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On a call last week, I suggested that we might not know the election results by the weekend–it turns out that I was wrong (mostly). The Associated Press projected just after 5:30 a.m. Wednesday that Donald Trump would return to the White House after winning Tuesday’s presidential race. And while there are still votes left to count, it’s clear that the Republicans have won the Senate (52 to 44 as of this writing) and likely the House (212 to 202 as of this writing).
One common assumption is that a Republican victory will immediately lead to tax cuts. While tax cuts may be in the cards, how quickly they get pushed through is uncertain–thanks to reconciliation. (☆)
Reconciliation is a process that allows the Senate to push legislation through quickly while avoiding the filibuster–that’s important, as here, when one party holds a majority (more than 50 votes) but not a super majority (60 votes). There are some limitations, however, thanks to the Byrd rule, including that any bill under reconciliation cannot increase the deficit beyond the fiscal years covered—that’s usually limited to 10 years (and why tax cuts rarely last forever). Some headlines suggest that Republicans will push for massive, permanent tax cuts, only that’s not possible under reconciliation if it contributes to the deficit beyond the window.
Congress relies on the process pretty often–notably, it was used for President Trump’s big tax cuts in his first term, the Tax Cuts and Jobs Act of 2017 (TCJA). That year, Republicans also held the House and Senate, but the TCJA didn’t get pushed through until December 2017.
Some proposals and promises made during the campaign will likely be sidetracked, but others will get some serious consideration. Among those that will be priorities? Provisions set to expire under the TCJA will probably be extended, with a few tweaks. And Trump will levy substantial new tariffs, though it’s possible they may be more modest than he suggested during the campaign.
One name that you didn’t see on the November ballot was John Anthony Castro–but not for lack of trying. Castro made a run for the 2024 Republican nomination for President so that he could file lawsuits to have Donald Trump removed from the ballot. Those cases did not go anywhere. In a twist, however, in a case that did go somewhere, Castro was found guilty in a U. S. District Court in Texas of 33 counts, including aiding and assisting in the preparation and presentation of a false and fraudulent tax return. On October 30, 2024, Castro was sentenced to 188 months in prison, followed by one year of supervised release.
While federal tax questions dominated the headlines this election cycle, state and local taxes were on the ballot, too (☆)–though not always characterized as strictly tax matters (those involving the legalization of cannabis, for example, have a tax bent because they would also raise revenue for states). Some notable outcomes? In Illinois, voters said yes to a proposal to create a 3% surtax on income over $1 million–the measure would tie the revenue from the surtax to reducing property taxes. It was a non-binding advisory question, primarily to take the temperature of the public. And in South Dakota, voters said no to a proposal that would have eliminated the state sales tax on items sold for human consumption. Currently, the state collects a 4.2% tax on the sale or use of certain goods, including foods and drinks.
Overall, about one-third of states had some kind of tax or revenue question on the ballot–and that doesn’t include those in municipalities. No state had any tax initiatives that would significantly impact the upcoming filing season, which is likely welcome for taxpayers and tax pros alike. And on the federal level, with just over two months left until the next tax filing season begins, it’s unclear what role the elections will play–if any–when the IRS opens the doors for filing (there’s always a chance, though slight, that we could see some retroactive tax extenders in a lame duck session).
Taxpayers keep asking what steps they can take to be prepared for any changes in 2025. Here’s my best advice: stay informed. That can look different for different people, but I would suggest making friends with a knowledgeable tax professional and finding a good source of reliable information (clears throat and refreshes my Forbes screen).
Enjoy your weekend, and think rainy thoughts for Pennsylvania–we need it!
Kelly Phillips Erb (Senior Writer, Tax)
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Taxes From A To Z: X Is For X-Mark (Signature)
Your tax return is not considered a valid return unless you sign it. If you are filing a joint tax return, your spouse must also sign.
