The IRS has provided interim guidance on the deductions for qualified tips and qualified overtime compensation under the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). For tax year 2025, employers and other payors are not required to separately account for cash tips or qualified overtime compensation on Forms W-2, 1099-NEC, or 1099-MISC furnished to individual taxpayers.

The IRS provided guidance on changes relating to health savings accounts (HSAs) under the One, Big, Beautiful Bill Act (OBBBA) (P.L. 119-21). These changes generally expand the availability of HSAs under Code Sec. 223.

The IRS provided guidance on changes relating to health savings accounts (HSAs) under the One, Big, Beautiful Bill Act (OBBBA) (P.L. 119-21). These changes generally expand the availability of HSAs under Code Sec. 223.

Background

To access HSAs, individual taxpayers (1) need to be covered under a high-deductible health plan (HDHP) and (2) should not have other disqualifying health coverage. The minimum annual deductible for an HDHP in 2025 is $1,650 for self-only coverage and $3,300 for family coverage. The out-of-pocket maximum for TY 2025 is $8,300 for self-only coverage and $16,600 for family coverage.

OBBBA Changes

The OBBA made a few key changes to HDHPs and, by extension, HSAs. First, it made permanent a safe harbor for HDHPs that have no deductible for telehealth and other remote care services. The OBBBA permanent extension applies retroactively after December 31, 2024.

Second, the term HDHP now includes any plan under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) that is available as individual coverage through an exchange, including bronze and catastrophic plans. Before the OBBBA was enacted, many bronze plans did not qualify as HDHPs because the plans’ out-of-pocket maximum exceeded the statutory limits for HDHPs or because they provided benefits that were not preventive care without a deductible. Similarly, catastrophic plans could not be HDHPs because they were required to provide three primary care visits before the minimum deductible was satisfied and to have an out-of-pocket maximum that exceeded the statutory limits for HDHPs. This provision amending the definition of an HDHP applies for months after December 31, 2025.

Finally, direct primary care service arrangements (DPCSA) under Code Sec. 223(c)(1)(E)(ii) are no longer treated as a health plan for purposes of determining HSA eligibility and enrollment, and enrolling in a DPCSA will not cause a taxpayer to fail eligibility to contribute to an HSA. These DPCSAs changes would apply after December 31, 2025.

Q&As

The IRS answered several common questions from the public regarding these three provisions with regards to administration and eligibility.

Notice 2026-5

IR 2025-119

The IRS has answered initial questions regarding Trump accounts, which it intends to address in forthcoming proposed regulations. The guidance addresses general questions relating to the establishment of the accounts, contributions to the accounts, and distributions from the accounts under Code Secs. 128, 530A, and 6434. Comments, specifically on issues identified in the notice, should be submitted in writing on or before February 20, 2026, by mail or electronically.

The IRS has answered initial questions regarding Trump accounts, which it intends to address in forthcoming proposed regulations. The guidance addresses general questions relating to the establishment of the accounts, contributions to the accounts, and distributions from the accounts under Code Secs. 128, 530A, and 6434. Comments, specifically on issues identified in the notice, should be submitted in writing on or before February 20, 2026, by mail or electronically.

Establishment of the Accounts

An account may be established for the benefit of an eligible individual by making an election on Form 4547, Trump Account Election(s), or through an online tool or application on trumpaccounts.gov. A Trump account may be created at the same time that an election is made to receive a pilot program contribution. A Trump account is a traditional IRA under Code Sec. 408(a).

A rollover Trump account can only be established after the initial Trump account is created and during the growth period of the account, which is the period that ends before January 1 of the calendar year in which the account beneficiary attains age 18. A rollover account must first be funded by a qualified rollover contribution before receiving any other contribution. Additional rules regarding the choice of trustee, rollover accounts, and the written government instrument requirements are discussed in section III.A of the notice.

Pilot Program and Contributions

The election to receive a pilot program contribution is made on Form 4547 or through the online tool, once available. Pilot program contributions will be deposited into the Trump account of an eligible child no earlier than July 4, 2026.

