The IRS has announced that, under the phased implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to individual information returns or federal income tax withholding tables for the tax year at issue. 

The IRS has announced that, under the phased implementation of the One Big Beautiful Bill Act (OBBBA), there will be no changes to individual information returns or federal income tax withholding tables for the tax year at issue. Specifically, Form W-2, existing Forms 1099, Form 941 and other payroll return forms will remain unchanged for 2025. Employers and payroll providers are instructed to continue using current reporting and withholding procedures. This decision is intended to avoid disruptions during the upcoming filing season and to give the IRS, businesses and tax professionals sufficient time to implement OBBBA-related changes effectively.

In addition to this, IRS is developing new guidance and updated forms, including changes to the reporting of tips and overtime pay for TY 2026. The IRS will coordinate closely with stakeholders to ensure a smooth transition. Additional information will be issued to help individual taxpayers and reporting entities claim benefits under OBBBA when filing returns.

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The IRS issued frequently asked questions (FAQs) relating to several energy credits and deductions that are expiring under the One, Big, Beautiful Bill Act (OBBB) and their termination dates. The FAQs also provided clarification on the energy efficient home improvement credit, the residential clean energy credit, among others.

The IRS issued frequently asked questions (FAQs) relating to several energy credits and deductions that are expiring under the One, Big, Beautiful Bill Act (OBBB) and their termination dates. The FAQs also provided clarification on the energy efficient home improvement credit, the residential clean energy credit, among others.

Energy Efficient Home Improvement Credit

The credit will not be allowed for any property placed in service after December 31, 2025.

Residential Clean Energy Credit

The credit will not be allowed for any expenditures made after December 31, 2025. Due to the accelerated termination of the Code Sec. 25C credit, periodic written reports, including reporting for property placed in service before January 1, 2026, are no longer required.

A manufacturer is still required to register with the IRS to become a qualified manufacturer for its specified property to be eligible for the credit.

Clean Vehicle Program

New user registration for the Clean Vehicle Credit program through the Energy Credits Online portal will close on September 30, 2025. The portal will remain open beyond September 30, 2025, for limited usage by previously registered users to submit time-of-sale reports and updates to such reports.

Acquiring Date

A vehicle is “acquired” as of the date a written binding contract is entered into and a payment has been made. Acquisition alone does not immediately entitle a taxpayer to a credit. If a taxpayer acquires a vehicle and makes a payment on or before September 30, 2025, the taxpayer will be entitled to claim the credit when they place the vehicle in service, even if the vehicle is placed in service after September 30, 2025.

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The IRS has provided guidance regarding what is considered “beginning of constructions” for purposes of the termination of the Code Sec. 45Y clean electricity production credit and the Code Sec. 48E clean electricity investment credit. The One Big Beautiful Bill (OBBB) Act (P.L. 119-21) terminated the Code Secs. 45Y and 48E credits for applicable wind and solar facilities placed in service after December 31, 2027.

The IRS has provided guidance regarding what is considered “beginning of constructions” for purposes of the termination of the Code Sec. 45Y clean electricity production credit and the Code Sec. 48E clean electricity investment credit. The One Big Beautiful Bill (OBBB) Act (P.L. 119-21) terminated the Code Secs. 45Y and 48E credits for applicable wind and solar facilities placed in service after December 31, 2027. The termination applies to facilities the construction of which begins after July 4, 2026. On July 7, 2025, the president issue Executive Order 14315, Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources, 90 F.R. 30821, which directed the Treasury Department to take actions necessary to enforce these termination provisions within 45 days of enactment of the OBBB Act.

Physical Work Test

In order to begin construction, taxpayers must satisfy a “Physical Work Test,” which requires the performance of physical work of a significant nature. This is a fact based test that focuses on the nature of the work, not the cost. The notice addresses both on-site and off-site activities. It also provides specific lists of activities that are to be considered work of a physical nature for both solar and wind facilities. Preliminary activities or work that is either in existing inventory or is normally held in inventory are not considered physical work of a significant nature.