If you’re signing the old-fashioned way, don’t assume that your “signature” is invalid because you can’t hold a pen properly due to a disability or if you are illiterate. An X-mark is legal in most states as a valid signature. Of course, it helps to have that signature witnessed (and some states may require that you do) in case there are any questions. But there’s nothing in the law that says that your signature must look a certain way, no matter what my fifth-grade teacher had me believe (though my handwriting is much neater than it could have been, so props to Mrs. Carter).
In some instances, another person may be able to sign for you:
- If a child can’t sign their name, their parent, guardian or another legally responsible person can sign the child’s name in the space provided followed by the words “By (parent or guardian signature), parent or guardian for minor child.”
- If your spouse can’t sign because of injury or disease, you can sign your spouse’s name on the return followed by the words “By (your name), Husband (or Wife).” A dated statement must be attached to the return that includes the tax form number, the tax year, and the reason your spouse can’t sign. Finally, it should state that your spouse has agreed to your signing for them.
- If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian.
- If your spouse cannot sign the return because they are serving in a combat zone or are performing qualifying service outside of a combat zone, and you don’t have a power of attorney (more on that in a minute), you can sign for your spouse. Attach a signed statement to the return that explains that your spouse is serving in a combat zone.
- If you are a court-appointed conservator, guardian or other fiduciary for a mentally or physically incompetent individual who has to file a tax return, sign your name for the individual and file Form 56, Notice Concerning Fiduciary Relationship.
- Generally, if you can’t sign your return, a representative may be able to sign it on your behalf if you have a Power of Attorney attached to the return. Since most Powers of Attorney don’t include the authority to sign for the specific tax form, the IRS prefers to see an executed Form 2848, Power of Attorney and Declaration of Representative, assuming that there is no issue of capacity or other reason. For more, check out the Regs at §1.6012-1(a)(5).
If you e-file your return, you must still “sign” the return. You do this by using a personal identification number (PIN). You can choose your own PIN using any combination of five numbers except for five zeros. Remember that a joint return requires two signatures—if you are filing a joint tax return, you and your spouse will each need to create a PIN and enter these PINs as your electronic signatures.
You can also authorize your tax practitioner to enter or generate your PIN. You’ll need to sign an authorization form, Form 8879, IRS e-file Signature Authorization.
Questions
This week, a reader asks:
I owe taxes and the IRS is trying to collect. The only income I receive is my Social Security check. Can the IRS take it?
The short answer is yes. While Social Security benefits are generally protected from seizure, there are a few exceptions. One of those is federal taxes–up to 15% of your monthly Social Security benefit may be levied to pay overdue federal taxes.
Section 6331 of the tax code gives the Treasury the right to levy or seize property for collection of delinquent federal taxes until the amount due, together with all expenses, is fully paid. Some exceptions apply—those are generally found in section 6334. Unfortunately, Social Security payments (other than Social Security Supplemental Security Income benefits made to those with limited income and resources who are disabled, blind or age 65 or older) are not exempt.
The best way to avoid garnishment is to make arrangements to pay, typically through an installment plan—you can sign up on the IRS website.
If you’re experiencing economic hardship, contact the IRS at the telephone number on the levy notice immediately and explain your financial situation.
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Statistics, Charts, and Maps (Oh My!)
Tax filing season officially wrapped for most individual taxpayers on October 15, 2024 (remember that those affected by storms may have additional time–see Tax Filings and Deadlines further below). Despite a slow start (☆) to the season–largely thanks to uncertainty related to extending the expanded child tax credit (the bill ultimately died (☆))–the 2024 tax season was pretty comparable to the 2023 tax season. Here’s a look.
A Deeper Dive
The annual Open Enrollment Period for Medicare ends on December 7–just about a month from now. During the open enrollment period, Medicare beneficiaries with a traditional plan can compare and switch Medicare Part D stand-alone drug plans or join a Medicare Advantage plan. Those enrolled in Medicare Advantage can compare and switch Medicare Advantage plans or elect coverage under traditional Medicare with or without a stand-alone drug plan.
