Tax Breaks: The Millions Breathe A Sigh Of Relief After Tax Day Edition

Forbes

19-04-2025

Millions of taxpayers breathed a sign of relief this week.
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That sound you heard earlier this week? It was the sound of millions of taxpayers and tax professionals breathing a sigh of relief now that Tax Day is over.
April 15 is Tax Day for most of the country—some exceptions apply—but that hasn't always been the case. The U.S. income tax system has changed quite a bit over the years, and that includes more than the due date for Form 1040.
What we know as the modern income tax system began in 1913 after a four-year push to get enough states to ratify the Sixteenth Amendment. By law, a proposed amendment becomes part of the Constitution once it is ratified by three-fourths of the States. At the time, 36 states were required (38 of 50 states would be needed today). On February 3, 1913, Delaware became the 36th state to ratify the Sixteenth Amendment. Eventually, 42 of the 48 states would ratify the amendment (Alaska and Hawaii weren't yet states, Florida and Pennsylvania refused to consider it, and Connecticut, Rhode Island, Utah, and Virginia voted no).
The first filing deadline was March 1, 1913. The deadline would change twice before Congress settled on April 15 in 1955 to give taxpayers and the IRS more time to prepare and process increasingly complex returns.
Statistically, most taxpayers have used a tax professional so far this season. Those taxpayers who self-prepared had a variety of options, including Direct File. That won't be the case next year. The Trump administration is planning to eliminate the IRS Direct File program. While Republican lawmakers had previously opposed the program, the free tax software program had been marked as safe for the 2025 season, with now Treasury Secretary Scott Bessent committing to the program during his confirmation hearing. "I will commit that for this tax season … Direct File will be operative," Bessent said. However, less than 48 hours after the end of the regular tax filing season, word circulated that the program would be axed.
Amanda Renteria, who serves as Chief Executive Officer for Code for America, a civic tech nonprofit, called it "a dark day for Americans who want a simple, free option to file their taxes electronically directly with the government."
"The decision to kill Direct File comes at a critical moment," she says, "when faith in public institutions is already at historic lows. This isn't just a step backward for tax administration—it's a betrayal of public trust at precisely the time government should be demonstrating its ability to deliver basic services effectively."
No matter how you filed your taxes this season, you need to keep great records–but for how long? Some taxpayers like to hang on to every piece of tax-related paper, from receipts to returns, forever. Others do just the opposite: they shred and purge immediately. When it comes to tax records, which is better?
For tax purposes, you need to find a middle ground. And that middle ground is more precise than somewhere between "forever" and "immediately." While it's true that you want to keep essential records, don't be afraid to toss out what you don't need.
The general rule is that you should hold onto your tax returns and the supporting documentation until the three-year statute of limitations–the time the government has for challenging your return–runs out. Supporting documentation for your tax returns includes not only your forms W-2 and 1099 but also credit card and other receipts, invoices, mileage logs, copies of checks, proofs of payment, and any other records that support income, deductions, credits, or tax breaks you reported or claimed on your return.
Of course, exceptions apply (the government gets longer to go after you for fraud and failure to file, for example)–and there may be non-tax-related reasons to hold onto records. Find out what works for you and follow through.
With Tax Day mostly in the rearview mirror, you are likely looking forward to a break this weekend. My family was planning to celebrate with an Easter egg hunt (yes, my kids are older, but they are all super competitive and would never turn down free candy), but my mom took a tumble, so our gathering will be a bit smaller than anticipated. There will, however, still be candy. I hope you're planning something similarly relaxing(ish).
Speaking of candy, don't skip out on this look at whether Mega Marshmallows, described as 'oversized, fluffy marshmallows,' should be classified as edible confectioneries, thereby subject to the standard U.K. VAT rate of 20 percent, or classified as a culinary ingredient that qualifies for VAT exemption. The case is HM Revenue & Customs v. Innovative Bites Limited, but you may have heard of Innovative Bites by a different moniker: the great British marshmallow decision of 2025.
Enjoy your weekend, and don't eat too many sweets,
Kelly Phillips Erb (Senior Writer, Tax)
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Paying off your tax debt with an installment agreement can relieve some anxiety.
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This week, a taxpayer asked:
I recently got into a car accident and received some money from the insurance company. I have put the $11,000 in my savings account. I'm on a payment plan to pay off back taxes. Can the IRS take the money from my savings to pay off my debt?
