New Rules Could Increase Taxable Income for Gamblers

Recent changes to federal tax law may significantly impact how gambling losses are reported on individual income tax returns. For tax years beginning after December 31, 2025, a new limitation on gambling loss deductions could result in taxpayers owing tax on income they never actually received.

The change affects anyone who participates in sports betting, casino gaming, poker tournaments, horse racing, or other wagering activities.  These taxpayers should understand how these new rules may affect their tax liability.

How Gambling Income Was Previously Reported

Under prior tax law, gambling losses were deductible up to the amount of gambling winnings during the same tax year. In other words, taxpayers could not claim a net gambling loss, but they could generally offset all wagering gains with an equal amount of documented losses. Winnings were reported as income, while losses were claimed as an itemized deduction.

For example, if a taxpayer had $20,000 in gambling winnings and $20,000 in documented gambling losses, the losses could fully offset the winnings if the taxpayer itemized, resulting in no taxable gambling income.

What Changes in 2026?

For tax years beginning after December 31, 2025, a taxpayer’s deduction for wagering losses is limited to 90% of total losses incurred. The deduction remains subject to the existing rule that losses cannot exceed gambling winnings.

This seemingly small adjustment may create a significant tax burden for some taxpayers because a portion of their losses will no longer be deductible.

Consider the following example:

  • Gambling winnings: $50,000
  • Gambling losses: $45,000
  • Net economic gain: $5,000

Under the new rules, only 90% of the losses, or $40,500, would be deductible. This results in taxable gambling income of $9,500 rather than the taxpayer’s actual economic gain of $5,000.

In this scenario, the taxpayer pays tax on income that exceeds their true profit from gambling activity. The disallowed portion of the losses effectively increases taxable income and may substantially increase the overall tax rate on gambling profits.

The “Phantom Income” Problem

One of the most concerning aspects of the new law is the potential creation of what tax professionals often refer to as “phantom income.”

Because only 90% of gambling losses are deductible, some taxpayers could owe income tax even when their gambling activity breaks even economically. A taxpayer whose losses equal their winnings may still report taxable gambling income solely because a portion of those losses is no longer deductible.

This result has generated concern among taxpayers and tax professionals, particularly for individuals who engage in high-volume gambling activity throughout the year.

Recordkeeping Will Be More Important Than Ever

Accurate documentation has always been critical for taxpayers claiming gambling losses, but these new rules make proper recordkeeping even more important. Taxpayers should maintain contemporaneous records that clearly document both winnings and losses.

The IRS may challenge records that appear to have been recreated after the fact, especially when diaries contain numerous rounded amounts. Taxpayers should avoid estimates and instead record gambling activity as it occurs. Mobile applications and digital tracking tools may help maintain accurate records throughout the year.

Additional Planning Opportunities

Taxpayers who regularly participate in wagering activities may want to review their estimated tax payments. The new limitation could increase taxable income beyond what is expected based on actual gambling profits, potentially leading to underpayment penalties if quarterly estimates are not adjusted.

Another planning technique that may be beneficial is the “session method” of reporting gambling activity. This approach generally allows gamblers to net wins and losses within a single gaming session rather than reporting every wager independently. Proper application of the session method may help reduce the amount treated as gross gambling winnings before the 90% limitation is applied.

Final Thoughts

The new gambling loss limitation represents a significant shift in the taxation of wagering activity. While the change may appear minor on the surface, it has the potential to increase taxable income and create unexpected tax liabilities for many gamblers, including those who have little or no actual economic profit.

If you regularly participate in sports betting, casino gaming, poker, or other gambling activities, now is a good time to review your recordkeeping practices and discuss planning opportunities with your tax advisor. Understanding these changes before filing season can help you avoid surprises and ensure you remain compliant with the new reporting requirements.

 

If you have questions about gambling losses, estimated tax payments, or the potential impact of these changes on your return, Scheffel Boyle is here to help. Our experienced tax advisors can provide guidance tailored to your specific situation and help you stay ahead of changing tax laws.

