By Forbes Staff,Kelly Phillips Erb,Tara Ziemba

Copyright forbes

LOS ANGELES, CA – JULY 09: The original DeLorean Time Machine Hero “A” Car on display for the release of the Back to the Future documentary Outatime: Saving The DeLorean Time Machine at Petersen Automotive Museum on July 9, 2016 in Los Angeles, California. (Photo by Tara Ziemba/Getty Images)
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My birthday is coming up and, as I do every year, I get a little contemplative. There are a few things in this world that make me feel, well, old. Things like having to scroll for a bit to reach my birth year when I complete an online form, realizing that my kids think about Nirvana in the same way that I used to think about Beatles (some old band that had long disappeared), and figuring out that if they remade “Back To The Future” today, Marty McFly would go back in time to 1994. Nineteen. Ninety. Four. (Let that sink in.)

I also felt it this week when the IRS officially announced that paper tax refund checks for individual taxpayers will be phased out beginning on September 30, 2025. It is the first step in the broader transition to electronic payments as required by an Executive Order issued by President Trump.

The executive order also requires that payments be made electronically, too, which means no more paper checks. But not to worry, while the switch over from paper refund checks will be immediate, the IRS says to make payments as usual–the agency will publish detailed guidance for 2025 tax returns before the 2026 filing season begins.

The announcement brought a mix of responses to my feed, ranging from “It’s about time!” to “This sounds like a very bad idea.” My favorite, “Who writes checks anymore?” Me. I’m that person (but don’t worry, I don’t write checks in grocery stores or at other retailers). I do it for a lot of reasons–including avoiding those distasteful service fees for credit card payments that merchants keep adding.

But honestly, I’m somewhere in the middle. I applaud the IRS’ efforts to expand electronic payments and I appreciate that they are typically more efficient and secure. I just hope that, as the agency works to craft exceptions, they are thoughtful about the fact that not everyone can or wants to rely on digital payments–including the unbanked and Americans abroad (under current law, if you live outside the country, your federal income tax refund can only be deposited directly into a U.S. bank account or an affiliated account). I’ll keep you updated as more guidance becomes available.

It’s not just the check-writing that is showing my age. This year, my daughter joined millions of other workers when she enrolled in her employer’s 401(k) plan. It’s her first real job and it’s been fun to watch her realize all of the perks associated with a “real job”—including an employer match, which, as I explained to her, is basically free money.

But what if your employer didn’t offer a match? Or worse, what if your employer announced that it would no longer contribute a match to your 401(k) plan?

That’s exactly what happened to workers at Sherwin-Williams, a paint and coatings company based in Cleveland, Ohio. The company, which boasts just under 50,000 workers nationwide, announced plans to temporarily suspend its 401(k) match. According to Cleveland.com, which first reported the move, the company cited several factors, including tariff policies, increased costs, high mortgage rates that have pushed housing demand to near-historic lows and inflation that has reduced DIY demand for three consecutive years.

It’s important to understand the options available under your plan–and what you can do outside of your plan (keep reading to see our related reader question this week).

Housing costs are also driving news in the tax sphere. The National Association of Home Builders said in March that 60% of U.S. households can’t afford a $300,000 home at a time when the median price is now well above $400,000.

One potential reason? Housing prices have soared since the 1990s, but the tax rules that govern selling a home haven’t changed. The capital gains exclusion for primary residences is still capped at $250,000 for single filers and $500,000 for married couples. For many long-time owners, especially seniors, that means selling triggers a steep tax bill. Downsizing becomes less about preference and more about what they can afford after taxes.

Congress has tried to raise the limits before–there have been multiple attempts since 1997, some to index the caps, others to create special relief for seniors. This summer, President Trump suggested he might offer relief. Eliminating the cap could free up hundreds of thousands of homes, boosting local tax revenues and helping unclog the market. But it could also create more competition at the low end as downsizers bid against first-time buyers. We’ll have to watch to see what happens.

Housing prices are also impacted by the cost of living, including state and local taxes (SALT). While tax rates stayed put under the new tax bill, some of the provisions in the One Big Beautiful Bill Act (OBBBA) result in so-called “stealth taxes”—items that increase your tax bill by reducing tax breaks or adding other taxes. One example from OBBBA is the SALT deduction limit. OBBBA raised the limit on SALT deductions from $10,000 to $40,000. But the limit is reduced for taxpayers with higher incomes, beginning with modified adjusted gross income (MAGI) above $500,000.

