My credit card is already feeling the heat. Despite the fact that we’re in the thick of summer, parents like me are already thinking about back-to-school shopping. According to a study conducted by the National Retail Federation and Prosper Insights & Analytics, two-thirds (67%) of back-to-school shoppers had already begun purchasing items for the upcoming school year as of early July. That represents a significant increase from last year, when only 55% of parents got an early start, and is the highest since NRF started tracking early shopping in 2018.
Why are parents heading to the stores already? The survey suggests that just over half (51%) of back-to-school families are shopping earlier this year compared to last year specifically out of concern that prices will rise due to tariffs. Families who start shopping early may have more opportunities to find bargains, including those who plan to spend money on electronics for college—electronics are among tariff targets.
One tweak that states hope will help drive sales? A sales tax holiday. A sales tax holiday is a period of time—often falling over a weekend—when a state will waive or reduce their sales tax payable on certain items. Many states focus their annual sales tax holiday on back-to-school supplies, though some—like Florida—offer sales tax holidays on more goods and services. Here’s a look at what to expect for the remainder of 2025.
This is also a good time of year to consider a second look at your taxes. A mid-year tax review is more than just a routine financial check-in—it’s a strategic opportunity to step back, evaluate where you stand, and make informed adjustments that could significantly impact your year-end tax outcome. Taking the time around the middle of the year to reassess your income, deductions, and tax withholdings can help you align your tax planning with any changes in your financial situation or goals.
One aspect of your tax planning that you should include in your review is retirement planning. Often, taxpayers wonder whether to invest in a Roth IRA or a traditional IRA. Choosing between these two types of accounts can significantly impact your future income, tax burden, and financial flexibility. It’s critical to understand the implications of withdrawals in each type of account, why the tax differences matter, and the importance of aligning your strategy with your values, such as passing on savings to heirs or making charitable contributions.
It’s also important to understand the role that Social Security plays in retirement planning, including for the more than 700,000 U.S. citizens who receive Social Security benefits while residing overseas.
Both U.S. seniors abroad and foreign nationals abroad who are nonresident aliens often depend nearly entirely on Social Security income. Both groups contributed equally to the Social Security system. Yet only U.S. citizens or residents can reduce or eliminate their tax burden via tax deductions including the new tax law deduction for seniors–nonresident aliens receive no such relief. The new tax law also leaves untouched the longstanding 30% withholding tax imposed on U.S. Social Security benefits paid to nonresident aliens.
Social Security beneficiaries who live in the U.S. are also facing changes. Specifically, the Social Security Administration has proposed that those who call the agency will have to go online to get a one-time code before they can generate a benefit verification letter, obtain a tax statement or replacement Form 1099, change their address, or request a claims status. According to paperwork filed with the Office of Management and Budget (OMB), the agency claims that fraud risk associated with phone services warrants the change. SSA wants to implement the new procedures beginning August 18.
The AARP voiced concerns that the change will be a challenge for “the one in four older adults who report never going online.” The phone, claims the AARP, is how many seniors access Social Security services. “Limiting phone-based services would remove the primary way they are able to get the help they need from the Social Security Administration,” the organization wrote in a letter to Frank Bisignano, the new SSA Commissioner. The AARP has asked Bisignano to reconsider the proposal.
It’s clear that many in Congress are sensitive to the needs of seniors–it’s one of the reasons that tax relief for seniors made it into the One Big Beautiful Bill Act.
Another group that made an impact on OBBBA? Taxpayers in high-tax states. The result was an increase in the limit on the state and local tax deduction from $10,000 to $40,000. This high-profile tax benefit for reducing taxable income is available for those who itemize deductions on their federal tax returns instead of using the standard deduction.
The higher cap on the SALT deduction comes with a catch: a phaseout for those with yearly income exceeding $500,000. While the income-tax rates for most of those taxpayers are 35% and 37% (the top two brackets), the SALT deduction phaseout can push your actual marginal tax rate to almost 46%. This significant jump has prompted financial advisors to suggest various strategies—including simply working less.