Continuity Requirement

The Physical Work Test also requires that a taxpayer maintain a continuous program of construction on the applicable wind or solar facility, the Continuity Requirement. To satisfy the Continuity Requirement, the taxpayer must maintain a continuous program of construction, meaning continuous physical work of a significant nature. However, the notice provides a list of allowable “excusable disruptions,” including delays related to permitting, weather, and acquiring equipment, among others.

The guidance also provides a safe harbor for the Continuity Requirement. Under the safe harbor, the Continuity Requirement will be met if a taxpayer places an applicable wind or solar facility in service by the end of a calendar year that is no more than four calendar years after the calendar year during which construction of the applicable wind or solar facility began. Thus, if construction begins on an applicable wind or solar facility on October 1, 2025, the applicable wind or solar facility must be placed in service before January 1, 2030, for the safe harbor to apply.

Five Percent Safe Harbor for Low Output Solar Facilities

A safe harbor is available for a low output solar facility, which is defined as an applicable solar facility that has maximum net output of not greater than 1.5 megawatt. A low output solar facility may also establish that construction has begun before July 5, 2026, by satisfying the Five Percent Safe Harbor (as described in section 2.02(2)(ii) of Notice 2022-61).

Additional Guidance

The notice provides additional guidance regarding: construction produced for the taxpayer by another party under a binding written contract; the definition of a qualified facility; the definition of property integral to the applicable wind or solar facility; the application of the 80/20 rule to retrofitted applicable wind or solar facilities under Reg. §§ 1.45Y-4(d) and 1.48E-4(c); and the transfer of an applicable wind or solar facility.

Effective Date

Notice 2025-42 is effective for applicable wind and solar facilities for which the construction begins after September 1, 2025.

Notice 2025-42

The Treasury Inspector General for Tax Administration suggested the way the Internal Revenue Service reports level of service (ability to reach an operator when requested) and wait times does not necessarily reflect the actual times taxpayers are waiting to reach a representative at the agency.

The Treasury Inspector General for Tax Administration suggested the way the Internal Revenue Service reports level of service (ability to reach an operator when requested) and wait times does not necessarily reflect the actual times taxpayers are waiting to reach a representative at the agency.

"For the 2024 Filing Season, the IRS reported an LOS of 88 percent and wait times averaging 3 minutes," TIGTA stated in an August 14, 2025, report. "However, the reported LOS and average wait times only included calls made to 33 Accounts Management (AM) telephone lines during the filing season."

TIGTA stated that the agency separately tracks Enterprise LOS, a broader measure of of the taxpayer experience which includes 27 telephone lines from other IRS business units in addition to the 33 AM telephone lines.

"The IRS does not widely report an Enterprise-wide wait time- as the reported average wait time computation includes only the 33 AM telephone lines," the report states. "According to IRS data, the average wait times for the other telephone lines were much longer than 3 minutes, averaging 17 to 19 minutes during the 2024 Filing Season."

TIGTA recommended that the IRS adjust its reporting to include Enterprise LOS in addition to AM LOS and provide averages across all telephone lines.

"The IRS disagreed with both recommendations stating that the LOS metric does not provide information to determine taxpayer experience when calling, and including wait times for telephone lines outside the main helpline would be confusing to the public," the Treasury watchdog reported. "We maintain that whether a taxpayer can reach an assistor is part of the taxpayer experience and providing average wait times across all telephone lines for the entire fiscal year demonstrates transparency."

The Treasury watchdog also noted that the National Taxpayer Advocate has stated the AM LOS is "materially misleading" and should be replaced as a benchmark.

TIGTA also warned that the reduction in workforce at the IRS could hurt recent improvements to LOS and wait times, noting that the agency will lose about 23 percent of its customer service representative employees by the end of September 2025.

"The staffing impact on the remainder of Calendar Year 2025 and the 2026 Filing Season are unknown, but we will be monitoring these issues."

