As NATP concluded its fourth annual TaxCon, tax professionals gathered virtually to discuss how recent election outcomes might shape the tax landscape. With the results still fresh, Tom O’Saben, NATP’s director of Tax Content and Government Relations, moderated a lively session featuring:

• Kelly Phillips Erb, JD, LLM, tax attorney and Forbes writer
• Larry Gray, CPA, NATP government liaison
• A.J. Reynolds, EA, NATP instructor

Together, they explored the potential for new tax legislation, offered practical advice for tax preparers, and discussed the challenges and opportunities presented by this transitional period in U.S. tax policy.

Key Takeaways

Business as usual (for now)

The consensus among the panelists was it should be business as usual for the upcoming tax season. Although there are changes on the horizon, the experts agreed that any new tax policies are unlikely to disrupt the upcoming filing season. With the new administration transitioning, significant legislation will likely take time to navigate through Congress. Gray emphasized the importance of the “lame-duck session” – the period after the elections but before the new Congress is sworn in – where the current Congress could pass last-minute bills.

One key proposal to watch is the Smith-Widen bill, which could be passed during the lame-duck session. This bipartisan bill championed by prominent Ways and Means and Senate Finance committees members could impact tax policy moving forward. However, if changes arise that affect current or prior year tax returns, NATP will be ready to update members promptly.

Checks and balances remain

The election’s close results underscore America’s commitment to a balanced government, preventing one party from holding unchecked power. Phillips Erb noted that while Republicans hold the presidency and a narrow Senate majority, the lack of a supermajority (60 votes) in the Senate means tax reforms could use the reconciliation process. If laws are passed using this method, they are temporary (in short the legislation cannot last longer than 10 years).

Qualified business income deduction (QBI) likely to stay

Panelists broadly agreed that the QBI deduction would likely remain intact, albeit with potential modifications. While the deduction provides a substantial benefit to small business owners, it’s been subject to political debate. Gray suggested the deduction may be capped or further targeted to ensure it primarily benefits middle-income earners, but it’s expected to survive any upcoming legislative revisions.

Estate tax exemption: will it snap back?

The panel also discussed the estate tax exemption, which doubled under the Tax Cuts and Jobs Act (TCJA) but is scheduled to revert to pre-TCJA levels after 2025. While some anticipated a gradual reduction, Reynolds speculated the exemption might stabilize around $12 million rather than reverting fully to potentially $7 million. Gray advised against any immediate changes in estate planning strategies, encouraging preparers to “wait and see” as details unfold.

Corporate tax rates and domestic incentives

Corporate tax rates are another area to keep an eye on. While the current rate is set at a flat 21%, there has been mention of dropping this to 20%, or even having a tiered structure based on gross income from the business. Reynolds also mentioned a potential 15% tax rate on U.S.-manufactured goods, intended to incentivize domestic production. For agricultural clients, this would provide an additional advantage, allowing them to retain a larger share of their revenue. However, Reynolds and Gray both advised practitioners to approach this with caution, as it’s still speculative.

State and local tax deduction (SALT)

A prominent discussion point was the $10,000 cap on state and local tax (SALT) deductions, a point of contention since it disproportionately affects taxpayers in high-tax states. Phillips Erb mentioned that bipartisan support exists for modifying or removing this cap, possibly raising the limit to alleviate tax burdens for middle-income earners. However, as Reynolds pointed out, removing the SALT cap could impact revenue neutrality, potentially complicating the reconciliation process. With growing interest from both parties, SALT may be a key area for reform in upcoming sessions.

What this means for tax professionals

The panel advised tax professionals to approach this tax season with a “business as usual” mentality. While significant reforms are possible, they are not imminent. Reynolds recommended that preparers use this time to begin conversations with clients about potential future changes, particularly as we approach the scheduled expiration of TCJA provisions in 2025.

Gray suggested that practitioners maintain detailed notes on their clients’ concerns, which will help with future consultations should new laws pass. Phillips Erb highlighted the importance of staying informed and monitoring updates through NATP and other professional networks, as small changes could arise in Congress’s lame-duck session.