Trustees of Trump accounts must maintain procedures to prevent contributions from exceeding the annual limit of Code Sec. 530A(c)(2)(A). Trustees are required to collect and report the amount and sources of contributions. Contributions may be made to a Trump account and to an individual retirement arrangement for the same individual during the growth period in accordance with the rules of Code Secs. 408 and 530A(c)(2).

Qualified general contributions will be transferred by the Treasury Department or its agent to the trustee of a Trump account pursuant to a general funding contribution. More information on how and where permitted entities will make an application to make a general funding contribution will be provided before the application process opens.

An employer can exclude up to $2,500 from the gross income of an employee for a contribution made by the employer to a Trump account contribution program. The annual limit is per employee, not per dependent. A Trump account contribution may be made by salary reduction under a Code Sec. 125 cafeteria plan if the contribution is made to the Trump account of the employee's dependent and not if the contribution is made to the Trump account of the employee.

Eligible Investments

The terms "mutual fund" and "exchange traded fund" are explained, with additional comments requested on their definitions. The tracking of returns of an index and leverage for purposes of Trump accounts are also described. A mutual fund or exchange traded fund will meet the requirements of having annual fees and expenses of no more than 0.1% of the balance of the investment fund if the sum of its annual fees and expenses is less than 0.1% of the value of the fund's net assets. Additional questions regarding eligible investments are discussed in section III.D of the notice.

Distributions

Only permitted distributions, which are qualified rollover contributions or qualified ABLE rollover contributions, excess contributions, or distributions upon the death of an account beneficiary, are allowed during the growth period. Hardship distributions during the growth period are not allowed. If an account beneficiary dies after the growth period, the rules that apply to other individual retirement accounts after the death of the account owner apply. If the Trump account beneficiary dies during the growth period, the account ceases to be a Trump account and an IRA as of the date of death.

Reporting and Coordination with IRA Rules

Annual reporting by the Trump account trustee is required. Forms and instructions will be issued in the future. After the growth period, distributions from Trump accounts are governed by the IRA distribution rules of Code Sec. 408(d).

Notice 2025-68

IR 2025-117

The IRS intends to issue proposed regulations to implement Code Sec. 25F, as added by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). Code Sec. 25F allows a credit for an individual taxpayer's qualified contribution to a scholarship granting organization (SGO) providing qualified elementary and secondary scholarships.

The IRS intends to issue proposed regulations to implement Code Sec. 25F, as added by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). Code Sec. 25F allows a credit for an individual taxpayer's qualified contribution to a scholarship granting organization (SGO) providing qualified elementary and secondary scholarships.

Tax Credit

Beginning January 1, 2027, individual taxpayers may claim a nonrefundable federal tax credit for cash contributions to SGOs. Taxpayers must be citizens or residents of the United States. The credit allowed to any taxpayer is limited to $1,700. The credit is reduced by the amount allowed as a credit on any state tax return. Additionally, to prevent a double benefit, no deduction is allowed under Code Sec. 170 for any amount taken into account as a qualified contribution for purposes of the Code Sec. 25F credit.

SGO Requirements

An organization can qualify as an SGO after satisfying conditions that include (1) being a Code Sec. 501(c)(3) organization that is exempt from tax under Code Sec. 501(a) and not a private foundation; (2) maintaining one or more separate accounts exclusively for qualified contributions; (3) appearing on the list submitted for the applicable covered state under Code Sec. 25F(g); and (4) providing scholarships to 10 or more students who do not all attend the same school, as well as meeting certain other requirements.

Request for Comments

The forthcoming proposed regulations describe the certification process currently envisioned by the Treasury Department and the IRS for covered states to elect to participate under Code Sec. 25F . The IRS requests comments on these matters before December 26, 2025, through the Federal e-Rulemaking portal (indicate “IRS-2025-0466”). Paper submissions should be sent to: Internal Revenue Service, CC:PA:01:PR (Notice 2025-70), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Notice 2025-70

IR-2025-115

The IRS has disclosed the first set of certifications for the qualifying advanced energy project credit under Code Sec. 48C(e).

