On this first episode of the Forbes Tax Breaks Podcast, Forbes Senior Writer and tax attorney Kelly Phillips Erb discusses the implications of the Trump administration's policies on the 2025 tax season. She highlights potential challenges due to hiring freezes and policy changes, and explores the impact on international taxation and foreign relations. Additionally, we answer a taxpayer question about the tax implications of child support and alimony. And we end by testing your knowledge of tax history.
Subscribe to the Tax Breaks Newslette herer:
https://www.forbes.com/sites/kellyphillipserb/2025/01/25/tax-breaks-the-welcome-to-the-not-so-usual-2025-tax-season-edition/
00:00 Introduction
00:44 The Impact of Donald Trump Executive Actions
07:48 Supreme Court Puts Business Ownership Reporting Block On Hold
10:30 Taxpayer Q&A
11:52 Tax Stats And Updates
14:53 Tax Industry Updates
16:40 Tax Trivia
17:56 Outro
SHOW NOTES:
Werfel’s Last Day:
https://www.forbes.com/sites/kellyphillipserb/2025/01/17/irs-commissioner-danny-werfel-announces-departure/
Long’s nomination:
https://www.forbes.com/sites/kellyphillipserb/2024/12/04/trump-picks-former-representative-billy-long-as-next-irs-commissioner/
Executive order hiring freeze:
https://www.forbes.com/sites/kellyphillipserb/2025/01/21/trump-signs-dozens-of-executive-orders-including-an-indefinite-freeze-on-irs-hiring/
Tax season open:
https://www.forbes.com/sites/kellyphillipserb/2025/01/10/irs-announces-2025-tax-filing-season-will-open-on-january-27/
Executive order trade:
https://www.forbes.com/sites/kellyphillipserb/2025/01/22/trump-orders-withdrawal-from-global-tax-deal-and-initiates-america-first-trade-policy/
Executive order birthright:
https://www.forbes.com/sites/darrencase/2025/01/22/trumps-first-day-back-and-the-impact-on-tax-and-estate-planning/
Supreme Court CTA:
https://www.forbes.com/sites/kellyphillipserb/2025/01/23/supreme-court-puts-business-ownership-reporting-block-on-hold-but-dont-rush-to-file-yet/
FinCEN:
https://www.fincen.gov/boi
Tax Notes transcript:
https://www.forbes.com/sites/taxnotes/2025/01/21/the-corporate-transparency-act-recent-challenges-and-confusion/
Foreign gifts
https://www.forbes.com/sites/virginialatorrejeker/2025/01/21/40-transfer-tax-irs-final-say-on-foreign-gifts-bequests-from-covered-expatriates/
Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes newsletters: https://newsletters.editori
Subscribe to the Tax Breaks Newslette herer:
https://www.forbes.com/sites/kellyphillipserb/2025/01/25/tax-breaks-the-welcome-to-the-not-so-usual-2025-tax-season-edition/
00:00 Introduction
00:44 The Impact of Donald Trump Executive Actions
07:48 Supreme Court Puts Business Ownership Reporting Block On Hold
10:30 Taxpayer Q&A
11:52 Tax Stats And Updates
14:53 Tax Industry Updates
16:40 Tax Trivia
17:56 Outro
SHOW NOTES:
Werfel’s Last Day:
https://www.forbes.com/sites/kellyphillipserb/2025/01/17/irs-commissioner-danny-werfel-announces-departure/
Long’s nomination:
https://www.forbes.com/sites/kellyphillipserb/2024/12/04/trump-picks-former-representative-billy-long-as-next-irs-commissioner/
Executive order hiring freeze:
https://www.forbes.com/sites/kellyphillipserb/2025/01/21/trump-signs-dozens-of-executive-orders-including-an-indefinite-freeze-on-irs-hiring/
Tax season open:
https://www.forbes.com/sites/kellyphillipserb/2025/01/10/irs-announces-2025-tax-filing-season-will-open-on-january-27/
Executive order trade:
https://www.forbes.com/sites/kellyphillipserb/2025/01/22/trump-orders-withdrawal-from-global-tax-deal-and-initiates-america-first-trade-policy/
Executive order birthright:
https://www.forbes.com/sites/darrencase/2025/01/22/trumps-first-day-back-and-the-impact-on-tax-and-estate-planning/
Supreme Court CTA:
https://www.forbes.com/sites/kellyphillipserb/2025/01/23/supreme-court-puts-business-ownership-reporting-block-on-hold-but-dont-rush-to-file-yet/
FinCEN:
https://www.fincen.gov/boi
Tax Notes transcript:
https://www.forbes.com/sites/taxnotes/2025/01/21/the-corporate-transparency-act-recent-challenges-and-confusion/
Foreign gifts
https://www.forbes.com/sites/virginialatorrejeker/2025/01/21/40-transfer-tax-irs-final-say-on-foreign-gifts-bequests-from-covered-expatriates/
Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes newsletters: https://newsletters.editori
Category
🛠️
LifestyleTranscript
00:00Welcome to the Tax Breaks Podcast.
