Tax Newsletter – January 2026 (Volume 9, Issue 1)
FAQs
-
Q: When is the PTIN renewal deadline and what do I need to renew?
A: December 31, 2025 - See Issue 8
-
Q: How does the new Login.gov sign-in process affect PTIN users?
A: The technology provider conducts identity verification and credential management for access to IRS online services. - See Issue 9
-
Q: How do the 2025 “No Tax on Tips” and “No Tax on Overtime” deductions work under Notice 2025-69?
A: Internal Revenue Service issued guidance for workers eligible to claim the deduction for tips and for overtime compensation for tax year 2025 - See Issue 2
-
Q: Where can I find the IRS’s One Big Beautiful Bill provisions page for ongoing updates?
A: One Big Beautiful Bill provisions - See Issue 10
-
Q: What are Trump Accounts, and what are the main pros/cons and reference notice?
A: Side-by-Side Comparison of Savings Tools for Children
(Trump Account vs 529 Plan vs UGMA/UTMA vs Roth IRA vs Savings Account) - See Issue 11
Click on the Issue # (a link) to navigate directly to the Issue section. Click any Basics logo to navigate back to the Issues List. The 📌 helps to identify an embedded resource link.
In this Month’s Issue:
- Issue 1 – IRS Resumes Normal Activities Following the 2025 Lapse in Appropriations
- Issue 2 – Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025 – Notice 2025-69
- Issue 3 – Guidance on Tax Benefit for Lenders on Loans Secured by Farm or Rural Property Under OB3
- Issue 4 – Social Security Commissioner Shares End of Fiscal Year Update with Congress
- Issue 5 – Will Student Loan Discharge Be Taxed?
- Issue 6 – Treasury Inspector General Releases 2026 Plans
- Issue 7 – President Withdraws IRS Chief Counsel Nominee
- Issue 8 – Reminder: Tax Professionals Have Until Dec. 31 to Renew Their Preparer Identification Number
- Issue 9 – New Login.GOV PTIN Registration Sign-In Process
- Issue 10 – IRS Issues Guidance on Tax Law Updates from One, Big, Beautiful Bill
- Issue 11 – New Guidance on Trump Accounts Notice 2025-68
- Issue 12 – 2026 Standard Mileage Rates at 72.5 cents per mile, up 2.5 cents
- Issue 13 – Treasury, IRS Provide Guidance on New Tax Benefits for Health Savings Account Participants under OB3
- Issue 14 – House Passes Fair Act, H.R. 5346 and H.R. 5349 (Both head to Senate – Not Law Yet)
- Issue 15 – IP PIN Service Under Maintenance Until January 2026
- Issue 16 – New Contact Information for Collection Advisory Offices
- Issue 17 – Improvements to the Adoption Tax Credit Make Adoption More Affordable
- Issue 18 – Banking Options Now That Paper Checks Have Been Discontinued
- Issue 19 – Applicable Federal Rates for January 2026, Rev. Rul. 2026-02
Issue 1 – IRS Resumes Normal Activities Following the 2025 Lapse in Appropriations
The IRS has resumed normal operations following the conclusion of the government shutdown, including reopening the agency’s Taxpayer Assistance Centers. As full operations commence, tax professionals should be aware of several key pieces of information in multiple areas:
Taxpayer services to individuals: Taxpayers and tax professionals who opted to receive email and/or text notifications concerning their appointment will be notified they have the opportunity to use the SMART Scheduler feature on IRS.gov to self-schedule previously cancelled Taxpayer Assistance Center appointments, if they meet certain criteria. Otherwise, taxpayers and their representatives may call to reschedule appointments for the IRS canceled due to temporary office closures
Audits: Tax professionals with questions about examinations affected by the shutdown should see the
Exam resumption FAQs 📌.
Collections. Tax professionals with a collection issue affected by the shutdown should see the
Collections resumption FAQs 📌. This section includes information related to liens, levies, notices of deficiency, penalties, passports and private debt collection.
Appeals: Tax professionals with cases in Appeals affected by the shutdown should see the
Appeals resumption FAQs 📌.
Taxpayer Advocate Service (TAS): All
TAS 📌 offices are now open. TAS will need some time to sort through cases, calls and faxes so they can address the most critical emergencies first.
Calls to TAS offices may go to voicemail: Leave your name, phone number, case number (if applicable) and detailed information about the case.
Tax Exempt and Government Entities. The IRS has fully resumed processing:
- Determination letter and voluntary compliance statement applications for retirement plans. Visit Tax Information for Retirement Plan 📌 for additional information.
- Applications for tax-exempt status. Please see IRS processing of exemption applications 📌 for any actions tax professionals may need to take while waiting for the IRS to issue a determination.
- Forms 8038-CP 📌 . Return for Credit Payments to Issuers of Qualified Bonds, for refundable credit payments on direct pay bonds.
Issue 2 – Guidance for Individuals Who Received Tips or Overtime During Tax Year 2025 – Notice 2025-69
This was covered in Day 1 of the Year-End Seminars and in the Quarterly Update on December 16, 2025 – we have provided this for those who were unable to attend these seminars.
