Alaska proved to be an adventure. While I wasn’t chased by a bear, I did experience a few bumpy flights, was grounded by a blizzard, skipped across a frozen tundra in a snowmobile, and maneuvered around a SWAT team at my hotel (yes, really).
I also did a lot of taxes. Our team of trained tax preparers (we also happened to be tax attorneys) traveled to four villages on the northern slope of Alaska, including the longest continually inhabited area and the northernmost community in North America.
Each morning, we would set up and wait for our first customers. In the larger villages, we could rely on radio to get the word out. In the smaller villages, we relied on Facebook posts and VHF radios. VHF radios are used in many rural Alaskan villages, and almost everyone has one in their home. The villages use them to share all kinds of announcements—from community emergencies to alerting the community that free tax preparation is available. It’s also used, as we learned firsthand, to announce school closures during a blizzard (followed by a flurry of children calling to confirm that school was *actually* closed).
As I noted on LinkedIn, I’m trying to wrap my head around my whirlwind week of working with underserved communities in rural Alaska. I learned a great deal about tax, legal, and practical challenges that taxpayers face–from tricky tax concepts to an unreliable postal system–and why it matters for all taxpayers, not just those in Alaska. (You can read more about it here. (☆) )
I was still in Alaska when I heard the news that U.S. businesses no longer have to comply (☆) with the beneficial ownership information (BOI) reporting filing requirements of the Corporate Transparency Act (CTA). The dramatic policy change was first announced on social media by the Treasury Department.
In a March 3 posting on its website, the Treasury Department stated that it would not enforce any penalties or fines associated with the BOI reporting rule under the existing regulatory deadlines and that it would not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners “after the forthcoming rule changes take effect either.”
According to the Treasury, the new rules it will be proposing will narrow the scope of required reporting to foreign companies only, though it’s not completely clear whether, in this context, it will apply to foreign companies registered in the U.S. or to U.S. companies owned by foreign persons and entities. Before the announcement, reporting requirements applied to businesses created in the U.S. and foreign companies registered to do business in any U.S. state or Indian tribe.
The surprise announcement has left businesses with unanswered questions, including what will happen to data that has already been collected. It’s also unclear what will happen to cases currently pending in court (cases are still winding through at least four federal appellate courts). It’s also likely that additional lawsuits will be filed to force the administration to comply with the law. Importantly, the law is still on the books and despite Treasury’s assertions, the executive branch cannot simply overturn laws passed by Congress. It can, however, choose not to aggressively enforce a law. This can lead to complications since a future administration could opt into enforcement.
Also making news? The House of Representatives passed a major budget plan. The bill, known as H.Con.Res.14, was passed on Feb. 25, 2025, with a 217 to 215 vote. Among other things, the bill calls for $450 billion in tax cuts every year from 2025 to 2034, adding up to $4.5 trillion over 10 years. The result is the projected U.S. national debt will rise from $35.46 trillion on October 1, 2024 to $55.57 trillion by September 30, 2034, a total increase of about $20 trillion and the package also includes a $4 trillion increase in the national debt limit.
The bill also aims to cut spending by $2 trillion. If Congress cannot find $2 trillion in spending cuts, tax cuts will be reduced dollar-for-dollar to make up for the shortfall.
The central focus of tax policy changes is an extension of the 2017 Tax Cuts and Jobs Act. If Congress doesn’t act, some TCJA provisions are set to expire at the end of 2025. Here’s a look at the top five tax policy changes that may impact you and your small business if the TCJA provisions expire.
A recently leaked memorandum revealed potential tax reform under discussion in the House that could reshape the tax obligations of U.S. persons living abroad and multinational business owners. Aside from the elimination of the U.S. estate tax or “death tax,” the memo suggests a reduction in U.S. taxes for those working overseas on their foreign-earned income and a lowering of the corporate income tax rate. These proposals could have far-reaching implications for individuals and businesses navigating the complexities of the U.S. tax system.
House Republicans hope to have a final bill on President Trump’s desk by May of 2025.
With all of the uncertainty surrounding the budget and the IRS, taxpayers aren’t rushing to file their taxes (☆). IRS data from the fourth week of the tax filing season—the week ending February 21, 2025—continues to suggest that taxpayers are not excited about filing this tax season. Tax filing statistics are down in almost every area except for tax refunds.
The IRS has apparently given up on excuses. For three weeks it offered an explanation for the lower numbers, stating last week that the agency “expects the tax return filing numbers will level out in future weeks as the April filing deadline approaches.” But the IRS didn’t offer any such platitudes this go-round—just the numbers.