00:07I'm your host, Kelly Phillips Erb.
00:10I'm a senior writer with Forbes, and you might have seen me around the web as Tax Girl.
00:14I'm also a tax attorney, and I work with tax professionals and taxpayers like you every
00:19day.
00:20There's a lot to talk about, so let's get started.
00:24This week, we're talking about a not-so-usual open to the 2025 tax filing season, plus President
00:31Trump signs executive orders that could impact your taxes, beneficial ownership information
00:36or BOI reporting updates, child support and taxes, tax season statistics, industry updates,
00:44and more.
00:45The tax season opens on Monday, January 27, 2025.
00:50That's the first day the IRS accepts tax returns for 2024.
00:54But the IRS news website, normally a flurry of activity and the run-up to the open, hasn't
01:00been updated in over a week.
01:02It's clear that things are changing at the IRS and that this tax season could be very
01:07different and difficult.
01:09And yes, I realize that this is the exact opposite of what I've been saying.
01:14I didn't think there would be any immediate impact on the tax filing season following
01:19the change from the Biden to the Trump administration.
01:21Sure, we knew there would be a change in tax policy, including a likely pullback in enforcement
01:26efforts, but I didn't expect any real changes that would impact this tax season.
01:32I was wrong.
01:33As a refresher, late last week, now-former IRS Commissioner Danny Werfel announced that
01:39his last day at the agency would be Monday, January 20, 2025.
01:44In his first week in office, Trump officially nominated former Congressman Billy Long, who
01:50has no training in tax accounting or law, to take his place.
01:54While taxpayers await the outcome of Long's confirmation hearing, Deputy IRS Commissioner
01:59Douglas O'Donnell has stepped in as Acting Commissioner.
02:03O'Donnell has served as Deputy Commissioner since early 2024.
02:06Normally, we would expect to see some sort of welcome or other introductory message from
02:11O'Donnell, but that hasn't happened yet.
02:14It may be that the IRS was a little distracted.
02:17President Trump signed dozens of executive actions on his first day in office, including
02:22some that will impact the IRS and draw taxes.
02:26One of those executive orders requires federal employees to return to work as soon as practicable
02:32on a full-time basis.
02:34The federal government is the nation's largest employer, with over 2 million civilian employees.
02:40The IRS has about 83,000 of these jobs.
02:43The move to force a return to office could send federal workers, including IRS employees,
02:49scurrying for the door.
02:50Trump also issued an order freezing hiring for most federal agencies.
02:55The hiring freeze does not apply to the military or immigration enforcement, national security,
03:00or public safety.
03:02The freeze is intended to be temporary, except for the IRS.
03:06Under the executive order, within 90 days, the Director of Office of Management and Budget
03:11OMB, in consultation with the Office of Personnel Management and the new Office of DOJ, must
03:18submit a plan to reduce the size of the government's workforce.
03:22Once the plan is submitted, the freeze will expire for all agencies other than the IRS.
03:28With respect to the IRS, the hiring freeze will remain in place until the Secretary of
03:33the Treasury, in consultation with OMB and DOJ, determines that it is in the national
03:38interest to lift the freeze.
03:40Before the announcement, the IRS had been actively hiring, with extra funding from the
03:45Inflation Reduction Act, which Democrats passed under Biden and Republicans have never liked.
