New Draft Form for New Deductions
The IRS released draft Form 1099-DAD to cover new deductions introduced under the One Big Beautiful Bill Act (OBBBA), including qualified tips, overtime, certain car loan interest, and deductions for seniors. This draft form signals how taxpayers will claim these benefits beginning with the 2025 tax year.
Why It Matters:
Tax professionals need to understand these new categories to ensure proper client eligibility and reporting. Misapplication could trigger IRS scrutiny or missed opportunities for deductions.
Actionable Steps:
- Review eligibility criteria for each new deduction category (tips, overtime, car loans, seniors).
- Educate clients about documentation they’ll need to substantiate claims on their 2025 tax returns.
- Prepare firm workflows to capture these items in tax prep software once finalized.
IRS Finalizes Rules on Roth Catch-Up Contributions
The IRS finalized regulations requiring certain high-income earners (over $145,000) to make catch-up contributions on a Roth basis, as directed by SECURE 2.0. This settles lingering questions about compliance timelines and employer responsibilities.
Why It Matters:
Payroll, benefits administration, and retirement plan compliance now carry added complexity. CPAs and advisors must help both employers and high-earning employees navigate these mandatory Roth contributions.
Actionable Steps:
- Verify which clients and employers fall under the new Roth catch-up rules.
- Update payroll and plan systems to ensure Roth withholding is captured correctly.
- Educate affected employees on tax impacts of Roth versus pre-tax contributions.
IRS to Phase Out Paper Checks
Effective September 30, 2025, the IRS and other federal agencies will no longer issue or accept paper checks for most payments, including tax refunds. All transactions must shift to electronic payment systems.
Why It Matters:
Clients who rely on paper refunds or payments must transition quickly. Tax professionals play a critical role in ensuring clients aren’t caught off guard—especially seniors and unbanked taxpayers.
Actionable Steps:
- Identify clients still using paper checks and guide them through electronic setup (Direct Deposit, EFTPS, IRS Direct Pay).
- Advise businesses to update A/P systems for electronic compliance.
- Provide reminders during year-end planning sessions to avoid payment delays.
IRS Issues Revenue Procedure 2025-28 on OBBBA Elections & Accounting Changes
Revenue Procedure 2025-28 provides updated rules for making elections, changing accounting methods, and filing amended returns under the One Big Beautiful Bill Act (OBBBA). It clarifies which changes qualify for automatic consent and which require IRS approval.
Why It Matters:
Firms must reassess their clients’ accounting methods to leverage new automatic change opportunities or ensure timely elections. Incorrect filings could lock clients into less favorable methods.
Actionable Steps:
- Review client portfolios for potential method changes under OBBBA.
- Update compliance calendars to align with election deadlines in Rev. Proc. 2025-28.
- Train staff on distinguishing automatic vs. non-automatic changes.
IRS Security Summit Wraps Up 2025 Campaign
The IRS wrapped up its “Protect Your Clients; Protect Yourself” campaign, warning of increasing scams targeting both professionals and taxpayers. Key concerns include identity theft, misuse of tax credits, and fraudulent refund schemes promoted on social media.
Why It Matters:
Fraudulent claims threaten both clients and practitioners. Data breaches can cause reputational damage and IRS penalties. Tax professionals remain on the front lines of fraud prevention.
Actionable Steps:
- Reinforce internal cybersecurity protocols and require staff phishing training.
- Alert clients to avoid social-media-promoted tax schemes.
- Adopt multi-factor authentication (MFA) for all client portals and firm systems.