Preparing for the 2025 Tax Season

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2025 tax season

As the 2025 tax season approaches, it’s essential for all taxpayers, including small business owners and individuals from various income levels, to proactively prepare for their 2024 federal income tax returns. Early preparation not only streamlines the process but also minimizes risks and ensures compliance with evolving tax regulations. Here are the essential steps you should take:

Leverage Enhanced IRS Digital Tools

The IRS has significantly improved its digital services to enhance taxpayer convenience. Setting up an IRS Online Account now will simplify your tax season and provide robust safeguards for your financial data. Through this account, you can:

  • Review critical details like your adjusted gross income from your most recent return.
  • Request an Identity Protection PIN (IP PIN) for added security.
  • Access wage and income transcripts.
  • Sign tax forms electronically, including powers of attorney.
  • View and manage payment plans, including balances and due dates.
  • Receive and respond to over 200 types of IRS electronic notices.

These tools are particularly valuable for taxpayers at all income levels, offering benefits for everyday taxpayers managing their financial needs as well as high-income earners with complex portfolios and business owners navigating multifaceted income streams.

Secure Your Identity with an IP PIN

The IP PIN is a six-digit code designed to prevent fraudulent use of your Social Security number for filing federal tax returns. For the 2025 filing season, the IRS will expedite processing for returns containing valid IP PINs, even in cases of duplicate dependent claims. High-net-worth individuals should prioritize obtaining an IP PIN to safeguard their identity. Visit the IRS website or a local Taxpayer Assistance Center for enrollment options.

Key Deadlines and Estimated Payments

For business owners and individuals with non-wage income (such as dividends, real estate income, or digital asset earnings), the deadline for the final quarterly estimated tax payment is January 15, 2025. Use the Tax Withholding Estimator on IRS.gov to calculate additional payments, ensuring you avoid underpayment penalties.

1099-K Reporting Updates

Transactions exceeding $5,000 on platforms such as online marketplaces or payment apps will generate Form 1099-K. It is imperative to:

  • Review all Forms 1099-K alongside other records to ensure accurate income reporting.
  • Maintain meticulous records of transactions to substantiate reported amounts.

Taxable income rules remain unchanged, and you must report all income, whether or not you receive a 1099-K. Ensure your financial records can withstand IRS scrutiny.

Reporting Digital Asset Transactions

Digital assets, including cryptocurrencies, NFTs, and stablecoins, continue to be a focus for IRS compliance. You’ll need to:

  1. Answer “Yes” or “No” on your return regarding digital asset transactions.
  2. Report all income derived from these assets, including sales, trades, or payments received.
  3. Retain documentation detailing each transaction’s purchase price, sale price, and fair market value in U.S. dollars.

Understand Refund Timing

While most refunds are issued within 21 days, complex returns or errors can lead to delays. Additionally, refunds involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) cannot be processed before mid-February due to legislative requirements.

Organize and Gather Tax Documents Early

To minimize errors and delays, establish a comprehensive record-keeping system for:

  • Forms W-2, 1099 (including 1099-K, 1099-NEC, 1099-MISC), and 1099-INT.
  • Documentation for digital asset transactions.
  • Business expense receipts, charitable contributions, and other deductions.

Expedite Refunds with Direct Deposit

Filing electronically and opting for direct deposit is the fastest way to receive refunds. For taxpayers without traditional bank accounts, explore FDIC-insured banking options, credit unions, or prepaid debit cards with routing and account numbers.

Explore Free Filing Resources

While high-net-worth taxpayers may prefer professional tax advisors, it’s worth noting that:

  • IRS Free File offers no-cost federal filing for eligible taxpayers.
  • Simplified returns can be filed through the Direct File program or Fillable Forms.

Programs like Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) are also available for those meeting specific eligibility criteria.

Final Thoughts

Preparation is the cornerstone of an efficient and compliant tax filing process. By leveraging IRS tools, meeting critical deadlines, and maintaining detailed records, high-net-worth individuals and small business owners can ensure a stress-free tax season in 2025. Consult with your tax advisor to tailor these strategies to your unique financial situation. TYS would be happy to have a conversation with you, just contact us here.