Tax Day is less than a month away. Are you ready?
If the IRS tax filing statistics are any indication, taxpayers still aren’t rushing to file. Numbers for tax filing and processing of tax returns dipped again (☆), a trend that hasn’t changed since the season opened on January 27, 2025.
Some taxpayers may be waiting to file–there’s still plenty of time. Others may be looking to file an extension. (☆) It’s free and easy and can help ensure a complete, correct return. Taxpayers sometimes push back, insisting that filing for an extension will cause a return to be flagged for audit. Not only do the statistics not bear this out, but it doesn’t make good sense: I maintain that it’s always better to file a complete, correct return on extension than a rushed, flawed return by Tax Day. Filing for extension will give you an extra six months–until October 15, 2025–to file your tax return. Just don’t forget to make a payment with your extension–it extends your time to file but not the time to pay. Your payment is still due on or before April 15, 2025.
U.S. persons with foreign financial accounts may also need to file a Report of Foreign Bank and Financial Accounts, or FBAR. The filing deadline is April 15, the same due date as one’s U.S. income tax return, but there is an automatic extension to October 15 if the initial FBAR deadline is missed. No separate extension request is required. For tax year 2024, the FBAR must be filed by April 15, 2025, with the automatic extension pushing the final due date to October 15, 2025.
If you’re expecting a refund as a result of your tax return, pay close attention to the mail (more on that in a bit) and to your benefits. The Social Security Administration will resume (☆) attempts to recover overpayments through the Treasury Offset Program—attempts that had been suspended since March 2020 due to COVID. The program allows the Treasury to withhold tax refunds, among other payments.
The agency will also begin withholding 100% of benefits checks to make up for any overpayments. That’s up from the current rate of 10% that the Biden Administration put into effect in March 2024 after growing public attention to the hardship caused by 100% withholding. It’s particularly problematic for those for whom Social Security is the primary source of income.
Crucially, the 100% withholding rate will not apply to beneficiaries with an overpayment prior to March 27. Their rate will remain 10%. In addition, the withholding rate for beneficiaries of Supplemental Security Income (SSI)—the minimum payments made to poor seniors and people with disabilities—will remain 10%.
The overpayment withholding rate—often called a clawback—allows the government to recover ”improper” payments. By definition, improper payments can be overpayments (when SSA pays someone more than they are due) or underpayments (when SSA pays someone less than they are due). According to a report from the Social Security Administration’s Office of the Inspector General, for the fiscal years 2015 through 2022, SSA estimates it made nearly $72 billion in improper payments, most of which were overpayments. That represents 0.84% of total Social Security payments during that time.
Here’s something else to keep an eye out for. Sadly, scammers are also taking advantage of unemployment benefits. (☆) Over the last few years, taxpayers have reported receipt of unemployment-related tax forms when they did not apply for benefits. If you’ve received a Form 1099-G that shows you received unemployment benefits you never received, someone may have used your name and personal information to apply for benefits. In that case, you’ll want to make a report to the state. And the IRS advises that when you file your taxes, you should only include income you received—the processing of your tax return should not be delayed while your report of unemployment identity theft is under investigation.
With all of that to consider, it’s no wonder that most Americans don’t look forward to Tax Day. A recent Wallet Hub survey found that nearly a third of taxpayers would rather serve on jury duty than do their taxes. Nearly one in eight taxpayers would rather talk to their kids about sex than do taxes, while one in 20 would rather drink expired milk.
Rashelle Isip, a New York City-based productivity consultant and time management coach, has literally written the book on time management: The Order Expert’s Guide to Time Management. Isip says that the first step to surviving tax season is understanding that it won’t last forever.
To make the process less stressful, Isip recommends that you not tackle the whole project at once. “Break it into pieces,” she says, offering a sample to-do list. (☆)
Isip also suggests introducing short breaks, like taking a class at the gym or going for a walk, into your routine. It can be hard to convince yourself to take a physical break, but Isip says that it can help to get out of your head and get your body moving. Then she says, take a quick moment of reflection and think about how you felt. You might be surprised at the results. It’s not unusual, for example, for you to think, “Going for a walk felt good—and now I see the error in my spreadsheet.”
“There is,” Isip explains, “always work to do. Always.” Taking a step away is essential, and while it seems counterintuitive, a break can actually increase your productivity.
Me? My breaks typically involve baking (my sourdough starter, Doughly Parton, needs daily attention), gardening (if you’ve seen my office, you know it’s full of plants), or a quick run. Some of you have chimed in to tell me how you take a break–I’d love to hear more.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Questions
This week, a reader asked:
I received a 1099-K, but the amount on the form is wrong. It includes more money than I received for my business. What do I do?