The IRS received 42,707,000 individual income tax returns in 2025, compared to 44,584,000 in 2024. That’s a drop of slightly less than two million returns, representing about 4.2% fewer returns and part of a bigger pattern—there has not been a single week in the filing season to date with an uptick.
There is a bright spot: After a recent dip, average tax refunds have bounced back. The IRS has issued 29,615,000 tax refunds so far in 2025 compared to 28,945,000 in 2024, an increase of 2.3%.
Speaking of bright spots, I appreciated how many of you checked in and offered words of encouragement while I was in Alaska. Some days, like when our flight was grounded, those were the things that kept me going. I’m also honored that so many of you messaged me to say that it inspired you to do some volunteer work of your own–that’s honestly the very best thing that could come out of my trip.
No matter where you are in the world, I encourage you to do two things: (1) Step out of your comfort zone and (2) Make a difference. If you’re really lucky, you’ll have the opportunity to do both at the same time.
Quyanaq. (Thank you.)
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Questions
This week, a reader asked:
With the markets going up and down so much, I’m seeing a lot of “hot tips” to invest in penny stocks. Is this a good idea for my Roth IRA?
Penny stocks—also called microcap stocks—are exactly what they sound like: cheap stocks. Despite the “penny” characterization, they are typically stocks trading below $5 per share.
The upside of penny stocks is that they won’t cost you a lot of money. If they go up, that’s a win. If they go down, if you didn’t invest too heavily, you’re not out much money.
Traditionally, however, penny stocks are pretty risky. They’re often hard to research (it’s easier to look into large, publicly traded companies on major exchanges). They may not be easily transferrable for the same reason—fewer shares changing hands in the market means less opportunity to offload them when you’re ready.
That volatility makes penny stocks a bad idea for a Roth IRA.
A Roth IRA is a tax-favored individual retirement account (IRA). With a Roth IRA, you pay the tax upfront on your retirement contributions in exchange for tax-free growth and withdrawals (some restrictions apply). There are no required minimum distributions (RMDs), and you can put money in your account for as many years as you want, subject to income limitations.
Tax-free growth is a real bonus, but it does have a downside: You can’t deduct losses inside a Roth IRA to offset regular capital gains or other income outside of the Roth IRA. That means that ideal investments are those that favor long-term growth and importantly, are not likely to decrease in value. Investments that are high-risk, like penny stocks, are not ideal.
(Thinking of opening a retirement plan for your small business? Click here for a quick primer on the options available to you.)
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Statistics, Charts, And Maps (Oh My!)
The IRS is on its third Commissioner in just over a month (☆). Secretary of the Treasury Scott Bessent announced that IRS Chief Operating Officer Melanie Krause will become acting IRS Commissioner following the retirement announcement of Doug O’Donnell.
O’Donnell had served as Acting Commissioner following former IRS Commissioner Danny Werfel’s departure on January 20, 2025 (one week before the tax season officially kicked off). His departure on February 28 marks a remarkable 39-day span of rotating Commissioners.
Until now, Robert E. Hannegan had served the shortest term (3 months and 14 days in 1943). His predecessor, Guy T. Helvering, served the longest term (10 years and 4 months).
Commissioners are nominated by the President and confirmed by the Senate—the IRS Commissioner and the IRS Chief Counsel are the only political appointees in the agency. IRS Commissioners typically serve a five-year term from the date of their nomination (set by the IRS Restructuring and Reform Act of 1998), which means that Werfel was expected to leave in 2027. However, breaking with tradition, Trump announced that he would replace Werfel with his own candidate for the job, Billy Long (☆).
Following Werfel’s departure in late January, Deputy Commissioner Douglas O’Donnell (☆) stepped in as Acting Commissioner (O’Donnell has served as Deputy Commissioner since early 2024). O’Donnell served as Acting Commissioner for just under a month. Last week, he announced plans to retire. IRS Chief Operating Officer Melanie Krause will now serve as the Acting Commissioner.
Krause has served as the IRS chief operating officer since last year. A relative newcomer to the agency, Krause joined the IRS in October 2021 as the Chief Data & Analytics Officer. In this role, in addition to leading the Research, Applied Analytics, and Statistics (RAAS) team, Krause coordinated research activities, including AI and other advanced analytics. Krause also served as Acting Deputy Commissioner for Services and Enforcement from November 2022 to March 2023.