That means as income rises, the SALT deduction is reduced so the real marginal tax rate increases. The marginal tax rate for the couple peaks at 45.5% when MAGI is $550,000. When MAGI is above $550,000, the marginal tax rate declines, but never below 35%. It’s an important consideration when thinking about retirement, spending and other potentially tax bracket-dependent items.

Income limits also impact tax breaks on the lower end of the income spectrum. OBBBA permanently increased the maximum child tax credit (CTC) amount to $2,200 per child and indexed it for inflation, which was good news for many families. But these changes do little for families with low incomes, because the credit’s pre-OBBBA phase-in rules remain in place. And, as under prior law, the phase-in amounts grow each year with inflation. But the amount of credit a family can receive beyond taxes owed is limited to 15% of earnings above $2,500. A larger credit with these same phase-in rules means that more children now live in families that cannot receive the full CTC because their parents do not earn enough.

There’s one more income-dependent OBBBA provision that’s making news: student loan borrowers are facing a ticking time bomb that could result in an “enormous tax liability.” That’s according to a lawsuit filed against the Department of Education in the U.S. District Court for the District of Columbia.

The complaint alleges that, in February of 2025, the Department of Education blocked access to all income-driven repayment plans and online loan consolidation applications without warning, impacting over 12 million student loan borrowers who rely on those plans. Eventually, the Department re-opened the online applications, leading to a backlog as borrowers rushed to recertify their income and apply for other relief.

So what’s the problem? The backlog remains. And while the American Rescue Plan Act of 2021 (ARPA) made clear that the cancellation of federal student loans does not result in a taxable event for federal income tax purposes for discharges occurring after December 31, 2020, and before January 1, 2026, OBBBA didn’t extend this protection for borrowers, except for loans cancelled due to death or disability. That means that if the Department does not process cancellations before the end of the year, those borrowers will not qualify for the exemption. In other words, the complaint alleges, “these borrowers will literally pay for the government’s inaction.”

Speaking of the government, last week I reported that the Treasury had issued final regulations on SECURE 2.0 Act provisions related to catch-up contributions. The Regs were, um, confusing at best (you might have seen the reporting with headlines like, “What’s the Actual Effective Date for Roth Catch-Up Contributions?” followed by statements like, “still they have caused some confusion.”). The most confounding bit was the compliance date. After some back and forth, I agreed that the Regs intended to convey that plans have no choice about whether to comply with the basic statutory requirement (the 2026 deadline), but that they have until 2027 to sort out the details of exactly how to comply. That change has been made and I apologize for any confusion. I would also be floored if we didn’t see an official follow-up from the Treasury on this point.

And with that, it’s wild to think that September is almost over. October will be here before you know it and that means at least two important things: post-season baseball (!) and it’s pro bono month. Every October since 2009, legal organizations across America participate in the National Celebration of Pro Bono to draw attention to the need for pro bono participation, and to thank those who give their time year-round.

While pro bono is often affiliated with lawyers, there are lots of opportunities for tax and other professionals to give back, too. My best advice? Work with an existing organization—they have the infrastructure to screen for need and fit, and may provide support, resources, and, importantly, insurance coverage (you may remember that the Alaska program I participated in was sponsored by the American Bar Association Section of Taxation). If you’ve never done any pro bono work before, this is a great time to give it a whirl.

Enjoy your weekend,

Kelly Phillips Erb (Senior Writer, Tax)

This is a published version of the Tax Breaks newsletter, you can sign-up to get Tax Breaks in your inbox here.

Saving for retirement may have limitations for tax purposes.

This week, a reader asks:

Can I have an IRA if I already have a 401(k) plan at work?

Yes, you can contribute to both a 401(k) plan and an IRA, subject to income restrictions and limitations.

For the 2025 tax year, you can contribute a combined total of $7,000 to traditional and Roth IRAs. IRA plans also allow catch‑up contributions for individuals aged 50 and over—that remains $1,000 for 2025, for a total of $8,000 for workers aged 50 and above.

