Income Tax News

We are into 2025, and the tax-filing season is open.

Our firm has begun preparing both business and personal tax returns for 2024. However, despite the calendar year changing to a new year, there are still opportunities for taxpayers to reduce their 2024 income tax obligation. Being aware of these tax-savings opportunities and taking advantage of those that may be applicable for the particular taxpayer can help reduce the tax burden when the returns are ultimately filed.

One opportunity for those who are covered by a qualifying high deductible health insurance plan is to contribute to a Health Savings Account. The HSA limit is $4,150 for single coverage for the year and $8,300 for family coverage. Those taxpayers who are 55 and older can also make an additional $1,000 catchup contribution. This contribution must be made by April 15, 2025, for the 2024 tax year. If the employer has already made contributions on behalf of the employee, the additional amount that the employee can contribute is limited by these amounts. It is important to review the health insurance coverage and months under the coverage to properly determine the limits for a deductible HSA contribution as this can vary based on the specific circumstances.

Another opportunity to potentially reduce the 2024 tax obligation is to make a retirement contribution for 2024. If the taxpayer and spouse are not covered by a retirement plan through work, then they can each potentially contribute to a deductible individual retirement account for 2024.

The IRA contribution limits for 2024 are $7,000 for a taxpayer under 50 and $8,000 for those taxpayers aged 50 and older. It is important for a taxpayer to determine their eligibility for these types of retirement contributions as there are restrictions if the taxpayer or spouse is covered through a retirement plan from their employer. There are also restrictions based on income as well.

Likewise, if a taxpayer is self-employed, they have a much higher amount that they can possibly contribute to a retirement plan by using a plan such a SEP IRA, Solo 401K plan or Keogh plan. Depending on the type of plan that the individual chooses to put in place and the amount of their income, there can be significant contributions to these types of retirement plans. The traditional IRA plans are also available to self-employed individuals, but these other types of retirement plans offer a larger deferral option and therefore potential larger tax-savings opportunities.

Another lesser known and newer tax savings opportunity available to Ohio taxpayers is to contribute to the Ohio Angel Scholarship Fund. In 2024 the State of Ohio extended the deadline for these types of contributions to April 15 of the following year. A contribution of up to $750 per single taxpayer or $1,500 for a married couple is allowed. This contribution is a dollar-for-dollar tax credit on the taxpayer’s Ohio tax return. Find a list of the approved educational organizations to which taxpayers can contribute at www.charitable.ohioago.gov.

Another strategy to save money in regard to your taxes is to file and pay your taxes on time. Many taxpayers take an extension on their taxes. However, an extension to file is not an extension to pay. It is important that 100% of the taxes are paid by the April 15 tax-filing deadline for both federal, state and local taxes. If there is a tax balance after that date, the respective taxing agency will charge a late payment penalty which can amount to a significant amount of money.

Knowing all of the potential tax-savings opportunities and working with a tax professional to identify those opportunities that may be available to the specific taxpayer will help to reduce the tax burden. In addition, these may provide ancillary benefits like increased savings for healthcare costs, retirement savings or simply helping others.

Paul Pahoresky is the managing member of PRP & Associates. He can be reached at 440-974-1040×14 or at paul@prpassoc.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics. 

Originally Appeared Here

HELENA — Gov. Greg Gianforte and Republican leaders in the Montana House and Senate have all talked about cutting state income taxes during the 2025 legislative session. This week, lawmakers are starting to look at possible plans to do that – but there are still a lot of different ideas on exactly how to structure the cuts.

(Watch the video for more on how Montana’s income tax structure could change)

Lawmakers considering different options for cutting Montana income taxes

Montana currently has two income tax brackets. An individual pays 4.7% on the first $20,500 of their income and 5.9% on everything above that. For married couples filing jointly, the brackets are below and above $41,000.

On Wednesday morning, the House Taxation Committee held a hearing on House Bill 337, sponsored by House Speaker Rep. Brandon Ler, R-Savage. By 2027, it would lower the top income tax rate from 5.9% to 5.4%, and it would raise the limit on the bottom bracket to $100,000 for individuals and $200,000 for joint filers.

“This is a bill I see that will help out everybody, from the low-income to your higher-income earners, and it will be spread across so that there’s, in my mind, no winners or losers here – every resident of the state of Montana will get an income tax break,” said Ler.

Ler said, once the bill is fully implemented, it will cut the state’s tax collections by about $300 million.

Jonathon Ambarian

House Speaker Rep. Brandon Ler, R-Savage, presented House Bill 337, which would cut Montana’s top income tax rate and widen the bottom tax bracket, Feb. 5, 2025.