One of the ways the IRS ensures it gets paid is through a levy. A levy is a legal seizure of your property. It's often confused with a lien, but they are very different. A lien is filed against you to act as security—for example, an IRS lien will prevent you from selling a significant asset like your home and taking the proceeds without paying the IRS. In comparison, a levy is the actual taking of your property to satisfy your tax obligations.
A levy is never a first step. The IRS gives you the opportunity to resolve your debt through a lump sum payment, an installment plan, or another arrangement.
Here's where you get some good news. Typically, so long as you are making regular payments on an installment agreement, the IRS won't levy your assets or garnish your wages. However, it's important to make your payments as scheduled, file your tax returns on time, and otherwise comply with the terms of your installment agreement. If you default, all bets are off, and the IRS can resume collection activities, including levies (seizing your assets).
Note, however, that your tax refund could still be seized and applied to your outstanding balance.
That said, even with a payment plan, the IRS may choose to keep a federal tax lien in place. The IRS will release the lien once you pay the debt. For certain types of taxes, the IRS will withdraw the lien if you enter into a direct debit installment agreement and meet certain other conditions.
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IRS numbers from the 11th week of the tax filing season—the week ending April 11, 2025—confirm that tax filings lag behind the numbers from last year. That isn't likely to turn around. With just a few days before the end of the filing season, the number of tax returns received dipped again, a trend that hasn't changed since the season opened on January 27, 2025.
In January, the IRS noted that it expects more than 140 million individual tax returns for tax year 2024 to be filed by the April 15, 2025, federal deadline. The IRS received 117,588,000 individual income tax returns as of April 11, 2025, compared to 116,295,000 as of April 12, 2024. The dip is 1.7%, with nearly two million individual tax returns filed to date in 2025 as compared to 2024.
(The data that includes the last day of the filing season, April 15, 2025, will be available on April 25, 2025. The IRS reports the filing data for each week based on the prior week's numbers.)
Notably, web visits to IRS.gov continued to lag far behind last year's numbers. There have been 296,470,000 visits to the website as of April 11, 2025, compared to 533,981,000 visits by April 12, 2024.
Tax season data for weeks ending April 12, 2024, and April 11, 2025
Kelly Phillips Erb
Those numbers reflect a drop of about 45%, but you won't see that statistic on the IRS website. For most of the tax season, the percentage drop was calculated. A footnote on the website now reads, 'Changes were made from 2024 to 2025 in the analytics methodology used to evaluate the number of visits to IRS.gov. Previously a session-based approach was used. In 2025, an event-based model is being used. As a result, comparison of data sets from year to year should not be made.'
A session-based approach tracks users within a defined timeframe and includes metrics like page views, bounce rate, and traffic source. If you have a blog or website, this is akin to what you learn from a platform like Universal Analytics.
In contrast, an event-based approach tracks the kinds of actions that a user takes, like clicks and form submissions. This is similar to what you'd learn using a platform like Google Analytics.
I've suggested the dip could also be attributed to a slowdown in content on the website. It likely won't help that the chief information officer at the IRS will leave his position at the end of the month. Rajiv Uppal's departure follows several high-profile defections from the tax agency since the beginning of the year. Uppal's position was created as part of former IRS Commissioner Danny Werfel's plans for a new leadership structure at the agency, and his domain included the IRS information technology division, previously touted as a key area of focus for the agency.
Failure to file an FBAR report can follow you... even to the grave.
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Family members often want to know what might happen if a spouse or parent dies with outstanding tax obligations. That can be a complicated question, but a recent decision out of the U.S. District Court for the Southern District of New York has made clear that FBAR penalties 'accrue' on the date the form is due (but fails to be filed) and not when the IRS assesses the penalties. The assessment could happen after the taxpayer has died, and the court found death does not end the obligations or render them excessive under the Eighth Amendment.
The case revolves around David Benishai, a U.S. citizen who held financial interests in multiple bank accounts in Israel from 2004 to 2010. Benishai failed to timely file FBARs.
Under the FBAR rules, each "US person" with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you've been faithfully reporting the income on your federal income tax return and even if you've never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income.
Benishai didn't timely file his FBARs, but he did file delinquent FBARs and agreed to extend the statute of limitations for the IRS to assess penalties. He passed away a few months before the IRS finalized its assessment.
Benishai's estate, administered by his wife, Hanna Hendler, challenged the assessment of 'nonwillful' penalties, which the IRS had assessed at $10,000 per report. The estate argued that the FBAR penalties could not be enforced after his death, that the statute of limitations had expired, and that they violated constitutional protections.