03:51With the IRS planning to open tax season on the 27th, a hiring freeze could have an immediate
03:57impact.
03:58Taxpayers may feel the pinch.
04:00With reduced staff, tax returns could take longer to process, and taxpayers may have
04:04to wait longer to see their refunds.
04:07Trump also signed measures aimed at foreign policy and taxes.
04:11One presidential memorandum calls for implementing an America First trade policy.
04:16In this much lengthier directive, Trump directs his advisers to take action to establish a
04:23robust and reinvigorated trade policy.
04:26Among other things, this includes directing the Secretary of the Treasury to investigate
04:31the causes of trade deficits, recommend some solutions, and examine the creation of a new
04:37agency, the External Revenue Service, or ERS.
04:41The ERS would collect tariffs, duties, and other foreign trade-related revenues.
04:48The memorandum also requires the Secretary of the Treasury to investigate whether any
04:52foreign country subjects U.S. citizens or corporations to discriminatory or extraterritorial
04:59taxes.
05:00If so, Section 891 of the Code allows the President to double U.S. tax rates due by
05:06citizens and corporations of those countries, subject to certain thresholds.
05:11As an aside, the rule has been in place since 1934, but never been used.
05:16Trump also directed members of his administration to notify the Organization for Economic Cooperation
05:22and Development, called the OECD, that any commitments made by the prior administration
05:28related to the global tax deal were no longer valid.
05:31Here's what he's referring to.
05:33The OECD, which includes the United States, is made up of 38 member countries.
05:39It believes that the current tax system gives multinational companies—those that could
05:43easily move their operations and properties across borders—an unfair advantage over
05:48domestic businesses.
05:49The OECD also believes that when taxpayers see those multinational corporations avoiding
05:55paying taxes, even if it's done legally, it undermines all voluntary compliance.
06:00For years, these challenges have been broken down into two sets of talking points, referred
06:05to as Pillars 1 and 2.
06:08Pillar 1 focuses on where tax should be paid.
06:11As part of the Pillar 1 agreement, large multinational companies must pay taxes in the countries
06:17where they operate, not just where they have their headquarters.
06:20This would prevent companies from opening headquarters in low-tax countries simply to
06:24shift profits.
06:26Pillar 2 examines the amount of tax to be paid.
06:29The Pillar 2 agreement would establish a global minimum corporate tax rate of 15 percent.
06:35The current corporate tax rate in the U.S. is 21 percent.
06:39In contrast, Ireland's corporate tax rate—where many U.S. companies, like Apple, had previously
06:45established headquarters—is just 12.5 percent.
06:49Today, 140 countries have reached agreement on these issues, and until recently, that
06:54included the United States.
06:56Despite Trump's order, there's no immediate change here.
06:59But it does signal a shift in U.S. sentiment.
07:02Since the U.S. is a big player in the global economic scene, this could cause a real problem
07:07for the OECD—and for U.S. foreign relations—moving forward.
07:12Finally, an additional executive order declared the end of birthright citizenship in circumstances
07:18where an individual is born within the U.S., but neither of the parents are lawful permanent
07:23residents or U.S. citizens.
07:26That order has far-reaching implications, including from a tax and estate planning perspective,
07:31since the tax code's treatment of U.S. citizens and permanent residents versus non-U.S. citizens
07:36and non-permanent residents is quite different.
07:40Legal challenges have already been filed to halt implementation, but you can bet that
07:45tax and estate planners will be watching this one closely.
07:48If that feels like a lot of news, you're right.
07:51But at the end of the week, advisors and businesses got even more news.
07:55The Supreme Court has ruled—for now—on the Corporate Transparency Act, or CTA, granting
08:01the government's application for a stay of a Texas ruling that had blocked the Beneficial
08:06Ownership Interest, or BOI, reporting requirements.
08:09BOI reporting is the result of a 2021 law, called the Corporate Transparency Act, or
08:15CTA, that requires companies to file reports that identify a company's beneficial owners
08:21with FINCIN, the Financial Crimes Enforcement Network.
08:24A good rule of thumb?