IRS Notice CP53E and the Rise of Refund-Related Scams

As the tax filing season winds down, fraud schemes often shift along with it. One recent example involves notices that appear to come from the IRS, including Notice CP53E. Because this notice references refund delivery and banking details, it can create unnecessary concern and prompt taxpayers to act too quickly. A measured response is the best safeguard. The IRS Taxpayer Advocate Service has also cautioned taxpayers to be careful with these notices and has explained that if a CP53E is received by mistake, such as when the return originally showed a balance due, it may be disregarded after confirming the account details. Before sharing information or making account changes, it is important to confirm whether the notice is legitimate and whether it applies to your return.

Understanding Notice CP53E

Notice CP53E is issued when the IRS is unable to complete a direct deposit because the banking information associated with a refund is missing, inaccurate, or rejected. This notice may feel especially new to taxpayers this year because a 2025 executive order directed the federal government to transition away from paper checks, including tax refunds, and toward electronic payments to the extent permitted by law. Although the notice itself may be valid, it is still unfamiliar to many taxpayers. That unfamiliarity, combined with the mention of refund processing, has made it a useful tool for scammers seeking to imitate official IRS correspondence.

  • It concerns a refund that would otherwise be sent by direct deposit.
  • It indicates the IRS could not process the deposit using the account information on file.

If the Notice Is Legitimate

When CP53E is legitimate, the IRS generally allows 30 days for the taxpayer to sign in to a secure IRS Online Account and correct the banking information associated with the refund. If no update is made during that period, the refund is typically reissued by paper check, which may take additional time to arrive. It is also important to note that IRS representatives cannot make this change by phone.

  • Banking changes cannot be completed by phone, text, or email.
  • Any update must be made through the taxpayer’s secure IRS Online Account.

Warning Signs of a Fraudulent Notice

Scammers often rely on urgency, unfamiliar terminology, and requests involving financial data. If a CP53E notice appears questionable, certain features may suggest it is not authentic.

  • A notice that asks you to verify, activate, or release a refund by scanning a code or clicking a link, especially if it prompts you to enter sensitive information. A QR code may appear on a legitimate notice, but it is still generally safer to go directly to IRS.gov by typing the address into your browser.
  • A request for banking information by phone, text message, or email. CP53E-related updates must be completed through the online account.
  • Language that is unusually urgent, threatening, or designed to pressure immediate action. A legitimate notice generally provides a response window of 30 days.

Practical Steps to Protect Yourself

If you receive an unexpected CP53E notice, pause before responding. The IRS does not request personal or banking information through unsolicited emails, text messages, phone calls, links, or QR codes. The following steps can help you evaluate the notice and reduce the risk of fraud.

  • Do not respond immediately to unexpected requests involving refund or banking information.
  • Access the IRS website by typing the address into your browser rather than scanning a code or following a link.
  • Review your filed return and IRS Online Account to confirm whether a refund is actually pending.
  • If no refund appears and none was expected, the notice may be disregarded.
  • Report suspicious phishing emails to phishing@irs.gov and consult IRS identity theft resources if you believe your information has been compromised.

If you are uncertain whether a CP53E notice is legitimate or how it relates to your return, don’t hesitate to reach out to your Scheffel Boyle CPA to set up a consultation. A careful review can prevent unnecessary account changes and help protect your financial information.

Potential Refund Deadline Extensions Under the Kwong Case

The Kwong case may provide taxpayers with an extended deadline for refunds.

A recent decision by the U.S. Court of Federal claims (Kwong vs. U.S.)  may give taxpayers an opportunity to recover or appeal penalties and interest related to the COVID disaster period.  The court decided in Kwong  that the declaration of the COVID disaster extended the deadline for many time-sensitive acts.  This includes payment and filing dates that fell within the covered disaster period.

The Kwong case involved a taxpayer with tax penalty and refund disputes.  The IRS determined that the deadline for the taxpayer’s claims was barred by the statute of limitations.  The taxpayer argued that the COVID disaster declaration extended the period to make a claim.  The court agreed and stated the following:

  • The start of the disaster period was January 20, 2020,
  • The end of the emergency declaration was May 11, 2023, and
  • The 60-day period following the end of the declaration ended on July 10, 2023

 

How the Kwong case affects other taxpayers

The Kwong case may have dealt with the specific refund claim within the COVID disaster declaration period, but a takeaway for other taxpayers is that any taxpayer (individual, trust, estate, business) with a claim for a refund of penalties or interest may be eligible for relief.  Some of the penalties and interest that may be eligible for relief include:

  • Late-filing penalties for returns filed after the original due date,
  • Late-payment penalties for taxes paid after the original due date,
  • Estimated tax penalties where quarterly payments were treated as late,
  • Potential penalties on certain international information returns,
  • Underpayment interest charged when tax was treated as unpaid, and
  • Interest tied to penalties that may not have been properly assessed

Eligible penalties and interest include those already paid and those subject to an ongoing dispute with the IRS.  Other time-sensitive acts that may qualify for the extended deadline include tax elections and amended returns.

