Paragraph 1: A Tax Season Unlike Any Other
The 2025 tax season commenced on January 27th, shrouded in an unusual quietude. The customary pre-season buzz was absent, with minimal media coverage and a stagnant IRS news website. This stark contrast to previous years signaled potential challenges and complexities for taxpayers. Contrary to initial predictions, the change in administration from Biden to Trump brought immediate and significant impacts, extending beyond anticipated policy shifts. The sudden departure of IRS Commissioner Werfel, followed by the nomination of Congressman Billy Long, a figure lacking experience in tax, accounting, or law, injected further uncertainty into the proceedings.
Paragraph 2: Executive Orders and IRS Disruptions
The nascent Trump administration swiftly enacted a series of executive orders with repercussions for federal employees, including those at the IRS. A mandate requiring a full-time return to the office for federal workers threatened potential attrition within the IRS, while a hiring freeze, intended to be temporary for most agencies, was indefinitely imposed on the tax agency pending a Treasury Secretary review. This freeze, implemented amidst the IRS’s active hiring phase fueled by the Inflation Reduction Act, jeopardized the agency’s capacity to process tax returns efficiently, potentially leading to delays in refunds for taxpayers.
Paragraph 3: Global Tax Deal Disrupted
President Trump’s executive actions extended to international tax agreements. A memorandum declared the U.S. withdrawal from commitments made under the OECD’s global tax deal, specifically targeting Pillars One and Two. Pillar One, aimed at taxing multinational corporations in countries where they operate, and Pillar Two, establishing a 15% global minimum corporate tax, were central to the OECD’s efforts to address tax avoidance by multinational companies. This U.S. reversal, given the nation’s significant global economic influence, posed a considerable challenge to the OECD’s initiatives and potentially strained U.S. foreign relations.
Paragraph 4: "America First" Trade Policy and its Tax Implications
Further emphasizing his "America First" approach, Trump issued directives to investigate trade deficits, recommending solutions and exploring the formation of an External Revenue Service (ERS) responsible for collecting tariffs and foreign trade-related revenue. The directive also mandated an investigation into discriminatory or extraterritorial taxes imposed on U.S. citizens or corporations by foreign countries, invoking section 891 of the tax code, which empowers the President to double U.S. tax rates for citizens and corporations of such countries under specific conditions. An additional executive order aimed to end birthright citizenship in certain circumstances, raising complex tax and estate planning implications due to the differing tax code treatment of U.S. citizens and permanent residents compared to non-citizens and non-permanent residents.
Paragraph 5: Legal Battles over Corporate Transparency Act
Adding to the week’s turmoil, the Supreme Court intervened in the ongoing legal battle over the Corporate Transparency Act (CTA). The Court granted the government’s application for a stay of a Texas ruling that had blocked the beneficial ownership interest (BOI) reporting requirements. Concurrently, a different Texas court issued a nationwide preliminary injunction, prohibiting FinCEN from enforcing the CTA. This conflicting legal landscape left businesses in limbo, creating uncertainty regarding their reporting obligations under the CTA.
Paragraph 6: IRS Guidance, Tax Deadlines, and Industry News
Amidst the political and legal upheaval, the IRS released final regulations clarifying the tax implications for U.S. recipients of gifts and bequests from former U.S. citizens and long-term resident green card holders, introducing the new Form 708 for reporting such transfers. The newsletter also highlighted upcoming tax deadlines, including the January 27th start of tax season, the April 15th filing deadline, and various extensions for disaster-affected areas. Finally, it noted key industry updates, such as KPMG’s new Global Head of Audit, Skadden’s expansion of its Tax Group, Inflexion’s investment in Baker Tilly Netherlands, KPMG’s foray into legal services, and a decline in confidence among accounting and finance professionals. The launch of a new Tax Breaks podcast was also announced, promising further insights into tax news and information.