08:26A company must report if it was created in the U.S. by filing a document with the Secretary
08:31of State or similar office, or, if it is a foreign company, it is registered to do business
08:36with the state or similar office.
08:39There are several exemptions—23 to be exact.
08:43Businesses that did not have to report include publicly traded companies, charitable corporations
08:48registered with the IRS, and certain large operating companies.
08:52But that wasn't all.
08:53While the high court was considering the request, another Texas court got into the act with
08:58a different result.
09:00On January 7, 2025, a U.S. District Judge in Texas granted a preliminary injunction
09:07and stay that would prohibit FINCIN from enforcing the new law—in that case, Smith v. U.S.
09:14Judge Jeremy D. Cronodal enjoined the government from enforcing the CTA not only against the
09:20plaintiffs and their related entities while the lawsuit continued, but it was a little
09:25bigger than that.
09:27The injunction purports to apply nationwide.
09:30In Smith, the plaintiffs made for a stay—there's that word again—of the reporting rule.
09:35Judge Cronodal granted that motion, staying—meaning temporarily stopping—the effective date
09:41of the boy reporting requirements while the lawsuit is pending.
09:45FINCIN acknowledged the Smith ruling on Friday, posting on its website that a separate nationwide
09:51order issued by a different federal judge in Texas remains in place, which means that
09:56reporting companies are not currently required to file beneficial ownership information with
10:02FINCIN despite the Supreme Court's action in Texas' top cop shop.
10:07Bottom line?
10:08The legal drama continues, but businesses don't need to rush to file just yet.
10:14Just before that ruling, an episode of Tax Notes Talk, the Tax Notes podcast, focused
10:19on where the CTA stands in light of recent litigation regarding its constitutionality.
10:25You can read the transcript of that episode on the Forbes.com Tax Notes blog.
10:30Speaking of podcasts, this is the first official episode of the Tax Breaks podcast.
10:36It features the tax news and information you've come to expect from our Tax Breaks
10:40newsletter, plus some special guests and value-added features.
10:44I'm excited about what the season holds and glad that you've chosen to join us.
10:49Now let's answer a taxpayer question.
10:52This week, a taxpayer asks, how do I claim voluntary child support I've paid on my
10:57taxes?
10:58Here's my answer.
11:00Child support payments are tax-neutral.
11:02That means there are no federal income tax consequences for making or receiving child
11:06support payments, no tax deduction for paying child support, and no reportable income for
11:11receiving child support.
11:12Alimony, however, is a bit different.
11:15For decades, alimony was tax-deductible.
11:17However, due to 2017 tax reform, alimony is no longer tax-deductible for agreements and
11:24orders signed on or after January 1, 2019.
11:29That also means it will not be taxable to the recipient.
11:33If you have an older agreement, the tax treatment stays as is unless you modify the agreement
11:38after January 1, 2019 by explicitly referencing that 2017 law.
11:44If you have a tax question or matter that you think we should cover in the next episode,
11:49let us know.
11:50You'll find more information in the show notes.
11:52Of course, if you follow me on Forbes, you know that I love looking at statistics and
11:57enjoy a good chart or map.
11:59This week, I'm focusing on filing statistics for the first week of the tax season.
12:04As I mentioned, the tax season will open on January 27, 2025.
12:09That date marks when the IRS will begin accepting paper and electronic tax returns.
12:14The agency expects more than 140 million individual tax returns to be filed by tax day April 15,
12:222025.
12:23Last year, the IRS received 15,318,000 individual tax returns in the first week of processing.
12:31But that was nearly a 20% drop from the same time period in the previous year.
12:36You can see what the opening tax season week has looked like year over year in the chart.
12:42You'll notice that 2021 was something of an anomaly.
12:45Due to the pandemic, the IRS tax filing season opened later than usual, so taxpayers who
12:51had hoped to file early had to hold on to their tax returns.
12:54I'll be following and sharing the filing stats for 2025, including average refund amounts
13:00and e-filed returns throughout the season.
13:04Now it's time for a deeper dive.
13:06This time, it's a look at final regulations focused on tax implications for U.S. persons
13:12receiving certain gifts and bequests from former U.S. citizens and long-term resident
13:17green card holders.
