I don’t hate dehydrated lasagna. That was the most recent lesson I’ve learned as I prepare to go to Alaska.
Earlier this year, I announced that I would be heading to Alaska to prepare tax returns as part of the Alaska Volunteer Income Tax Assistance (VITA) Project. The project partners with the Alaska Business Development Center (ABDC) and trains volunteers to prepare tax returns for residents in remote villages who rely on VITA to prepare free income tax returns.
These are small towns (something I’m used to, having grown up in rural North Carolina) which have few—if any—restaurants or food stores. As a result, we must bring our own food. But, there’s another twist: to get to the villages, we have to fly in seaplanes—that means that our food must be dehydrated to save space and weight.
I’ve been experimenting on what to bring based on recommendations from my fellow tax attorneys who have participated in the program before. My first taste test? Dehydrated vegetable lasagna and a blueberry peach crisp.
Despite the limited dining options, I’m pretty excited about the trip. Since my announcement, I’ve received several questions about the VITA program. I thought it might be a good idea to write up a primer (☆) with answers to some of the most common.
One of those questions? Whether the VITA program is on the current chopping block, since the Trump administration has prioritized slashing programs and costs across all federal agencies (other than the military, Veterans Affairs, and Homeland Security), including the IRS.
VITA programs could be obvious targets for elimination because they often benefit families who rely on tax credits such as the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC)—the EITC has long been a target of some Republicans in Congress because, at its core, it’s a spending program. The EITC is a refundable tax credit for eligible workers with relatively low incomes. If and when the EITC comes under fire, the VITA programs could get burned too. We’ll know more as budget talks progress.
For now, nothing has changed about the EITC, but some eligible taxpayers won’t receive the benefit of the credit because they don’t file a tax return. Direct File—the IRS’ new online tool for filing tax returns—may be the key to getting eligible filers to claim credits like the CTC and EITC. Direct File guides people through their tax returns in an intuitive interview style and then empowers them to file their returns for free — from computers, tablets, or smartphones. The IRS piloted the program last year in 12 states, and survey findings on how it was received were remarkable: 90% of respondents ranked their experience with Direct File as excellent or above average. This year, the program is available to millions of residents of 25 states, including the six largest: California, Texas, Florida, New York, Pennsylvania, and Illinois.
And despite public confusion over Direct File this week (☆), the program remains open. Elon Musk posted on X (formerly Twitter) that he had “deleted” 18F, the group responsible for creating the technology behind projects like the IRS’ Direct File program, in response to a post suggesting that “the far left government wide computer office” was recently taken over by Musk allies. That caused some users on social media to incorrectly report that the program itself had been axed.
Here is what you need to know: 18F is not a group inside the IRS but a team of designers, software engineers, strategists, and product managers within the General Services Administration (GSA). The team collaborates with other agencies to fix technical problems, build products, and improve public services through technology.
While 18F helped create Direct File, the program is administered by the IRS—it is still operational on the IRS website. Additionally, the White House noted in an email to the press that “the official IRS Direct File website remains online and is accepting tax returns.” Direct File has also been guaranteed to last the filing season by Treasury Secretary Scott Bessent, who told the Senate Finance Committee at his confirmation hearing, “I will commit that for this tax season … Direct File will be operative.”
Direct File isn’t the only thing sticking around the IRS for the filing season—employees are staying, too. (☆) It turns out that the IRS can’t operate without some of its employees, particularly during tax filing season.
Last week, the Office of Personnel Management (OPM) sent more than two million full-time federal workers an email offering them the option to resign from their positions but stay on the payroll through September 30, 2025 (the end of the fiscal year) as part of the Deferred Resignation Program (DRP). This week, the IRS confirmed that specific, critical filing season positions are now exempt from the DRP until May 15, 2025. It is unclear who fits that criteria, but the memo notes that it includes those in Taxpayer Services, Information Technology, and the Taxpayer Advocate Service. And in a nod to the idea that the exemption was an afterthought, those who had already accepted the offer and stopped working but fall within the exception were advised that they would be told when to return to work.
In a statement to Axios, Doreen Greenwald, the president of NTEU (the union that represents IRS workers), said: “Not only is this a clear case of bait-and-switch — they were originally told they would be paid to not work through Sept. 30 — but it proves that the terms of OPM’s so-called offer are unreliable and cannot be trusted.”