You can contribute to up to $23,500 to your 401(k) plan in 2025—that limit applies to employee contributions made to 401(k) plans and similar plans maintained by non-profit and government employers—403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan for workers. The catch-up contribution limit that generally applies is $7,500 for 2025. That means that participants in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $31,000 each year, starting in 2025. SECURE 2.0 allows for a higher catch-up contribution limit for employees aged 60, 61, 62, and 63 who participate in these plans—for 2025, this higher catch-up contribution limit is $11,250 (compared to $7,500 for everyone else).

Income phase-outs also apply. This is where your question really matters. The advantage of most retirement plans is the tax break. If, during the year, you or your spouse was covered by a retirement plan at work, your IRA tax deduction may be reduced, or phased out, until it is eliminated, depending on your filing status and income. Here are the phase‑out ranges for 2025:

For single taxpayers covered by a workplace retirement plan, the phase-out range is between $79,000 and $89,000.

For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is between $126,000 and $146,000.

For an individual contributing to an IRA who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is between $236,000 and $246,000.

For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is between $0 and $10,000 (those numbers do not change because they are not subject to an annual cost-of-living adjustment).

Importantly, if neither you nor your spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.

Income phase-outs also apply to Roth IRAs. For 2025, those numbers have increased to between $150,000 and $165,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is increased to between $236,000 and $246,000. And, as with traditional IRAs, the phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

(Note that if you’re phased out of the Roth, you can still contribute to a traditional IRA–you just won’t receive a tax deduction.)

Do you have a tax question that you think we should cover in the next newsletter? We’d love to help if we can. Check out our guidelines and submit a question here.

Getting To Know You Tuesday: Ashia Thompson

Ashia Thompson
Ashia Thompson

What does a tax professional look like? This week, meet Ashia Thompson.

Some tax professionals like to reach for the clouds—Ashia Thompson practically lives among them. Ashia, a U.S. Certified Public Accountant and founder of Top Tier Accounting, calls the Burj Khalifa home. Located in Dubai, United Arab Emirates, it’s the world’s tallest building, with a total height of 829.8 meters, or just over half a mile.

Ashia started her professional career at PricewaterhouseCoopers (PwC). She later joined Deloitte Tax LLP, where she worked as a Senior Tax Consultant in the Business Tax Services Commercial group before founding her own firm. She is a member of the National Association of Black Accountants (NABA) and the American Institute of Certified Public Accountants (AICPA).

Today, Ashia works with high-net-worth entrepreneurs, networking with those she says who “don’t just dream big—they move differently.”

Ashia is the next professional to be featured in our Getting To Know You Tuesday series—a chance to get to know all kinds of tax professionals and understand that the field of tax is bigger than April 15. If you’d like to nominate a tax professional to be featured, send your suggestion to kerb@forbes.com with the subject: Getting To Know You Tuesday.

Statistics, Charts, and Graphs

There have been 10 government shutdowns since 1980.
Kelly Phillips Erb

On September 30 at midnight, the government will run out of money for the next fiscal year. That means that, unless a compromise is reached in Washington, there will be a government shutdown.

While it feels like we are always under the threat of a shutdown these days, that wasn’t always the case. Since 1980, the government has only been shut down 10 times. Until 1990, not one of the shutdowns lasted more than a single day. That changed in 1990 when the government turned off the lights for three days.

More recently, the government stopped operating twice during President Trump’s first term. The December 22, 2018 shutdown lasted 35 days, the longest in history. Taxpayers and tax professionals remember it well—by the time it ended, the IRS was weeks behind schedule on training and new hires for the 2019 tax season. At the time, the National Taxpayer Advocate advised House officials that it would take “at least a year” for the IRS to return to normal operations.

For some perspective on how a shutdown might impact the IRS this time around, I turned to someone who is very familiar with the workings of the agency: Terry Lemons. Terry spent more than 25 years at the IRS, overseeing the agency’s communications operations for over 17 years before retiring earlier this year. He says that, as he saw time and time again during a quarter-century of dealing with shutdown threats at the Internal Revenue Service, a budget stalemate creates needless work, wastes resources and ultimately distracts from helping taxpayers.

A Deeper Dive

FBAR reporting requirements mean that you must report offshore accounts.

A recent case out of the U.S. District Court for the Northern District of Texas may change the way that the IRS pursues FBAR enforcement.

First, a little background on FBARs. As part of the Bank Secrecy Act (31 USC §5314), every U.S. person with a financial interest in, or signature or other authority over, one or more foreign financial accounts with an aggregate value of more than $10,000 must annually report the account to the Treasury Department. You do this by filing a Report of Foreign Bank and Financial Accounts—more commonly known as an FBAR. Failure to report can result in a penalty, depending on whether the failure was willful or non-willful. The penalties can be draconian, but typically, the penalty for a non-willful violation is $10,000.