The normal statute of limitations for making a claim for refund expires the later of three years from the filing of a return or two years from paying the tax.  The court’s decision in Kwong determined that a deadline falling between 1/20/20 and 7/10/23 was extended until 7/10/23.  This means that interest and penalties should not have accrued during these periods.  Penalties and interest already paid during this period may be eligible for refunds and penalties and interest subject to a dispute during this period may qualify for relief as well.  Taxpayers  have three years from 7/10/23 (60 days after the end of the emergency declaration) to make a claim for refund, meaning that taxpayers only have until 7/10/26 to file a claim.

 

Important caution

The IRS is expected to appeal the Court’s decision.  A successful appeal by the IRS would mean that penalties and interest during this period were validly assessed.  However, the timing of any IRS appeal will likely extend beyond the 7/10/26 deadline noted above.  In situations where a claim is contingent on the outcome of a case that is not decided by the statutory deadline, a protective claim may be filed to preserve a taxpayer’s rights.

If taxpayers file a valid protective refund claim by 7/10/26 and the IRS is unsuccessful in its appeal of the Kwong case, then the IRS would be required to refund eligible penalties and interest to taxpayers who made a timely protective claim even if that IRS appeal was not determined until after the 7/10/26 deadline.

 

Next Step

The next step for taxpayers is to review their tax history during this period and if applicable file a protective refund claim before 7/10/26.  Taxpayers may determine whether interest and/or penalties were paid by reviewing their tax returns and/or their IRS account transcripts.

This is a one-time opportunity unique to the COVID disaster period, but there is a short window to act and uncertainty as to a potential IRS appeal.

 

If you need assistance with a refund claim or understanding your possible eligibility, please reach out to us for help.

Transition Relief for Tips and Overtime Deductions: Practical Guidance for 2025


IRS Transition Relief Eases Compliance for 2025

With the passage of the One, Big, Beautiful Bill Act (OBBBA), individual taxpayers can now benefit from new federal income tax deductions for qualified tips and qualified overtime compensation. Recognizing the challenges of implementing these changes, the IRS has announced important transition relief for the 2025 tax year. This relief means that, for 2025, employers and payors are not required to separately report tips or overtime on standard tax forms, and taxpayers can rely on reasonable methods and existing documentation to claim these deductions. This approach is designed to simplify compliance while final regulations and updated forms are being developed for future years.

Determining Qualified Tips

For the 2025 tax year, the IRS has issued guidance allowing employees to claim the qualified tip deduction even if cash tips are not separately listed on Form W-2. To start, employees must verify that their job was one that customarily and regularly received tips as of December 31, 2024. To figure out your qualified tips, you can use the following sources:

  • Social Security tips reported in Box 7 of your Form W-2.
  • Cash tips your employer voluntarily reported in Box 14 of Form W-2 or on a separate statement.
  • Any amount shown on Line 4 of Form 4137 (Social Security and Medicare Tax on Unreported Tip Income) filed with your 2025 tax return and included in your income.
  • Tips you reported to your employer on Forms 4070 (Employee’s Report of Tips to Employer) or similar substitute forms.

 

Qualified Tips Deduction – Examples

 

Example 1: Restaurant Server

  • Scenario: Employee A works as a server in a busy restaurant. Throughout 2025, A receives cash and credit card tips from customers, which are reported to the employer as required.
  • Application: For the 2025 tax year, A’s Form W-2 shows $18,000 in box 7 (“Social Security Tips”). Because the IRS transition relief allows employees to use the total in box 7—even though the form does not separately account for tips under the new law—A can claim a deduction for the full $18,000 as qualified tips, provided all other requirements are met (such as working in an occupation that customarily received tips before December 31, 2024).

