“I will commit that for this tax season … Direct File will be operative.” That was the word from Scott Bessent, President-elect Donald Trump’s nominee for Treasury Secretary, when asked about the program during his confirmation hearing.
The controversial Direct File program allows eligible taxpayers to file taxes directly with the IRS online for free. The word “controversial” is a nod to the fact that while the IRS touts the program as beneficial to taxpayers and says the initial feedback was overwhelmingly positive, some Republicans in Congress aren’t happy with the program. (You can read what some taxpayers had to say to Forbes about their experiences here. (☆))
During the filing season, Direct File will be available (☆) in 25 states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming. That means 62% of Americans will live in states offering Direct File.
Direct File is slated to open on January 27, 2025, the same day the IRS will officially begin accepting paper and electronic tax returns.
Bessent is a South Carolina native and 1984 graduate of Yale University. He also founded the hedge fund Key Square Management, which had about $600 million in assets under management as of the end of 2023. You can read more about him here.
If confirmed, Bessent will have primary responsibility for formulating and recommending domestic and international financial, economic, and tax policy, formulating fiscal policies that have general significance for the economy, and managing the public debt. The Secretary of the Treasury (currently Janet Yellen) has other duties, including carrying out certain law enforcement responsibilities and sitting on councils and boards, including the Social Security and Medicare Boards of Trustees and the International Monetary Fund. You can think of the Secretary as the government’s chief financial officer (CFO).
The Secretary of the Treasury is different from the Commissioner of the IRS–the Secretary is more or less the Commissioner’s boss. The IRS Commissioner is responsible for administering and enforcing the nation’s tax laws. While IRS Commissioners traditionally serve out their terms, Werfel announced that his last day at the agency will be Monday, January 20, 2025 (his term would normally run until late 2027). Trump has nominated Congressman Billy Long to take his place (you can read more about Long here.) (☆)
While taxpayers await the outcome of Long’s confirmation hearing, Deputy IRS Commissioner Douglas O’Donnell will step in as Acting IRS Commissioner (O’Donnell has served as Deputy since early 2024). It’s a familiar role—O’Donnell served as acting IRS Commissioner from November 2022 through March 2023.
One of the IRS Commissioner’s most important responsibilities is setting the Treasury Regulations. Proposed and final regulations are published in the Federal Register (taxpayers may submit comments or speak at hearings before final regulations are published). Recently, the IRS submitted proposed regulations to update Circular 230 (☆)–that’s more or less the rule book for certain tax professionals, including attorneys, certified public accountants (CPAs), and enrolled agents (EAs) who can practice before the IRS. Circular 230 was a bit outdated (it still had rules regarding registered tax return preparers and the Enrolled Retirement Plan Agent Special Enrollment Examination (ERPA-SEE), neither of which exists anymore) and needed to be adjusted accordingly. The IRS also confirmed its position on contingent fees (spoiler alert: the agency doesn’t like them), reminded practitioners to follow best practices, including when it comes to tech, and introduced a new subsection related to appraisers and standards for disqualification.
Final regulations have been submitted for so-called “microcaptive transactions.” While microcaptive sounds like it involves a tiny spy, the reference is to small captive insurance companies taxed under section 831(b)—a captive insurance company is generally one that is owned and controlled by its insureds. The regulations designate certain transactions as listed transactions (presumed questionable tax shelters) and others as “transactions of interest” (might be a questionable tax shelter). The rules require enhanced reporting requirements for taxpayers and related parties.
IRS regulations also allow the agency to extend due dates following a disaster. We’ve seen that happen a few times following hurricanes, storms, and most recently, the California wildfires. The IRS is giving tax filing and payment extensions to those impacted by the wildfires, and California’s Governor announced that the state is doing the same. Other tax relief–like casualty loss deductions and retirement account tax breaks–may also be available. (☆)
The IRS isn’t the only agency offering economic relief for those impacted by the fires. In addition to financial assistance available through the Federal Emergency Management Administration (FEMA), the Small Business Administration is authorized to provide up to $2 million in low-interest-rate, long-term disaster loans per business to cover physical or economic damage. (☆)
The stories coming out of the area include reminders of how vulnerable older adults can be during disasters. If your aging loved ones have mobility issues, cognitive impairments, vision, or hearing loss, this subject of preparedness needs your attention.
In addition to the winds fueling the fires, the weather has impacted much of the country this week (even as I am writing this newsletter, I’m trying to sort out how I can get back home from a tax conference, thanks to some unexpected winter storms). Let’s be careful out there.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Questions
This week, a reader on social media asked, in response to my story about helping out after the California wildfires:
Basically nothing is deductible anymore if it isn’t over the 25k standard deduction right?
To get the benefit of a charitable donation on your individual tax return, you must itemize your deductions on Schedule A. Schedule A is also where you would deduct expenses like your real estate taxes, state and local taxes, and your mortgage interest.
Most taxpayers no longer itemize, thanks to the Tax Cuts and Jobs Act, which doubled the standard deduction. According to the IRS, about 15,474,250 taxpayers–about 10% of all individual filers–itemized their deductions in 2022 (the last year for which complete data is available). But those that do itemize take advantage of the tax break. More than ⅔ of those taxpayers who itemized in 2022–11,214,315–claimed the charitable deduction.
You can take a look at the standard deduction amounts for 2025 here:
You can find all the IRS 2025 tax adjustments, including tax rates, here.
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Statistics, Charts, And Maps (Oh My!)
With a new administration in the White House–and a new Congress–there could be a lot of changes on the horizon in 2025. (☆)
Tops on the list is what might happen to the Tax Cuts and Jobs Act, or TCJA. President-elect Trump’s signature tax legislation was signed into law in 2017, during his first term. The law made sweeping changes to deductions, depreciation, expensing, tax credits, and other tax items that affect businesses and individuals. While many—but not all—of the changes for businesses were made permanent, a significant number of changes affecting individuals were temporary. If Congress doesn’t take any action (which is highly unlikely), those changes will “sunset” at the end of 2025 meaning they will revert to their pre-2017 status.