During the hearing, opponents of HB 337 said too much of the benefit would go to wealthier Montanans, and that reducing revenues by that amount would threaten the stability of state services. Ler responded that he expected the reduction would be offset by attracting more businesses and income to Montana.

Senate President Sen. Matt Regier, R-Kalispell, has backed Senate Bill 203, sponsored by Sen. Mike Yakawich, R-Billings. That bill, set for a hearing on Thursday, wouldn’t change rates but would set the bottom bracket to the same level as HB 337 – making the change immediate instead of phasing it in over several years.

Yakawich said SB 203 was intended to target income tax relief to those in the middle class.

“A family with kids making $100,000, both working, paying for daycare and everything else – it’s really middle class, and they’re struggling, so I really want to help them,” he said.

According to a fiscal analysis by the governor’s budget office, SB 203 would reduce tax collections by about $220 million each of the first two years it’s fully in effect.

Jonathon Ambarian

Sen. Mike Yakawich, R-Billings, is sponsoring Senate Bill 203, which would allow Montanans to pay the state’s lower tax rate on more of their income.

Yakawich has touted his bill’s bipartisan support. Several Democrats, including House Minority Leader Rep. Katie Sullivan, D-Missoula, and Senate Minority Leader Sen. Pat Flowers, D-Belgrade, have signed on as co-sponsors.

Meeting with reporters this week, Sullivan said Republicans had made it clear they intended to pass some form of income tax reductions, and that endorsing SB 203 was a way to show where they’d like those reductions to be directed.

“our focus was is first and foremost property tax relief. Of course, income tax as well.We’d like to see everybody be able to receive a benefit if there’s an income tax plan that goes through, and not just have it focus on the wealthiest Montanans, which is what we see as the proposal right now,” said Sullivan.

Gov. Greg Gianforte has laid out his own proposal, which would drop the tax rate even farther to 4.9%, and wouldn’t change the boundary between the top and bottom tax bracket, but would allow Montanans to claim a larger earned income tax credit.

A legislative bill draft that incorporates Gianforte’s priorities was requested by Sen. Josh Kassmier, R-Fort Benton. Kassmier told MTN this week he expects that bill to be introduced soon, but that it hasn’t been determined yet who will be the lead sponsor.

“The governor has proposed the largest income tax cut in state history by reducing the rate most Montanans pay from 5.9% to 4.9%,” a spokesperson for Gianforte said in a statement to MTN. “Additionally, to help lower- and middle-income Montanans, the governor’s proposal also boosts the earned income tax credit. The governor is supportive of this measure, and will carefully consider any bill that makes it to his desk.”

When presenting his budget proposal in November, Gianforte estimated his income tax reductions would total $850 million.

Originally Appeared Here

As the 2025 tax season kicks off, many citizens are looking forward to their tax refunds. The Internal Revenue Service (IRS) has started to accept tax returns, and those who file early could receive their refunds as soon as mid-February. With the average tax refund last year reaching $3,004, this is seen by many as a considerable financial boost. If you are among the taxpayers anticipating a refund, here are some tips to help you optimize your filing experience and ensure a seamless refund process.

When can you expect your tax refund?

In the words of Mark Steber, chief tax officer at tax preparer Jackson Hewitt, “Tax refunds, for most Americans, are the single largest payday of the year.”

To ensure that you receive your tax refund promptly, it is important to file your returns in a timely manner. Most taxpayers can expect their refunds within 10 to 21 days after filing, especially if they opt for direct deposit. According to IRS data, if you e-file your return as soon as the IRS starts accepting submissions, you might see your refund as early as February 7, 2025.

However, if you are claiming specific credits, such as the Earned Income Tax Credit or Child Tax Credit, your refund may be delayed until March for verification purposes.

To track your refund, the IRS offers a useful tool called “Where’s My Refund?” which provides updates within 24 hours of e-filing. This tool is especially useful for electronic filers, as paper returns can take a month or more to process. The quickest and safest way to receive your refund is by using electronic filing along with direct deposit, which minimizes potential issues compared to paper checks.

For a smooth filing process, keep these important tips in mind

Before filing, make sure you have all the required documents, including W-2s, 1099s, and any relevant tax forms from financial institutions.

For those with more complicated circumstances—such as marriage, divorce, or multiple income streams—consider seeking advice from a tax professional. They can help you navigate potential deductions and credits, guaranteeing adherence to tax regulations while maximizing your refund.

If you are using tax software, many platforms—such as TurboTax and H&R Block—offer free filing options for qualifying taxpayers. For example, TurboTax allows first-time filers or those who have not used their service recently to file for free until February 18, 2025. This could lead to substantial savings while still ensuring a thorough filing process.