Example 2: Bartender with Additional Tips

  • Scenario: Employee B works as a bartender and reports $20,000 in tips to their employer using monthly tip reports (Forms 4070). B’s Form W-2 for 2025 shows $15,000 in box 7, but B also has $4,000 in unreported tips, which are included on Form 4137 and added to B’s income on Form 1040.
  • Application: For 2025, B can choose to use either the $15,000 from box 7 of Form W-2 or the $20,000 reported to the employer on Forms 4070 as the base for the deduction. Additionally, B can include the $4,000 of unreported tips from Form 4137, line 4, in the total deduction amount. This flexibility is possible due to the IRS transition relief, which allows reasonable methods for substantiating tip income in the absence of new reporting requirements.

Example 3: Self-Employed Travel Guide

  • Scenario: Individual D operates as a sole proprietor travel guide, receiving $7,000 in tips from customers via a third-party payment platform. The Form 1099-K received from the platform shows $55,000 in total payments but does not separately identify tips.
  • Application: For 2025, D can rely on daily tip logs and other supporting documentation (such as receipts or point-of-sale system reports) to substantiate the $7,000 in tips received. The IRS transition relief allows D to use these records to calculate the qualified tips deduction, even though the Form 1099-K does not provide a separate accounting of tips.

 

How to Calculate Qualified Overtime Compensation

For the 2025 tax year, if qualified overtime compensation is not shown in Box 14 of Form W-2 or on a separate statement, an FLSA-eligible employee may still meet the separate accounting requirement as long as the compensation is correctly reported on Form W-2, Form 1099-NEC, or Form 1099-MISC.

Employees can then calculate the amount of qualified overtime compensation using earnings or pay statements, invoices, or similar documentation, applying a reasonable method.

 

Qualified Overtime Compensation Deduction – Examples

 

Example 1: Payroll System Shows Overtime Premium

  • Scenario: Individual A is a nonexempt employee whose payroll system tracks overtime pay. In 2025, the payroll system shows that A received $5,000 as an “overtime premium” for hours worked beyond 40 per week.
  • Application: For the 2025 tax year, A can claim a deduction for the full $5,000 as qualified overtime compensation. The IRS transition relief allows employees to use payroll records or pay stubs that separately account for the overtime premium, even if this information is not reported in a dedicated box on Form W-2.

Example 2: Aggregate Overtime Amount

  • Scenario: Individual A’s pay stub for 2025 shows a total “overtime” amount of $15,000. This figure includes both the overtime premium and the regular wages for overtime hours, but does not break out the premium separately.
  • Application: Under the IRS guidance, A can use one-third of the aggregate overtime amount ($5,000) as the deductible FLSA Overtime Premium. This method is permitted for 2025 due to transition relief, which allows reasonable approximations when separate accounting is unavailable.

Example 3: Higher Overtime Rate

  • Scenario: Individual B’s employer pays overtime at twice the regular rate (rather than the standard 1.5x). B’s pay stub shows $20,000 as total overtime pay for 2025.
  • Application: For the 2025 tax year, B can use one-fourth of the total overtime amount ($5,000) as the deductible FLSA Overtime Premium. The IRS transition relief provides this fractional method for cases where overtime is paid at a higher rate and separate accounting is not provided.

Key Points for Taxpayers

  • Transition relief allows use of existing forms and reasonable documentation for 2025.
  • Maintain thorough records (pay stubs, tip logs, earnings statements) to substantiate deductions.
  • Employers and payors are not required to separately report tips or overtime for 2025, but this will change for future years.
  • Deductions are subject to annual limits and phase-outs based on income.

Conclusion

The IRS’s transition relief for 2025 makes it easier for taxpayers to claim new deductions for tips and overtime, even as reporting requirements evolve. By following the practical examples above and maintaining good records, individuals can maximize their tax benefits while staying compliant.


If you have any questions, don’t hesitate to reach out to your Scheffel Boyle CPA to set up a consultation.

Treasury and IRS Announce Penalty Relief for 2025 Tip and Overtime Reporting Under the One Big Beautiful Bill Act

The Internal Revenue Service (IRS) has issued new guidance offering transitional penalty relief for employers and payors navigating updated reporting requirements under the One Big Beautiful Bill (OBBB) Act. This relief applies specifically to tax year 2025 and addresses the complexities of reporting cash tips and qualified overtime compensation.