Closing thoughts: a season of watchful waiting

The panel ended with a message of calm and preparedness. While the election’s results signal a new direction, the path to new tax legislation will likely be steady rather than swift. For now, preparers should focus on the upcoming tax season without anticipating immediate disruptions. However, NATP and other professional associations will remain vigilant, providing timely updates on any legislative developments that may affect members.

Watch the full discussion

For those interested in a deeper dive into these topics, we encourage you to watch the full panel discussion embedded below. It’s a fantastic opportunity to hear from experts on the potential impacts of this election on tax policy and to better prepare for the future.

After the Treasury Inspector General for Tax Administration (TIGTA) found the IRS has not applied tax filing requirements related to reported gambling winnings, the IRS is beginning to take enforcement actions and conduct a review of the reasons non-filers have not been identified. TIGTA found the IRS has not enforced income tax return filing requirements for the recipients of millions of Forms W-2G, Certain Gambling Winnings, that reported millions of dollars in gambling winnings.

TIGTA reached its conclusions after reviewing all the Forms W-2G issued to individuals during tax years 2018 through 2020 and found 148,908 individuals with gambling winnings totaling $15,000 each who were issued Forms W-2G, but did not file a tax return. In total, these nonfilers were associated with approximately $13.2 billion in total gambling winnings.

Following TIGTA’s review, the IRS analyzed 17,436 high-income nonfilers with a total positive income of $100,000 or more for the 2018 tax year and calculated that it could increase tax revenue by roughly $1.4 billion by addressing 139,045 nonfilers with gambling winnings that were included in the agency’s nonfiler case creation process inventory. The IRS also said it will begin appropriate enforcement actions for nonfilers with gambling winnings for the 2018 through 2020 tax years, including against the top 100 nonfiler cases identified by TIGTA.

The IRS also agreed to review and profile the population of nonfilers with gambling winnings for the 2018 through 2020 tax years that were not identified by the agency’s Individual Master File Case Creation Nonfiler Identification Process (IMF CCNIP). The research will determine potential reasons why nonfiler returns were not identified and assess the current state of the returns to determine whether filing requirements have been satisfied. If a taxpayer has not satisfied the filing requirement and enforcement is applicable, then the Collection or Exam divisions will consider manual enforcement.

While TIGTA found hundreds of the Forms W-2G it reviewed did not include the taxpayer identification numbers (TINs) necessary to trace income to the recipient, the IRS disagreed with TIGTA’s recommendation that it conduct an analysis of forms missing TINs. IRS officials maintained that Forms W-2G that were issued with missing or invalid TINs do not contribute significantly to the tax gap. Additionally, it said the percentage of Forms W-2G filed without TINs were an insignificant percentage of the total annual volume of Forms W-2G it receives.

For tax professionals looking to enhance their understanding the federal income tax implications of gambling, check out our Tax Consequences of Gambling on-demand webinar. This session offers 2 CPE for AFSP, EA, CPA, and CRTP and covers essential insights into reporting requirements for both recreational and professional gamblers. From differentiating between casual and professional gambling to addressing foreign tax reporting obligations, this course will equip you with the knowledge to navigate these complex tax scenarios confidently.

Day cares have unique income and expense categories, such as meals, educational supplies and home office deductions, that significantly impact allowable deductions and credits.

With a proper understanding of how to handle these taxes, you can ensure compliance with IRS rules, maximize tax savings and reduce the risk of costly audits or penalties, allowing your clients to focus on their business operations with peace of mind.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Can the taxpayer count expenses for the children of the day care owner?

A: The owner’s children’s expenses are not part of the business.

Q: For calculating meal expenses for the day care children, can the standard or actual meal method be changed every year, or must the same method be used?

A: The method used to calculate meal expenses can be changed every year.

Q: For in-home day care, do most expenses go on Form 8829, Expenses for Business Use of Your Home?

A: Office-in-home expenses are reported on Form 8829, while other expenses go directly on Schedule C, Profit or Loss from Business.

Q: If you go grocery shopping and buy items for both the day care and your family, do you need to purchase these separately?

A: It would be easier for tracking purposes to purchase separately for the day care. If purchased together, you would need to separate the business and personal items.

To learn more about handling taxes for day cares, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.