partnership – Legal Advice Issued by Field Attorneys 20244101f

In a recent memorandum, IRS Chief Counsel discussed whether the disclosure of a partner’s tax information included in an investigation report created as part of the partnership’s Collection Due Process (CDP) proceeding would run afoul of §6103.

After receiving a collection notice, A, a partnership, requested a CDP hearing. In its CDP request, A asked that its account be placed in currently not collectible (CNC) status.

When they received the CDP request, Appeals asked IRS Collections to investigate whether A’s tax debt was collectible. Appeals’ partnership referral investigation (ARI) file included the personal tax information of A’s partners.

After investigating, Collections agreed that A’s account was CNC. However, in its ARI report, Collections also determined that some of A’s partners had assets that could be used to pay A’s tax liability.

The Internal Revenue Manual (IRM) requires Appeals to share the ARI report with A. However, under §6103, the IRS must keep tax returns and return information confidential. Specifically, such information may not be disclosed to government employees or other persons except as authorized by statute (permissible disclosure).

So, would Appeals’ sharing the ARI report containing the partners’ confidential information with A run afoul of § 6103?

According to Chief Counsel, it depends on where the information in the report originated.

 

Q&As:

Q1. Would sharing with A the partners’ personal information included in the ARI for the partnership create an issue with § 6103?

    • § 6103 – Not if the confidential partner information included in the ARI report was received from outside the IRS (for example, it was received from A) as part of the partnership proceedings. In that case, the information is the partnership’s return information. Disclosing the partnership’s tax information to the partnership doesn’t violate 6103.

Q2. Would sharing with A the partners’ personal information included in the ARI report be a permissible disclosure under § 6103?

    • 1 – Not if the information in the ARI report is internal IRS information. In that case, the partner information may be disclosed to A as allowed by 6103 only.

Q3. Would withholding the full ARI results by redacting or removing information due to disclosure concerns violate the IRM’s requirement to disclose the ARI to A?

    • § 6103 – Not sharing the full investigation results would not violate the IRM if the withheld information was internal IRS partner information and disclosure of that information was not authorized by § 6103.

Q4. What information can Appeals share with the taxpayer partnership?

    • The partner information Appeals can share with A depends on how the IRS obtained the partner information included in the ARI report. (see answers to Q1 and Q2 above).

 

a blue and white circle with a triangle in the center Issue 36: IRS to Use IP PINs to Stop Refund Delays Due to Duplicate Dependent Returns

The IRS will begin accepting certain e-filed tax returns claiming dependents who have already been claimed on another taxpayer’s return to prevent refund delays for tax credits, including the earned income tax credit (EIC) and the child tax credit (CTC). Beginning with the 2025 filing season, the IRS will accept Forms 1040, 1040-NR and 1040-SS, even if a dependent listed on the return has been claimed on someone else’s previously filed return, so long as the primary taxpayer on the second return includes a valid identity protection personal identification number (IP PIN).

The change allows the IRS to accept tax returns with duplicate dependent returns more quickly and accelerate the issuance of tax refunds related to the duplicate returns. In previous years, the second return needed to be paper-filed. The IRS will continue to reject e-filed returns without an IP PIN if they claim a dependent who appears on a previously filed return.

Using an IP PIN will also help protect taxpayers from someone else fraudulently claiming the taxpayer’s dependent on their return. However, if the taxpayer obtains an IP PIN and e-files again with the IP PIN on their return, the IRS will accept the return if there are no other issues. Taxpayers claiming dependents for the 2022 and 2023 tax years must still file by mail if their dependent has been claimed on another return.

The IRS encourages taxpayers to sign up for IRS Online Account, which provides a quick and easy way to obtain an IP PIN. The IRS’s IP PIN system will be down for scheduled maintenance from Nov. 23 until early 2025, so the IRS is encouraging taxpayers who plan on filing early to sign up for their IP PIN before the shutdown.

To Late to sign up now – but be aware of this change. IRS issued this guidance on November 21, 2025, knowing the IP PIN system would be shut down.

a blue and white circle with a triangle in the center Issue 37: Lower Interest Rates for First Quarter of 2025

IRS interest rates will decrease by 1% for the calendar quarter beginning Jan. 1, 2025. The new interest rates will be:

  • 7% for overpayments, 6% for corporate overpayments
  • 4.5% for the portion of a corporate overpayment exceeding $10,000
  • 7% for underpayments

9% for large corporate underpayments

a blue and white circle with a triangle in the center Issue 38: Applicable Federal Rates for December 2024, Rev. Rul. 2024 – 26

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                REV. RUL. 2024-26 TABLE 2 Adjusted AFR for December 2024

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Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 5.0%

a blue and white circle with a triangle in the center Basics & Beyond Resources

 

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