It also noted that the IRS is working on a new metric – First Call/Contact Resolution – to measure the percentage of calls that resolve the customer’s issue without a need to transfer, escalate, pause, or return the customer’s initial phone call. TIGTA reported that analysis of FY 2024 data revealed that 33 percent of taxpayer calls were transferred unresolved at least once.

By Gregory Twachtman, Washington News Editor

The Financial Crimes Enforcement Network (FinCEN) has granted exemptive relief to covered investment advisers from the requirements the final regulations in FinCEN Final Rule RIN 1506-AB58 (also called the "IA AML Rule"), which were set to become effective January 1, 2026. This order exempts covered investment advisers from all requirements of these regulations until January 1, 2028.

The Financial Crimes Enforcement Network (FinCEN) has granted exemptive relief to covered investment advisers from the requirements the final regulations in FinCEN Final Rule RIN 1506-AB58 (also called the "IA AML Rule"), which were set to become effective January 1, 2026. This order exempts covered investment advisers from all requirements of these regulations until January 1, 2028.

The regulations require investment advisers (defined in 31 CFR §1010.100(nnn)) to establish minimum standards for anti-money laundering/countering the financing of terrorism (AML/CFT) programs, report suspicious activity to FinCEN, and keep relevant records, among other requirements.

FinCEN has determined that the regulations should be reviewed to ensure that they strike an appropriate balance between cost and benefit. The review will allow FinCEN to ensure the regulations are consistent with the Trump administration's deregulatory agenda and are effectively tailored to the investment adviser sector's diverse business models and risk profiles, while still adequately protecting the U.S. financial system and guarding against money laundering, terrorist financing, and other illicit finance risks. Covered investment advisers are exempt from the obligations of the regulations while the review takes place.

FinCEN intends to issue a notice of proposed rulemaking (NPRM) to propose a new effective date for these regulations no earlier than January 1, 2028.

This exemptive relief is effective from August 5, 2025, until January 1, 2028.

FinCEN Exemptive Relief Order

In 2013, a new and unique tax will take effect—a 3.8 percent "unearned income Medicare contribution" tax as part of the structure in place to pay for health care reform. The tax will be imposed on the "net investment income" (NII) of individuals, estates, and trusts that exceeds specified thresholds. The tax will generally fall on passive income, but will also apply generally to capital gains from the disposition of property.

In 2013, a new and unique tax will take effect—a 3.8 percent "unearned income Medicare contribution" tax as part of the structure in place to pay for health care reform. The tax will be imposed on the "net investment income" (NII) of individuals, estates, and trusts that exceeds specified thresholds. The tax will generally fall on passive income, but will also apply generally to capital gains from the disposition of property.

Specified thresholds

For an individual, the tax will apply to the lesser of the taxpayer's NII, or the amount of "modified" adjusted gross income (AGI with foreign income added back) above a specified threshold, which is:

• $250,000 for married taxpayers filing jointly and a surviving spouse;
• $125,000 for married taxpayers filing separately;
• $200,000 for single and head of household taxpayers.

Examples. A single taxpayer has modified AGI of $220,000, including NII of $30,000. The tax applies to the lesser of $30,000 or ($220,000 minus $200,000), the specified threshold for single taxpayers. Thus, the tax applies to $20,000.

A single taxpayer has modified AGI of $150,000, including $60,000 of NII. Because the taxpayer's income is below the $200,000 threshold, the taxpayer does not owe the tax, despite having substantial NII.

For an estate or trust, the tax applies to the lesser of undistributed net income, or the excess of AGI over the dollar amount for the highest tax rate bracket for estates and trusts ($11,950 for 2013). Thus, the tax applies to a much lower amount for trusts and estates.

Application of tax

The tax applies to interest, dividends, annuities, royalties, and rents, and capital gains, unless derived from a trade or business. The tax also applies to income and gains from a passive trade or business.

Other items are excluded from NII and from the tax:  distributions from IRAs, pensions, 401(k) plans, tax-sheltered annuities, and eligible 457 plans, for example. Items that are totally excluded from gross income, such as  distributions from a Roth IRA and interest on tax-exempt bonds, are excluded both from NII and from modified AGI.