And in one last news twist this week, the government has appealed (☆) Smith v. U.S., the recent Texas case that put a temporary halt to the beneficial ownership interest (BOI) reporting requirements in the Corporate Transparency Act (CTA). Without Smith, the reporting requirements would have kicked in following the Supreme Court grant of the government’s application for a stay of another Texas ruling in the Fifth Circuit.
The government also asked for a stay of the injunction barring the reporting requirements while the appeal was pending. It relied on the same arguments that won the day at the Supreme Court—and the government noted as much, writing, “The same result is warranted here.”
The government also suggested that FinCEN intends to extend the compliance deadline by 30 days from the date any stay is granted–with additional concessions. A Treasury official noted that “in keeping with Treasury’s commitment to reducing regulatory burden on businesses,” the agency would, during the 30-day period, “assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.” It’s unclear exactly what that means, but does suggest that the government may be willing to narrow the sweeping requirements.
Of course, you know that there’s more than tax news happening right now–notably, the Super Bowl is this weekend. Even if you’re not a big football fan, it’s a great chance to relax, eat some snacks, and catch up on the Kendrick Lamar-Drake feud.
Enjoy your weekend and Go Birds!
Kelly Phillips Erb (Senior Writer, Tax)
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Questions
This week, a reader asked:
How do I deduct my student loan payments?
You can’t deduct your student loan payments–just the interest.
You can deduct up to $2,500 of the interest you paid on a qualifying student loan. The limit is per return, not per taxpayer (meaning that married taxpayers filing jointly don’t get double the cap, though married taxpayers filing separately can’t claim the deduction at all). And best of all, you don’t need to itemize to claim the deduction.
Your student loan must have been taken out to pay qualified education expenses. This includes tuition and fees, books, supplies, equipment, and other necessary costs like transportation. Room and board may be included, but some restrictions apply.
Your student loan does not have to come from a formal student loan provider. You can include other debt, such as credit cards, bank loans, or a line of credit if you use those loans only to pay qualified education expenses—do not commingle expenses. However, borrowed funds cannot be from a related person or from a loan from a qualified employer plan.
The student who borrowed the funds must be you, your spouse, or your dependent, and must have been enrolled at least half-time in a degree program when the loan was taken out.
If someone else makes a payment on your behalf, it can be treated for federal income tax reasons as though you made the payment. For example, if your mom and dad pay some of your loans, you can still claim the deduction. But be careful: If your parents claim you as a dependent, but you are legally obligated to pay the loan, then neither one of you can take the deduction.
The student loan interest deduction is phased out (reduced) if your modified adjusted gross income (MAGI) is between $80,000 and $95,000 (or between $165,000 and $195,000 if you file a joint return). For most taxpayers, MAGI is your adjusted gross income before subtracting any deduction for student loan interest.
There’s no double-dipping. You must reduce your qualified education expenses by the total amount paid for by employer-provided educational assistance, tax-free distribution of earnings from a Coverdell education savings account or a qualified tuition program (QTP), U.S. savings bond interest previously excluded from income, tax-free scholarships, fellowships and grants, and veteran’s benefits.
You should receive a tax form from your lender each year showing the interest you paid. Generally, if your lender received interest payments of $600 or more during the year, the lender must send you Form 1098-E by January 31.
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Statistics, Charts, And Maps (Oh My!)
A few weeks before the IRS began accepting tax returns on January 27, 2025, taxpayers and tax professionals—including me—expected a relatively normal filing season. But as things started to change—the former IRS Commissioner submitted his resignation, a hiring freeze kicked in, and IRS employees were offered the chance to leave early—the tax filing season began to look a little less predictable. That might explain why early numbers (☆) suggest that taxpayers aren’t rushing to file.
The IRS had received 15,318,000 individual income tax returns at this point in 2024, compared with 13,177,000 in 2025. That’s a drop of 14.0%.
The early 2024 numbers were already sluggish since taxpayers were waiting to see what Congress would do about potentially retroactive tax benefits (the change never happened). The drop is even more significant if you compare the 2025 filing season with the 2023 filing season–that’s a dip of 30%.
The IRS, however, isn’t concerned, noting on its website that “[l]arge percentage changes in filing season numbers are usually seen at the beginning of each tax season” and that “[h]istorically, these numbers even out in future weeks as more tax returns come in.” I’m not convinced that’s the entire story.