Notice 2025-69 📌 - clarifies for workers how to determine the amount of their deduction without receiving a separate accounting, from their employer for cash tips or qualified overtime on information returns such as Form W-2 or Form 1099. Those forms remain unchanged for the current tax year. The Notice also provides transition relief to workers who receive tips in the course of a specified service trade or business.
Tax professionals should review the notice carefully. It includes multiple examples illustrating various situations they may encounter for tipped taxpayers and taxpayers earning overtime compensation. It also explains certain exemptions in the law.
No Tax on Tips summary: Under the One, Big, Beautiful Bill (PL119-21), workers may be eligible for new deductions for tax years 2025 through 2028 if they received qualified tips. For tipped workers, the maximum annual deduction is $25,000, which phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
Examples of how the rules work for tipped employees
Today’s guidance provides examples to illustrate various situations tipped employees might encounter; below are abridged versions of some of those examples.
Waiter with reported tips in box 7, Form W-2
Ann is a restaurant server whose 2025 Form W-2, Box 7 reports $18,000 of social security tips. Ann did not report any additional tips on Form 4137. Ann may use $18,000 in determining the amount of her qualified tips for tax year 2025.
Bartender with additional reported tips on Form 4137
Bob is a bartender who reports $20,000 in tips to his employer during the 2025 tax year on Forms 4070 and reports $4,000 of unreported tips on Form 4137, line 4. Bob’s 2025 Form W-2 reports $200,000 in Box 1 and $15,000 in Box 7. Bob may use either the $15,000 in box 7 of the Form W-2, or the $20,000 of tips reported to Bob’s employer on Forms 4070 in determining the amount of qualified tips for tax year 2025. Regardless of the option chosen, Bob may also include the $4,000 of unreported tips from Form 4137, line 4, in determining the amount of qualified tips.
Self-employed travel guide
Doug is a self-employed travel guide who operates as a sole proprietor. In 2025, Doug receives $7,000 in tips from customers paid through a third-party settlement organization (TPSO). For tax year 2025, Doug receives a Form 1099-K from the TPSO showing $55,000 of total payments. The Form 1099-K does not separately identify the tips. However, Doug keeps a log of each tour that shows the date, customer, and tip amount received. Because Doug has daily tip logs substantiating the $7,000 tip amount, he may use the $7,000 tip amount in determining qualified tips for tax year 2025.
No Tax on Overtime
For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.
- Maximum annual deduction is $12,500 ($25,000 for joint filers).
- Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
- The deduction is available for both itemizing and non-itemizing taxpayers.
Certain employees are exempt from the rules on overtime
Generally, the FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half their regular rate of pay for all hours worked over 40 in a workweek. However, the law provides for certain exemptions.
Today’s guidance provides a series of examples illustrating situations that workers who receive qualified overtime might encounter. Today’s guidance does not affect any rights or responsibilities regarding tips or overtime compensation under the FLSA. Below are abridged versions of some of those examples.
Overtime examples
Andrew works overtime during 2025, and he receives a payroll statement from his employer that shows $5,000 as the “overtime premium” that he was paid during 2025. Andrew may include $5,000 (the FLSA overtime premium) to determine the amount of qualified overtime compensation received in tax year 2025.
Assume the same facts as in the first example except that Andrew’s payroll statement shows a total “overtime” amount of $15,000, which is the total amount Andrew was paid for working overtime (the FLSA overtime premium combined with the portion of his regular wages). Andrew may include the $5,000 FLSA overtime premium, computed by dividing $15,000 by 3 in determining the amount of qualified overtime compensation for 2025.
Brad’s employer has a practice of paying overtime at a rate of two times an employee’s regular rate of pay, and Brad was paid $20,000 in overtime pay during 2025. Brad’s last pay stub for 2025 shows “overtime” of $20,000 paid in 2025. For purposes of determining the amount of qualified overtime compensation received in tax year 2025, Brad may include $5,000 ($20,000 divided by 4).
Carol is a covered, nonexempt employee under the FLSA and works in law enforcement and is paid $15,000 of overtime pay on a “work period” basis of 14 days that complies with the FLSA. See
Fact Sheet #8 📌: Law Enforcement and Fire Protection Employees Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor. For purposes of determining the amount of qualified overtime compensation received in tax year 2025, Carol may include $5,000 ($15,000 divided by 3).
Diane works for a State or local government agency that gives compensatory time at a rate of one and one-half hours for each overtime hour worked. In 2025, Diane was paid wages of $4,500 for compensatory time off based on that overtime. To determine the amount of qualified overtime compensation received in tax year 2025, Diane may include $1,500, one-third of these wages, for purposes of determining the qualified overtime compensation deduction.
The deduction is available for both itemizing and non-itemizing taxpayers.
