Tax Breaks: The Not Quite The End Of The World As We Know It (And I Feel Fine) Edition

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I cannot believe that this week is nearly over. And I mean that in the very best and worst ways at the same time. Let me explain.

First, I had a wonderful holiday week. After a long December, it was nice to stare at the lights and play a lot (and I mean a LOT) of Christmas music. And I was fortunate enough to have my kids home with me—there's no better gift than that. I thought it might prove to be a relaxing end to the year. But the Fifth Circuit had other plans.

On December 23, the Financial Crimes Enforcement Network, or FinCEN, was (again) enjoined from enforcing the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA). A unanimous Fifth Circuit bench granted the government's emergency motion for a stay of a preliminary injunction pending an appeal. (☆) (A stay is a court order that stops a legal proceeding—it's usually temporary.)

This news came as a shock to many, since last week, a judge in Texas ruled that a nationwide preliminary injunction barring FinCEN from enforcing the CTA would stand. (☆)

The reversal initially meant that businesses would be required to file BOI reports while the government's appeal winds its way through the court system unless they are otherwise exempt. In response to the December 23 ruling, FinCEN posted a message to its website just before the Christmas holiday, extending the January 1, 2025, reporting deadline (☆) to January 13, 2025.

Quite the whirlwind, right? Only the courts weren't done yet. On December 26, the Fifth Circuit issued another order, (☆) this one vacating the stay. (Vacate is a legal term meaning to set aside a previous judgment or order.) That means that the part of the ruling that stayed the injunction has been removed—the injunction is now back in play. The court also explained that the appeal had been expedited to the next available oral argument panel—oral arguments are now set for March 2025.

If this sounds confusing, it's because there are several moving parts. The injunction was preliminary—the merits of the case have not been heard in the Fifth Circuit yet. That's what's moving through the system now. The other bits are largely related to procedure (the stay of the preliminary injunction, for example, was requested by the government while the matter is being heard).

On December 27, FinCEN updated its website to say:

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

So, to recap, the original district court injunction barring FinCEN from enforcing the BOI reporting requirements remains in force. That will stay in place until spring, barring any additional legal actions—but let's face it, that wouldn't surprise anyone at this point. Depending on which side you're on, in the meantime, the extra time is something of a gift.

Some gifts are more straightforward. The IRS has rules regarding the taxation of gifts, and these rules can affect both what you give and how much you give. When it comes to gifting during Christmas, one key concept to understand is the annual gift exclusion. Your quick cheat? As of 2024, the IRS allows individuals to give up to $18,000 per recipient each year without triggering the gift tax. This means that, in the spirit of the season, you can give a gift worth up to $18,000 to each person, including children, parents, or friends, and you will not need to file a gift tax return or pay any taxes on those gifts. (That amount goes up to $19,000 in 2025. I don't know about you, but while I got some great gifts—that book of cheese trivia won't be enough to push me over the limit from any individual this year.)

In addition to the “nice” list, here's another list you might be on. The IRS says that over one million taxpayers may have missed out on the Recovery Rebate Credit (RRC) claimed on their 2021 tax returns. The agency is now taking steps to send those checks to eligible taxpayers.

Taxpayers and tax professionals focused on digital assets one last gift this season: On December 27, 2024, the Treasury Department published the final regulations applicable to Decentralized Finance (DeFi), specifically targeting participants in trading front-end services that help retail investors interact with DeFi protocols. (For those of you scratching your head, DeFi refers to peer-to-peer financial services on the blockchain.) Notably, the final regulations include protections that appear to preempt expected litigation over government interpretations of statutes previously limited by the Supreme Court Loper Bright. (The IRS also issued draft instructions for Form 1099-DA, Digital Asset Proceeds From Broker Transactions.)

That brings us to year-end. It's just a few days until a new year starts—and it could be a significant year from a tax perspective. There's a new Congress, a new administration, and a potentially new IRS Commissioner. We expect some regulatory rollback, and portions of the Tax Cuts and Jobs Act are set to expire. That means there's some uncertainty—which can be scary—but there's also room for opportunity. Engaging in a bit of tax planning now (☆) can help you start 2025 off right.

Speaking of, by the time you get the next edition of the newsletter, we'll have started a brand-spanking new year. I hope that it's full of wonder and promise. Happy New Year! I'll see you on the other side.

Enjoy your weekend,

Kelly Phillips Erb (Senior Writer, Tax)

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Questions

This week, a reader asks:

The only income I'll make this year is $1050 from CD interest. Obviously, I won't owe the IRS any taxes for the year, but am I required to file, even though I'll owe nothing?

Not everyone needs to file a tax return. Whether you need to file a tax return depends on your filing status, age, and gross income. You can figure that out using this chart:

For purposes of the chart, gross income means all income you receive in the form of money, goods, property, and services not otherwise exempt from tax. That includes income from sources outside the U.S. and from selling your main home or other assets, as well as losses from your business.

When figuring gross income, don't include Social Security benefits unless you are married filing separately and lived with your spouse at any time in 2024, or if one-half of your Social Security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly).

Even if you don't have to file a tax return, you may want to file a tax return to get a refund of any federal income tax withheld. You should also file if you are eligible for any of the following credits:

• Earned Income Tax Credit (EITC)
• Additional Child Tax Credit (ACTC)
• American Opportunity Credit
• Credit for Federal Tax on Fuels
• Premium Tax Credit
• Credits for Sick and Family Leave

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Statistics, Charts, and Maps (Oh My!)