13:19Seventeen years after Congress enacted Section 2801 of the Tax Code, the IRS has finally
13:25released those final regs.
13:27The regulations clarify, to a certain extent, that the tax implications for U.S. persons
13:32receiving certain gifts and bequests from former U.S. citizens and long-term resident
13:38green card holders are as follows.
13:42Section 2801 imposes a transfer tax, currently at the rate of 40%, on the value of covered
13:47gifts and covered bequests received by U.S. persons, citizens, or residents from covered
13:53expatriates.
13:55Covered expatriates are individuals who meet certain criteria and who renounce U.S. citizenship
14:00or abandon long-term resident status.
14:03For green card holders, a tax expatriation can happen inadvertently when challenged at
14:08the border about meeting requirements for continued U.S. permanent residence.
14:13If a U.S. citizen or resident received a gift or bequest from a foreign person after
14:18June 17, 2008, they may be required to file Form 708 and pay the Section 2801 transfer
14:26tax.
14:27If that sounds unfamiliar, it's because it's a new form.
14:30The IRS has not yet made Form 708 available.
14:34Determining whether the transfer is subject to the transfer tax falls on the U.S. recipient.
14:40With that in mind, U.S. persons receiving gifts or inheritances from foreign persons
14:45should consult with tax professionals to navigate these rules.
14:49Failure to plan properly could result in unintended tax burdens.
14:53Now for something a little more brief, some quick accounting and tax newsmakers.
14:58First, private equity continues to make inroads in tax and accounting.
15:03Recently, Inflection, a European mid-market private equity firm, announced that it has
15:08agreed on a minority investment in Bakertille, Netherlands, a leading accountancy and advisory
15:13firm.
15:14The investment is being made by Partnership Capital III, Inflection's dedicated minority
15:19fund.
15:21Also in trends, a new trend could be brewing.
15:23The accounting firm KPMG hopes to expand into legal services.
15:28KPMG Law U.S., a subsidiary of KPMG U.S., applied to the Arizona Supreme Court to operate
15:35as an alternative business structure.
15:38Arizona is the first state in the country to do away with rules barring non-lawyers
15:43from co-owning law firms.
15:46And we know that the accounting profession has its share of challenges, but according
15:50to the Global Economic Conditions Survey, the largest regular economic survey of accountants
15:56worldwide, confidence among accountants and chief financial officers, or CFOs, has fallen
16:03sharply.
16:04The survey, which is carried out jointly by the Association of Chartered Certified Accountants
16:10and the Institute of Management Accountants, surveyed over 1,800 accountancy and finance
16:16professionals.
16:17The confidence level is now at its lowest since the second quarter of 2020.
16:22Finally, the Mississippi House of Representatives passed House Bill 1, which phases out the
16:28state income tax over a decade.
16:30The bill now goes to the Senate for consideration.
16:33Pay attention to this one.
16:35If federal support for states is reduced, I'd expect measures like this one to fail.
16:41And now, a little tax trivia.
16:43In what year did the IRS first accept e-filed returns?
16:47Your choices are A, 1981, B, 1986, C, 1992, or D, 1997.
16:58I'll give you a minute.
16:59The answer is B. In 1986, an IRS pilot program accepted 25,000 e-filed tax returns.
17:23Approximately five tax preparers in three metropolitan areas—Cincinnati, Raleigh-Durham,
17:29and Phoenix—agreed to participate.
17:32At the time, the system could only process returns that were due refunds.
17:36By 2011, 100 million returns were e-filed in one filing season, with a cumulative total
17:43exceeding 1 billion returns.
17:45That year, approximately three out of every four individual tax returns were filed electronically.
17:51Now, it seems like we all do, but back in the day, it was a little bit different.
17:57And that's a wrap for this week.
17:58I'd love to know what you thought of this episode.
18:01You can send an email with your feedback to me at kerb, K-E-R-B, at boards.com.
18:08And if you liked it, please share.
18:10You can find a link to the audio of each episode on boards.com.
18:14You can also subscribe at Apple Podcasts, Stitcher, Spotify, or your favorite listening
18:19app so you never miss an episode.
18:22Thanks for listening, because paying taxes is painful, but hearing about them shouldn't
18:27have to be.