Newsletters

March 4, 2025

The Department of the Treasury will not be enforcing beneficial ownership information regulations on U.S. citizens or domestic companies or their beneficial owner under existing deadlines.

In a March 2, 2025, announcement, the agency added that it will "not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either."

March 4, 2025

The Department of the Treasury will not be enforcing beneficial ownership information regulations on U.S. citizens or domestic companies or their beneficial owner under existing deadlines.

In a March 2, 2025, announcement, the agency added that it will "not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either."

According to the announcement, the Treasury Department is planning to issue a notice of proposed rulemaking "that will narrow the scope of the rule to foreign companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest."

Current statute does not limit BOI reporting to foreign companies.

The announcement by Treasury comes in the wake of the Financial Crimes Enforcement Network announcing that mandatory reporting was back in effect with a new reporting deadline 30 calendar days from February 19, 2025, for most companies. The new deadline followed a stay on the injunction order against the reporting requirements put in place by the U.S. District Court for the Eastern District of Texas.

As of March 3, 2025, the FinCEN BOI website still carries the following alert, updated February 19, 2025: "Beneficial ownership reporting requirements are back in effect, with a new deadline of March 21, 2025, for most companies. FinCEN will assess its options for further modifying deadlines."

However, FinCEN also issued an announcement on February 27, 2025, stating that it "will not issue any fines or penalties or take any other enforcement actions against companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines."

FinCEN added in that announcement that by March 21, 2025, it "intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported."

The agency is also planning on soliciting public comment on potential revising BOI reporting requirements for an NPRM that will be issued "later this year."

By Gregory Twachtman, Washington News Editor for Wolters Kluwer

Los Angeles County individuals and businesses impacted by fires that began on January 7, 2025, qualify for a postponement to file, and pay taxes until October 15, 2025.

Los Angeles County individuals and businesses impacted by fires that began on January 7, 2025, qualify for a postponement to file, and pay taxes until October 15, 2025.

This includes:

• 2024 individual income tax returns and payments normally due on April 15, 2025.
• Quarterly estimated tax payments normally due on January 15, April 15, June 15, September 15, 2025.
• Calendar-year 2024 partnership, limited liability company (LLC), and S corporation tax returns and payments normally due on March 15, 2025.
• Calendar-year 2024 corporate and fiduciary income tax returns and payments normally due on April 15, 2025.
• Calendar-year 2024 returns filed by tax-exempt organizations normally due on May 15, 2025.
• Calendar-year 2025 LLC annual tax payments normally due on April 15, 2025, and LLC estimated fee payments normally due on June 15, 2025.
• Passthrough Entity Elective Tax payments normally due on March 15 and June 15, 2025.

Note: Only Los Angeles County was granted the postponement to file and pay taxes until October 15, 2025. Taxpayers with their principal residence or their principal place of business located outside of Los Angeles County must file and pay by the normal due dates.

To our business clients.

WITHHOLDING FROM EMPLOYEES' PAYCHECKS:

1a. Social Security - The employee portion of this tax remains at 6.2% with a wage limit of $176,100. The employer’s portion of Social Security for 2025 also remains at 6.2%, on wages up to $176,100.  

1b. Medicare - The employee and employer each pay 1.45% and there is no cap on the amount of payroll which will be subject to this total tax of 2.9%. Because of the unlimited ceiling on Medicare, there is no maximum tax deduction.

Generally, payroll deposits will include 15.3% of wages (6.2% times 2, plus 1.45% times 2) on wages up to $176,100, and 2.9% of all wages thereafter. However, there is an additional Medicare withholding of 0.9% on employees earning over $200,000. So the employee’s normal Medicare tax rate of 1.45%, will rise to 2.35% on their earnings over $200,000 but the employer still pays only the 1.45% rate.

2. The rate for self-employment persons will be 15.3% on wages up to $176,100. The Medicare tax of 2.9% continues on amounts over $176,100. Self-employed people earning over $200,000 will also face the additional .9% Medicare tax. Because the Medicare tax applies to all earnings, there is no maximum self-employment tax. (There is a deduction allowed for self-employed persons for both self-employment tax and income tax computations).

3. Federal and State Income Tax - The amount of withholding will change for both Federal and State effective January 1, 2025.  Please see the updated federal Employer’s Tax Guide Publication 15 (Circular E) on the Internal Revenue Service website at: https://www.irs.gov/pub/irs-pdf/p15.pdf and the California Employment Development Department’s Publication DE 44 (updated each January) in the Publication dropdown menu at: https://edd.ca.gov/en/payroll_taxes/forms_and_publications/ 

4. State Disability Insurance - The rate will change to 1.2%, and there is no cap on the amount of payroll which will be subject to this tax.

EMPLOYER TAXES PAID QUARTERLY:

1. Federal Unemployment Tax - The 2025 federal unemployment tax rate is .6% on the first $7,000.
2. State Unemployment Insurance and Employment Training Tax - The wage limit will remain at $7,000.  Rates are set individually for employers. You will receive a notice of your 2025 rate in the mail or it can be accessed in your EDD e-Services for Business account. Please send a copy of any notice you receive to your payroll report preparer. 