Form 1099-K is used to report certain payment transactions when, for the tax year 2024, payments totaling more than $5,000 are settled (☆) through a third-party network including payment apps like PayPal and online marketplaces like Etsy. No threshold applies to payment card transactions—payment cards include credit, debit, or stored value cards such as gift cards–if you received $1 of payments from a payment card transaction, you should receive a Form 1099-K for those payments.
However, just because a payment is reported on a Form 1099-K does not mean it is taxable. (Similarly, a payment that was not reported on a Form 1099-K can still be taxable–it depends on the nature of the payment.)
For example, payments made through a third-party network for a birthday or holiday or wedding gifts; for sharing the cost of a car ride or meal; or for paying a family member or roommate for a household bill aren’t taxable. These payments should not be reported on Form 1099-K. If you get a mistaken 1099-K for one, that doesn’t make them taxable.
The casual sale of goods and services, including selling used personal items like clothing, furniture, and other household items for a loss, could properly generate a Form 1099-K for many people, even if the seller has no tax liability from those sales. Most sales of personal items result in a loss (sadly, the loss on the sale of a personal item is not deductible), but on the chance that you have a gain, you’ll report it as you would any other capital gain on Schedule D.
That applies to those Taylor Swift tickets that you sold for a gain, too. That gain is taxable, even if you’re not in the business of selling Eras Tour tickets—and you may well receive a Form 1099-K.
As you’d expect, transactions in the course of business are taxable–even if that business is only selling the sweaters and scarves you knit. They are also reportable on Form 1099-K.
Each payment app or online marketplace will have its own processes for categorizing payments. If you use the same platform for business and personal items, you could have some mixed reporting. The IRS encourages you to review the policies of any apps or online marketplaces you use to make sure that your transactions are reported appropriately.
If you still have a question about your Form 1099-K or believe that your Form 1099-K needs to be corrected, you should contact the entity that filed the Form 1099-K. The contact information is generally in the upper left corner of the form. If you don’t recognize that name, contact the payment settlement entity (PSE) whose name and phone number are shown in the lower-left corner of the form above their account number.
Don’t wait to file your tax return if you can’t get a corrected Form 1099-K. You can simply adjust the error when you file. You’ll make the adjustment on Schedule 1 of your Form 1040 as follows:
- Part I – Line 8z – Other Income – Include the Form 1099-K Received in Error.
- Part II – Line 24z – Other Adjustments – Adjust the payments on the Form 1099-K Received in Error.
The IRS has a dedicated webpage, Understanding Your Form 1099-K, for more information.
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Statistics, Charts, And Maps (Oh My!)
As consumer confidence falters, government layoffs dominate the news and recession warning signs start blinking, it’s smart to think about what you might do if you need additional cash.
One source Americans consider tapping in an emergency or when they’re otherwise short of cash? Retirement accounts. (☆) It makes sense, since for many workers, retirement accounts represent most of their liquid savings.
In general, a retirement plan can begin distributing money after a participant reaches a certain age—usually 59-1/2. If you take funds earlier, you usually must pay a 10% penalty (some exceptions apply, keep reading) in addition to normal federal income tax on the distribution. Truth is, the rules on early withdrawals are complicated and seem to be constantly changing. Here’s a handy, quick-look table with some of the exceptions:
A Deeper Dive
Waiting on your tax refund?
In 2023, the IRS issued 120.9 million refunds, amounting to more than $461.2 billion. Last year, nearly 91% of all refunds were issued by Direct Deposit—so far this season, nearly 97% of refunds have been issued by Direct Deposit. The IRS encourages taxpayers to use Direct Deposit, claiming it’s the easiest, safest and fastest way to receive your refund.
A recent criminal case (☆) offers a cautionary tale to drive home that point. A former U.S. Postal Service employee was found guilty of stealing checks, including tax refund checks, from customers on his route.
According to court documents, Hachikosela Muchimba was a mail carrier assigned to Route 23 at the Friendship Post Office Station in Washington, D.C. Over two years, he stole checks from the mail intended for delivery to residents on his route. At least 90 of the checks were U.S. Treasury checks, including tax refunds.
Muchimba deposited nearly 100 checks worth over $1.6 million into several banks. In some instances, Muchimba altered the checks by removing the payee’s name and replacing it with his name. Bank surveillance footage captured images of him making deposits and withdrawing funds—in some of the footage, he’s wearing his U.S. Postal Service work clothes.
Muchimba proved to be his own worst enemy. A postal customer provided law enforcement with a copy of an altered check. Remarkably, the customer recognized the name and the address on the check as the same that his mail carrier, Muchimba, had used on a holiday card sent to residents on his mail route the previous December.