And finally, don’t click through the newsletter without catching this story–Olof Kyros Gustafsson, also known as (aka) “Sir Olaf Gustafsson,” aka “El Silencio,” has pleaded guilty to six federal criminal charges related to marketing and selling products, including flamethrowers and cell phones, that he never delivered. The products were based on licensing rights tied to the late Colombian drug kingpin Pablo Escobar. (That’s right–a flamethrower. If that’s not enough of an enticement, I’ll add that the story also references a foil-covered iPhone and a billion dollar suit against Netflix.) There’s not much that can top that, though I’ll give it a whirl–there’s lots more interesting tax content below.
Enjoy your weekend (I hear it’s going to be a cooler one across much of the country).
Kelly Phillips Erb (Senior Writer, Tax)
Questions
This week, a reader asked:
What if you have an installment agreement with the IRS because you owe them money from past years? Will they seize my refund check and apply it to my outstanding debt? And if they will, can I skip the next month’s payment to make up for it? I’d still be paying the same amount for the year.
The answer to your refund question is yes, any federal income tax refunds will be applied to your tax debt until it is paid in full. The IRS should have made that clear to you when you applied for the installment agreement.
If you owe a federal or state government-related debt—including taxes—it can be turned over to the Treasury Offset Program (TOP), which helps collect the debt by holding back money from a federal payment, such as a tax refund or Social Security check. That process may be referred to as offsetting the payment, administrative offset, or offset.
Generally, to be part of the offset program debts must be $25 or more and must be delinquent and legally enforceable, meaning they cannot be in bankruptcy, forbearance, or under appeal. Federal debts that might trigger offsets include federal income tax delinquencies, student loan defaults, and SSA overpayments. States can also participate by asking the IRS to intercept or offset federal tax refunds for state tax obligations or money owed to state agencies—this includes the authority of the state’s child support enforcement office to collect on outstanding child support debts.
TOP offsets don’t include private debt unrelated to a government agency, such as credit card debt or a delinquent car loan. TOP can’t seize your tax refund check to pay your Comcast bill or to resolve a debt you owe to your accountant.
The good news is that the IRS will apply the amount of your refund check to your tax liability, further reducing the amount you owe.
That said, you should not skip any installment agreement payments, even if the IRS has seized your refund check. To remain in the installment agreement program, you must pay at least your minimum monthly payment when it’s due—no skips. (You must also file all required tax returns on time and pay all taxes in full and on time.)
If you skip a payment, the IRS may move your agreement into default. To get back into your installment agreement, you’ll likely have to pay a fee—the IRS may also require you to submit more financial information. Additionally, if the IRS moves to terminate your agreement, the collection period (typically, 10 years) is suspended for 30 days—that means that you’re just extending the deadline for the IRS to collect on your debt.
Best practice? Make your payment on time every time, even if your refund check is seized.
Do you have a tax question that you think we should cover in the next newsletter? We’d love to help if we can. Check out our guidelines and submit a question here.
Getting To Know You Tuesday: Brad Garland
When you think about tax professionals, it’s easy to just focus on the work. As Brad Garland reminds us, there are many opportunities to be involved in your community, too.
Brad is a partner and founder at Honeycomb CPAs & Advisors, which he describes as “curating and managing the team, the clients, and the culture of a practice in the community.”
That community is Huntsville, Alabama and Brad takes the term seriously. Outside of work, he is a founding member of the Accelerate chapter of BNI. He serves the Community Foundation of Greater Huntsville, the Huntsville-Madison County Public Library, Kinertia (the entity that curates TEDxHuntsville), and the Liberty Learning Foundation. Brad also sits on the Auburn University’s School of Accountancy Advisory Council and is a co-founder of Rocket City Scholarship Granting Organization.
Brad is the next professional to be featured in our Getting To Know You Tuesday series—a chance to get to know all kinds of tax professionals and understand that the field of tax is bigger than April 15. If you’d like to nominate a tax professional to be featured, send your suggestion to kerb@forbes.com with the subject: Getting To Know You Tuesday.
Statistics, Charts, and Graphs
Are you at risk of an IRS audit? Probably not. While your income levels are statistically tied to your level of risk, audit levels overall are on the way down–and have been for some time.
At the end of 1985, the IRS had 96,705 employees. Of those, 24,433 were involved in “Examination” and 15,119 in “Collection”. They collected $743 billion from a population of 239 million at a cost of $0.48 per $100 collected. Of 96,496,900 1984 individual returns, 1,265,592 were examined. That’s 1.31%.