Issue 3 – Guidance on Tax Benefit for Lenders on Loans Secured by Farm or Rural Property Under the One, Big, Beautiful Bill
The Department of the Treasury and the Internal Revenue Service also
issued guidance 📌 for a new tax benefit for certain lenders that make loans secured by rural or agricultural real property. https://www.irs.gov/pub/irs-drop/n-25-71.pdf provides interim guidance that taxpayers may rely on until the Treasury Department and the IRS issue forthcoming proposed regulations.
PL 119-21 added § 139L to the Internal Revenue Code, which allows certain lenders to exclude from gross income 25% of the interest they receive from loans secured by rural or agricultural real property. The interim guidance defines key terms from §section 139L, establishes standards for determining whether a loan is secured by rural or agricultural property, and provides rules regarding refinancings.
Tax professionals should submit comments about the notice to assist in the drafting of the forthcoming proposed regulations. Comments may be submitted through
Regulations.gov 📌 (type IRS-2025-0400 in the search field) or by mail, to Internal Revenue Service, CC:PA:01:PR (Notice 2025-71) Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
Issue 4 – Social Security Commissioner Shares End of Fiscal Year Update with Congress
Social Security Administration (SSA) Commissioner Frank J. Bisignano sent an end of year
letter to Congress 📌 to provide an update on the tremendous progress being made at SSA.
The letter comes at the end of Fiscal Year 2025 and gave Members of Congress an update on SSA’s ongoing customer service improvements, operational enhancements, online accessibility advancements, backlog reductions, and overall program integrity.
Issue 5 – Will Student Loan Discharge Be Taxed?
Federal tax exclusion for certain student loan discharges under income-driven repayment (IDR) plans will expire at the end of 2025. Beginning January 1, 2026, balances discharged under income driven repayment (IDR will generally be treated as taxable income unless another exclusion applies. However, a group of Senate Democrats, led by Sen. Elizabeth Warren, has urged the IRS and Treasury to provide administrative relief through existing mechanisms such as the insolvency, scholarship or general welfare exclusions.
If tax-free discharges end, the change could result in significant tax bills for borrowers who made payments for 20 to 25 years to qualify for forgiveness. This change could mean a taxpayer earning $50,000 annually could owe more than $9,000 in additional taxes.
New Student Loan Interest News – Proposed Settlement
The Trump administration recently announced a proposed settlement that, if approved by a federal court, would permanently end the Biden-era Saving on a Valuable Education (SAVE) student loan repayment plan, affecting more than 7 million borrowers currently enrolled.
The agreement was reached with seven Republican-led states, including Missouri, that had sued the Biden administration, arguing the SAVE plan was an overreach of executive authority.
Key Details of the Proposed Settlement
- Impacted Borrowers: Approximately 7 to 7.7 million federal student loan borrowers are currently enrolled in the SAVE plan.
- Plan Termination: Under the proposed settlement, the U.S. Department of Education would immediately cease enrolling new borrowers, deny pending applications, and transition current enrollees to other legally compliant repayment options.
- Timeline: The settlement is awaiting approval from a U.S. District Court judge in Missouri. If approved, affected borrowers will have limited time to select a new repayment plan.
- Justification: The administration stated the action is intended to "right this wrong" and enforce the position that borrowers must repay their loans as mandated by Congress.
- Interest Accrual: The Education Department had already resumed interest charges on SAVE borrowers' accounts as of August 1, 2025, while the legal battle played out.
What Happens Next for Borrowers
Borrowers currently on the SAVE plan will be contacted by the Office of Federal Student Aid (FSA) with instructions on how to transition to a new repayment plan.
The Education Department is encouraging borrowers to enroll in existing income-driven repayment (IDR) plans or the new Repayment Assistance Plan (RAP), which is set to be available by July 1, 2026, under the "One Big Beautiful Bill Act".
Borrowers can find information on available options and manage their federal loans on the official Federal Student Aid website. Many advocacy groups have expressed concern that moving off the SAVE plan will result in significantly higher monthly payments for those affected.
Issue 6 – Treasury Inspector General Releases 2026 Plans
The
Treasury Inspector General for Tax Administration 📌 (TIGTA) has outlined key priorities for fiscal year 2026. Among the most significant issues are a reduction in workforce and ongoing information-technology modernization challenges for the IRS. Staffing levels in critical filing-season operations have fallen by 17-19 %, while backlog inventories may swell to approximately six million cases, two million more than peak pandemic levels. The agency estimates that it will need roughly 3,500 new hires to restore full telephone service capacity.
TIGTA also warns that delays in the Zero Paper Initiative and other digital efforts could hamper taxpayer services and enforcement next year. Tax practitioners should anticipate processing delays, increased audit inventories and more client outreach on IRS notices. Proactive planning for clients now, including verifying receipt of refunds, responding promptly to IRS correspondence and preparing for slower service, can mitigate potential disruption in the 2026 filing season.