2025 FEDERAL PAYROLL DEPOSIT REQUIREMENTS:

Federal Payroll Tax Deposits must follow the monthly or semi-weekly deposit method assigned to each employer by the IRS. The IRS will send a notice if your status changed from 2024; however, the employer is ultimately responsible for determining which deposit schedule actually applies. If you didn’t receive an IRS notice, you can make your own determination as shown below:

1. An employer’s status as a monthly or semi-weekly depositor should be known before the beginning of each calendar year and is determined annually. This determination is based on the amount of employment taxes the employer reported on the four quarterly reports for the 12-month period from July 1, 2023 through June 30, 2024.  
2. Employers who accumulated less than $2,500 of employment taxes during a quarter are only required to make a deposit at the end of the quarter. They can pay their payroll taxes with the quarterly form.
3. Employers who report $50,000 or less of employment taxes (taxes withheld from the employee plus the employer portion) during the 12-month period from July 1, 2023 through June 30, 2024, and all new employers, will be monthly depositors. The deposits will be due the 15th of the following month. NOTE: These deposits will have to be made electronically (see below).
4. Employers who reported more than $50,000 of employment taxes during the 12-month period from July 1, 2023 through June 30, 2024, will be semi-weekly depositors. The deposits will be required on or before either Wednesday or Friday, depending on the timing of the payroll. Semi-weekly depositors will still have at least three banking days after a payday to make the deposit. NOTE: These deposits will have to be made electronically (see below).
   Under the semi-weekly rule, the payroll taxes withheld plus the employer’s portion of the FICA/Medicare on payrolls which were paid on Wednesday, Thursday or Friday must be deposited by the following Wednesday. Payroll taxes, accumulated for a payroll period, which were paid on Saturday through Tuesday must be deposited by the following Friday. Remember, your deposit will be due either on a Wednesday or Friday.
5. Employers who accumulate $100,000 of employment taxes during a monthly or semi-weekly period are required to deposit those taxes by the next banking day. Once you make a next-banking-day deposit, you automatically become a semi-weekly depositor for the remainder of that calendar year and the following calendar year.

FEDERAL ELECTRONIC DEPOSIT REQUIREMENTS FOR 2025:

Employers must use the IRS’ EFTPS for making tax payments. There is an exception for employers with a deposit liability of less than $2,500 for a return period. These employers can remit employment taxes with their quarterly or annual return.

If you are required to use EFTPS for your Federal tax deposits and fail to do so, you may be subject to a 10% penalty. For deposits made by EFTPS to be considered on time, you must initiate the transaction at least one business day before the date the deposit is due. If you are new to EFTPS you will need to allow seven (7) days to get your pin number and complete your account set-up.

You may voluntarily participate in the Electronic Federal Tax Payment System even if you are not required to do so. 

To get more information or to enroll in EFTPS, call 1-800-555-4477, or visit the EFTPS web site at www.eftps.gov. 

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN, FORM 941

Each quarter’s wages subject to income tax, social security and/or Medicare taxes must be reported on Form 941. This form must be filed even if you have no taxes to report. Any employment taxes totaling less than $2,500 for the period and not previously deposited for the quarter can be paid with the report. 

Due dates for 2025 employment tax deposits are April 30, July 31, and October 31, 2025, and January 31, 2026, for the previous quarter. If all taxes have been deposited when due, and no tax is being paid with the return, an additional ten days is allowed to file the return. Late returns are subject to penalties on any unpaid tax due with the return.

2025 STATE PAYROLL TAX DEPOSIT REQUIREMENTS:

These deposits are required to be paid electronically. The depositing requirements are described below:

1. State deposit due dates are generally the same as federal deposit due dates.
2. Employers who are required to make federal monthly deposits and have accumulated $350 to $500 of undeposited state income tax withholding, are required to deposit all State Income Tax and State Disability Insurance withholding using the federal monthly deposit schedule.e.
3. Employers who deposit semi-weekly for federal purposes and have accumulated more than $500 of undeposited state income tax withholding are required to deposit all State Income Tax and State Disability Insurance withholding to the Employment Development Department using the federal semi-weekly deposit schedule.
4. Employers, who accumulate $100,000 of federal employment taxes, and more than $500 of state withholding taxes, must deposit all State Income Tax and State Disability Insurance withholding by the next banking day. Once you make a next banking day deposit, you automatically become a semi-weekly depositor for the remainder of that calendar year and the following calendar year.

5. If you accumulate more than $350 of state withholding taxes in a month or in the cumulative of two or more months, but are not required to make a federal monthly deposit, you are still required to deposit all State Income Tax and State Disability Insurance withheld by the 15th of the following month. Any withholding which is not required to be deposited based on the above will be due on April 30, July 31, and October 31, 2025 or January 31, 2026 for the preceding quarter. 

6. State Unemployment Insurance (SUI) and Employment Training Tax (ETT) must be deposited at least quarterly. 

A penalty of 15% plus interest will be charged on late payroll tax payments. 

CALIFORNIA ELECTRONIC DEPOSIT REQUIREMENTS:

e-Services for Business can be used to electronically submit all tax payments, wage reports and employment tax returns. Register at https://edd.ca.gov/eServices or contact the Taxpayer Assistance Center at 1-888-745-3886.

STATE WAGE AND WITHHOLDING REPORTS:

Employers file two quarterly reports, the DE 9 and DE 9C. These reports must be filed by April 30, July 31, and October 31, 2025, and January 31, 2026 for the previous quarter, even if you don’t have payroll during a quarter. A wage item penalty of $20.00 per employee will be charged for late or unreported employee wages. On these reports, be sure to include the full first name, not just the first initial.

The DE 9 and DE 9C forms must be filed on-line together using e-Services for Business. 

STATE REPORTING REQUIREMENTS FOR NEW OR RE-HIRED EMPLOYEES:

All employers are required to report the full name, social security number, home address and start-of-work date of each employee within twenty days of the start-of-work date.

Form DE 34, Report of New Employees, is used to report new employees.  The information may be filed online through e-Services for Business https://edd.ca.gov/eServices faxed to the EDD at 1-916-319-4400, or mailed to:

Employment Development Department
Document Management Group, MIC 96
P.O. Box 997016
West Sacramento, CA 95799-7016 

The reporting of new employees is required for all newly hired employees, employees rehired or returning to work from a furlough, separation, leave of absence without pay, or termination.  If a returning employee was not formally terminated or removed from payroll records and is returning after less than sixty consecutive days, you don’t need to report the employee as a rehire.