What you should do if you miss the filing deadline

Tax returns are due by April 15, 2025. If you cannot meet this deadline, you can request an extension by filing Form 4868. This will give you until October 15, 2025, to submit your return without needing to provide a justification.

However, if you owe taxes, you still need to pay by the April deadline to avoid penalties. If you’re unsure about the process or have outstanding debts with the IRS, it is advisable to consult a tax professional.

Remember, filing early can accelerate the refund process. As the IRS starts accepting returns, those who file promptly can avoid the rush and potential delays that often occur during peak filing season.

To recap: if you are expecting a tax refund, e-filing your taxes early and opting for a direct deposit can help you receive your money faster. Gather all your documents and consider seeking professional help if your tax situation is complex. By taking these steps, you can ensure an easier filing experience and maximize your refund, making this tax season a great opportunity for a financial windfall. Stay informed and organized, and you will be able to receive your refund without unnecessary delays.

Originally Appeared Here

The Internal Revenue Service needs to do more to enable whistleblowers to report on fraud, waste and abuse, even if they’ve signed nondisclosure agreements, which should provide anti-gag provisions allowing them to speak out, according to a new report.

The report, released Thursday by the Treasury Inspector General for Tax Administration, comes in response to a congressional request to assess whether the IRS complied with the Whistleblower Protection Enhancement Act of 2012 by including the required anti-gag provision in its NDA and related documentation as required by law. It’s unclear whether the congressional request was related to the IRS whistleblowers who complained about preferential treatment of Hunter Biden’s tax evasion case.

The anti-gag provision informs employees that their rights and obligations to report wrongdoing to Congress, the Inspectors General, or the Office of Special Counsel supersedes an NDA, the TIGTA report noted. 

The IRS estimates that approximately 500 to 1,000 of its employees and 6,000 of its contractors sign an NDA each year. “Without anti-gag provisions in the NDAs, employees and contractors might be reluctant or discouraged to report on fraud, waste, and abuse activities, which would cause reputational harm for the agency,” said the report. 

TIGTA found that the IRS has guidance that references whistleblower protections and addresses prohibited practices of retaliation against whistleblowers. However, specific reference to the anti-gag provision was not included in its NDAs, policies or whistleblower protections training. 

In addition, the IRS’s guidance on prohibited personnel practices under the Whistleblower Protection Enhancement Act document states that the NDA policy, form or agreement must include the anti-gag provision before the policy, form or agreement can be enforced. Because NDAs in use by the IRS at the time of TIGTA’s review did not contain anti-gag provisions, they may not be enforceable, according to the report. 

TIGTA reviewed 22 NDAs signed from August 2018 to April 2024 and found that five contained a partial reference to the anti-gag provision, but 17 did not contain any reference to the anti-gag provision. Some of teh existing internal guidance referenced NDAs and whistleblower protections. However, TIGTA did not see evidence of a dedicated NDA policy that required the anti-gag provision be included.  

The NDA and whistleblower guidance were not easily accessible for employees to find on the IRS intranet site. Training for new hires and annual briefings for all employees, managers and contractors mentioned the Whistleblower Protection Act of 1989, and addressed the prohibited practices of retaliating against whistleblowers. Although it was not required, they did not contain the anti-gag provision. As a result of TIGTA’s evaluation, in July 2024, IRS officials updated the NDA form template for contractors with staff-like access and non-procurement employees involved in procurement activities to include the required anti-gag provision. The IRS also updated its Expert Witness NDA form template in October 2024. 

TIGTA made four recommendations in the report. It recommended the IRS should ensure that NDAs, policies, forms and other guidance documents include the required anti-gag provision. It also suggested the IRS should create a dedicated section for NDAs in its internal guidance that contains the anti-gag provision. The IRS should also include information about the anti-gag provision in training programs covering whistleblower protections (such as new employee orientation and contractor training), the report recommended, and add a link to TIGTA’s Whistleblower Protections web page on its internal web page and pertinent information to the Employee Resource page on its internal webpage to ensure employee awareness of the whistleblower protections as it relates to the anti-gag provision. 

IRS officials agreed with TIGTA’s recommendations. During the evaluation, the IRS updated its NDA template for contractors with staff-like access, non-procurement employees involved in procurement activities, and expert witnesses to include the required anti-gag provision. The IRS also developed updates to the fiscal year 2025 mandatory Prohibited Personnel Practices and Whistleblower training, and the updates are under final legal review. 

“We appreciate your recognition of our references to anti-gag provisions in our documentation and training, and we appreciate your identifying areas where we can improve our notification of whistleblower protections and whistleblower rights,” wrote IRS chief risk officer Michael Wetklow in response to the report.

Originally Appeared Here

The tax credit Idahoans receive for buying groceries would increase from $120 a year to $155 a year under a new bill introduced Monday in the Idaho Legislature.