Issue 7 – President Withdraws IRS Chief Counsel Nominee
President Donald Trump has withdrawn the nomination of Donald Korb for the position of chief counsel of the Internal Revenue Service and assistant general counsel at the U.S. Department of the Treasury. Korb’s nomination cleared the Senate Finance Committee but faced opposition from conservative activists over past political donations and remarks. With the withdrawal, the agency remains without a confirmed chief counsel.
Issue 8 – Reminder: Tax Professionals Have Until Dec. 31 to Renew Their Preparer Identification Number
The IRS is reminding tax professionals to renew their Preparer Identification Number now, if they have not already. Anyone who prepares or helps with preparation of tax returns for compensation must have a valid PTIN. Tax professionals must include their PTIN on any return or claim for refund filed with the IRS.
PTINs will expire on December 31, 2025. Renewing is simple and can be completed in about 15 minutes.
Existing PTIN holders can log into their account through the IRS Tax Professional PTIN System. The registered tax professional will need to complete an online renewal application by verifying their personal information and answering a few questions. The fee to renew or get a PTIN for 2026 is $18.75, which is non-refundable. After payment, the IRS will send the applicant confirmation that the PTIN has been renewed.
- Create an account using their name and an email address that they can always access
- Review the PTIN application checklist: 📌 What you need to get started
- Complete the online application by providing personal information, tax return information and professional credentials
- Pay the PTIN fee by credit, debit or ATM card or eCheck.
The applicant will receive a PTIN once they complete all steps and the IRS receives payment.
- Using the PTIN system, tax professionals can also:
- See a list of their completed continuing education courses
- View a summary of the number returns filed using their PTIN during the year
- Receive communications through a secure mailbox from the IRS Return Preparer Office
- Track their progress toward participating in the IRS Annual Filing Season Program 📌.
Issue 9 – New Login.GOV PTIN Registration Sign-In Process
Dear Tax Professional:
Coming soon, the Tax Professional PTIN System will allow tax preparers with a Social Security number (SSN) to sign in using Login.gov in addition to ID.me. These technology providers conduct identity verification and credential management for access to IRS online services.
Existing Login.gov users
If you have a Login.gov account from a state government or another federal agency, you can use these credentials to access IRS online services. You may be required to re-proof your identity. If you’re a new user, you will have to create a new Login.gov account.
Your Login.gov credentials enable access to various IRS online services including the Tax Professional PTIN System, Tax Pro Account, Business Tax Account, Individual Online Account, and more.
New PTIN System users
New users will be required to create an account with ID.me or Login.gov to access the Tax Professional PTIN System.
To create a new ID.me or Login.gov account for access to the Tax Professional PTIN System, users will need a government-issued photo ID, an email address, and a camera-enabled computer or mobile device. Both Login.gov and ID.me offer multiple registration options and 24/7 customer assistance.
More information
Additional information can be found by visiting the following resources:
Issue 10 – IRS Issues Guidance on Tax Law Updates from One, Big, Beautiful Bill
IRS has created a
landing page 📌 for information about tax law changes in the One, Big, Beautiful Bill. This bill has a significant effect on federal taxes, credits and deductions. The page covers the following topics in detail:
- Income tax, credits, deductions
- Family and dependent credits
- Business credits and deductions
- Investment and community development
- Clean energy
- Tax exempt entities, charitable deductions and giving
- Latest news
- Guidance and additional resources
Issue 11 – New Guidance on Trump Accounts Notice 2025-68
Notice 2025-68 is the first official guidance for newly created “Trump Accounts,” a new type of individual retirement-account (IRA) designed for children under age 18. These accounts result from the 2025 tax law known as the One, Big, Beautiful Bill Act (OBBBA).
Notice 2025-68 lays out how Trump Accounts are to be set up, funded, invested, and — eventually — converted or rolled over.
Key Features: Contributions, Investments, and Restrictions
Government contribution (pilot): Eligible U.S. citizen children born between January 1, 2025, and December 31, 2028, for whom an account election is made, receive a one-time $1,000 deposit from the federal government.
When contributions begin: Contributions to Trump Accounts cannot start until July 4, 2026.
Who can contribute / funding sources: Over time, funding can come from:
- The $1,000 pilot payment
- “Qualified general contributions” — e.g. from states, certain governments, or eligible charities/501(c)(3) orgs.
- Employer-made contributions under a “Trump Account contribution program” (per new section 128). Employers may contribute up to $2,500 per year per employee (regardless of number of dependents), which counts toward the general contribution cap.
- Voluntary contributions by family, friends, or others — up to an aggregate limit of $5,000 per year (subject to indexing for inflation after 2027) for private contributions + employer contributions together. Investment limitations: Funds in Trump Accounts during the “growth period” must be invested in specific eligible investments — generally mutual funds or exchange-traded funds (ETFs) that track the S&P 500 or comparable U.S.-equity indexes.
Growth-Period Restrictions & Transition to Traditional IRA
Growth period: From the time the account is established until the calendar year when the child turns 18. During this time: Withdrawals/distributions are generally not allowed (with few exceptions, e.g. death or rollover).
The account is treated under special rules (not like a normal IRA) contribution limits, investment restrictions, and different reporting requirements apply.