STATE REPORTING REQUIREMENTS FOR INDEPENDENT CONTRACTORS:

Businesses are required to report specific independent contractor information to the EDD if the following statements all apply:

• You will be required to file a 2025 Form 1099-NEC for the services performed by the independent contractor.
• You pay the independent contractor $600 or more OR enter into a contract for $600 or more.
• The independent contractor is an individual or sole proprietorship.

If all the above statements apply, you must report the independent contractor to the EDD within 20 days of paying/contracting for $600 or more in services. You are not required to report independent contractors that are corporations, general partnerships, limited liability partnerships, and limited liability companies. Form DE 542, Report of Independent Contractor(s), is used. The information may be filed online through e-Services for Business https://edd.ca.gov/eServices faxed to the EDD at 1-916-319-4410, or mailed to:

Employment Development Department
Document Management Group, MIC 96
P.O. Box 997350
Sacramento, CA  95899-7350 

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While we’ll try to inform you of any additional changes made during 2025, please be vigilant yourself and also seek out information on changes from your payroll processors.

If you need assistance in preparing your payroll checks or have other questions relating to these taxes, please call.  

STANDARD MILEAGE RATES FOR 2025

For 2025, the standard mileage rate for business mileage will be 70 cents per mile. The previous rate was 67 cents per mile.

The standard mileage rate for the use of a car when providing services to a charitable organization will remain at 14 cents per mile.

The standard mileage rate for the use of your car for medical expenses or deductible moving expenses will remain at 21 cents per mile.

By Tobias Salinger August 07, 2024

The IRS has quashed any remaining hope that it would alter its new guidelines for inherited individual retirement accounts, ending the "stretch" strategy for most beneficiaries.

With its finding in rules issued last month that tax revenue-raising provisions of the 2019 Secure Act require so-called noneligible beneficiaries who have inherited IRAs in 2020 or later to transfer all the assets into their income within a decade, the IRS told financial advisors and their clients that there would be no more delays in implementation or a shift in the final statutes. That means beneficiaries must begin taking required minimum distributions next year — if they haven't already started. But experts agree that it's likely past time to initiate that process.

"Everyone thought there was a mistake. The longer we waited for the final regulations, the more the industry seemed to be thinking, 'OK, they're actually going to hold us to this,'" Heather Zack, the director of high net worth solutions with Waltham, Massachusetts-based wealth management firm Commonwealth Financial Network, said in an interview.

By Tobias Salinger August 07, 2024

The IRS has quashed any remaining hope that it would alter its new guidelines for inherited individual retirement accounts, ending the "stretch" strategy for most beneficiaries.

With its finding in rules issued last month that tax revenue-raising provisions of the 2019 Secure Act require so-called noneligible beneficiaries who have inherited IRAs in 2020 or later to transfer all the assets into their income within a decade, the IRS told financial advisors and their clients that there would be no more delays in implementation or a shift in the final statutes. That means beneficiaries must begin taking required minimum distributions next year — if they haven't already started. But experts agree that it's likely past time to initiate that process.

"Everyone thought there was a mistake. The longer we waited for the final regulations, the more the industry seemed to be thinking, 'OK, they're actually going to hold us to this,'" Heather Zack, the director of high net worth solutions with Waltham, Massachusetts-based wealth management firm Commonwealth Financial Network, said in an interview.

That said, the rules point to "a strategy that most advisors were taking already" in seeking to "equalize distributions over 10 years" rather than setting up a "tax bomb" by taking them all at once, she noted. "I don't think there were many advisors who were telling their clients, 'Let's wait and take out everything in year 10.'"

The rules' implications to retirement planning with "a tax component" merit a conversation with clients who inherited an IRA in any of the past four years, said Matthew Cleary, a financial planner with Wakefield, Massachusetts-based 401(k) and wealth firm Sentinel Group.

"We want to bring that up absolutely, because it may be a situation where you do want to have more of a schedule to minimize the tax burden of taking it out in one year," Cleary said in an interview. "There are a couple of exceptions to that rule, but for the most part the stretch IRA is dead."

Caveats to the new 10-year requirement apply to eligible designated beneficiaries — a group that includes the spouse of the deceased IRA owner, heirs who are chronically ill or disabled, and heirs younger than the late retirement saver by only a decade or less, Zack and Cleary noted. Another carve-out from the mandatory distributions applies to heirs who are 20 years old or younger, who can still use the stretch strategy until they are 21, according to a blog post by Sarah Brenner, director of retirement planning for IRA advice firm Ed Slott & Company. At that age, the new rules state that the beneficiary must launch their distributions and empty the accounts into their own income within the 10-year window.

In addition, the rules maintained the "controversial" provision that most beneficiaries are subject to the 10-year guideline — even if the account owner died on or after the beginning period for the holder's own required minimum distributions, Brenner wrote in another blog.

"This rule requires annual RMDs to continue once they have started," she wrote. "Many believed this rule went away with the Secure Act, but apparently the IRS thought differently. Due to all the confusion its interpretation caused, the IRS waived RMDs during the 10-year period for beneficiaries for the years 2021, 2022, 2023, and 2024. In the newly released final regulations, the IRS is doubling down on its position that these annual RMDs are required. They must be taken starting in 2025. However, the IRS will not impose penalties for annual RMDs that were not taken for years before 2025."

In its announcement, the IRS specifically discussed the concerns around that interpretation.

"Treasury and IRS reviewed comments suggesting that a beneficiary of an individual who has started required annual distributions should not be required to continue those annual distributions if the remaining account balance is fully distributed within 10 years of the individual's death as required by the Secure Act," the agency said in its July 18 press release. "However, Treasury and IRS determined that the final regulations should retain the provision in the proposed regulations requiring such a beneficiary to continue receiving annual payments."