 

What’s Changing?

Under the OBBB Act, employers and other payors are now required to report:

  • Cash tips received by employees, along with the occupation of the tip recipient.
  • Qualified overtime compensation paid to employees.

 

These changes are designed to support new deductions available to certain employees and self-employed individuals for qualified tips and overtime. However, recognizing the challenges in implementing these requirements, the IRS is treating 2025 as a transition year.

 

Key Highlights of Notice 2025-62

To ease the transition, the IRS has announced the following penalty relief measures:

  • No penalties will be imposed for failing to separately report:
    • Cash tips and the occupation of the recipient.
    • Total qualified overtime compensation.
  • Relief applies only for tax year 2025, and only if the employer or payor otherwise submits a complete and correct return or statement.

 

The IRS acknowledges that many employers may not yet have the systems or procedures in place to comply with the new reporting standards. Additionally, Forms W-2 and 1099 will not be updated for tax year 2025 to reflect OBBB-related changes.

 

Encouraged Best Practices

While not mandatory for penalty relief, employers and payors are strongly encouraged to:

  • Provide employees and payees—especially those in tipped occupations—with:
    • Occupation codes
    • Separate accounting of cash tips
    • An indication of whether the employer’s business is a specified service trade or business
  • Offer separate reporting of qualified overtime compensation, which can help individuals claim deductions more easily.

 

This information can be shared via:

  • Online portals
  • Supplemental written statements
  • Secure digital methods
  • Box 14 of Form W-2 (for overtime compensation)

 

Looking Ahead

The IRS will release additional guidance to help individual taxpayers understand how to claim deductions for qualified tips and overtime compensation when filing their 2025 returns.

 

If you have any questions about this law, feel free to contact your Scheffel Boyle accountant or call us at one of our offices.

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Big Changes Ahead for Tax Refunds: IRS to End Paper Refund Checks Starting September 30, 2025

The IRS has announced a major change that will impact how individual taxpayers receive their refunds. Beginning September 30, 2025, the IRS will no longer issue paper refund checks. This move is part of a broader federal initiative aimed at improving security, reducing fraud, and streamlining payment processes.

 

Why the Change?

This update stems from Executive Order 14247, signed earlier this year, which directs federal agencies to transition to electronic payment systems. According to the IRS, the shift away from paper checks is intended to:

  • Enhance security and reduce the risk of fraud
  • Lower administrative costs
  • Increase efficiency in processing refunds

Currently, about 93% of tax refunds are already issued via direct deposit, making this transition a natural next step.

 

What Are the Alternatives?

If you’re not set up for direct deposit, or prefer not to use it, the IRS will offer several electronic alternatives:

  • Prepaid debit cards
  • Digital wallets
  • Limited exceptions for emergency situations where electronic payment would cause undue hardship

These options are designed to ensure that all taxpayers can receive their refunds securely and promptly, even without a traditional bank account.

 

What About Payments to the IRS?

Executive Order 14247 also applies to payments made to the IRS. While paper checks are still accepted for now, this is expected to change in the near future. Taxpayers should begin preparing for a fully electronic payment system.

 

What Should You Do Now?

If you’re expecting a refund and are not currently set up for direct deposit, now is the time to take action. Talk to your tax advisor or financial professional about updating your refund delivery method. Being proactive will help ensure you receive your refund without delays or complications once the new policy takes effect.

 

Final Thoughts

While this announcement currently applies to individual taxpayers, the Executive Order does not distinguish between individuals and businesses—so similar changes may be on the horizon for business-related payments and refunds.

 

Need help updating your refund delivery method or have questions about how this change affects you? Reach out to our team, we’re here to guide you through the transition.

Key Tax Provisions in the One Big Beautiful Bill Act

On July 4th, 2025, President Trump signed into law the “One Big Beautiful Bill Act”, a sweeping reconciliation package that includes a broad array of tax provisions affecting individuals, businesses, and international taxpayers.

We want to highlight some of the key provisions and offer preliminary insights into how they may affect your tax planning. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. We will continue to closely monitor any potential tax legislation and update you accordingly.