Post-growth period (age 18+): Once the beneficiary turns 18 (calendar year), the Trump Account switches to being treated like a conventional traditional IRA under section 408. At that point, normal IRA rules apply (distributions, tax treatment, etc.).
Administrative / Regulatory Process & What’s Next
The Notice is an “intent to issue proposed regulations” — meaning these are not yet binding final rules, but the IRS / Treasury intend that the proposed regs align with the guidance in the Notice.
A draft of Form 4547 (“Trump Account Election(s)”) is being posted. Once finalized, it — or a corresponding online application — must be used by a parent/guardian (or other authorized “responsible party”) to elect to establish a Trump Account for an eligible child.
The IRS is requesting public comments on the intended regulations. Comment deadline: February 20, 2026, though some parts (account election / pilot program contribution) may be finalized sooner.
What This Means for Families / Children / Taxpayers
For eligible children (born 2025–2028), this creates a tax-advantaged savings vehicle established at birth (or soon after) — similar to an IRA — with the potential to grow over many years.
The one-time $1,000 government seed contribution gives a head start on savings. Additional funding (family, employers, charities, states) could significantly expand that over time.
Because withdrawals aren’t allowed until 18, it encourages long-term savings and prevents early dissipation.
Once child turns 18, the account becomes a regular IRA, giving flexibility but also subject to standard IRA rules.
For employers: the new “Trump Account contribution programs” create a potential benefit like other employer-sponsored savings or benefit plans.
Pros and Cons of Establishing
Potential Advantages for Families / Children
- Automatic “starter money” — For eligible children (born Jan 1, 2025–Dec 31, 2028), the government contributes a one-time $1,000 seed deposit at account creation.
- Long-term growth potential — If parents (or others) add contributions annually, invested in broad U.S. equity indexes, the account could grow substantially over many years.
- Flexible funding sources — Contributions to a child’s Trump Account aren’t limited to parents: grandparents, other relatives/friends, employers, charities or even certain government entities can contribute (though total contributions are capped annually).
- Employer contribution opportunity — Up to $2,500 per year may come from an employer (for employee’s dependent child) and this employer contribution doesn’t count toward the employee’s taxable income.
- Tax-deferred growth — Like other IRAs, earnings should grow tax-deferred until withdrawal (subject to applicable tax/IRA rules once child reaches eligible age).
- Potential “head start” for financial security — For families who contribute regularly, a Trump Account may act as a long-term savings vehicle — usable after child turns 18 (or later) for retirement-like savings or other adult purposes.
- Broad investment approach (simple, diversified) — Required investments are low-cost, broad U.S. equity index mutual funds or ETFs (e.g. S&P 500–type funds), which tends to be a mainstream, diversified, “set-and-forget” investing strategy.
- Potential for outside funding — Charities or nonprofits, or philanthropic gifts (such as large donations by wealthy benefactors) may enhance the savings potential beyond what a typical family alone could contribute.
Potential Downsides, Limitations, and Risks
- No tax deduction for contributions — Unlike some retirement accounts, contributions (by parents or others) are made with after-tax dollars; you don’t get an upfront deduction.
- Strict investment constraints — The money must be invested in approved low-cost broad U.S. stock index funds/ETFs. Sector funds, leverage, alternative investments, or individually picking stocks likely aren’t allowed.
- Funds are locked until child turns 18 — Withdrawals generally cannot be made prior to age 18 (with only limited exceptions like death or rollover). That means money isn’t accessible for things like education, emergencies, or earlier needs.
- Uncertainty about taxation upon withdrawal — Once converted to a traditional-IRA–style account at age 18, typical IRA tax/timing/withdrawal rules will apply (e.g. early-withdrawal penalties, tax on distributions). That reduces flexibility compared to some education-savings or savings-for-any-purpose accounts.
- Not optimal for short- or medium-term goals — Because of the lock until 18 and the long-term growth orientation, this is not a good tool if you anticipate using savings early — e.g. for tuition, housing, or other needs before adulthood.
- Opportunity cost / parental liquidity tradeoff — Committing to regular contributions means parents are diverting money that might otherwise go to more immediate needs (education, emergencies, debt, etc.). The long horizon may not align with all families’ priorities.
- Dependence on market performance — Because funds are invested in equities, growth depends heavily on the stock market. Poor returns or a prolonged downturn could reduce expected benefits (compared with more conservative vehicles).
- Less flexible than other options for some use-cases — For example, traditional education-savings vehicles (like 529 plans — or other child-savings/529 + savings combos) may offer better flexibility or tax treatment for tuition or early-life expenditures.
- Regulatory and implementation uncertainty (for now) — As of the guidance, the rules are new; there might be changes before final regulations. The system for opening, managing, and rolling over accounts may evolve.
- Risk of underuse or abandonment — If parents or guardians don’t contribute — or forget / neglect to actively manage the account — the value of the seed $1,000 alone may not offset inflation or provide meaningful growth.