On March 13, 2025, a jury found Muchimba guilty of 20 counts, including conspiracy to commit theft of mail and bank fraud, theft of mail, bank fraud, engaging in a monetary transaction in property derived from specified unlawful activity, and unlawful procurement of citizenship or naturalization. His sentencing is scheduled for August 8, 2025. He faces up to 30 years in prison for bank fraud and five years for mail theft.
Tax Filings And Deadlines
📅 April 1, 2025. Deadline for retirees who turned 73 in 2024 to begin receiving required minimum distributions (RMDs) from IRAs, 401(k)s and other retirement plans. Under a special rule, IRA owners and participants born after December 31, 1950, and who turned 73 in 2024, can delay their first RMD until April 1, 2025. The April 1 deadline is for the first year only–for subsequent years, the distribution is due by December 31. Further, taxpayers receiving their first required distribution for 2024 in 2025 (by April 1) must take their second RMD for 2025 by December 31, 2025.
📅 April 15, 2025. Due date for most taxpayers to file an individual tax return—or apply for an extension.
📅 May 1, 2025. Due date for individuals and businesses in the entire states of Alabama, Georgia, North Carolina, and South Carolina and parts of Florida, Tennessee, and Virginia affected by severe storms and flooding from Hurricane Helene (☆) and Hurricane Milton.
📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
📅 October 15, 2025. Due date for individuals and businesses affected by wildfires and straight-line winds in southern California that began on January 7, 2025. Currently, individuals and households that reside or have a business in Los Angeles County qualify for tax relief.
Tax Conferences And Events
📅 May 8-10, 2025. American Bar Association Section of Tax May Meeting. Marriott Marquis Washington, DC. Registration required.
📅 May 13-14, 2025. National Association of Enrolled Agents 2025 Capitol Hill Fly-In, Washington, DC. Registration required (NAEA members only).
📅 June 16-19, 2025. Latino Tax Fest. MGM Grand Hotel & Casino, Las Vegas, Nevada. Registration required.
📅 July 18-19, 2025. Tax Retreat “Anti Conference”. Denver, Colorado. Registration TBA.
📅 July 21-23, 2025. National Association of Tax Professionals Taxposium 2025, Caesars Palace, Las Vegas, Nevada. Registration required.
Trivia
What invention, designed to increase IRS efficiency, was described as looking like “an octopus carrying 10 dinner trays”?
(A) Devil Desks
(B) Exception Mail Stops
(C) Flat Tubs
(D) Tingle Tables
Find the answer at the bottom of this newsletter.
Positions And Guidance
In a letter to Congressional leadership in the Senate Finance and House Ways & Means Committees, the American Institute of CPAs (AICPA) highlighted a number of legislative proposals directly related to possible changes to the tax rules. The 2025 tax priorities outlined in the letter included several proposals from the AICPA’s 2025 Compendium of Tax Legislative Proposals – Simplification and Technical Proposals, which included 69 suggested simplification of and technical changes to provisions in the Internal Revenue Code.
Noteworthy
Gary Shapley has been named deputy chief for IRS Criminal Investigation (IRS-CI), starting March 19. In his new role, Shapley will oversee 20 field offices and 14 foreign posts, including more than 2,000 special agents investigating tax fraud and other financial crimes.
Fried Frank announced that Oliver Currall will join the firm as a partner in the Tax Department in London. Currall advises on UK and international tax structuring, with a particular focus on cross-border private equity and M&A transactions, and the structuring and operation of global investment funds. He provides tax advice to major private equity sponsors on their deals and to asset managers on the operation of UK management company and asset holding structures.
Temple Low Income Taxpayer Clinic, an academic clinic at Temple Beasley School of Law, is accepting applications for a summer intern (the internship is paid or you can get academic credit). The clinic is a great opportunity to work with low-income clients to help them navigate tax disputes and change their lives. To apply, email a paragraph describing your interest and a resume by Monday, May 9.
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In Case You Missed It
Here’s what readers clicked through most often in last week’s newsletter:
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Trivia Answer
The answer is (D) Tingle Tables.
Tingle Tables are named for Jim Tingle, the former IRS employee who invented them in 1962, building the prototype in his backyard.
In 1989, the New York Times said the desk looked like “an octopus carrying 10 dinner trays,” noting that it was used to sort federal income tax returns. That’s because the desk featured a U-shaped surface with 18 to 25 hanging baskets—that’s where the IRS employees who open tax returns began sorting. The design allowed employees to break down as many as 1,500 returns a day.
The design is so iconic that a Tingle Table is held for display by the National Museum of American History.
As for the other choices? Exception mail stops are a designation used by the IRS to direct mail. Flat Tubs are actually used by the U.S. Postal Service. They are the white tubs used to hold and transport various types of mail, especially flats. And Devil Desks? That’s just something I made up.
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