House Majority Leader Jason Monks, R-Meridian, sponsored the new bill, House Bill 61, saying the state has not increased the tax credit for two years.

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“We’ve seen a lot of inflation taking place lately on the groceries,” Monks said. “It’s important that individuals have the ability to purchase food without having to pay additional taxes on that, and so this particular legislation would increase that credit from $120 to $155.”

Before this bill, the Idaho Legislature last increased the grocery tax credit from $100 to $120 in 2023.

If Monks’ bill is passed into law, the credit would cover about $10,033 in groceries for a family of four every year with a $620 grocery credit, Monks said. That corresponds to covering $861 worth of groceries each month.

As is the case currently, the taxpayer filing the tax return, their spouse and each dependent would be eligible to receive the credit, which is why the credit would be $620 for a family of four.

However, in lieu of the new $155 per credit, Monks’ bill also allows Idaho taxpayers to save all of their grocery receipts for the whole year and submit their receipts to the Idaho State Tax Commission to receive a credit of up to $250 a year – in case they buy more groceries than the standard $155 credit would offset.

How would the new grocery tax credit bill affect Idaho’s seniors?

Under the new bill, the $155 grocery tax credit would apply uniformly to all Idahoans who do not submit itemized receipts. Currently, senior citizens receive a larger credit than the general public. 

Rep. John Gannon, D-Boise, expressed concern for seniors, many of whom may be retired or on a fixed income. 

“It looks to me like seniors are only going to get $15 more on their grocery tax credit,” Gannon said.

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Monks told Gannon the choice to make the $155 credit uniform was deliberate. Monks said he always thought the increased credit for seniors was off because he said in his experience teenagers eat more than seniors. 

While Monks’ bill would increase the tax credit Idaho taxpayers receive each year, it would leave the sales tax in place on groceries so that the state can collect sales tax revenue on groceries that out-of-state visitors buy.

“Being that tourism is one of our largest industries in the state, we get a lot of money that comes in from that, and that wouldn’t change under this scenario,” Monks said. 

A fiscal note attached to the new bill estimates that it would reduce sales tax revenue to the state by about $50 million.

Following a short debate, the House Revenue and Taxation Committee voted to introduce the new bill Monday, which clears the way for the bill to return to the committee for a full public hearing. 

In an emailed statement, House Minority Leader Ilana Rubel and Senate Minority Leader Melissa Wintrow said that Idaho residents “deserve a meaningful break” on grocery costs.

“Yet Republicans are extending a pittance to working families in the form of a $35 increase in the tax credit for groceries,” they said. “Meanwhile, they have proposed a quarter of a billion dollar income tax cut that will overwhelmingly benefit the richest individuals and corporations, while leaving the state unable to adequately fund necessary services. We are frustrated by the priorities of the supermajority party that puts the most wealthy and well-connected ahead of those struggling to afford basic needs, including groceries.”

How to submit testimony to Idaho’s House Revenue and Taxation Committee

House Revenue and Taxation Committee Chairman David Cannon, R-Blackfoot, said his committee is not accepting remote virtual testimony on bills this year. However, Cannon said he will allow Idahoans to submit written email testimony by 4 p.m. the day before a hearing.

To submit written testimony, people should send an email to [email protected] with the subject line clearly marked for legislative testimony. Cannon said everyone submitting email testimony must include their name, legislative district and any organization or group they represent, followed by the bill number they wish to testify on and whether they are for or against the bill. Cannon encouraged email writers to keep their testimony short so that it would last two minutes or less if read aloud.

Cannon said the committee secretary would read some email testimony, giving preference to writers who live farther from the Idaho State Capitol in Boise. 

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Originally Appeared Here

You’ve probably heard that not long after his January 20 inauguration, President Trump kicked off his second term with a flurry of executive orders. By most accounts, he signed a total of approximately 200 various orders, actions, and proclamations on his first day back in office.

The actions cover everything from withdrawing the United States from the Paris Climate Agreement, declaring a national emergency on the Southern Border, and ending birthright citizenship for children born to undocumented parents to pardoning about 1,500 people involved in the January 6 Capitol riot, renaming the Gulf of Mexico to the “Gulf of America,” and delaying the TikTok ban for 75 days.

Meanwhile, another set of orders involves federal workers. Aside from wanting workers to return to offices, the new president has ordered a hiring freeze.

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According to the text of the order, “As part of this freeze, no Federal civilian position that is vacant at noon on January 20, 2025, may be filled, and no new position may be created except as otherwise provided for in this memorandum or other applicable law.”

