Tax News & Views Miles to Go On The Way to a Tax Bill Roundup
First pieces of House reconciliation bill. SALT cap, tips, overtime so far not addressed. Tariff Truce. Pope and taxes. Odometers.
Key Takeaways
Budget bill draft looks to "put cash in taxpayers pockets" ahead of midterms.
$5 trillion price tag exceeds House budget resolution target.
22% QBI deduction, $15 million estate exemption are included.
SALT deduction tip, Trump campaign promises not yet in bill.
China, U.S. agree to 90-day tariff cease fire.
Who does the Pope's 1040?
Former IRS employee breaks bad.
National Odometer Day.
GOP Tax Bill Seeks to Put Cash in Taxpayers’ Pockets in Early 2026 - Richard Rubin, Wall Street Journal:
The first public version of Republicans’ long-awaited tax bill aims to put more money in Americans’ pockets quickly in early 2026, extending President Trump’s expiring tax cuts and adding some new twists that would boost many tax refunds next year and increase take-home pay.
The bill released late Friday would increase the standard deduction by $1,000 for individuals and $2,000 for married couples starting in tax year 2025, above and beyond the Trump tax cuts’ expansion of that basic level where income taxes don’t apply. The standard deduction is currently $15,000 for individuals and $30,000 for married couples.
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The legislation is incomplete and will likely be changed substantially before the committee vote. It is silent on some of the issues that are dividing Republicans, including the cap on the state and local tax deduction and the fate of clean-energy tax credits that Democrats created in 2022. It doesn’t include the tax-rate increase for the highest-earning Americans that Trump has been floating in recent days.
House GOP Tax Plan Faces $5 Trillion Price Tag, Budget Crunch - Renu Zaretsky, Daily Deduction:
A preliminary estimate from the Joint Committee on Taxation (JCT) finds the House GOP’s first draft of a major 2025 revenue bill would cost nearly $5 trillion over 10 years. That’s already a half trillion more than the House budget resolution permitted under a best-case scenario pushed by deficit hawks to have at least $2 trillion in corresponding spending cuts. The partial plan would extend expiring provisions from the 2017 Tax Cuts and Jobs Act and make some of those measures more generous. The plan would temporarily boost the standard deduction and child tax credit. But the legislation does not yet include President Trump’s signature proposals to eliminate taxes on tips and overtime, TCJA-related business tax deductions, and the state and local tax deduction cap (a key issue for swing-district GOP lawmakers in high-tax states).
GOP Unveils Plan To Cement 2017 Tax Cuts, Expand Biz Relief - Asha Glover and Stephen Cooper, Law360 Tax Authority ($):
The 28-page tax bill, released late Friday by House Ways and Means Committee Chairman Jason Smith, R-Mo., would expand most of the popular tax incentives in the 2017 Tax Cuts and Jobs Act, the signature legislation of President Donald Trump's first term...
Smith's bill would make TCJA individual tax rates permanent by removing the sunset date of Dec. 31, 2025, and would permanently extend the doubled standard deduction with a temporary increase through 2028 of $1,500 for married taxpayers and $1,000 for individuals.
Personal exemptions and miscellaneous itemized deductions would be repealed permanently, and the child tax credit would be increased to $2,500 per child through 2028 before dropping to a permanent credit of $2,000.
House Tax Bill Would Extend Brackets, Boost Child Tax Credit - Doug Sword, Tax Notes ($):
Provisions of the legislation released by House taxwriters so far would:
- Boost the income thresholds for most of the tax brackets with an added inflation adjustment.
- Extend the increased standard deduction with a temporary enhancement to $2,000 for joint filers.
- Extend the child tax credit, and increase it to $2,500 per child through 2028, and $2,000 afterward.
- Terminate the deduction for personal exemptions, setting the deduction at $0.
- Make the 20 percent passthrough deduction permanent with an increase to 22 percent for three percentages used to calculate qualified business income.
- Make permanent an increase in the estate and gift tax exemption to an inflation-adjusted $15 million.
- Repeal the expiration of the TCJA’s increase in the alternative minimum tax exemption amounts and phase-out thresholds.
- Make permanent the $750,000 limitation on acquisition indebtedness for home mortgage interest deductibility.
- Make permanent the repeal of miscellaneous itemized deductions.