As part of his characteristically detailed social thread examining the tax impact of a newly released rule, Buckingham Strategic Wealth Chief Planning Officer and Kitces.com blog Lead Financial Planning Nerd Jeffrey Levine reported that finding as the answer to "the No. 1 question advisors have asked for 2+ years now," adding, "Sorry, I don't make the rules, I just report them!!!" The industry had been eagerly anticipating the guidelines, he said.

"I honestly can't remember a time when advisors, tax pros and 'mom and pop' investors more eagerly awaited news from the IRS," Levine said. "But more than 4.5 years after Secure was passed, we now have some definitive answers to key Q's."

IRA owners seeking to avoid a tax hit on their beneficiaries could convert traditional accounts to Roth ones, which usually won't carry any more duties tied to the added income, Cleary noted.

"They would still be subject to the 10-year rule, but then they don't necessarily have the tax issue," he said. "It's an idea for the right person who's able to pay those taxes up front."

While there are "not a ton" of strategies that advisors can take to reduce the impact of the distributions on their income once they start taking them, separate charitable donations and maximizing other deductions could mitigate part of the burden, Zack said. 

Since inherited IRAs are "something that every advisor deals with," the rules have created "this whole maze of different beneficiary withdrawal requirements" based on the year of the account owner's death and the age, spousal and health status of the heir, she noted. And the final rule clarified that the 10-year distribution span started with IRA owners who died in 2020 — regardless of the fact that the IRS pushed back the required distribution four years in a row.

"It's just made the landscape a lot more complicated for advisors and clients now than it used to be," Zack said. "That is definitely of concern for some folks. That clock has been running this entire time."

Every year, Americans donate billions of dollars to charity. Many donations are in cash. Others take the form of clothing and household items. With all this money involved, it's inevitable that some abuses occur. Current tax law cracks down on abuses by requiring that all donations of clothing and household items be in "good used condition or better."

Every year, Americans donate billions of dollars to charity. Many donations are in cash. Others take the form of clothing and household items. With all this money involved, it's inevitable that some abuses occur. Current tax law cracks down on abuses by requiring that all donations of clothing and household items be in "good used condition or better."

Good used or better condition
The law does not define good or better condition. For guidance, you can look to the standards that many charities already have in place. Many charities will not accept your donations of clothing or household items unless they are in good or better condition.

Clothing cannot be torn, soiled or stained. It must be clean and wearable. Many charities will reject a shirt with a torn collar or a jacket with a large tear in a sleeve. As one charity spokesperson summed it up, "Don't donate anything you wouldn't want to wear yourself."

Household items include furniture, furnishings, electronics, appliances, and linens, and similar items. Food, paintings, antiques, art, jewelry and collectibles are not household items. Household items must be in working condition. For example, a DVD player that does not work is not in good used or better condition. You can still donate it (if the charity will accept it) but you cannot claim a tax deduction. Household items, particularly furnishings and linens, must be clean and useable.

The law authorizes the IRS to deny a deduction for the contribution of a clothing or household item that has minimal monetary value. At the top of this list you can expect to find socks and undergarments.

Fair market value
You generally can deduct the fair market value of your donation. Unless your donation is new - for example, a blouse that has never been worn - its fair market value is not what you paid for it. Just like when you drive a new car off the dealer's lot, a new item loses value once you wear or use it. Therefore, its value is less than what you paid for it.

If you're not sure about an item's value, a reputable charity can help you determine its fair market value. Our office can also help you value your donations of used clothing and household items.

Get a receipt
Generally, you must obtain a receipt for your gift. If obtaining a receipt is impracticable, for example, you drop off clothing at a self-service donation center, you must maintain reliable written information about the contribution, such as the type and value of the property.

Charitable contributions of property of $250 or more must be substantiated by obtaining a contemporaneous written acknowledgement from the charity including an estimate of the value of the items. If your deduction for noncash contributions is greater than $500, you must attach Form 8283 to your tax return. Special rules apply if you are claiming a deduction of more than $5,000.

Exception
In some cases, the rules about good used or better condition do not apply. The restrictions do not apply if a deduction of more than $500 is claimed for the single clothing or household item and the taxpayer includes an appraisal with his or her return.

If you have any questions about the charitable contribution rules for donations of clothing and household items, give our office a call.

To our business clients:

Form 1099-NEC is to be used for reporting nonemployee compensation (NEC). This form must be filed by January 31, 2025 with the IRS and also provided to the recipient by this date. California participates in the combined Federal/State filing program for Form 1099-NEC which means that a copy of the form won’t need to be sent separately to the FTB.

The form 1099-MISC is still required for other types of payments and information. See below for the specific uses of this form. 

The 1099-NEC form is unusual in that it needs to be both to the IRS and the recipient by January 31st. Most other 1099s are due to the recipient by January 31st and to the IRS by February 28th.

The penalty for each instance of failing to file a correct 1099 form by the due date with the IRS is as follows:

• $60 per form if correctly filed within 30 days of the due date;
• $130 per form if correctly filed after 30 days of the due date but by August 1st;
• $330 per form if filed after August 1st, or not filed (assuming there was no intentional disregard);
• At least $660 per form with no maximum penalty if due to intentional disregard of the requirements.

A similar additional penalty framework applies if the payee isn’t provided their copy by these deadlines. 

California imposes its own penalties with the amount ranging between $15 and $130 per information return depending on the reason for the penalty. 

Federal business income tax returns contain two questions regarding the filing of 1099 forms. We'll be checking with you about your fulfilment of the 1099 form filing requirements in order to answer those questions correctly.

WHAT IS A 1099 FORM?

A 1099 form is an informational return on which businesses report various sorts of payments they've made to partnerships, sole proprietorships, individuals and certain types of corporations during the calendar year. Some of the most common types of 1099 forms are:

WHO SHOULD WE SEND A 1099 FORM TO?