Despite rumors suggesting that the IRS has announced a start to the tax filing season in 2025, that hasn't yet happened. And it appears that many taxpayers have a short memory, assuming that the tax filing season tends to start in early January—that's rarely the case. Most tax filing seasons in the last decade or so have opened in the last week of January (or February)—here’s a look:

A Deeper Dive

With so much conversation on reporting requirements and last-minute domestic tax moves, it can be easy to forget about international tax. That would be a mistake, however, since much of what is happening abroad will impact American taxpayers, including, among other things, corporate tax rates.

Importantly, the Organization for Economic Cooperation and Development (OECD) has been focused on efforts to implement Pillars One and Two. Pillar One focuses on where tax should be paid. You can think of it in terms of nexus—similar to the same kinds of discussions we have in the U.S. between states. The critical question is: Who has the right to tax income even if there's no physical presence? Pillar Two examines the amount of tax to be paid, with an eye toward the disparate tax rates from country to country.

In April, the OECD published an updated commentary on the GLOBE (global anti-base-erosion) model rules. The GLOBE model rules are supposed to make large multinational enterprises pay an effective tax rate of 15% wherever they operate.

Several jurisdictions have adopted the GLOBE (and related) rules, including the U.K., Belgium, the UAE, Switzerland, Poland, the U.K. crown dependencies, Canada, Singapore, and Kenya. That will no doubt put pressure on the U.S. as the new administration takes a look at corporate tax rates.

Pillar One is more complicated, namely because of digital services taxes. As part of the negotiations, countries were supposed to eliminate digital services taxes. There was no agreement, so Canada decided to go ahead and enact its DST in June. That didn't make U.S. companies (who already feel like the target of DSTs) happy. Meanwhile, Pillar One negotiations are still ongoing.

Something to keep an eye on? What the U.S. does next. The U.S. hasn't adopted Pillar Two yet, and Republicans (who will control the White House and both chambers of Congress in 2025) aren't fans. However, they're also not fans of DSTs, which could lead to some compromises.

In related news, 11 years ago, the U.K. Labour Party considered a proposal to require large multinational companies to publicly report their profits and taxes in the countries where they do business. In 2016, U.K. lawmakers settled on a compromise: The finance bill wouldn't mandate public cBc (country by country) reporting, but the Treasury could implement it whenever it liked. With governments and attitudes changing, is now the time?

If all of that feels like a lot, you're not alone. International tax can be tricky. Here's a lighter look at U.S. international taxes and filing requirements—’tis the season!

Tax Filings And Deadlines

📅 February 3, 2025. Due date for individuals and businesses affected by Hurricanes Beryl and Debby (more info here (☆) and here (☆)), those in South Dakota affected by severe storms, straight-line winds and flooding that began on June 16, 2024, taxpayers in Puerto Rico affected by Tropical Storm Ernesto, and those individuals and businesses in Connecticut and New York affected by severe storms and flooding from torrential rainfalls that began on August 18, 2024.

📅 May 1, 2025. Due date for individuals and businesses in the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia affected by severe storms and flooding from Hurricane Helene (☆) and Hurricane Milton.

📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.

Tax Conferences And Events

📅 February 19-25, 2025. ABA Tax Section 2025 Midyear Tax Meeting. JW Marriott Los Angeles L.A. Registration required.

📅 May 13-14, 2025. National Association of Enrolled Agents 2025 Capitol Hill Fly-In, Washington, DC. Registration required (NAEA members only).

📅 July 21-23, 2025. National Association of Tax Professionals Taxposium 2025, Caesars Palace, Las Vegas. Registration required.

Trivia

How many gifts in total were given in "The Twelve Days of Christmas" song?

(A) 12

(B) 60

(C) 144

(D) 364

Find the answer at the bottom of this newsletter.

Positions And Guidance

The IRS has published Internal Revenue Bulletins 2024-52 and 2025-01.

The IRS has a Get Ready page on its website to help taxpayers get ready to file in 2025.

In the run-up to tax season, the IRS has posted a flurry of draft forms and instructions, including the draft instructions for Forms 1099-MISC and 1099-NEC.

Noteworthy

The IRS is seeking qualified applicants for nomination to the Electronic Tax Administration Advisory Committee (ETAAC), an organized public forum for discussing issues in electronic tax administration, such as preventing identity theft and refund fraud. New members will serve three-year terms beginning in September 2025. Applications will be accepted through January 31, 2025. For more information about ETAAC, the application process, and qualification criteria, email publicliaison@irs.gov.

The AICPA & CIMA, together as the Association of International Certified Professional Accountants, announced the winners of their inaugural Chartered Global Management Accountant (CGMA) Professional Awards – Asia Pacific in a virtual ceremony on December 20, 2024. Over 1200 applications and nominations from individuals, businesses, and educational institutions in Sri Lanka, Malaysia, India, Pakistan, Thailand, Maldives, Australia, and New Zealand were submitted for consideration in four categories: CGMA Leadership Award, CGMA Sustainability Award, CGMA Innovation Award, and CGMA Digital Transformation Award.

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If you have career or industry news, submit it for consideration here or email me directly.

In Case You Missed It

Here's what readers clicked through most often last week:

• Tax Preparer Known As “The Magician” Pleads Guilty In $145 Million Tax Fraud Scheme
• Biden’s Recent Clemency Move Is Controversial (And It’s Not Hunter Biden)

You can find the entire newsletter here.

Trivia Answer

The answer is (D) 364.

That's how many gifts are in the song as sung with the verses repeated. According to the PNC Christmas Price Index, purchasing all 364 gifts would cost $209,272 in 2024.

The PNC PI measures the change in prices consumers could expect to pay for the gifts in the song. Data is compiled by PNC's Investment Office using sources from nationwide, including dance and theatre companies, hatcheries, pet stores, and others. You can see the entire list here.

Feedback

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