Sellers CPA Tax and Financial Newsletter – April 2025

Welcome to the April 2025 Spring edition of the Sellers CPA Tax and Financial Newsletter!

As we move into the heart of tax season, our goal is to keep you informed about the latest developments in tax policy, IRS updates, and financial planning strategies that could impact your business. With significant changes unfolding under the Trump administration and a dynamic tax landscape, staying ahead is more critical than ever. Let’s dive into the most current news and insights for this month.

IRS Updates: The Trump Administration’s Influence

The Internal Revenue Service (IRS) is undergoing a period of unprecedented transformation, driven largely by executive actions from the Trump administration. As of March 31, 2025, several key developments are shaping the agency’s operations and, consequently, how businesses and individuals interact with it.

Massive Workforce Reductions

The Trump administration has prioritized shrinking the federal government, and the IRS has been a focal point of these efforts. Reports indicate that the agency is drafting plans to cut its workforce of approximately 90,000 employees by as much as half. This follows the termination of over 7,000 workers in February 2025, with additional layoffs looming. Posts on X and news outlets suggest specific cuts targeting the Taxpayer Advocate Service (25%), Direct File staff (30%), the legal department (15%), and the Appeals Office (27%). These reductions are part of a broader initiative led by Elon Musk’s informal Department of Government Efficiency (DOGE), which has embedded personnel within the IRS to oversee downsizing and modernization efforts.

For taxpayers, this could mean longer wait times for assistance, delayed refund processing, and reduced support for resolving disputes. Businesses relying on timely IRS responses—whether for audits, appeals, or guidance—may face increased challenges as the agency’s capacity diminishes.

Executive Order on Electronic Payments

A notable executive order issued in late March 2025 mandates that the IRS transition to near-complete use of electronic payment options by September 30, 2025. This policy eliminates paper checks for federal tax refunds, replacing them with direct deposits or debit cards for those without bank accounts. While this shift aims to streamline operations and reduce costs, it may pose difficulties for businesses and individuals unaccustomed to digital payment systems. Ensuring your banking information is up to date with the IRS will be essential to avoid disruptions.

Push for Taxpayer Data Access

Another significant development involves the Trump administration’s efforts to leverage IRS data for non-tax purposes. The Department of Homeland Security has requested addresses of approximately 700,000 undocumented immigrants520 immigrants, a move IRS officials have resisted due to taxpayer privacy laws. This clash between administration priorities and legal safeguards highlights the tension surrounding the IRS’s role under the current administration. While this issue remains unresolved, it underscores the broader push to reshape the agency’s mission.

Impact on Tax Season 2025

The combination of staff cuts and operational changes has already begun to affect taxpayers. Early data from the IRS shows that average tax refunds in 2025 are about one-third lower than last year—around $2,200 compared to $3,200—partly due to shifting taxpayer behavior and reduced enforcement capacity. Experts warn that the ongoing layoffs could exacerbate delays, particularly for paper filers or those requiring human review. Businesses should anticipate potential bottlenecks and plan accordingly.

Tax Law Changes for 2025

Beyond IRS operational shifts, several tax law changes are taking effect or being proposed under the Trump administration’s agenda. Here’s what you need to know:

Extension of the 2017 Tax Cuts

President Trump has called for a permanent extension of the 2017 Tax Cuts and Jobs Act (TCJA), set to expire in 2025. In February, the House passed a budget resolution allowing for $4.5 trillion in tax cuts over the next decade, offset by $1.7 trillion in spending reductions. Key provisions likely to persist include lower corporate tax rates (currently 21%) and expanded deductions for pass-through entities. However, the final shape of this legislation remains in flux as it moves through the Senate.

New Proposals: No Taxes on Tips, Overtime, and Social Security

Trump has also championed additional tax relief measures, including eliminating taxes on tips, overtime pay, and Social Security benefits for retirees. These proposals, if enacted, could significantly reduce taxable income for certain business owners and employees. However, critics argue that replacing lost revenue with tariffs—as suggested by Trump and Commerce Secretary Howard Lutnick—could increase costs for businesses reliant on imports, potentially offsetting any tax savings.

Inherited IRA Rule Change

A less publicized but impactful change affects inherited Individual Retirement Accounts (IRAs). Starting in 2025, certain non-spouse heirs (e.g., adult children) must take required minimum distributions (RMDs) annually during the 10-year drawdown period following the original owner’s death. Failure to comply could trigger a 25% tax penalty. This clarification from the IRS, finalized last year, closes a loophole many heirs were unaware of, making compliance a priority for estate planning.

Earned Income Tax Credit (EITC) Expansion

On a positive note, the IRS has updated the Earned Income Tax Credit for 2025, increasing eligibility and credit amounts for low- to moderate-income workers. This could benefit small business owners and their employees, though nearly 20% of eligible taxpayers historically fail to claim it. Ensuring your team is aware of this credit could enhance retention and financial wellness.

Financial Planning Amid Uncertainty

With the IRS in flux and tax laws evolving, proactive financial planning is essential for businesses. Here are some strategies to consider:

• File Early: Given the potential for delays, submitting your tax returns as soon as possible can help secure refunds faster and avoid late-season bottlenecks.

• Update Payment Systems: Prepare for the shift to electronic refunds by verifying your bank details with the IRS. For employees or contractors without accounts, explore options like prepaid debit cards.

• Review Tax Strategies: With potential extensions of the TCJA and new exemptions on the horizon, reassess your deductions, credits, and entity structure to maximize benefits.

• Monitor Tariff Impacts: If your business relies on imported goods, model the potential cost increases from proposed tariffs to adjust pricing or sourcing strategies.

How Sellers CPA Can Assist

Navigating this complex landscape requires expertise and foresight. Whether you’re filing business taxes, seeking an extension, or refining your financial plan, Sellers CPA is here to help. Our team stays abreast of the latest IRS developments and tax law changes to provide tailored guidance for your unique needs. Contact us today to discuss how we can support your business in 2025 and beyond.

Thank you for reading the April 2025 Sellers CPA Tax and Financial Newsletter. Stay tuned next month for more updates and insights. Wishing you a successful tax season!

Carol Sellers Owner Sellers CPA