The court found that FBAR penalties are primarily 'remedial,' which means they are designed to compensate the government for the costs of investigating non-compliance and enforce tax collection, not purely punitive and designed to punish the taxpayer. (This is consistent with the court's approach in Bittner, a Supreme Court case that held that the maximum penalty for the non-willful failure to file should be calculated per report, not per account.)
When a penalty is remedial in nature, the penalty can survive the taxpayer's death.
📅 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.
📅 June 16, 2025. Due date for individuals living and working abroad to file their 2024 federal income tax return and pay any tax due.
📅 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.
📅 November 3, 2025. Due date for individuals and businesses affected by storms in Arkansas and Tennessee that began on April 2, 2025.
📅 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.
According to the IRS, the average taxpayer spends how many hours preparing their return?
(A) 5
(B) 13
(C) 35
(D) 72
Find the answer at the bottom of this newsletter.
The American Institute of CPAs (AICPA) has signaled its strong support for bipartisan legislation establishing the accounting profession as a career pathway through Science, Technology, Engineering, and Math (STEM). H.R. 2911, the Accounting STEM Pursuit Act, introduced by Representatives Young Kim (R-CA) and Haley Stevens (D-MI), would allow K-12 grant funding to be used for accounting education, with a focus on improving access for underrepresented students.
The American Bar Association (ABA) Section of Taxation submitted comments in response to Executive Order 14178 titled 'Strengthening American Leadership in Digital Financial Technology' and Executive Order 14219 titled 'Ensuring Lawful Governance and Implementing the President's 'Department of Government Efficiency' Deregulatory Initiative.' These orders direct the Department of Treasury and other executive agencies to conduct a comprehensive review of substantive agency actions, including guidance documents, for guidance that 'affect[s] the digital asset sector,' 'imped[es] technological innovation,' or 'impose[s] undue burdens on small business and impede[s] private enterprise and entrepreneurship' and to suggest items that should be modified or rescinded.
Greenberg Traurig, LLP, announced that Michelle Rosenblatt joined the Private Wealth Services Practice as a shareholder. Rosenblatt has experience in tax, estate, and wealth preservation planning. She focuses her practice on U.S. and international tax, estate, business, and wealth preservation planning for high-net-worth individuals, families, and family offices.
William Fry announced that Cian O'Sullivan has joined the firm as a tax partner. O'Sullivan is a Chartered Tax Advisor and Chartered Accountant, managing corporate clients across various sectors and providing both domestic and international tax advice.
VWV has announced that Rod Smith has joined the firm as the new head of the London Office Estates, Tax and Trusts team. Smith brings over 25 years of experience advising on high-value, complex, and multi-jurisdictional estates and trusts.
The city of Venice (Italy) will charge day-trippers an arrivals tax for the second year, a measure to combat overtourism. Visitors who are not overnighting pay 5-10 euros (about $6-11 U.S.) to enter. Venice collected 2.4 million euros during a 2024 pilot program for the tax, but the costs for the new system totaled 2.7 million euros. This year, the city expects a surplus.
Pedestrians in Seattle were startled to hear crosswalk signals broadcast a recording purporting to be Amazon founder Jeff Bezos criticizing local tax policies. One message reportedly said, "Hi, I'm Jeff Bezos, this crosswalk is sponsored by Amazon Prime with an important message. Please don't tax the rich. Otherwise, all the other billionaires will move to Florida too." The recordings, which appeared to be a form of political protest, targeted multiple intersections in Seattle's tech-heavy South Lake Union neighborhood and the University District.
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Here's what readers clicked through most often in the newsletter last week:
You can find the entire newsletter here.
The answer is (B) 13.
It takes taxpayers about 13 hours, on average, to file their taxes.
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The estimated average time burden for all taxpayers filing a Form 1040 or 1040-SR is 13 hours, with an average out-of-pocket cost of $290 per return. This average includes all associated forms and schedules, and taxpayer activities like recordkeeping.
Nonbusiness taxpayers have an average burden of about eight hours and an average cost of $160 per return, while business taxpayers have an average burden of about 24 hours and $620 per return. You are considered a 'business' filer if you file a Schedule C (self-employed and business owners), Schedule E (income from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs), Schedule F (farming income), or Form 2106 (Employee Business Expense) with your Form 1040.
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