This move has been portrayed as a cost-cutting measure, but the freeze, which notably applies more harshly to the IRS, could have significant implications beyond budget management. That is particularly true given that tax season starts next week.

Here’s more of what you need to know.

Trump federal hiring freeze 2025

Trump’s federal Hiring Freeze is a 90-day freeze on hiring federal civilian employees across executive departments.

The freeze exempts military, national security, and public safety positions. It requires the Office of Management and Budget (OMB) to develop a plan to reduce the federal workforce through efficiency and attrition. The order to halt hiring came alongside a “Return to In-Person Work” order terminating remote work arrangements for federal employees. That order also:

• Mandates full-time, in-person work at duty stations
• Allows agency heads limited exemptions

Legal backlash: Several lawsuits have already been filed challenging various executive orders signed by President Trump, including against an order to make it easier to terminate career federal employees.

It’s worth noting that while federal hiring freezes are not new (former presidents Jimmy Carter and Ronald Regan implemented them, as did Trump in his first term), they aren’t a universal practice. And interestingly, Trump’s newly implemented hiring freeze carves out a more extended timeframe for the IRS.

“Upon issuance of the OMB plan, this memorandum shall expire for all executive departments and agencies, with the exception of the Internal Revenue Service (IRS). This memorandum shall remain in effect for the IRS until the Secretary of the Treasury, in consultation with the Director of OMB and the Administrator of USDS, determines that it is in the national interest to lift the freeze.”

The timing couldn’t be more precarious as the IRS wanted to boost hiring to improve operations and customer services.

Tax season starts soon

The 2025 tax filing season begins Monday, January 27, and the IRS is simultaneously managing the rollout of its expanded Direct File program in 25 states.

Additionally, the executive order comes as former Commissioner Danny Werfel has just stepped down, although he had years remaining in his term. As Kiplinger has reported, Trump’s pick for Commissioner, Billy Long, a former congressman and auctioneer with limited tax experience, awaits U.S. Senate confirmation.

The hiring freeze IRS carve-out adds to a planned shift from the Biden administration’s policies to modernize and strengthen IRS operations. Among those priorities were initiatives to hire more IRS agents and agency staff and focus on modernization and tax compliance for large corporations, high earners, and wealthy nonfilers.

Republican lawmakers have rallied against several Biden-era changes at the tax agency, including IRS Direct File (a new program available in 25 states that allows eligible taxpayers to file taxes for free directly with the tax agency).

IRS funding, billions of which have been clawed back in various stopgap measures since an initial $80 billion was initially allocated to the agency under the Inflation Reduction Act (IRA), has also been an issue. In recent years, false assertions have been made that thousands of IRS agents are coming for the tax dollars of hard-working Americans. And a recently proposed bill proposes to abolish the IRS and rewrite the tax code.

Separately, Trump has recently floated the idea of an External Revenue Service (ERS) — though it’s unclear whether such an agency would be connected to the IRS.

In any case, the implications of the hiring freeze and other key changes (like the likely dismantling of clean energy tax incentives like the EV tax credit expressed in another executive order) could affect millions of taxpayers preparing to file their 2024 taxes.

Tax refund status: Will IRS refunds be delayed this year?

Now that the tax agency faces the prospect of maintaining critical services with constraints on expanding its workforce, tax refund processing concerns come to mind for many.

In a typical year, the IRS processes over 140 million individual tax returns, with an average refund of around $3,100. Also, this month the IRS is automatically refunding unclaimed rebate recovery credits for eligible taxpayers.

• Audit capabilities could be an area of potential disruption. Some wonder if the freeze could reduce the agency’s ability to investigate tax discrepancies, particularly among high-income earners and large corporations. (The agency was in the process of hiring additional staff to handle such audits.)
• Could customer service suffer? With fewer staff to handle the agency’s many phone calls during tax season (reportedly about 92 million in FY23 ), taxpayers might face extended wait times on phone lines and slower responses to written communications.

So far, Treasury Department officials have been cautious in their public statements, noting that the hiring freeze will remain in effect per the executive order until a comprehensive review determines it serves the “national interest.”

However, AICPA vice president for tax policy and advocacy, Melanie Lauridsen wrote the following in a LinkedIn post.

“There is NO CONCERN for the April 15 tax filing season as far as hiring seasonal employees for the filing season. Seasonal employees should have already been hired and received training to begin working from January through May. The IRS will also reallocate workers from other areas to help cover filing season processing.“

Though, Michael Cohn, Editor-in-Chief of Accounting Today, told the news outlet, The Independent, that the freeze “could prove problematic during tax season.”