They should be sent to partnerships, sole proprietorships, limited liability companies (LLC), limited liability partnerships (LLP), and individuals you made payments to in the course of your business. A 1099 should also be sent to any attorney, physician, or supplier of medical services even if they are a corporation. Any payment on which you take backup withholding for Federal income taxes must be reported on the appropriate Form 1099, regardless of the amount of the payment. This means:

1. Only send 1099s for payments you made related to the operation of your business.
2. You don't need to send 1099s for materials or products you purchased.
3. You don't need to send 1099s to corporations (unless it is for medical or legal services). However, the burden to find out if it's a corporation is on you. If the name has "Incorporated", "Inc.", "Corporation", or "Corp." in it, you can assume it's a corporation. Otherwise, you need to ask.
4. You don't need to send 1099s to exempt organizations, retirement trusts, or IRA accounts.

FILING RETURNS WITH THE IRS

Businesses who file 10 or more informational returns are required to file electronically through the IRS' FIRE System (Filing Information Returns Electronically). We can help you with this.

If you must file any Form 1098 or 1099 with the IRS and you are filing paper forms, you must send a separate Form 1096 with each different type of form, as the transmittal document.

For businesses located in California, the government copies need to be mailed to:

Department of the Treasury
IRS Submission Processing Center
1973 North Rulon White Blvd.
Ogden, UT 84201

CALIFORNIA REPORTING REQUIREMENTS

If you file IRS Forms 1099 series, Forms 5498, 1098 and W-2G with the IRS on paper, you are not required to file a paper copy of the same form with the Franchise Tax Board. The IRS will forward the information to them. 

When the Federal and State payment amounts differ, you may file information returns directly with the Franchise Tax Board.

WHAT INFORMATION DO YOU NEED FOR THE 1099 FORM?

1. Name and address of whom you paid.
2. The amount you paid them during 2024.
3. The type of payment made.
4. Their identification number. For an individual this would be their social security number. For a proprietorship, LLC, partnership, or corporation this would be their employer identification number which is a nine-digit number, usually beginning with "94-" or "77-".

IMPORTANT: It is extremely important that the name recorded on the 1099 agrees with the name listed on the Social Security Administration's records for the specified identification number. Therefore, in the case where an individual is self-employed, care must be taken to make sure that the name of the individual is listed on the 1099. Any "dba" name should be listed on the 1099 underneath the individual's legal name which agrees with the Social Security Administration's records.

WHAT IF SOMEONE WON'T GIVE US THEIR IDENTIFICATION NUMBER?

If someone won't give you their identification number, you're not sure they're giving you the correct number, or you're not sure they're incorporated as they say, then you should send them a W-9 form (available at the IRS website) by certified mail, return receipt requested. The receipt will document your request for their number and help you avoid the penalty for filing a 1099 form without an identification number. If the W-9 form is completed and returned to you, it will take you off the hook for both the accuracy of the identification number used and as to whether they're really a corporation.

WHAT CAN SEEBA & ASSOCIATES DO TO HELP?

Please give us a call if you would like us to help in the preparation of these 1099 forms. We can:

1. Answer your questions regarding the issues discussed above,
2. Prepare 1099 forms for you from information you've gathered, consisting of name, address, identification number, and amount paid in 2024, or
3. Figure the amount you've paid for 2024 from your books and records. Along with the address and identification number supplied by you, we'll prepare the 1099 forms.
4. e-File your 1099 forms via the IRS system.

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IMPORTANT

Please let us know as soon as possible if we can assist you since the 1099s are due by January 31st.

You should be getting an identification number or completed W-9 form from anyone you pay for services, even if less than $600, before you pay them. Otherwise, you are obligated to withhold 24% of their payment and remit it to the IRS. Please call us if you run into problems where the 24% "backup withholding" may come into effect.

You should also keep in mind that you will need to maintain records of amounts paid to independent contractors as payments are made or contracts are signed in order to comply with the 2025 Employment Development Department reporting requirement for independent contractors.

If you have any questions regarding 1099 filings, feel free to contact us.

So that the reporting for this fringe benefit is not so burdensome, the IRS allows employers to include the personal use of business-owned cars during November and December in the following year's W-2s. This means that W-2s for 2024 need to include the value of the personal use of the vehicles from November 1, 2023 to October 31, 2024 and that this value can be calculated now. Those clients using computerized payroll systems which prepare W-2s will have to inform the system of this fringe benefit value which needs to be included in payroll before the end of December.

The following information should serve to remind you of how to calculate the value of the personal use of business-owned cars for W-2 purposes and how to withhold taxes on it:

So that the reporting for this fringe benefit is not so burdensome, the IRS allows employers to include the personal use of business-owned cars during November and December in the following year's W-2s. This means that W-2s for 2024 need to include the value of the personal use of the vehicles from November 1, 2023 to October 31, 2024 and that this value can be calculated now. Those clients using computerized payroll systems which prepare W-2s will have to inform the system of this fringe benefit value which needs to be included in payroll before the end of December.

The following information should serve to remind you of how to calculate the value of the personal use of business-owned cars for W-2 purposes and how to withhold taxes on it:

1. For non-officer/shareholders:  If commuting is the only personal use of a business-owned car allowed by an employer, then the employer would need to include $3 a day in the employee's wages to recognize the value of the commute, plus 5.5 cents/mile for the fuel provided by the employer.

2. For officers and shareholders:  The personal use of a business-owned vehicle must be included in their W-2. The formula for computing the value of their personal use is as follows:
    

   1. Annual lease value based on the IRS table (see attached table) prorated for the number of months the vehicle was used from November 2023-October 2024.
   2. Times this value by the personal use percentage determined from mileage records maintained throughout the year which list business and personal miles driven.
   3. Then add the lesser of the actual cost, or 5.5 cents/mile, for gasoline provided by employer that was used for personal travel
   4. Next subtract any reimbursement that the employer receives from employee.
   5. The result is the value of the personal use of the business-owned vehicle to be included in employee's W-2 compensation.