The tax does not apply to nonresident aliens, charitable trusts, or corporations.

Tax planning techniques

Taxpayers are concerned about having to pay the tax. One technique for avoiding the tax is to sell off capital gain property in 2012, before the tax applies. This can be particularly useful if the taxpayer is facing a large capital gain from the sale of a principal residence (after taking the $250,000/$500,000 exclusion from income). Older taxpayers who do not want to sell their property may want to consider holding on to appreciated property until death, when the property gets a fair market value basis without being subject to income tax.

The technique of "gain harvesting" may be even more attractive if tax rates increase on dividends, capital gains, and AGI in 2013, with the potential expiration of the Bush-era tax cuts. However, the status of these tax rates will not be determined until after the election, potentially in a lame-duck Congressional session. It is also possible that Congress will simply extend existing tax rates for another year and "punt" the decision until 2013, as tax reform discussions heat up.

Taxpayers may also want to change the source of their income. Investing in tax-exempt bonds will be more attractive, since the interest income does not enter into AGI or NII. Converting a 401(k) account or traditional IRA to a Roth IRA will accomplish the same purpose. Income from a Roth conversion is not net investment income, although the income will increase modified AGI, which may put other income in danger of being subject to the 3.8 percent tax. Increasing deductible or pre-tax contributions to existing retirement plans can also lower income and help the taxpayer stay below the applicable threshold.

Trusts and estates should make a point of distributing their income to their beneficiaries. A trust's NII will be taxed at a low threshold (less than $12,000), while the income received by a beneficiary is taxed only if the much higher $200,000/$250,000 thresholds are exceeded.

Uncertainty

There was some uncertainty about the tax taking effect because of litigation challenging the health care law providing the tax, but a June 2012 Supreme Court decision upheld the law. The application of the tax is also uncertain because the Republican leadership has vowed to pursue repeal of the health care law if the Republicans win the presidency and take control of both houses of Congress in the November 2012 elections. But this is speculative. In the meantime, the Supreme Court decision guarantees that the tax will take effect on January 1, 2013.

These can be difficult decisions. While economic considerations for managing assets and income are important, it also makes sense for a taxpayer to look at the tax impact if the certain asset sales or shifts in investment portfolios are otherwise being considered.

The Tax Code provides that the IRS generally may not select an individual, partnership, or corporate tax return for audit after a period of three years has expired, dating from the tax return's filing date or due date, whichever is later. For example, if a taxpayer filed his 2011 Form 1040 on February 10, 2012, and the due date for the filing of returns that year was April 17, 2012, then the statute of limitations period ends on April 17, 2015, and not February 10, 2015. On the other hand, if the taxpayer filed his tax return late, on November 10, 2012, and had not obtained an extension of time to file, the statute of limitations period would run from November 10, 2012.

The Tax Code provides that the IRS generally may not select an individual, partnership, or corporate tax return for audit after a period of three years has expired, dating from the tax return's filing date or due date, whichever is later. For example, if a taxpayer filed his 2011 Form 1040 on February 10, 2012, and the due date for the filing of returns that year was April 17, 2012, then the statute of limitations period ends on April 17, 2015, and not February 10, 2015. On the other hand, if the taxpayer filed his tax return late, on November 10, 2012, and had not obtained an extension of time to file, the statute of limitations period would run from November 10, 2012.

If a taxpayer receives an extension of time to file the return (for example, an automatic six-month extension until October 15), however, the return is considered filed on the actual date of filing rather than the extension date.  On the other hand, filing an amended tax return, such as a Form 1040X, however, would generally have no effect on the three-year period if it does not increase tax liability. For example, if the taxpayer filed his tax return on April 17, 2012, subsequently discovered a missing item of deduction, and filed an amended return on May 15, 2012 that did not increase his tax liability, the three-year state of limitations period will still run from April 17, 2012 to April 17, 2015.

For more information on the statute of limitations on tax assessments and any exceptions, please contact our office.