For taxpayers, the advice remains consistent: be prepared. For some, that might mean filing taxes early if they need or expect a tax refund. But for most, that means:

• Maintaining good financial records and documentation
• Being patient with potential processing and customer service delays
• Considering professional tax assistance
• Staying tuned to tax changes

As the 2025 tax season unfolds, eyes will be on the IRS to see how it manages the constraints and new leadership. Will the agency adapt and maintain service levels, or will taxpayers experience disruptions?

Only time will tell, but one thing seems inevitable: the landscape of U.S. tax administration is changing, and taxpayers will be among the first to feel the impacts.

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Originally Appeared Here

Danny Werfel, the commissioner of the Internal Revenue Service, will resign Monday, he told employees, as President-elect Donald Trump eyes a successor to undo much of President Joe Biden’s agenda at the tax agency.

Though the commissioner’s term wasn’t due to expire until 2027, Trump had previously announced plans to fire Werfel, who took office in 2023, and nominate Billy Long, a former Missouri congressman without any tax policy experience, to replace him.

Long’s Senate confirmation is not in doubt given the Republican majority in the chamber.

“Once the president announced his plans to bring in a new IRS commissioner, I had to recognize that the incoming team wanted to go in a new direction in terms of who was leading the IRS,” Werfel told The Washington Post. “So I worked to determine what would be the best departure timing that would stay true to my ongoing commitment to the IRS mission and also to my commitment to doing what’s necessary to support a successful transition.”

Deputy IRS Commissioner Doug O’Donnell will lead the agency in the interim, Werfel said. O’Donnell previously served as acting commissioner in 2022 before Werfel took office.

Congressional Democrats urged Werfel to remain in office and force Trump to fire him. Trump in his first term had mused about sending IRS agents after political opponents, and many tax experts are concerned that Long — as other Trump appointees have promised — will try to punish the president-elect’s perceived enemies.

Werfel said he was “confident that there are checks and balances in place to effectively prevent that politicization,” and that his decision to step down was in part aimed at heading off any notion of political allegiance at the agency.

“There’s a precedent for having commissioners complete their five-year terms, and when the president announced his plans to replace the IRS leadership, it signaled that he was moving away from that precedent,” Werfel said. “I am a fan of that precedent. I think that precedent helps for continuity and aligns with the IRS’s nonpartisanship. But I also recognize that the president has the authority to remove a commissioner at will and to select a new commissioner.

“This issue will be debated, and it should be. Right now in this moment, I had to do what I felt was best for the agency, and I didn’t want to be a distraction for the employees and the IRS mission.”

Werfel presided over a transformation at the tax service after Biden and congressional Democrats infused it with tens of billions of dollars in the 2022 Inflation Reduction Act.

The resources allowed the agency to begin modernizing its long-outdated IT systems and roll out a suite of new customer service features to make tax-filing easier. Individuals can upload dozens of forms to the IRS and in a number of states file their taxes directly with the agency free, using a government-backed feature that competes with paid tax-prep software such as Intuit TurboTax and H & R Block.

The results were successful overall, tax experts said. The IRS squashed its once multimillion-page backlog of tax filings and slashed wait times on customer service helplines.

New funding for stricter scrutiny of high-income taxpayers and major corporations netted billions of dollars in overdue payments and penalties, a feather in the Biden administration’s cap as it argued for “tax fairness.”

But Republicans said the new resources amounted to an overreach and a “shakedown” of middle-class taxpayers. The GOP has sought to claw back tens of billions of dollars from the IRS and is poised to rescind even more in a party-line tax and spending bill.

Werfel said he had not met with Trump transition officials aside from remedial briefings on the agency’s work. He offered to remain in his post until Long was confirmed by the Senate, but did not receive any answer to that proposal from Trump officials.

“Danny is not a political guy. He’s a great public servant. He did a great job, and I think was willing to do whatever he could to be helpful,” said John Koskinen, who served as IRS commissioner in the Obama and Trump administrations. “In some ways, his idea of gracefully stepping aside in light of any lack of indication that the new administration wanted him, he thought the most helpful thing to do would be to quietly step aside.”

Werfel said he hoped Long and the incoming Trump economic policy team would preserve the agency’s “momentum.”

“Enough progress has been made that important wins for taxpayers are on the horizon in the coming year or two, and I think the new administration will benefit from taking us across the finish line on some of the projects that are underway,” he said.

Originally Appeared Here

Maryland Gov. Wes Moore (D) on Wednesday revealed his plan to balance the state budget in the face of a $3 billion deficit, detailing wide-reaching cuts that would affect some vulnerable populations, key initiatives that he campaigned on and the state’s ambitious education goals.

At the same time, the governor floated raising income taxes for the state’s wealthiest earners and increasing taxes on some capital gains, gambling and cannabis to fill the looming budget hole. However, the proposed change to the state’s tax system would lower what nearly two-thirds of Maryland taxpayers pay, saving them an average of $173, and up to $300 per year.