A Deeper Dive
I always tell taxpayers to keep excellent records. Sometimes, though, keeping track of receipts is the easy part—figuring out what is actually deductible can be much more difficult. That’s especially true when it comes to the entertainment and meals tax deduction which has changed a few times over the years. Here’s a quick cheat sheet for deductibility:
- Food for company holiday parties (100%)
- Food and beverages given to the public (100%)
- Dinner for employees working late at the office (100%)
- Business meals with clients (50%)
- Food items for the office (50%)
- Meals while traveling for work (50%)
- Meals at a conference (50%)
Most business owners focus on business meals, which are only 50% deductible. (This may still be confusing for some taxpayers because special Covid relief-related rules in 2021 and 2022 allowed for 100% deductibility, but those rules no longer apply.)
Under current rules, if you take your favorite client to dinner—to discuss business—you can only deduct half the expense of the meal. You’ll want to keep a record of your deductible meal, including the date, total cost (including tax and tip), name of the restaurant, and details of the business meal (who attended and how it related to yor business).An easy way to track? Jot those details on the back of the receipt. You don’t have to write a tome, just a few notes reminding you who was present and what you talked about (“Paul Rudd—discussed tax planning opportunities related to role in the next Ant-Man movie”).
If in doubt about whether a meal or entertainment expense might be deductible, ask your tax professional.
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 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.
Tax Conferences And Events
📅 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
Alaska is one of five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) that does not have a state sales tax. Which of the states with a state sales tax was the first to adopt one?
(A) Kentucky
(B) Mississippi
(C) North Carolina
(D) South Carolina
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletins 2025-9, 2025-10, and 2025-11.
The IRS has announced interest rates will remain the same for the calendar quarter beginning April 1, 2025. For individuals, the rate for overpayments (yes, the IRS has to pay you interest sometimes) and underpayments will be 7% per year, compounded daily. The rate is 6% for corporate overpayments (4.5% for the portion of a corporate overpayment exceeding $10,000) and 7% for corporate underpayments (9% for large corporate underpayments).
The Assurance Services Executive Committee (ASEC) of the American Institute of CPAs (AICPA) has released the 2025 Criteria for Stablecoin Reporting: Specific to Asset-Backed Fiat-Pegged Tokens. These criteria provide a framework to stablecoin issuers for presenting and disclosing information related to the tokens they issue, and to report on the availability of cash or other assets that back them. (Stablecoins are a type of digital asset whose value is tied to the assets backing them, such as U.S. currency.)
The American Institute of CPAs (AICPA) issued a statement on the suspension of enforcement of the beneficial ownership information (BOI) reporting requirements. Noting comments made by Treasury Secretary Scott Bessent claiming this move as a “victory for common sense,” the AICPA awaits the release of additional details later this month but believes that Treasury is headed in the right direction with this decision.
Noteworthy
KPMG LLP has elected Timothy (Tim) J. Walsh to serve as its next Chair and Chief Executive Officer, and Atif Zaim as Deputy Chair, for a five-year term beginning July 1, 2025. Walsh has spent more than 33 years at KPMG, and is currently the national managing partner, U.S. Audit operations. Zaim is the current U.S. Consulting Leader and former national managing principal of the Advisory practice.
Cherokee Nation citizen James “Jim” Muskrat, a 98-year-old CPA and Army veteran, will prepare taxes for free again this year in Joplin, Missouri. Muskrat has volunteered for the VITA (Volunteer Income Tax Assistance) program since 2013.
Arkansas has proposed legislation to repeal the state’s grocery tax. The Grocery Tax Relief Act would not impact county and municipal grocery taxes. The loss in revenue from the elimination of the tax would impact the Arkansas Game and Fish Commission, Arkansas State Parks, Arkansas Heritage Commission, and Keep Arkansas Beautiful Commission.
The Swiss government opened the consultation process on a new Foreign Account Tax Compliance Act (FATCA) agreement to provide for the automatic and reciprocal exchange of information between Swiss and U.S. tax authorities. Under current law, Swiss financial institutions disclose account details directly to U.S. tax authorities with the consent of the U.S. clients (when U.S. clients do not consent, the U.S. requests the information through administrative channels). However, no account data is transmitted from the U.S. to Switzerland. That will change–in the future, Switzerland will also receive account data from the U.S.
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In Case You Missed It
Here’s what readers clicked through most often in our last newsletter:
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Trivia Answer
The answer is (B) Mississippi.
Mississippi adopted a state sales tax in 1930 in response to a budget crunch created by the Great Depression. By the end of the 1930s, 22 states had implemented a state sales tax, including North Carolina (1933). South Carolina added a state sales tax in 1951, while Kentucky didn’t sign on until 1960.
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