It’s been an unpredictable season so far. I’ll keep you posted.
A Deeper Dive
You can’t flip on the news or click through social media without hearing about tariffs. And while everyone thinks they know something about tariffs, how they work can be challenging to figure out—that’s because they are often a moving target.
A tariff is a tax on imports. A country typically imposes tariffs to make money or protect certain industries from competition—sometimes, both. The idea is that tariffs make it more expensive to use foreign goods. In theory, that higher cost should mean a decline in imports and an uptick in the use of domestic goods (assuming that the goods are manufactured or available at home).
The current Trump plan is to impose 25% tariffs on Canada and Mexico and a 10% tax on imports from China. (A reduced tariff of 10% would apply to Canadian energy imports.)
The tariffs have already been subject to delays. The 25% tariff on Canada was slated to begin on February 4, 2025, but on February 3, Canadian Prime Minister Trudeau agreed to a 30-day pause. The 25% tariff on Mexico was also scheduled to start on February 4, 2025, but it was delayed by one month after the two countries reached a deal.
The tariff on China went into effect earlier this week—but changes have already been made. Trump reversed his decision to eliminate the “de minimis” loophole that allowed packages from China valued at under $800 to be processed without customs duties or tariffs—a boon for retailers like Temu—though the order said Trump would get rid of the loophole again once the U.S. commerce secretary establishes a system to “fully and expediently process and collect tariff revenue.”
Why those countries? Trump appears to be using the import taxes for two distinct purposes: to raise revenue and to force countries to cooperate with his domestic policy agenda, including immigration curbs. His problem: If U.S. trading partners capitulate to Trump’s policy demands, and he rewards them by withdrawing the tariffs, much of that hoped-for revenue will dry up. The question then is which does Trump want more: tariff revenue or perceived international policy victories?
Tax Filings And Deadlines
📅 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 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.
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
Tariffs and trading were top of mind for many this week. According to the most recent data from the Office of the United States Trade Representative (USTR), the top five purchasers of U.S. goods exports were Canada, Mexico, China, Japan, and which country?
(A) United Kingdom
(B) France
(C) India
(D) South Korea
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletins 2025-06 and 2025-07.
The IRS updated the frequently asked questions for the energy efficient home improvement and residential clean energy property credits in Fact Sheet 2025-01.
The IRS issued guidance (Rev. Rul. 2025-4) on the income and employment tax treatment of contributions and benefits paid in certain situations under paid family and medical leave programs in the District of Columbia and states with similar programs.
The American Institute of CPAs (AICPA) submitted a letter to the IRS asking the agency to consider including a checkbox and space for a Federal Emergency Management Agency (FEMA) declaration number to allow taxpayers affected by federally declared disasters to self-identify as eligible.
Noteworthy
EisnerAmper has announced that Dean Peterson has been named the International Tax Services Leader. Peterson has over 20 years of experience providing comprehensive tax consulting and compliance solutions for privately and publicly held companies.
Proskauer welcomed Gwenaël Kropfinger as partner in the firm’s tax department in the Paris office, where he will strengthen support for private capital and asset management clients investing in Europe. Kropfinger has extensive experience in advising private equity funds and multinational groups on the tax structuring of M&A deals including LBOs and capital markets transactions.
Ropes & Gray announced that Amir Shmueli has joined the firm in New York as a partner in the global finance practice. Shmueli’s work has focused on specialized financing structures backed by novel asset classes such as franchise royalties, film and television rights, and tax liens.
The National Taxpayer Advocate reminded taxpayers that the tax year 2025 marks the 50th anniversary of the Earned Income Tax Credit (EITC). The Tax Reduction Act of 1975 introduced the EITC as a modest tax break to provide financial help to economically challenged working families. Over the years, the EITC has grown into the federal government’s largest refundable tax credit program for low- to moderate-income workers.
A new South Carolina proposal would lower taxes for boat owners. The bill would provide a property tax exemption of 50% of the fair market value of watercraft. South Carolina is a top destination for boating and fishing.
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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 United Kingdom.
The United States is the world’s second largest exporter of goods, behind only China. The top five purchasers of U.S. goods exports in 2022 were Canada, Mexico, China, Japan, and the United Kingdom.
Feedback
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