For months, Moore has been foreshadowing that the state will face difficult choices as it seeks to address its worst financial crisis in 20 years, leading to budget shortfalls that are projected to balloon to nearly $6 billion by 2030.

Wednesday’s announcement offered the first glimpse into how the governor is willing to carry out the $2 billion in curtailed state spending he announced last week and signaled that he believes the fiscal crisis has met the “high bar” he set for raising new revenue.

Moore cast his plan as an approach that reins in expenditures while also investing $750 million in economic growth, especially in emerging industries such as cybersecurity, defense contracting, quantum computing and life sciences.

Now, Moore is tasked with making the case to lawmakers and the public to justify his proposed cuts and tax plan, the starting point in negotiations over how to address the budget shortfalls and steer Maryland to financial health.

“Where we can find efficiencies and where we can make things work better, we have to be unafraid to do it as a state,” Moore said in an interview Wednesday morning.

Lawmakers and advocates were still combing through the details of Moore’s plan, but many said the $67 billion proposed budget is a good starting point.

Moore’s proposal, which state lawmakers are likely to debate over the next 2½ months, balances the budget and would leave the state with a $106 million positive cash balance.

Sen. Jim Rosapepe (D-Prince George’s), vice chair of the Budget and Taxation Committee, welcomed the idea of asking the state’s wealthiest residents to contribute more in taxes.

Moore’s proposed overhaul of the tax code would result in lower bills for 60 percent of Maryland taxpayers, no change for 22 percent and a tax hike for 18 percent — the increases largely concentrated among those who make $750,000 or more per year, Moore said Wednesday.

Rosapepe said Maryland’s tax plan has been “too regressive for too long” and applauded the governor’s proposal to shift the tax burden away from working people and onto the state’s highest earners.

“Working people feel they pay too much in taxes, and they do,” Rosapepe said.

The governor’s budget plan is roughly 1.2 percent larger than in fiscal 2025 but would slow spending on some key initiatives that Moore campaigned on and that state leaders have touted as major priorities.

Among other cuts, Moore proposed temporarily freezing enrollment in the state’s child-care scholarship program, trimming the anticipated budget of the state’s Developmental Disabilities Administration and decreasing investment in public universities.

The governor has also floated cost-containment measures that will ask local jurisdictions to shoulder more financial burden across multiple programs and require hospitals and insurers to contribute more to the state’s hospital deficit assessment to cover expanding Medicaid expenses.

Sen. Guy Guzzone (D-Howard), chair of the Budget and Taxation Committee, called the governor’s effort to address the state’s deficit a “first step” in a course-correcting process that could take years, adding that he believed Moore’s proposed solutions were “reasonable” — even if Senate lawmakers may ultimately differ on the details.

Guzzone predicted lawmaker concern over Moore’s proposed cuts to programs that help people with disabilities and victims of crime.

“We will look at both of those very carefully,” Guzzone said. “We know how important those are to a number of constituencies.”

The governor is also recommending that the state adopt a policy known as combined reporting, which requires multistate parent companies and subsidiaries to report profits together for state tax purposes. Under Moore’s plan, the state would simultaneously adopt a cut to the corporate income tax rate.

The proposed tax changes also include ending the state’s inheritance tax, which would be offset by lowering the estate tax exemption from $5 million to $2 million. And some habits for Marylanders would get more pricey under Moore’s plan. The governor has suggested raising the tax on sports betting from 15 to 30 percent, raising the table game tax from 20 to 25 percent and hiking the tax on cannabis from 9 to 15 percent.

Whether lawmakers will support Moore’s recommendations to raise taxes for some and lower them for others remains to be seen. Nor is it clear where Democrats, who control both chambers of the General Assembly, will land on the governor’s proposed cuts.

“This is the moment. We’re going to be asking all Marylanders, is this important to you? Are you willing to pay a little extra to do it?” Guzzone said. “That’s what this moment is about.”

Republican lawmakers said they welcome Moore’s emphasis on growing the state’s economy, his proposal to lower corporate taxes and cut income taxes for many Marylanders, but they did not support other parts of the governor’s plan.

“I was very pleased he talked at length about how we have to grow our private sector economy,” said House Minority Leader Jason C. Buckel (R-Allegany). Buckel said investment in making Maryland a more competitive, business-friendly state was the “long-term solution” to budget woes.

Still, Buckel said he would have liked to see deeper cuts to spending and a plan that did not rely on increasing income taxes for nearly 1 in 5 Maryland taxpayers.

Del. David Moon (D-Montgomery), the House majority leader, called Moore’s plan “thoughtful and thorough.”