At the end of 2022, there were 84,553 IRS employees who collected $4.901 trillion at a cost of $0.29 per $100 collected from a population of 334 million. There were 161,666,477 individual returns of which 326,611 were examined. That is 0.2%.
The IRS closed fiscal 2024 with 99,628 employees. Those numbers continue to drop, and it looks like they may be heading lower.
With your risk of audit somewhat low, should that translate into a free pass to skip out on your tax bill? Of course not. Not only is paying your taxes the right thing to do, there are some practical considerations. For example, the chance of criminal prosecution for willful violation of the tax laws still exists–alongside penalties, interest and other punishments (like liens and levies) if you do get caught.
A Deeper Dive
Got a question? You might be tempted to ask ChatGPT, Gemini, or another artificial intelligence (AI) tool. People turn to AI for just about everything these days—including taxes.
When you ask a large language model (LLM)—an AI model designed to understand, generate, and manipulate human language used in chatbots like ChatGPT and Gemini—for tax advice, you’ll usually get an answer. It may include a disclaimer encouraging you to consult a real expert, but it rarely refuses the request.
This week, I asked ChatGPT the same reader question that I answered last week: I’m really interested in the people who are complaining about gambling limits in the new tax law. I didn’t even know that you could deduct your losses at all! How does that work?
(You can read my answer here.)
ChatGPT told me: Great question—and you’re right to be curious. Gambling tax rules are surprisingly complex, and yes, gamblers can deduct losses—but only under very specific rules. And recent changes have made some gamblers angry, especially those who play professionally.
But interestingly, in the answer, ChatGPT highlighted changes under the TCJA (noting “But under the Tax Cuts and Jobs Act (TCJA) of 2017, Congress capped all gambling-related deductions—including business expenses—at the amount of gambling winnings.”). There was no reference to the One Big Beautiful Bill Act at all.
So, it answered, but it wasn’t a complete answer. Maybe it didn’t know exactly what the reader was asking and needed more specifics. But that could be problematic—in many countries, applying tax law to someone’s specific situation is legally considered tax advice, and that’s often a regulated activity. So what happens when the advice comes from a machine and not from a person?
A German court ruling has already addressed this issue, offering a useful starting point for understanding where automation ends and regulated advice begins. While the case didn’t involve LLMs, it still provides valuable insights.
Germany’s Federal Court of Justice (Bundesgerichtshof) reviewed a contract-generating platform that allowed users to create legal documents by answering a guided questionnaire. The service was advertised as producing “legal documents with lawyer-level quality”—faster and cheaper than a real lawyer.
The question was whether this kind of software crossed into regulated territory by offering legal advice without a license. The court ruled that it didn’t. Notably, the court emphasized the user’s role and found that users were not misled into expecting full legal services and that they understood that the output was a standardized document generated without professional legal review.
However, the German court drew a clear distinction—automated tools are permitted as long as they offer general guidance, not case-specific legal advice. If a tool behaves like a structured manual with templates and logic paths, it’s usually safe. But if it interprets tax rules based on someone’s personal data, it may cross into regulated territory.
So what does that mean for professionals? The value of tax professionals doesn’t lie in simply
knowing the rules, but in interpreting them, applying judgment, and asking the hard questions that AI can’t (or doesn’t know to ask). The goal isn’t to compete with AI but to work with it.
Tax Filings And Deadlines
📅 September 30, 2025. Due date for individuals and businesses impacted by 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.
📅 November 3, 2025. Due date for individuals and businesses affected by storms in Arkansas and Tennessee that began on April 2, 2025.
Tax Conferences And Events
📅 August 5-September 16 (various dates), 2025. IRS Nationwide Tax Forum in New Orleans, Orlando, Baltimore and San Diego. Registration required (discounts available for some partner groups).
📅 September 17-18, 2025. National Association of Tax Professionals Las Vegas Tax Forum. Paris Hotel, Las Vegas, Nevada. Registration required.
📅 Sept. 26-27, 2025. National Association of Tax Professionals Philadelphia Tax Forum. Sheraton Philadelphia Downtown, Philadelphia, Pennsylvania. Registration required.
Trivia
What rock star couple famously attracted attention when the IRS filed tax liens against their property in 2011?
(A) Whitney Houston and Bobby Brown
(B) Billy Joel and Christie Brinkley
(C) Ozzy and Sharon Osbourne
(D) Ike and Tina Turner
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS and Security Summit partners reminded tax professionals about the federal mandate to have a Written Information Security Plan (WISP) designed to help protect them against threats from identity thieves and data breaches.