Side-by-Side Comparison of Savings Tools for Children
(Trump Account vs 529 Plan vs UGMA/UTMA vs Roth IRA vs Savings Account)
| Feature |
Trump Account |
529 Plan |
UGMA / UTMA |
Roth IRA (Minor) |
Regular Savings Account |
| Primary Purpose |
Long-term investment account for children (converts to IRA at age 18) |
Education savings (tax-free for qualified education) |
General-purpose asset transfer to child |
Retirement savings for children with earned income |
Simple savings / liquidity |
| Who Can Contribute |
Parents, family, friends, employers, charities, some gov entities |
Anyone |
Anyone |
Anyone (child must have earned income) |
Anyone |
| Contribution Limits |
~$5,000/yr (plus up to $2,500 employer) |
State-determined; very high (often > $300k lifetime) |
No formal limit (but subject to gift-tax rules) |
$7,000/yr (2025 limit) |
No limit |
| Tax Benefits |
Tax-deferred growth; no deduction; seed $1,000 for eligible kids |
Tax-free growth + tax-free withdrawals for qualified education |
None (earnings taxed to child) |
Tax-free growth; tax-free withdrawals in retirement |
None |
| Control |
Parent/guardian controls until child is 18 |
Account owner controls (often parent) even after child reaches 18 |
Control transfers to child at 18 or 21 |
Controlled by guardian until age of majority |
Control transfers to child if titled jointly or custodially |
Issue 12 – IRS sets 2026 business standard mileage rate at 72.5 cents per mile, up 2.5 cents
Notice-2026-10 📌 - The IRS has announced that the optional standard mileage rate for business use of automobiles will increase by 2.5 cents in 2026, while the mileage rate for vehicles used for medical purposes will decrease by half a cent, reflecting updated cost data and annual inflation adjustments.
Optional standard mileage rates are used to calculate the deductible costs of operating vehicles for business, charitable, and medical purposes. Additionally, the optional standard mileage rate may be used to calculate the deductible costs of operating vehicles for moving purposes for certain active-duty members of the Armed Forces, and now, under the One, Big, Beautiful Bill, certain members of the intelligence community.
Beginning Jan. 1, 2026, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 72.5 cents per mile for business standard mileage 📌, up 2.5 cents
- 20.5 cents Moving, decrease by 5 cents
- 20.5 cents Medical, decrease by 5
- 14 cents per mile driven in service of charitable organizations
Additionally, the optional standard mileage rate may be used to calculate the deductible costs of operating vehicles for moving purposes for certain active-duty members of the Armed Forces, and now, under the One, Big, Beautiful Bill, certain members of the intelligence community.
The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.
Under the law, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses, except for certain educator expenses. However, deductions for expenses that are deductible in determining adjusted gross income remain allowable, such as for certain members of a reserve component of the Armed Forces, certain state and local government officials, certain performing artists, and eligible educators. Alternatively, eligible educators may claim an itemized deduction for certain unreimbursed employee travel expenses. In addition, only taxpayers who are members of the military on active duty or certain members of the intelligence community may claim a deduction for moving expenses incurred while relocating under orders to a permanent change of station.
Use of the standard mileage rates is optional. Taxpayers may instead choose to calculate the actual costs of using their vehicle.
Taxpayers using the standard mileage rate for a vehicle they own and use for business must choose to use the rate in the first year the automobile is available for business use. Then, in later years, they can choose to use the standard mileage rate or actual expenses. Once actual expenses are used they cannot change back to the standard mileage rate until the vehicle is replaced with a new vehicle.
BASIS REDUCTION AMOUNT
For automobiles a taxpayer uses for business purposes, the portion of the business standard mileage rate treated as depreciation is 26 cents per mile for 2022, 28 cents per mile for 2023, 30 cents per mile for 2024, 33 cents per mile for 2025, and 35 cents per mile for 2026. See section 4.04 of Rev. Proc. 2019
MAXIMUM STANDARD AUTOMOBILE COST
For purposes of computing the allowance under a FAVR plan, the standard automobile cost may not exceed $61,700 for automobiles (including trucks and vans). See section 6.02(6) of Rev. Proc. 2019-46.
MAXIMUM VALUE OF EMPLOYER-PROVIDED AUTOMOBILES
For purposes of the fleet-average valuation rule in § 1.61-21(d)(5)(v) and the vehicle cents-per-mile valuation rule in § 1.61-21(e), the maximum FMV of automobiles (including trucks and vans) first made available to employees in calendar year 2026 is $61,700.
Issue 13 – Treasury, IRS Provide Guidance on New Tax Benefits for Health Savings Account Participants under the One, Big, Beautiful Bill
Treasury and the IRS has issued
Notice 2026-05 📌 providing guidance on new tax benefits for Health Savings Account participants under the One, Big, Beautiful Bill. These changes expand HSA eligibility, which allows more people to save and to pay for healthcare costs through tax-free HSAs.