Individual Income Tax Provisions

  • Permanent extension of lower tax rates and brackets: The bill makes permanent the individual income tax rates and brackets established by the Tax Cuts and Jobs Act (TCJA) including lower individual tax brackets. The top marginal rate remains at 37%, and inflation adjustments are retained for all but the top bracket.
  • Standard Deduction: The nearly doubled standard deduction was made permanent, with additional inflation adjustments.
  • Itemized deductions/Pease Limitation repeal: The law permanently removes the Sec. 68 overall limitation on itemized deductions (known as the Pease limitation) and implements a limitation that allows an overall maximum benefit of 35% for the value of a taxpayer’s itemized deductions.
  • Child Tax Credit: The law would permanently increase the child tax credit to $2,200 per child with $1,700 being refundable, with inflation adjustments.
  • Estate and Gift Tax Exemption: The increased exemption is made permanent and raised to $15 million per individual ($30 million for married couples) in 2026, indexed for inflation.
  • SALT Deduction Cap: The state and local tax (SALT) deduction cap is increased from $10,000 to $40,000 per household and would be phased out for taxpayers with modified adjusted gross income (MAG) over $500,000.
  • Charitable Deduction for Non-Itemizers: A permanent above-the-line deduction for certain charitable contributions ($1,000 for single filers, $2,000 for joint filers) beginning in 2026.
  • No Tax on Tips and Overtime: For 2025-2028, above-the-line deductions are created for qualified tips (In certain occupations) and for overtime premium pay, subject to income and occupation limitations. The deduction for qualified tips is limited to $25,000 per taxpayer, while the deduction for overtime is limited to $12,500 per taxpayer.
  • Enhanced Deduction for Seniors: For 2025-2028 a deduction is available for seniors ( age 65+) with income below $75,000 ($150,000 for joint filers).
  • Car Loan Interest Deduction: For 2025- 2028 up to $10,000 of interest on loans for U.S. assembled passenger vehicles may be deducted, subject to income phaseouts.
  • Moving Expense Deduction: The bill permanently terminates the deduction except for Armed Forces.
  • Home Mortgage Interest and Insurance Premiums: The bill would permanent the $750,000 Sec. 163(h)(3) limit on the treatment of mortgage insurance premiums as qualified residence interest. The exclusion of home-equity indebtedness from the definition of qualified residence interest would also become permanent.
  • Casualty Loss Deduction for personal Casualties: The Sec. 165(h)(5) limitation on personal casualty loss deductions, under which a casualty loss is deductible only to the extent it Is attributable to a federal declared disaster, would be made permanent.
  • Deduction for wagering losses: The law limits the amount of deductible losses to 90% of the taxpayer’s wagering losses only to the extent of winnings.
  • Establishment of Trump Accounts: The law creates a new tax-deferred savings account for the benefit of children up until the age of 18, which includes a pilot program where children born between 2025 and 2028 may receive a $1,000 government contribution.
  • Other Deductions and Credits: The bill makes permanent or enhances several other deductions and credits, including the adoption credit, employer-provided childcare credit, paid family and medical leave credit, and education-related benefits.