The IRS has published Internal Revenue Bulletin 2025-32, which includes the prescribed interest rates for federal income tax purposes for August 2025. Those rates are useful for various planning and tax reasons, including providing the minimum fixed interest a private lender must levy on a new loan to avoid unwanted tax complications. You can read more about inter-family loans here.
The IRS published Notice 2025-28 advising that it plans to partially withdraw proposed regulations and issue revised proposed regulations on the application of the Corporate Alternative Minimum Tax (CAMT) to applicable corporations with financial statement income (FSI) attributable to investments in partnerships. In addition, the notice provides interim guidance primarily on simplified methods to determine an applicable corporation’s adjusted financial statement income (AFSI) with respect to an investment in a partnership, reporting by partnerships of information needed to compute ASFI, and rules for partnership contributions and distributions.
The American Institute of CPAs (AICPA) signaled its strong support of legislation introduced by Senator John Fetterman (D-PA) which would provide a filing option for taxpayers experiencing spousal abuse or abandonment. The Survivor Assistance for Fear-free and Easy Tax Filing Act of 2025 (SAFE Act), S. 2129, allows survivors of domestic abuse or spousal abandonment to file their taxes as if they were not married.
In a letter sent to Treasury and the IRS, the AICPA provided comments on two proposed regulations: REG-112261-24 (nonrecognition of gain or loss in corporate separations, incorporations, and reorganizations) and REG-116085-23 (multi-year reporting requirements for corporate separations and related transactions).
Noteworthy
KPMG announced that Douglas O’Donnell, former IRS Acting Commissioner, joined KPMG US as a senior managing director within its Washington National Tax practice. O’Donnell will co-lead the Tax Controversy & Dispute Resolution group within the practice.
In an Op-Ed piece for the Wall Street Journal, Michael LaFaive (senior director of fiscal policy at the Mackinac Center for Public Policy) and Todd Nesbit (assistant professor of economics at Ball State University) note that California is the top state for illegal cigarettes. The state levies a nearly $3 per pack tax on cigarettes. The result, the pair writes, “has been a rise in crime, lost revenue and yet another lesson in unintended—yet entirely predictable—consequences.”
Speaking of cigarettes, a tax increase went into effect on August 1 on cigarettes and liquid nicotine sold in New Jersey. The new tax rate, which is expected to raise about $50 million, applies to all New Jersey unaffixed cigarette stamps, and to all stamped cigarettes, liquid nicotine, and container e-liquid in the possession of any distributor, wholesaler, or retailer licensed by the state.
In a 6-1 decision, the Missouri Supreme Court ruled that a city or a county can collect a marijuana sales tax of up to 3% — but not both at the same time.
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If you have tax and accounting 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 in the newsletter last week:
You can find the entire newsletter here.
Trivia Answer
The answer is (C) Ozzy and Sharon Osbourne.
In 2011, public records revealed that Ozzy and Sharon Osbourne owed over $1.7 million in unpaid federal taxes for the years 2008 and 2009, resulting in tax liens that were filed against their Los Angeles property. Shortly after the news was made public, Sharon took to X (then, Twitter) to take responsibility, claiming financial mismanagement:
Ozzy passed away on July 22, 2025.
Those other rock stars? They also had some tax woes, though the timing and reasons were a bit different.
After Whitney Houston died in 2012, an estate tax dispute arose with the IRS over the value of her entertainment royalties, residual income, and other assets.
In a two-part HBO documentary, “Billy Joel: And So It Goes,” Joel recounted how he learned that his former manager, Frank Weber, had allegedly taken advantage of him. As the bills piled up—he noted at the time that he “owed Uncle Sam $5 million, I didn’t have the money I thought I have, and it was devastating”—he filed a $90 million lawsuit against Weber. He was married to Christie Brinkley at the time. The experience inspired the 1993 song, “The Great Wall of China.”
Ike and Tina Turner were audited many times in the 1970s. When Tina fled her abusive husband to file for divorce in 1976, she was largely broke, with debts that included a bill from the IRS. She fought to retain her stage name during the divorce and resurrected her career—this time as a solo artist. At her death, her estate was estimated to be $250 million.
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