A remainder interest is the interest you receive in property when a grantor transfers property to a third person for a specified length of time with the provision that you receive full possessory rights at the end of that period. The remainder is "vested" if there are no other requirements you must satisfy in order to receive possession at the end of that period, such as surviving to the end of the term. This intervening period may be for a given number of years, or it may be for the life of the third person. Most often, this situation arises with real estate, although other types of property may be transferred in this fashion as well, such as income-producing property held in trust. The holder of a remainder interest may wish to sell that interest at some point, whether before or after the right to possession has inured.

To determine the amount of gain or loss on the sale of an interest in property, you must first need to know the basis in that property. Generally, the basis of property is either the transferor's basis, if the transferor made a gift of the property while still living, or the fair market value at the time of the transfer if it was a testamentary gift. However, the value of a remainder interest is not the full value of the property, because someone else has an intervening right to its use.

The value of the remainder interest is equal to the undivided value of the property minus the value of the intervening interest. The value of this interest depends on applicable interest rates and the duration of the interest. In the case of a life estate, the duration depends on the age of the recipient and is determined with reference to mortality tables published in the Treasury regulations. The applicable interest rate is specified in Code Sec. 7520 as being 120 percent of the applicable federal rate (AFR) for that month, rounded to the nearest 0.2 percent. You may find these tables at the IRS web site.

IRS Pub. 1457 is known as Actuarial Values Book Aleph and contains tables that express the values of life estates, term interests and remainders. In this publication, you will need to select the appropriate section based on whether the interest is a term for years or a life estate. In each section is a series of tables based on interest rates ranging from 2.2 to 22.2 percent. Find the age of the life estate holder or duration of the term in the first column of the table. Next to it, under the column for remainder interests, is a decimal representation of the fractional interest represented by the remainder. Multiply this decimal by the basis of the property and you have the basis of the remainder interest.

Examples: Bob's grandfather died in March of 2009 and left a house valued at $100,000 to his mother for life, with the remainder interest to Bob. Bob's mother is 65 years old. The Sec. 7520 rate for that month is 2.4 percent, and the fractional value of the remainder is .67881. The value of Bob's interest in the house is $67,881.

This is a simple question, but the question does not have a simple answer. Generally speaking the answer is no, closing costs are not deductible when refinancing. However, the answer depends on what you mean by "closing costs" and what is done with the money obtained in the refinancing.

Costs added to basis. Certain expenses paid in connection with the purchase or refinancing of a home, regardless of when paid, are capital expenses that must be added to the basis of the residence. These include attorney's fees, abstract fees, surveys, title insurance and recording or mortgage fees. Adding these costs to basis will lower any capital gain tax that you pay when you eventually sell your home. If your gain is sheltered anyway by the home sale exclusion of $250,000 ($500,000 for couples filing jointly) on the eventual sale of a principal residence, any previous addition to basis, while doing no harm, will also do no good.

Costs neither deductible nor added to basis. Other costs are neither deductible nor added to basis. These costs include fire insurance premiums, FHA mortgage insurance premiums and VA funding fees, settlement fees and closing costs.

Interest expense. Taxpayers may deduct qualified residence interest, however. "Qualified residence interest" is interest that is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to a qualifying residence.

Points. Points are charges paid by a borrower to obtain a home mortgage. Other names used for deductible points are loan origination fees, loan discounts, discount points and maximum loan charges. While a fairly broad rule permits the deduction of home mortgage interest, the rule governing the deduction of points is narrower and has a number of restrictions. Points paid to refinance a mortgage on a principal residence, like other pre-paid interest that represents a charge for the use of money, are generally not deductible in the year paid and must be amortized over the life of the mortgage. However, if the borrower uses part of the refinanced mortgage proceeds to improve his or her principal residence, the points attributable to the improvement are deductible in the year paid.

Prepayment penalties. In cases where a creditor accepts prepayment of a secured debt, such as a mortgage debt on a home, but imposes a prepayment penalty, the prepayment penalty is deductible as interest.