What you need to know about reconciliation - Jake Sherman, Laura Weiss, Samantha Handler and John Bresnahan, Punchbowl News:
- On Friday night, Ways and Means released their initial mark of the tax bill. At some point today – most likely in the afternoon – we’ll get a more fleshed out version of the tax title.
- We’ve reported all the important developments on the text coming today. Ways and Means is expected to create a new tax regime, hiking levies on university endowments. And despite some pleas from Trump, House Republicans are unlikely to add another tax bracket for the ultra-rich.
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Some incentives — including electric vehicle tax credits the GOP has railed against — are likely to be repealed as of Dec. 31. Most other credits would be phased out on staggered timelines but could face new limits in the interim. This would include eliminating transferability and adding new sourcing restrictions that apply to countries like China.
Trump’s tax cuts on trial - Lisa Kashinsky and Ben Leonard, Politico:
Right now, the bill appears to have a math problem. The draft that Ways and Means released Friday has an estimated $5 trillion cost, above the $4.5 trillion that Republicans permitted in their underlying budget framework. It’s raising questions about whether the full bill will include some tax hikes. The Friday draft was also silent on a number of Trump 2.0 tax proposals.
SALT was another glaring omission, and we’re expecting further movement on that today. SALT Republicans who’ve been clashing with leadership — and each other — over the parameters for lifting the cap on state and local deductions are meeting with Ways and Means Republicans and Speaker Mike Johnson at 10 a.m. to try to hash out a deal, two people familiar with the plans told Benjamin.
Tariff Partial Truce
US, China pausing most steep tariff hikes for 90 days - Sarah Fortinsky, The Hill:
Under the agreement, the U.S. would lower its tariff rate on Chinese imports from 145 percent to 30 percent, while China agreed to lowers its tariff rate on U.S. goods from 125 percent to 10 percent
China also agreed to suspend or remove non-tariff countermeasures taken against the U.S. since early last month, according to a White House fact sheet on the deal.
Small businesses dread tariff fallout - Matthew Choi, Dan Merica and Jacob Bogage, Washington Post:
Her Seattle-based ice cream company, Molly Moon’s Homemade Ice Cream, sources about 90 percent of its ingredients from the Pacific Northwest. It’s the kind of made-in-America business that President Donald Trump says he wants to encourage.
But there’s no getting around importing some tropical ingredients that customers expect from an ice cream shop. Moon says she can’t source chocolate, vanilla and cane sugar domestically in quantities or at the price she needs. Utensils like disposable spoons need to be shipped from China. Coconut, needed for her vegan flavors, has to be shipped from Thailand.
Moon projects existing tariffs on those ingredients will wipe out 50 percent of her company’s profits this year. If Trump’s “Liberation Day” tariffs on countries around the world go into effect as scheduled next month, Moon predicts, the company won’t be profitable at all.
IRS Update
Revenue agents who conduct audits lead IRS job losses - Martha Waggoner, The Tax Adviser. "The IRS lost 11% of its staff through voluntary separations and terminations in the first three months of 2025, and the largest percentage of those who left were revenue agents who conduct audits, a government watchdog said in a report."
Tax Bill Is Big Lift for Shorthanded IRS, Ex-Official Says - Benjamin Valdez, Tax Notes ($):
Former acting IRS Commissioner Douglas O’Donnell cautioned that ongoing workforce reductions at the agency will make it difficult to implement a complicated tax bill and handle post-filing-season work.
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“If there’s any significant tax law change — and I’m not talking just about extenders, but we’re talking about certain types of income not being taxable — that is going to introduce a tremendous amount of challenge that people need to be thinking about in terms of systems that we need to update,” O’Donnell said.
IRS Officials' Stock Holdings and Corporate Tax Outcomes - Michael Mayberry, Eashwar Nagaraj, and Scott Rane, SSRN (via Tyler Cowen, Marginal Revolution; my emphasis):
We investigate the information content of personal stock trades by IRS officials. We collect transaction-level data on over five thousand IRS officials' personal investments and document substantial trading activity in individual stocks by officials across IRS departments. We find that IRS officials' trades, predominantly their purchases, generate positive abnormal returns on average, consistent with officials' information being not yet fully impounded into stock price. Next, we examine whether stock trades by these officials are associated with the firm's future tax enforcement outcomes. For a given firm, we find IRS officials' purchases are associated with subsequent decreases in tax reserves and specifically lapses in the statute of limitations. We also find that IRS officials' sales are associated with subsequent unfavorable tax settlements. These findings suggest that IRS officials possess, and trade on, material tax-related information and that these trades are associated with future tax enforcement outcomes for firms.