(I was flabbergasted to learn that, in 2024, the average Medicare beneficiary can choose among 43 Medicare Advantage plans and 21 Part D stand-alone prescription drug plans (PDPs), though it’s likely there will be fewer plans in 2025.)
Traditionally, fewer than 30% of drug plan enrollees pay attention to how their coverage will change in the new year. But the Inflation Reduction Act has changed options, including those related to Part D coverage.
Some notable changes and advice? A few plans are changing from a copayment to a coinsurance. In some cases, enrollees will pay more in premiums to pay more for their medications. Pay attention to the fine print.
Shop around. Preferred pharmacies are not always the lowest cost–and, in 2025, it appears that grocery store pharmacies will continue to offer competitive pricing.
Don’t wait to find out what you might pay in 2025. Your costs can be unpredictable and likely will change–sometimes, overnight. Do your homework in advance.
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
📅 November 18, 2024, 1 p.m. to 2:30 p.m. ET. IRS webinar to help large business taxpayers understand the Compliance Assurance Process (CAP, which helps large corporate taxpayers improve federal tax compliance through real-time issue resolution tools). Free. Registration required, space is limited to the first 1,000 registrants.
📅 December 12-14, 2024. ABA Section of Tax, 2024 Criminal Tax Fraud and Tax Controversy Conference, Las Vegas, NV. CLE available. Registration required. (Maybe I’ll see you there?)
📅 December 16-17, 2024. NYU 43rd Institute on State and Local Taxation, Westin New York at Times Square, New York, NY. CLE and CPE available. Registration required, virtual option available.
Trivia
What happened to the Bush tax cuts?
(A) Congress rescinded them the following year.
(B) They expired after 10 years.
(C) Congress voted to extend them.
(D) Congress voted to make them permanent.
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletin No. 2024-45 and Internal Revenue Bulletin No. 2024-46.
The ABA Section on Taxation has submitted comments to the IRS on Revenue Procedure 2022-19 with respect to issues relating to the validity or status of Subchapter S Corporation elections including those arising under section 1362(f).
Noteworthy
The IRS released financial information and highlighted selected accomplishments and challenges in its fiscal year 2024 Financial Report. Notably, during fiscal year 2024, the IRS collected more than $5.1 trillion in tax revenue, collected more than $98 billion in enforcement revenue and distributed $553 billion in federal tax refunds and other outlays.
Detroit residents will soon have the option to pay taxes and other city fees using cryptocurrency through a secure platform managed by PayPal, City officials announced. Detroit would become the largest U.S. city to accept cryptocurrency payments.
Holland & Knight welcomes Kimberly Smith, a transactional lawyer with a focus on New Markets Tax Credits and commercial lending and real estate finance, as a partner in the firm’s Tax Credit & Community Development Finance Practice in New York. Most recently, Smith was a partner at Butler Snow.
KPMG will lay off close to 4%, or about 330 people, of its audit workforce in the U.S., according to Reuters.
The Public Company Accounting Oversight Board (PCAOB) announced a settled disciplinary order sanctioning JTC Fair Song CPA Firm, a public accounting firm located in Shenzhen, the People’s Republic of China, for repeated violations of PCAOB rules and for failing to cooperate with an investigation into those violations.
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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 (C) Congress voted to extend them.*
Admittedly, this is a little tricky.
The so-called Bush tax cuts—the result of legislation passed in 2001 and 2003—were initially designed to expire on December 31, 2010, thanks to reconciliation. However, before the cuts were set to expire, they were extended by two years as part of a compromise package under then-President Barack Obama.
Pushing the tax cuts out, however, coincided with government spending cuts at a time when there were already concerns about existing economic instability. Allowing the tax cuts to expire, some feared, would cause the U.S. to tumble over the fiscal cliff, perhaps leading to a recession.
As a result, the bipartisan American Taxpayer Relief Act of 2012—sometimes called the “fiscal cliff” deal—made a majority (about 82%) of the Bush tax cuts permanent. So, if you voted (D), you’re 82% right.
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