Business Tax Provisions

  • QBI Deduction: Sec. 199A qualified business income (QBI) deduction is made permanent, and the deductible amount for each qualified business remains 20%. The phase-in ranges are expanded, making more taxpayers eligible to claim the deduction.
  • PTET SALT Deduction: The law does not limit the availability of the pass-through entity ax (PTET) deduction for pass-through entities as it currently exists.
  • Bonus Depreciation: 100% expensing (bonus depreciation) for qualified property is permanently restored for property place in service beginning Jan. 19, 2025.
  • 179 Expensing: The maximum amount a business may expense is increased to $2.5, million, with the phaseout threshold raised to $4 million, both indexed for inflation after 2025.
  • Qualified Production Property” Manufacturing Property”: The law introduces an elective 100% depreciation allowance for qualified production property that is acquired and placed in service between Jan. 19, 2025, and Dec. 31, 2030, restoring full expensing for a broader range of assets.
  • R&D Expenditures: The TCJA introduced a requirement that specified research and experimental (R&D) expenditures be capitalized and amortized ratably over a five-year period for tax years after 2021. The law permanently suspends that requirement for domestic research or experimental expenditures paid or incurred in tax years beginning Dec 31,2021. Taxpayers are provided with options to claim deductions for previously capitalized domestic research or experimental expenditure paid before 2025. Foreign R&D would continue to be capitalized and amortized for over 15 years.
  • EBL Permanency: The law makes Sec. 461(I) excess business loss (EBL) limitation permanent, which is currently set to expire at the end of 2028.
  • Deferred payment of tax on capital gains of certain farmland: The law allows qualified sellers of qualified farmland property to elect to pay tax on these capital gains in four equal annual installments.
  • Third-Party Network Transaction Reporting Threshold: The law reverts to the prior rule for Form 1099-K, Payment Card and Third Party Network Transactions, reporting, under which a third-party settlement organization (TPSO) would not be required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200.
  • Form 1099 Reporting Threshold: The law increases the information reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
  • Renewed OZs: The new law establishes a permanent opportunity zone (OZs) policy, with revised eligibility and incentives, including special rules for rural areas.
  • Clean Energy and IRS Credits: The law terminates or phases out several clean energy credits from the inflation Reduction Act (IRA) and the 179D deduction.
  • Employee Retention Credit (ERC) – The law prohibits payment of 2021 Q3, and Q4 ERC claims as of January 31, 2024, and extends the statute of limitations on ERC claims to six years.

How you can prepare:

This brief summary of key law changes only takes into account a few of the changes in this new law. We recommend reviewing your current tax strategy considering these proposed changes. Our team is available to discuss how these provisions may impact your personal or business tax situation and to help you plan accordingly.

 

As always, if you have any questions, please contact your trusted Scheffel Boyle CPA to schedule a consultation.

Beneficial Ownership Information

Beneficial Ownership Information (BOI) reporting is a new federal law requirement created by the Corporate Transparency Act (CTA) which became law in 2021. BOI reporting was created to provide the government with necessary tools to investigate shell companies used by money launderers and criminals. However, in order to “catch the bad guys” most legitimate businesses are now required to report information electronically to the government regarding their beneficial owners. This reporting will be done through the FINANCIAL CRIMES ENFORCEMENT NETWORK of the U.S. Treasury Department (FinCEN).

For companies created or registered prior to January 1, 2024, reporting is required by January 1, 2025. For companies created or registered on or after January 1, 2024, and before January 1, 2025, reporting is required within 90 calendar days of the earlier of receiving actual or public notice that the company’s creation/registration is effective. Updates to such reporting will also be required, and entities and individuals may be subject to civil or criminal penalties due to lack of compliance with the CTA. On its website, FinCEN (www.fincen.gov/boi) has posted Frequently Asked Questions. One answer (B.7.) to questions about report preparation reads that FinCEN expects that many, if not most, reporting companies will be able to submit their (BOI) to FinCEN on their own using the guidance FinCEN has issued.

Not all companies are required to report under this new law, only those companies that meet the law’s definition of a “reporting company” and do not qualify for an exemption. A Reporting Company is any Corporation, LLC, Partnership, or other entity created by registering with a state’s Secretary of State.

Since the information to be reported under BOI arises from determinations that are primarily legal in nature, we have been advised by the AICPA & Industry leaders that Scheffel Boyle should not be involved in the preparation, compiling or filing of these reports. We suggest you contact your legal counsel for any questions you may have.

We at Scheffel Boyle are notifying you of these requirements to ensure that you, our clients, are aware of the BOI reporting requirements and that you can make an informed decision as to whether these new laws are applicable to you.

If you have any questions regarding BOI, please contact your accountant at Scheffel Boyle CPAs. We’re always happy to help!

Scheffel Boyle CPAs Ranks #11 in both of STL Business Journal’s Annual Largest Accounting Firms Lists

Scheffel Boyle has ranked #11 for number of CPAs and #11 for number of professionals on the St. Louis Business Journal’s annual Largest Accounting Firms lists.

Each year, The Journal publishes two lists for ranking CPA firms: one based on the number of CPAs and the other on the number of professionals (employees required to have continuing education hours).

Thank you to our clients, employees, and community partners for all they have done to help us grow and continue serving the St. Louis and Metro East region.