                                                                            or                                      
                                                                 (A x B) + (C - D) = E

3. It is possible to avoid income tax withholding on the value of the personal use of an employer-provided vehicle. However, early action was required in order to avoid withholding income tax for 2024. The employer must have notified the employee in writing by January 31, 2024 or within 30 days after receiving the vehicle during the year, in order to avoid income tax withholding on this fringe benefit. If the employee is not notified of the withholding election by the specified dates, the employer must withhold income taxes on the value included in the W-2. For 2025, the employee must be notified in writing by January 31, 2025 or within 30 days of receiving the vehicle, in order to avoid 2025 withholding on this fringe benefit.

4. Even though an employer can avoid withholding income tax on the value of the personal use of a vehicle (as described in item 3 above), the Social Security tax (FICA), the Medicare tax, and State Disability Insurance (SDI) must be withheld on the value included in the W-2. However, there are some choices available on the timing of these withholdings. The employer is given the option of calculating and withholding these taxes on a pay period, quarterly, semi-annual, or annual basis. As stated previously, the annual period would run from November through October, which means that the employer could wait until the end of October to figure the taxes to be withheld. If the employee will reach the maximum Social Security wages for the year by that time, without considering the fringe benefit, only Medicare tax withholding would be necessary.

Please feel free to contact us if you need help in calculating the value of the personal usage of business owned cars, but remember it must be calculated in time to be included on the 2024 W-2 forms.

 Click here to view the Business Car Usage

All businesses are required to report independent contractors, to whom they will be issuing a 1099-MISC form, to the California Employment Development Department. The information provided will be forwarded to state and local child support agencies to help in their efforts to locate parents who are delinquent in their child support obligations.

The information must be reported to the EDD, using form DE 542 ("Report of Independent Contractors"), within twenty days of either entering a contract for $600 or more, or the date during the calendar year when total payments to the independent contractor reach $600. Form DE 542 requests the independent contractors' full name, social security number, address and the contract dates and amounts. You may obtain forms by calling the Employment Development Department at (916) 657-0529, accessing the EDD web site at www.edd.ca.gov, or contacting our office.

Only individuals working as independent contractors are to be reported. Thus, you don't need to report corporations or partnerships which you pay for services provided to your business. However, you must report all independent contractors you hire for $600 or more, regardless of whether the independent contractor lives or works in California or another state. You only need to report an independent contractor one time per each calendar year that you contract or pay the contractor $600 or more.

The completed DE 542 forms can be either mailed or faxed to the Employment Development Department. The mailing address is:Employment Development Department PO Box 997350 MIC 96 Sacramento, CA 95899-7350 And the fax number is: (916) 319-4410

The EDD may assess a $24 penalty for each failure to comply with the reporting requirements within the required time frame. Also, a penalty of $490 may be assessed for the failure to report the required information due to an agreement between you and the independent contractor to disregard the filing requirements.

California's state-run college saving program, Golden State Scholarshare Trust allows parents and others to put aside tax-deferred money for college.

Plan Features

Money that participants (parents, grandparents, businesses, etc.) contribute to the Scholarshare Trust will grow while in the participant's account and be tax free for federal and California purposes upon disbursement to the beneficiary's school of choice. The funds disbursed can cover room and board, as well as tuition fees, books, supplies and equipment required for enrollment or attendance at a "qualified institution" (defined below). The participant retains ownership of his/her deposits in the trust until disbursement, at which time ownership is transferred to the beneficiary (student). Interest earnings disbursed from the trust are not included in the beneficiary's gross income (while attending college).

Qualified Institutions

Neither the beneficiary nor the participant will have to choose a college when opening a Scholarshare account. However, the type of college the beneficiary plans to attend will affect the maximum contribution allowed, i.e., community college, state university, private institution, etc. The student may use the funds to attend any qualified institution. A qualified institution is one that offers credit toward:

A bachelor's degree; An associate's degree; A graduate level or professional degree; and Another recognized post-secondary credential. Certain proprietary and post-secondary vocational schools are also eligible institutions.

At the time the beneficiary enrolls in college, the Scholarshare Program will transfer payments from the participant's Scholarshare account directly to the college to pay the beneficiary's qualified expenses.

Transferability

If the beneficiary dies or does not attend college, the contributor has the option of canceling the account or changing the beneficiary. Cancellation results in a refund equal to the then-current market value less a penalty of no less than 10 percent of the earnings. The penalty is waived in the event of the beneficiary's death.

Without cause and before the beneficiary's admission to college, the contributor may change the beneficiary designation to relatives of the original beneficiary or relatives of the beneficiary's spouse, including the contributor if the contributor is a relative of the original beneficiary or a relative of the original beneficiary's spouse.

Income Tax Issues

There are no income tax deductions to the contributor for placing funds into a Scholarshare program. Taxation is avoided on the earnings. Amounts paid for tuition will also be eligible for both the HOPE credit and Lifetime Learning credit, subject to the rules that regularly apply to each of those credits.

Gift Tax Issues

For gift tax purposes, deposits are completed gifts of present interests to the designated beneficiary and therefore qualify for the annual gift tax and generation-skipping transfer tax exclusion of $15,000 per year per donee as indexed. They do not qualify as excludable education expenses under the gift tax rules which allow education expenses to be paid in addition to the $15,000 annual exclusion. If the deposit exceeds the annual exclusion amount, the contributor may elect to take the balance into account ratably over a five-year period on their gift tax return.

The Financial Crimes Enforcement Network (FinCEN) has announced that the mandatory beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) is back in effect. Because reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.