Expansion of HSA Eligibility Under the OBBB
The OBBB expands access to HSAs by making the following changes:
- Telehealth and Remote Care Services: The OBBB made permanent the ability to receive telehealth and other remote care services before meeting the high-deductible health plan (HDHP) deductible while remaining eligible to contribute to an HSA, effective for plan years beginning on or after Jan. 1, 2025.
- Bronze and Catastrophic Plans Treated as HDHPs: As of Jan. 1, 2026, bronze and catastrophic plans available through an Exchange are considered HSA-compatible, regardless of whether the plans satisfy the general definition of an HDHP. This expands the ability of people enrolled in these plans to contribute to HSAs, which they generally have not been able to do in the past. Notice 2026-05 clarifies that bronze and catastrophic plans do not have to be purchased through an Exchange to qualify for the new relief.
- Direct Primary Care Service Arrangements: Beginning Jan. 1, 2026, an otherwise eligible individual enrolled in certain direct primary care (DPC) service arrangements may contribute to an HSA. In addition, they may use their HSA funds tax-free to pay periodic DPC fees.
More information
Notice 2026-05 addresses each of these changes. Treasury and IRS invite comments on all aspects of this Notice by March 6, 2026. Commentors are encouraged to use the
Federal e-Rulemaking portal 📌 to submit comments online (indicate “IRS-2025-0335”). Paper submissions should be sent to: Internal Revenue Service, CC:PA:01:PR (Notice 2026-05), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
Issue 14 – House Passes Fair and Accountable IRS Reviews Act and the Tax Court Improvement Act Both Head to the Senate – Not Law Yet
The Fair and Accountable IRS Reviews Act 📌 (Fair Act, H.R. 5346) passed the U.S. House of Representatives on Dec. 1, 2025. The bill requires that an IRS employee’s immediate supervisor, or a designated higher-level official, provides written approval before the IRS assesses or enters tax penalties. The bill defines “immediate supervisor” as the person to whom the employee directly reports.
It also mandates supervisor approval before any written communication about a proposed penalty is sent to the taxpayer. If enacted, these supervisory approval requirements would apply to penalty notices issued and assessments made after the date of enactment.
House Passes the Tax Court Improvement Act.
The bill is designed to improve services for taxpayers by giving the United States Tax Court greater judicial review authority. Among its key provisions, the Tax Court would be authorized to issue subpoenas before hearings to facilitate settlements. The bill would allow special trial judges to hear additional cases and impose sanctions, including fines and jail time for contempt. It would also allow the Tax Court, in certain deficiency cases, to apply equitable tolling, providing taxpayers with more time to file petitions under specific circumstances. If enacted, the law could improve access to justice and enhance procedural fairness in tax disputes. As of now, the bill has not passed in the Senate and cannot yet be signed into law.
Issue 15 – IP PIN Service Under Maintenance Until January 2026
The IRS confirmed the
Identity Protection Personal Identification Number 📌 (IP PIN) service is down for annual maintenance until sometime in January of next year. As of Nov. 16, 2025, taxpayers have been unable to get or view an IP PIN through their Individual Online Account.
Once enrolled in the IP PIN program, a new IP PIN is generated for the taxpayer each calendar year. Some taxpayers receive their new IP PIN by mail, while others must retrieve it each year in their IRS Online Account.
Issue 16 – New Contact Information for Collection Advisory Offices
Tax professionals can use
Publication 4235, Collection Advisory Offices Contact Information 📌, to determine which IRS office to contact with questions about certain collection-related topics, notices of federal tax lien and where to submit requests for lien-related certificates. Tax professionals and their clients generally should not send correspondence to their local office.
In addition to contact information for IRS offices, Publication 4235 also includes updated information about where to file certain applications and forms, along with IRS resources for a variety of topics. For example, it includes links to the understanding a
federal tax lien 📌 webpage,
online account 📌 where clients can check the total amount of their tax debt,
frequently asked questions 📌 on estate taxes and more.
Issue 17 – Improvements to the Adoption Tax Credit Make Adoption More Affordable
Taxpayers who finalized an adoption in 2025 or started the adoption process before 2025, may qualify for the Adoption Tax Credit. Additionally, there have been significant changes to the tax credit under the One, Big, Beautiful Bill.
Here’s an overview of the credit and eligibility, including the recent changes:
- The credit can be claimed for eligible expenses related to international, domestic, private and public foster care adoptions.
- The maximum Adoption Credit taxpayers can claim on their 2025 tax return is $17,280 per eligible child.
- This credit is now partially refundable, meaning taxpayers may get back more than what is owed in taxes The refundable amount is up to $5,000 per qualifying child for tax years 2025 and after. However, any nonrefundable amount carried forward can’t be used to calculate a refundable portion for future tax years.
- An eligible child must be younger than age18. If the adopted person is older, they must be unable to physically or mentally take care of themselves.
- Indian tribal governments now have the same authority as State governments to determine whether a child has special needs for the purpose of claiming the Adoption Credit. Taxpayers who adopt an eligible U.S. child with special needs may be able to claim the credit even if they didn’t pay any qualified adoption expenses.