One of the most talked about provisions? Individual tax rates. If the TCJA sunsets, marginal rates will revert to the earlier rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% in 2026, and the rates will kick in at significantly different dollar amounts. Here’s what that would look like:
The tax brackets on the left show what the rates looked like in 2016 before the TCJA. The tax brackets on the right illustrate what the tax rates look like this year (you can find out more about 2025 tax adjustments here).
If Congress doesn’t act—again, unlikely—the tax brackets in 2026 will revert back to those on the left.
(For a closer look at some TCJA changes, check out this previous article. (☆))
A Deeper Dive
Remember former Marine Stephen Lara?
It took just 90 minutes for Lara to lose his life savings in what he thought was a routine stop. Years later, however, Lara finally got justice.
Lara got his cash back—but only after The Institute for Justice (IJ), a libertarian not-for-profit law firm which fights what it sees as government abuses, sued the DEA on his behalf.
With IJ still representing him pro bono (for free), Lara next asked the Nevada courts to rule that the state’s constitution, which protects property rights, bars the Nevada Highway Patrol from participating in the “equitable sharing” civil forfeiture program run by the feds–something almost all states now do.
A Washoe County judge did just that, ruling that Nevada law enforcement cannot use an “equitable sharing” civil forfeiture program to bypass state laws that protect property owners. The decision shuts down what the Nevada Highway Patrol (NHP) argued was a legal loophole that allowed officers to seize property under state law and process it federally—while still receiving an up-to-80% kickback from the proceeds from the feds.
Lara isn’t taking a victory lap just yet. He continues to seek damages and pursue additional claims under the Nevada Constitution. He’s been fighting against what happened to him for three years—and that’s with the assistance of the IJ. So many people, he notes, don’t have this representation. It is, he says, “damn near impossible for the average citizen to navigate on their own.”
Tax Filings And Deadlines
📅 January 27, 2025. Tax season opens! The IRS will begin accepting paper and electronic tax returns (for individual taxpayers).
📅 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.
📅 April 15, 2025. Due date for most taxpayers to file an individual tax return—or apply for an extension.
📅 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.
📅 October 15, 2025. Due date for individuals and businesses affected by wildfires and straight-line winds in southern California that began on January 7, 2025. Currently, individuals and households that reside or have a business in Los Angeles County qualify for tax relief. The same relief will be available to any other counties added later to the disaster area.
Tax Conferences And Events
📅 February 19-21, 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
When was the office of the U.S. Treasurer created?
(A) July 29, 1775
(B) July 29, 1776
(C) July 29, 1789
(D) July 29, 1913
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletin: 2025-3.
The IRS published Announcement 2025-6 describing pilot program testing changes to Fast Track Settlement (FTS) programs available to taxpayers under examination in the Large Business and International (LB&I), Small Business/Self-Employed (SB/SE), and Tax Exempt/Government Entities (TE/GE) operating divisions (collectively, Exam).
Noteworthy
SCOTUSblog publisher and co-founder Tom Goldstein has been indicted on federal tax evasion charges. A federal grand jury in Greenbelt, Maryland, returned a 22-count indictment, charging Goldstein with tax evasion, assisting in the preparation of false tax returns, failure to pay taxes, and making false statements to two separate mortgage lenders. Through his lawyers, Goldstein has denied the allegations.
Morrison Foerster has announced the arrival of Richard Nugent as a partner in the firm’s global Tax Group, based in the New York office. Nugent will co-chair the global Tax Group, alongside Tony Carbone.
The Public Company Accounting Oversight Board (PCAOB) announced a settled disciplinary order sanctioning Baker Tilly US, LLP for violations of PCAOB rules and quality control standards. Without admitting or denying the findings, Baker Tilly consented to the disciplinary order that resulted in a censure, a $500,000 civil money penalty, a requirement that the firm engage an independent consultant to review and make recommendations concerning quality control policies and procedures, and a commitment to additional training.
David Sacks has been named as the White House’s artificial intelligence and cryptocurrency czar. Sacks is the founder of software as a service firm Yammer, which Microsoft purchased in 2012 for $1.2 billion. He also founded venture capital firm Craft Ventures and is a former PayPal chief operating officer.
The IRS announced the appointment of 18 new members to the IRS Advisory Council (IRSAC). The IRSAC, established in 1953, is an organized public forum for IRS officials and representatives of the public to discuss issues in tax administration. The 2025 IRSAC Chair is Christine Freeland, President of Christine Z. Freeland, CPA PC, in Chandler, Arizona. Those appointed to serve three-year terms on the council are: Grace Allison, Pablo Blank, Selvan Boominathan, Caroline Bruckner, Samuel Cohen, Kendra Cooks, Omeed Firouzi, David Gannaway, Jared Goldberger, David Heywood, Manuela Markarian, Charles Markham, Mark Matkovich, Sarah Narkiewicz, Adam Robbins, Tralynna Scott, Kristofer Thiessen, and Rolanda Watson.
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In Case You Missed It
Here’s what readers clicked through most often last week:
You can find the entire newsletter here.
Trivia Answer
The answer is (A).
The Treasurer of the United States is the only Treasury office older than the Department. The Treasurer serves as the custodian and trustee of the federal government’s collateral assets and the supervisor of the department’s currency and coinage production functions. Currently, the Treasurer is Marilynn Malerba.
The Treasurer’s signature, along with that of the Secretary of the Treasury, is on all U.S. paper currency. (It’s true, pull a bill from your wallet and check it out.)
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