The Financial Crimes Enforcement Network (FinCEN) has announced that the mandatory beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) is back in effect. Because reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.

FinCEN's announcement is based on the decision by the U.S. District Court for the Eastern District of Texas (Tyler Division) to stay its prior nationwide injunction order against the reporting requirement (Smith v. U.S. Department of the Treasury, DC Tex., 6:24-cv-00336, Feb. 17, 2025). This district court stayed its prior order, pending appeal, in light of the U.S. Supreme Court’s recent order to stay the nationwide injunction against the reporting requirement that had been ordered by a different federal district court in Texas (McHenry v. Texas Top Cop Shop, Inc., SCt, No. 24A653, Jan. 23, 2025).

Given this latest district court decision, the regulations implementing the BOI reporting requirements of the CTA are no longer stayed.

Updated Reporting Deadlines

Subject to any applicable court orders, BOI reporting is now mandatory, but FinCEN is providing additional time for companies to report:

• For most reporting companies, the extended deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. FinCEN expects to provide an update before that date of any further modification of the deadline, recognizing that reporting companies may need additional time to comply.
• Reporting companies that were previously given a reporting deadline later than March 21, 2025, must file their initial BOI report by that later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.

Plaintiffs in National Small Business United v. Yellen, DC Ala., No. 5:22-cv-01448, are not required to report their beneficial ownership information to FinCEN at this time.

FinCEN Notice FIN-2025-CTA1

The IRS has issued Notice 2025-15, providing guidance on an alternative method for furnishing health coverage statements under Code Secs. 6055 and 6056. This method allows insurers and applicable large employers (ALEs) to comply with their reporting obligations by posting an online notice rather than automatically furnishing statements to individuals.

The IRS has issued Notice 2025-15, providing guidance on an alternative method for furnishing health coverage statements under Code Secs. 6055 and 6056. This method allows insurers and applicable large employers (ALEs) to comply with their reporting obligations by posting an online notice rather than automatically furnishing statements to individuals.

Under Code Sec. 6055, entities providing minimum essential coverage must report coverage details to the IRS and furnish statements to responsible individuals. Similarly, Code Sec. 6056 requires ALEs, generally those with 50 or more full-time employees, to report health insurance information for those employees. The Paperwork Burden Reduction Act amended these sections to introduce an alternative furnishing method, effective for statements related to returns for calendar years after 2023.

Instead of automatically providing statements, reporting entities may post a clear and conspicuous notice on their websites, informing individuals that they may request a copy of their statement. The notice must be posted by the original furnishing deadline, including any automatic 30-day extension, and must remain accessible through October 15 of the following year. If a responsible individual or full-time employee requests a statement, the reporting entity must furnish it within 30 days of the request or by January 31 of the following year, whichever is later.

For statements related to the 2024 calendar year, the notice must be posted by March 3, 2025. Statements may be furnished electronically if permitted under Reg. § 1.6055-2 for minimum essential coverage providers and Reg. § 301.6056-2 for ALEs.

This alternative method applies regardless of whether the individual shared responsibility payment under Code Sec. 5000A is zero. The guidance clarifies that this method applies to statements required under both Code Sec. 6055 and Code Sec. 6056. Reg. § 1.6055-1(g)(4)(ii)(B) sets forth the requirements for the alternative manner of furnishing statements under Code Sec. 6055, while the same framework applies to Code Sec. 6056 with relevant terminology adjustments. Form 1095-B, used for reporting minimum essential coverage, and Form 1095-C, used by ALEs to report health insurance offers, may be provided under this alternative method.

Notice 2025-15

The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2025 and the lease inclusion amounts for business vehicles first leased in 2025.

The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2025 and the lease inclusion amounts for business vehicles first leased in 2025.

Luxury Passenger Car Depreciation Caps

The luxury car depreciation caps for a passenger car placed in service in 2025 limit annual depreciation deductions to:

• $12,200 for the first year without bonus depreciation
• $20,200 for the first year with bonus depreciation
• $19,600 for the second year
• $11,800 for the third year
• $7,060 for the fourth through sixth year

Depreciation Caps for SUVs, Trucks and Vans

The luxury car depreciation caps for a sport utility vehicle, truck, or van placed in service in 2025 are:

• $12,200 for the first year without bonus depreciation
• $20,200 for the first year with bonus depreciation
• $19,600 for the second year
• $11,800 for the third year
• $7,060 for the fourth through sixth year

Excess Depreciation on Luxury Vehicles

If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends.

The annual cap for this excess depreciation is:

• $7,060 for passenger cars and
• $7,060 for SUVS, trucks, and vans.

Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans

If a vehicle is first leased in 2025, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:

• $62,000 for a passenger car, or
• $62,000 for an SUV, truck or van.

The 2025 lease inclusion tables provide the lease inclusion amounts for each year of the lease.

The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.

Rev. Proc. 2025-16

The leadership of the Senate Finance Committee have issued a discussion draft of bipartisan legislative proposals to make administrative and procedural improvements to the Internal Revenue Service.

A limited liability company (LLC) classified as a TEFRA partnership could not claim a charitable contribution deduction for a conservation easement because the easement deed failed to comply with the perpetuity requirements under Code Sec. 170(h)(5)(A) and Reg. § 1.170A-14(g)(6). The Tax Court determined that the language of the deed did not satisfy statutory requirements, rendering the claimed deduction invalid.

A limited liability company (LLC) classified as a TEFRA partnership could not claim a charitable contribution deduction for a conservation easement because the easement deed failed to comply with the perpetuity requirements under Code Sec. 170(h)(5)(A) and Reg. § 1.170A-14(g)(6). The Tax Court determined that the language of the deed did not satisfy statutory requirements, rendering the claimed deduction invalid.