The IRS has disclosed the first set of certifications for the qualifying advanced energy project credit under Code Sec. 48C(e) for the period beginning:

• March 29, 2024, through September 30, 2025, resulting from the Round 1 allocation; and
• January 10, 2025, through September 30, 2025, resulting from the Round 2 allocation.

The Service also disclosed the identities of taxpayers and amounts of the Code Sec. 48C credits allocated to said taxpayers.

Background

Notice 2023-18, I.R.B. 2023-10, established a program to allocate $10 billion of credits for qualified investments in eligible qualifying advanced energy projects under Code Sec. 48C(e)(1). Code Sec. 48C(e)(4)(A) provides a base credit rate of 6 percent of the qualified investment. In cases where projects satisfy Code Secs. 48C(e)(5)(A) and (6), the Service would provide an alternative rate of 30 percent of the qualified investment.

Certification

Each applicant for certification has two years from the date of acceptance of the Code Sec. 48C(e) application. During this time, the applicant needs to submit evidence that the requirements of the certification have been met. The IRS will publish additional notices annually for certifications issued during each successive 12-month period beginning on October 1, 2025 for both Round 1 and 2.

Announcement 2025-22

Announcement 2025-23

The IRS and Treasury Department have provided procedures for a state to elect to be a “covered state” to participate with the Code Sec. 25F credit program for calendar year 2027 prior to identifying any scholarship granting organizations (SGOs) in the state. Form 15714 is used by a state to make the advanced election.

The IRS and Treasury Department have provided procedures for a state to elect to be a “covered state” to participate with the Code Sec. 25F credit program for calendar year 2027 prior to identifying any scholarship granting organizations (SGOs) in the state. Form 15714 is used by a state to make the advanced election.

Background

For tax years beginning after 2026, a U.S. citizen or resident alien may claim a nonrefundable personal tax credit of up to $1,700 for qualified contributions made to a scholarship granting organization (SGO). A qualified contribution is a charitable contribution of cash to an SGO that uses the contribution to fund scholarship for eligible K-12 students.

In order for a contribution made by a taxpayer to an SGO in a state (or the District of Columbia) to be a qualified contribution eligible for the credit, the state must elect participate in the credit program and must identify by January 1 of each calendar year a list of qualified SGOs in the state.

Advanced Election for 2027

A state may make an advanced election using Form 15714 to be a covered state for the Code Sec. 25F credit for the 2027. The form may be submitted any time after December 31, 2026, and before the day before the final date on which the State is permitted to submit the State SGO list (as will be specified in future guidance).

The advance election will allow a state to inform potential SGOs of the state’s participation in the credit before submitting a full SGO limit to the IRS. Any SGO list submitted with Form 15714 will not be processed by the IRS and the state will need to resubmit the list as specified in future guidance. Once a state’s advance election has been made on Form 15714 for calendar year 2027, the only subsequent submission the IRS will accept is the official submission of the state’s SGO list for the calendar year.

Rev. Proc. 2026-6

IR 2025-121

The IRS has formally withdrawn two proposed regulations that would have clarified how married individuals may obtain relief from joint and several tax liability. The withdrawal affects taxpayers seeking protection under Code Sec. 6015 and relief from federal income tax obligations tied to State community property laws under Code Sec. 66.

The IRS has formally withdrawn two proposed regulations that would have clarified how married individuals may obtain relief from joint and several tax liability. The withdrawal affects taxpayers seeking protection under Code Sec. 6015 and relief from federal income tax obligations tied to State community property laws under Code Sec. 66.

The two notices of proposed rulemaking—originally issued on August 13, 2013 (78 FR 49242), and November 20, 2015 (80 FR 72649)—offered procedural guidance for requesting equitable, innocent spouse, or separation of liability relief. These proposals also reflected statutory amendments introduced by the Tax Relief and Health Care Act of 2006 and evolving jurisprudence. The Treasury Department and the IRS decided to halt progress on these rules due to the passage of time, the scope of public comments, and resource prioritization.