“I am applauding the governor at the moment for digging in on the deficit,” Moon said.

Last year, House Democrats proposed their own $1.2 billion tax, toll and fee increase package to generate revenue, though the General Assembly ultimately passed more modest changes to avoid major cuts to the state’s transportation budget.

Moon said Moore’s plan doesn’t exactly match their old one and predicted that his members will need to spend time comparing the proposed cuts and revenue to ensure the underlying values align.

“It’s going to be incumbent on the governor to sell the plan to the public,” Moon said.

Moon said one of the “trickier parts” of Moore’s budget plan will be the proposed cuts and delayed rollouts to key elements of the Blueprint.

The governor’s plan would permanently slash funding for behavioral health services in schools from $130 million to $40 million and delay the rollout of designated planning time for teachers, a move that would also affect the underlying formula used to decide how much money schools receive.

“We in the House have a high bar for changes to the Blueprint and public schools spending,” Moon said, adding that his members will need to see “good justification” for Moore’s modifications.

On Wednesday, Moore made the case that wealthier Marylanders — like himself — should be willing to contribute more in the form of higher taxes to help support better schools, safer streets and a stronger economy, even as the state reduces the tax burden for most taxpayers.

“We refuse to balance the budget on the backs of working class,” Moore said.

Originally Appeared Here

Beware, taxpayers! The IRS will start to accept 2024 tax year returns soon in late January 2025, most likely on January 27 or 29, although the exact date hasn’t been announced yet.

Filing your taxes early not only ensures you follow the rules but also speeds up the arrival of any refund you’re entitled to. The IRS recommends filing electronically and using direct deposit for quicker and smoother processing. Online tax platforms or professional preparers can make the process easier, helping you handle the often complicated tax system.

Taxpayers will have almost three months to file their returns, with the deadline set for April 15. That said, it’s better not to wait until the last minute—filing earlier means the IRS can process your refund sooner, if you’re due one.

The IRS is broadening its free program that lets people file their taxes directly with the agency.

Direct File Program Overview

The Direct File program, which enables taxpayers to prepare and submit their returns without needing commercial tax software, will be available to over 30 million individuals across 24 states during the 2025 tax season.

This program was first tested as a pilot in 12 states during the 2024 filing season. IRS Commissioner Daniel Werfel has announced that the program will become permanent, with plans to increase access for more taxpayers.

“We’re making major expansions to Direct File, which will allow millions more people to use the service in 2025,” Werfel said during a call with reporters on Thursday. He also mentioned that additional states might opt to join the program for the 2025 tax season.

States where the Program is Available

The 2024 pilot program was available in select states and catered to individuals with straightforward W-2 filings, allowing them to submit their returns directly to the IRS. According to the IRS, participants claimed over $90 million in refunds through the program.

States where the program was originally available in 2024:

• California
• New York
• Arizona
• Florida
• New Hampshire
• Nevada
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming
• Massachusetts

States to be added in 2025:

• Alaska
• Connecticut
• Idaho
• Kansas
• Maine
• Maryland
• New Jersey
• New Mexico
• North Carolina
• Oregon
• Pennsylvania
• Wisconsin

New Eligibility Guidelines and Benefits

New eligibility guidelines will expand the program to include taxpayers with 1099 income, as well as those claiming credits like the Child and Dependent Care Credit, the Retirement Savings Contributions Credit, and deductions for Health Savings Accounts, among others.

“Other countries have been offering their citizens this kind of option for years,” Treasury Deputy Secretary Wally Adeyemo said during the call with reporters. Several members of the Organization for Economic Cooperation and Development, such as Germany and Japan, use similar systems with pre-filled tax forms.

The idea of direct filing isn’t popular with commercial tax preparation software companies, which have made billions by charging people to use their platforms.

A new report from the IRS inspector general this week highlights that the agency hasn’t maintained adequate safeguards to protect data within the IRS Free File Alliance. This alliance is a long-standing partnership between the IRS and some commercial tax prep companies to offer free services to low- and middle-income taxpayers.

The Free File Alliance operates independently from the Direct File program.

The IRS was directed to explore the creation of a “direct file” system as part of the funding it received through the Inflation Reduction Act, signed into law by President Joe Biden in 2022. The law allocated $15 million and set a nine-month deadline for the IRS to deliver a report outlining how such a program could be implemented.

Filing taxes might not be anyone’s idea of a good time, but at least the IRS is working to make it a little less painful. After all, a system that’s easier to use means fewer headaches—and maybe fewer calls to your accountant at 3 a.m. And hey, if Germany and Japan can handle pre-filled tax forms, maybe we’re finally catching up… one tax season at a time!

Originally Appeared Here

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Originally Appeared Here