Taxes and an American Pope
Even as pope, Leo XIV might have to deal with U.S. tax returns - Victoria Craw and Julie Zauzmer Weil, Washington Post:
Pope Leo XIV, the newly elected pontiff, must answer to at least one more higher power: the IRS.
The United States generally requires all citizens to file an annual tax return, even those who live out of the country. But assuming he doesn’t renounce his U.S. citizenship, Leo — born in the Chicago area and known until this week as Robert Prevost — has special tax considerations, both as a clergyman and now as the head of a foreign government.
Leo’s situation differs from that of other popes in recent memory, because many countries do not assess taxes on citizens living abroad. “Recent popes from Poland, Germany and Argentina were not taxed by their home countries,” said Jared Walczak, a vice president of the Tax Foundation,a nonpartisan think tank in Washington, who called the first American pope’s accounting situation “uncharted.”
Related: Eide Bailey Expatriate Tax Services.
Blogs and Bits
Tariff and other tax scams on IRS Small Business Week radar - Kay Bell, Don't Mess With Taxes. "Lifehacker reports one tariff scam involves fake government emails, with crooks leveraging people’s unfamiliarity with tariffs by posing as official agencies seeking tariff payments directly from consumers. The online advice site also points out other tariffs schemes that send fake messages about mail and packages; fake factory shopping deals; false tariff relief payments; and investment scams, some using cryptocurrency, as a way to make money off the trade confusion."
The Danger Of Relying On AI For U.S. Tax Advice - Virginia La Torre Jeker, Forbes. "The cracks in AI’s armor start to show when tackling U.S. international tax matters. This is not only because international tax is an area rife with complexity but also because it is highly dynamic."
Even with Exemptions, Tariffs Will Hurt American Energy Production - Alex Muresianu, Tax Policy Blog. "Tariffs will also hit more complex equipment and machinery. That will punish American energy across the ecosystem. For oil and gas extraction, tariffs hit heavy equipment used on American oil fields. The harm is magnified further down the value chain: tariffs will hit major categories of equipment used by oil refiners and natural gas processors, such as air and gas compressors and other pumping equipment."
GOP Efforts To Downsize Trump’s Tax Ideas Will Make Filing More Complicated - Howard Gleckman, TaxVox. "When policymakers’ ambition to pass big tax cuts collides with the need to limit the cost, the inevitable loser is simplicity. People may get a tax cut, but they’ll battle more paperwork to get it."
Breaking bad, IRS alumnus edition
Grandview tax preparer sentenced for filing false tax returns - IRS (Defendant name omitted, emphasis added):
A Grandview, Mo., woman was sentenced in federal court today for filing false tax returns for others.
Defendant was sentenced by U.S. District Judge Greg Kays to 33 months in federal prison without parole. The court also ordered Defendant to pay restitution of $1,113,215.90 to the Internal Revenue Service.
On Nov. 13, 2024, Defendant plead guilty to one count of aiding and abetting the preparation and filing of false tax returns.
Defendant was an ex-IRS employee and Missouri-based return preparer who prepared returns for clients in the Kansas City metropolitan area. Defendant obtained tax return information from clients either by meeting them in person or through the mail. Defendant then prepared returns with false information, namely, false residential energy credits, charitable contributions, medical expenses, dependents, etc. Finally, she retained a portion of the claimed refund before providing the rest of the refund to her clients. Defendant also appears to have submitted doctored and fake substantiation documentation when her clients were audited by the IRS.
When a 1040 preparer fee is based on your refund, or when the preparer has a portion of the refund paid to her own account, questions are in order.
What day is it?
It's National Odometer Day! This actually should be celebrated on January 1, when you should check your odometer as part of documenting your business miles.
Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Items are for information only and are not tax advice.
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About the Author
Joe B. Kristan CPA
Partner, Eide Bailly LLP
After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Certified Public Accountants.
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