While the agency acknowledged the regulatory need in this area, it cited the volume and breadth of feedback as grounds for reassessment. The IRS clarified that any future rules addressing these issues would require new proposals and another round of public comment, in line with current statutory frameworks and legal developments.

Importantly, this withdrawal does not prevent the issuance of new regulations on joint and several liability relief. Nor does it alter existing statutory or regulatory obligations in place under current law. The IRS retains authority under 26 U.S.C. 7805 to revisit and re-propose rules as necessary.

The withdrawal was announced by the IRS and Treasury on December 15, 2025, and was signed by Frank J. Bisignano, Chief Executive Officer. Tax professionals and affected individuals should continue to rely on existing law and procedures when seeking relief under Code Secs. 6015 and 66.

Proposed Regulations, NPRM REG-132251-11; REG-134219-08

The American Institute of CPAs has voiced its opposition to the Internal Revenue Service’s proposal to combine the Office of Personal Responsibility and the Return Preparer Office

The American Institute of CPAs has voiced its opposition to the Internal Revenue Service’s proposal to combine the Office of Personal Responsibility and the Return Preparer Office.

“The AICPA has an extensive and resolute history of steadfastly supporting initiatives that would enhance compliance, elevate ethical conduct, and protect taxpayer confidence in our tax system,” the organization said in a November 14, 2025, letter to the directors of the two offices. “The proposed combination of OPR and RPO contravenes those principles.” A copy of this and other AICPA 2025 tax policy and advocacy comment letters can be found here.

AICPA said it “strongly opposes any efforts to combine OPR and RPO because it would inappropriately consolidate credentialed and uncredentialed return preparers under OPR, create potential conflicts of interest, and divert resources from the primary role of OPR.”

It added that the merger “would sow confusion among taxpayers trying to understand the differing qualifications and practice rights of preparers, which would harm taxpayers and erode taxpayer confidence in our tax system.”

AICPA noted that OPR “has the exclusive delegated authority to interpret and enforce the regulations in Treasury Department Circular 230 (Circular 230), which governs tax practitioners interacting with the tax administration system,” while RPO “administers the Preparer Tax Identification Number (PTIN) program, manages the enrolled agent practitioner program, encourages enrollment in the Annual Filing Season Program (AFSP), and processes some complaints against return preparers.”

“These two offices perform dissimilar government functions, oversee different types of preparers, and, therefore, should remain separate to avoid potential conflicts of interest,” AICPA said in the letter.

AICPA argued that the combination would divert resources away from the primary role of OPR and could undermine the credibility of OPR’s enforcement objective.

“Under a combined OPR unit, unscrupulous and incompetent preparers could readily misrepresent that they are subject to ethical obligations overseen by the ‘Office of Professional Responsibility,’ which would give such preparers a foothold to abuse taxpayers and undermine public trust and accountability in the tax profession,” AICPA stated in the letter.

By Gregory Twachtman, Washington News Editor

People are buzzing about Roth Individual Retirement Accounts (IRAs). Unlike traditional IRAs, "qualified" distributions from a Roth IRA are tax-free, provided they are held for five years and are made after age 59 1/2, death or disability. You can establish a Roth IRA just as you would a traditional IRA. You can also convert assets in a traditional IRA to a Roth IRA.

Before 2010, only taxpayers with adjusted gross income of $100,000 or less were eligible to convert their traditional IRA (provided they were not married taxpayers filing separate returns). Beginning in 2010, anyone can convert a traditional IRA to a Roth IRA, regardless of income level or filing status.

Comment: While you can only contribute a maximum of $5,000 to a Roth IRA for 2010 (plus a $1,000 catch-up contribution if you are over age 50), you can convert an unlimited amount from a traditional IRA.