Easement Valuation

The taxpayer asserted that the highest and best use of the property was as a commercial mining site, supporting a valuation significantly higher than its purchase price. However, the Court concluded that the record did not support this assertion. The Court found that the proposed mining use was not financially feasible or maximally productive. The IRS’s expert relied on comparable sales data, while the taxpayer’s valuation method was based on a discounted cash-flow analysis, which the Court found speculative and not supported by market data.

Penalties

The taxpayer contended that the IRS did not comply with supervisory approval process under Code Sec. 6751(b) prior to imposing penalties. However, the Court found that the concerned IRS revenue agent duly obtained prior supervisory approval and the IRS satisfied the procedural requirements under Code Sec. 6751(b). Because the valuation of the easement reported on the taxpayer’s return exceeded 200 percent of the Court-determined value, the misstatement was deemed "gross" under Code Sec. 6662(h)(2)(A)(i). Accordingly, the Court upheld accuracy-related penalties under Code Sec. 6662 for gross valuation misstatement, substantial understatement, and negligence.

Green Valley Investors, LLC, TC Memo. 2025-15, Dec. 62,617(M)

The Tax Court ruled that IRS Appeals Officers and Team Managers were not "Officers of the United States." Therefore, they did not need to be appointed under the Appointments Clause.

The Tax Court ruled that IRS Appeals Officers and Team Managers were not "Officers of the United States." Therefore, they did not need to be appointed under the Appointments Clause.

The taxpayer filed income taxes for tax years 2012 (TY) through TY 2017, but he did not pay tax. During a Collection Due Process (CDP) hearing, the taxpayer raised constitutional arguments that IRS Appeals and associated employees serve in violation of the Appointments Clause and the constitutional separation of powers.

No Significant Authority

The court noted that IRS Appeals officers do not wield significant authority. For instance, the officers do not have authority to examine witnesses, unlike Tax Court Special Trial Judges (STJs) and SEC Administrative Law Judges (ALJs). The Appeals officers also lack the power to issue, serve, and enforce summonses through the IRS’s general power to examine books and witnesses.

The court found no reason to deviate from earlier judgments in Tucker v. Commissioner (Tucker I), 135 T.C. 114, Dec. 58,279); and Tucker v. Commissioner (Tucker II), CA-DC, 676 F.3d 1129, 2012-1 ustc ¶50,312). Both judgments emphasized the court’s observations in the current case. In Buckley v. Valeo, 424 U.S. 1 (per curiam), the Supreme Court similarly held that Federal Election Commission (FEC) commissioners were not appointed in accordance with the Appointments Clause, and thus none of them were permitted to exercise "significant authority."

The taxpayer lacked standing to challenge the appointment of the IRS Appeals Chief, and said officers under the Appointments Clause, and the removal of the Chief under the separation of powers doctrine.

IRC Chief of Appeals

The taxpayer failed to prove that the Chief’s tenure affected his hearing and prejudiced him in some way, under standards in United States v. Smith, 962 F.3d 755 (4th Cir. 2020) and United States v. Castillo, 772 F. App’x 11 (3d Cir. 2019). The Chief did not participate in the taxpayer's CDP hearing, and so the Chief did not injure the taxpayer. The taxpayer's injury was not fairly traceable to the appointment (or lack thereof) of the Chief, and the Chief was too distant from the case for any court order pointed to him to redress the taxpayer's harm.

C.C. Tooke III, 164 TC No. 2, Dec. 62,610

Probably one of the more difficult decisions you will have to make as a consumer is whether to buy or lease your auto. Knowing the advantages and disadvantages of buying vs. leasing a new car or truck before you get to the car dealership can ease the decision-making process and may alleviate unpleasant surprises later.

Probably one of the more difficult decisions you will have to make as a consumer is whether to buy or lease your auto. Knowing the advantages and disadvantages of buying vs. leasing a new car or truck before you get to the car dealership can ease the decision-making process and may alleviate unpleasant surprises later.

Nearly one-third of all new vehicles (and up to 75% of all new luxury cars) are leased rather than purchased. But the decision to lease or buy must ultimately be made on an individual level, taking into consideration each person's facts and circumstances.

Buying

Advantages.

• You own the car at the end of the loan term.
• Lower insurance premiums.
• No mileage limitations.

Disadvantages.

• Higher upfront costs.
• Higher monthly payments.
• Buyer bears risk of future value decrease.

Leasing

Advantages.

• Lower upfront costs.
• Lower monthly payments.
• Lessor assumes risk of future value decrease.
• Greater purchasing power.
• Potential additional income tax benefits.
• Ease of disposition.

Disadvantages.

• You do not own the car at the end of the lease term, although you may have the option to purchase at that time.
• Higher insurance premiums.
• Potential early lease termination charges.
• Possible additional costs for abnormal wear & tear (determined by lessor).
• Extra charges for mileage in excess of mileage specified in your lease contract.

Before you make the decision whether to lease or buy your next vehicle, it makes sense to ask yourself the following questions:

How long do I plan to keep the vehicle? If you want to keep the car or truck longer than the term of the lease, you may be better off purchasing the vehicle as purchase contracts usually result in a lower overall cost of ownership.

How much am I going to drive the vehicle? If you are an outside salesperson and you drive 30,000 miles per year, any benefits you may have gained upfront by leasing will surely be lost in the end to excess mileage charges. Most lease contracts include mileage of between 12,000-15,000 per year - any miles driven in excess of the limit are subject to some pretty hefty charges.

How expensive of a vehicle do I want? If you can really only afford monthly payments on a Honda Civic but you've got your eye on a Lexus, you may want to consider leasing. Leasing usually results in lower upfront fees in the form of lower down payments and deferred sales tax, in addition to lower monthly payments. This combination can make it easier for you to get into the car of your dreams.

If you have any questions about the tax ramifications regarding buying vs. leasing an automobile or would like some additional information when making your decision, please contact the office.