- Taxpayers who adopt their spouse's child can't claim this credit.
- Taxpayers who carry out a surrogate parenting agreement do not qualify for the credit.
Eligible expenses
- Reasonable and necessary adoption fees
- Court costs and legal fees
- Adoption related travel expenses like meals and lodging
- Other expenses directly related to the legal adoption of an eligible child
Expenses may qualify even if the taxpayer pays them before an eligible child is identified. For example, some taxpayers pay for home study at the beginning of the adoption process. These taxpayers can claim the fees as qualified adoption expenses.
Issue 18 – Banking Options Now That Paper Checks Have Been Discontinued
The IRS no longer issues paper checks for most federal payments, including tax refunds, as of September 30, 2025. The primary alternatives for receiving funds electronically are direct deposit and prepaid debit cards, with limited exceptions available for those with undue hardship.
Options for Receiving an IRS Refund Electronically
The IRS offers several electronic options for receiving your tax refund, which are faster and more secure than paper checks.
- 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 Form 8888, Allocation of Refund 📌.
- 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.
For those without bank accounts, the IRS recommends exploring free or low-cost account options available through the
FDIC GetBanked 📌 initiative or
MyCreditUnion.gov 📌.
Options for Paying the IRS Electronically
Similarly, paper checks are no longer accepted for payments to the IRS. You must use one of the following electronic methods:
- 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 IRS2Go 📌 app 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.
If you are facing a hardship that prevents you from using electronic payments, the IRS has stated there will be limited exceptions available, and you may be able to call a dedicated phone line to request an exception.
Issue 19 – Applicable Federal Rates for January 2026, Rev. Rul. 2026-2
REV. RUL. 2026-2 TABLE 1
Applicable Federal Rates (AFR) for January 2026
| |
Period for Compounding |
|
Annual |
Semiannual |
Quarterly |
Monthly |
| Short-term (≤ 3 years) |
| AFR |
3.63% |
3.60% |
3.58% |
3.57% |
| 110% AFR |
4.00% |
3.96% |
3.94% |
3.93% |
| 120% AFR |
4.37% |
4.33% |
4.30% |
4.28% |
| 130% AFR |
4.73% |
4.68% |
4.65% |
4.64% |
| Mid-term (> 3 years, ≤ 9 years) |
| AFR |
3.81% |
3.77% |
3.75% |
3.74% |
| 110% AFR |
4.19% |
4.15% |
4.13% |
4.11% |
| 120% AFR |
4.55% |
4.52% |
4.49% |
4.48% |
| 130% AFR |
4.96% |
4.90% |
4.87% |
4.85% |
| 150% AFR |
5.74% |
5.66% |
5.62% |
5.59% |
| 175% AFR |
6.71% |
6.60% |
6.55% |
6.51% |
| Long-term (> 9 years) |
| AFR |
4.63% |
4.58% |
4.55% |
4.54% |
| 110% AFR |
5.10% |
5.04% |
5.01% |
4.99% |
| 120% AFR |
5.58% |
5.50% |
5.46% |
5.44% |
| 130% AFR |
6.04% |
5.95% |
5.91% |
5.88% |
REV. RUL. 2026-2 TABLE 2
Adjusted AFR for January 2026
| |
Period for Compounding |
|
Annual |
Semiannual |
Quarterly |
Monthly |
| Short-term adjusted AFR |
2.75% |
2.73% |
2.72% |
2.71% |
| Mid-term adjusted AFR |
2.88% |
2.86% |
2.85% |
2.84% |
| Long-term adjusted AFR |
3.51% |
3.48% |
3.46% |
3.46% |
REV. RUL. 2026-2 TABLE 3
Rates Under Section 382 for January 2026
| Adjusted federal long-term rate for the current month |
3.51% |
|
Long-term tax-exempt rate for ownership changes during the current month
(the highest of the adjusted federal long-term rates for the current month and the prior two months.)
|
3.51% |
REV. RUL. 2026-2 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for January 2026
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.
| Appropriate percentage for the 70% present value low-income housing credit |
7.98% |
| Appropriate percentage for the 30% present value low-income housing credit |
3.42% |
REV. RUL. 2026-2 TABLE 5
Rate Under Section 7520 for January 2026
|
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
|
4.60%
|
|
REV. RUL. 2026-2 TABLE 6
Deemed Rate for Transfers to New Pooled Income Funds During 2026
|
Deemed rate of return for transfers during 2026 to pooled income funds that have been in existence for less than 3 taxable years
|
4.00%
|
|
REV. RUL. 2026-2 TABLE 7
Average of the Applicable Federal Mid-Term Rates for 2025
|
For purposes of section 7702(f)(11), the average of the applicable federal mid-term rates (based on annual compounding) for the 60-month period ending December 31, 2025 is
|
3.19% rounded to 3%
|
|
|
IRS Applicable Federal Rates page
📌
Rev. Rul. 2026-2
📌
|