Conversion is treated as a taxable distribution of assets from the traditional IRA to the IRA holder, although it is not subject to the 10 percent tax on early distributions. While paying taxes on conversion is undesirable, the advantages of holding assets in a Roth IRA usually outweigh this disadvantage, especially if you will not be retiring soon. Furthermore, if you convert assets in 2010, you have the option of including them in income in 2011 and 2012 (50 percent each year) instead of 2010.

Comment: Generally, this income-splitting would be advantageous to any taxpayer who does not expect a sharp increase in income in 2011 or 2012. A wildcard factor is that the lower income tax rates that have been in effect since 2001 will expire after 2010 and could increase in 2011.

There are four ways to convert a traditional IRA to a Roth IRA:

• A rollover - you receive a distribution from a traditional IRA and roll it over to a Roth IRA within 60 days;
• Trustee-to-trustee transfer - you direct the trustee of the traditional IRA to transfer an amount to the trustee of a Roth IRA;
• Same-trustee transfer - the trustee of the traditional IRA transfers assets to a Roth IRA maintained by the same trustee; or
• Redesignation - you designate a traditional IRA as a Roth IRA, instead of opening a new Roth account.

Comment: The account holder does not have to convert all of the assets in the traditional IRA.

Another advantage of converting assets from a traditional IRA to a Roth IRA is that you can change your mind and put the assets back into the traditional IRA. This is known as a recharacterization. You have until the due date, with extensions, for the return filed for the year of conversion. Thus, if you convert assets in 2010, you have until mid-October in 2011 to undo the conversion.

This ability to recharacterize the conversion allows you to use hindsight to check whether your assets declined in value after the conversion. Since you are paying taxes on the amount converted, a decline in asset value means that you paid taxes on phantom income that no longer exists. However, if you convert assets into multiple Roth IRAs, you can choose to recharacterize the assets in a Roth IRA that decreased in value, while maintaining the conversion for a Roth IRA's assets that appreciated in value.

The use of a Roth IRA can be a savvy investment, but whether to convert assets is not an easy decision. If you would like to explore your options, please contact this office.

Yes, but only for a limited time. In late December 2009, Congress passed the 2010 Defense Appropriations Act (2010 Defense Act). The new law temporarily extends the eligibility period for COBRA premium assistance through February 28, 2010 and the duration of the subsidy for an additional six months (up to 15 months).

Reduced premiums

Individuals who are involuntarily separated from employment between September 1, 2008 and February 28, 2010 may be able to make reduced premium payments for COBRA continuation coverage. Instead of paying the full monthly premium, assistance eligible individuals pay 35 percent of the premium and their former employers pay the remaining 65 percent of the premium. The former employer is reimbursed by a payroll tax credit.

Extension

Originally, Congress set a December 31, 2009 deadline for eligibility for COBRA premium assistance. The 2010 Defense Act extended the deadline for eligibility to February 28, 2010. The 2010 Defense Act also extended the maximum period for receiving the subsidy an additional six months (from nine to 15 months).

In some cases, an individual may have exhausted his or her nine months of COBRA premium assistance before Congress approved the extension. The 2010 Defense Act provides an extended period for the retroactive payment of the individual's 35 percent payment. To continue coverage, the assistance eligible individual must pay the 35 percent of premium costs by February 17, 2010 or, if later, 30 days after notice of the extension is provided by their plan administrator.

In other cases, an individual may have exhausted his or her nine months of COBRA premium assistance and paid 100 percent of the COBRA premium for December. Individuals who paid the full COBRA premium in December are entitled to a refund under the 2010 Defense Act.

Automatic

Individuals who qualify for COBRA premium assistance are automatically eligible to pay reduced premiums for up to six more months for a total of 15 months. The individual must continue to be eligible for the subsidy. If he or she becomes eligible for other group health coverage (such as a spouse's plan) or Medicare the individual is no longer eligible for COBRA premium assistance.

Income limits

Higher-income individuals may qualify for COBRA premium assistance but find they have to repay it. If an individual's modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for married couples filing a joint return), the amount of the subsidy during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for married couples filing a joint return), the amount of the premium reduction that must be repaid is reduced proportionately.

Higher-income individuals may permanently waive the right to COBRA premium assistance. However, they may not later obtain the subsidy if their adjusted gross incomes end up below the limits. Our office can help you decide which option is best.

Possible extension

Many lawmakers in Congress support extending eligibility for COBRA premium assistance beyond February 28, 2010. In fact, the House of Representatives approved a bill in December extending eligibility through June 30, 2010. However, the Senate has yet to vote on the bill. Our office will keep you posted of developments.

The new "new homebuyer" tax credit

The homebuyer tax credit would have expired on November 30, 2009 had Congress not extended the credit. The new credit is extended to homes purchased before (1) May 1, 2010, or (2) July 1, 2010 if the taxpayer enters into a written binding contract before May 1, 2010 to close on the home before July 1, 2010. The credit amount remains at a maximum of $8,000, or 10 percent of the home's purchase price (whichever is less). However, the new law places a cap on the home's purchase price, which cannot exceed $800,000 in order to claim the credit. In addition, a modified credit is available for "repeat" homebuyers, discussed below.

Comment. The "first-time homebuyer credit" is somewhat of a misnomer. Under the original - and now extended - credit, you did not (and still do not) technically have to be purchasing your very first home to qualify for and take the credit. A first-time homebuyer for purposes of the $8,000 credit is a taxpayer who an individual (and spouse, if married) who had no present ownership interest in a principal residence during the three-year period ending on the date the home is purchased. This means that you could have previously owned a home as long as you have not had any ownership interest in a personal residence for at least the three years prior to purchasing the home for which you are claiming the credit.

Congress raises income limits

The homebuyer tax credit is also now available to a greater segment of the home-buying population. The new law has increased the income limits that phase out the credit, allowing higher income individuals and families to qualify.Phase-out of the credit begins under the new law at $125,000 modified adjusted gross income (AGI) for single taxpayers (up from $75,000) and at $225,000 for married taxpayers filing joint returns (up from $150,000). The phaseout range itself is $20,000, thereby reducing the credit to zero for individual taxpayers with modified AGI of more than $145,000 ($245,000 for married joint filers). The credit is reduced proportionately for taxpayers with modified AGIs between these amounts.

"Long-time" homeowners qualify for reduced $6,500 credit

A reduced homebuyer tax credit may be claimed by existing homeowners who have owned and lived in their home for a long period of time. The reduced tax credit, of up to $6,500, may benefit long-time homeowners who are ready to move up or simply move on from their current home. The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

To qualify for the reduced $6,500 credit, you must be a "long-time resident" as defined by the law. For purposes of the credit, a "long-time resident" is defined as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase of the new residence. Importantly, for married taxpayers, the law tests the homeownership history of both the spouses.

If you are an existing, repeat homebuyer who qualifies for the reduced credit, you do not have to purchase a home that is more expensive than your previous home to qualify for the tax credit. There is no requirement that the new principal residence be a "move up" property; it can be less expense than your former home. However it must be your new "principal residence" in order to claim the credit. Moreover, a repeat homebuyer does not need to sell or otherwise dispose of his or her current residence to qualify for the $6,500, either, as long as your new home becomes your principal residence.

Example. Bob and Edith are married and are both eligible to claim the reduced $6,500 credit for existing "long-time residents." Their modified AGI is $240,000, which results in being $15,000 over the beginning of the phaseout for married taxpayers filing jointly. They will be able to claim a partial reduced homebuyer credit in the amount of $1,650 (15,000/$20,000 = 0.75; 1.0-0.75 = 0.25. $6,500 x 0.25 = $1,625).

While the homebuyer credit can be very valuable, it is also very complex. In addition to the provisions we have described, there are special rules for repayment, new documentation requirements, a purchase price cap, and more. Please contact our office for more details about the first-time homebuyer credit.