The FBAR is an annual report now due on April 15 (unless it falls on a weekend or holiday, which is the case in 2023, making it due on April 18). It’s the same deadline as Tax Day though you do not file an FBAR with the IRS—you file with FinCEN, or the Financial Crimes Enforcement Network. If you can’t file by the deadline, you can get an automatic extension to October 15.

In this case, Sharnjeet Sagoo had foreign bank accounts at financial institutions in Kenya, India and England, with total balances of approximately $1.4–1.7 million–well in excess of the $10,000 reporting threshold. Sagoo’s failure to file the FBAR triggered an IRS civil audit with the agency considering the omissions “willful,” leading to penalties against her of more than $1million. (There’s a distinction here worth noting. This case focused on willful behavior. Remember that the $10,000 maximum penalty for the non-willful failure to file should be calculated per report, not per account, thanks to a 2023 Supreme Court case.)

Sagoo refused to pay and the government sued in federal district court. Sagoo cited a recent Supreme Court case, SEC v. Jarkesy, which mandated jury trials for certain agency-imposed civil penalties. Sagoo moved to dismiss the case, arguing the IRS unconstitutionally acted as “prosecutor, jury, and judge” by assessing penalties without giving her a jury trial.

The U.S. District Judge Reed O’Connor agreed, granting the motion and dismissing the case with prejudice–that means that the case is final unless it’s overturned on appeal.

The case is United States v. Sagoo. I would expect to see the IRS appeal. If the case is upheld, the Sagoo ruling mandates jury trials for willful FBAR penalty collection lawsuits, unless the taxpayer waives their right to a trial by jury. This shift is a double-edged sword that has potential to both help and harm taxpayers.

Tax Filings And Deadlines

📅 September 30, 2025. Due date for individuals and businesses impacted by 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, Kentucky, and Tennessee that began on April 2, 2025.

Tax Conferences And Events

📅 October 3-4, 2025. National Association of Tax Professionals Dallas Tax Forum. Omni Dallas, Dallas, Texas. Registration required.

📅 October 19-25, 2025. 2025 Pro Bono Celebration Events. American Bar Association. Events by state.

📅 October 21-22, 2025. National Association of Tax Professionals Orlando Tax Forum. The Florida Hotel & Conference Center, Orlando, Florida. Registration required.

What percentage of American workers in the private sector contributes to a 401(k) plan?

Find the answer at the bottom of this newsletter.

Positions And Guidance

The IRS has published Internal Revenue Bulletin 2025-40.

The IRS has issued guidance (Notice 2025-52) that provides tax relief for farmers and ranchers in applicable states and regions who sold or exchanged livestock because of drought conditions. Under the guidance, farmers and ranchers may take more time to replace their livestock and defer tax on any gains from the forced sales or exchanges.

Meadows, Collier, Reed, Cousins, Crouch & Ungerman, LLP announced that Joseph Rillotta has joined the firm’s Tax Controversy & Litigation and White-Collar Defense practices. A former trial attorney in the U.S. Department of Justice Tax Division and most recently Counselor to the IRS Commissioner, Rillotta brings experience across criminal and civil tax enforcement, complex investigations, and high-stakes litigation.

The American Bar Association Tax Section is now accepting applications for its Christine A. Brunswick Public Service Fellowship program class of 2026-2028. The program was developed in 2008 to address the need for tax legal assistance, and to foster an interest in tax-related public service. Applications are due November 7, 2025.

The Penn Wharton Budget Model (PWBM) projects that the Social Security Trust Fund will be depleted in 2034. At depletion, 83% of scheduled benefits would be able to be paid, based on tax revenue coming in, falling to 69% by 2099. PWBM projects a 75-year actuarial balance of –4.2% (a deficit) of taxable payroll. This means that Social Security could be made sustainable over the next 75 years if the current employer-employee combined Social Security payroll tax rate were raised from 12.4% to 16.6%, or an equivalent amount of spending cuts were made, or some combination of both.

If you have tax and accounting career or industry news, submit it for consideration here or email me directly.

In Case You Missed It

Here’s what readers clicked through most often in the newsletter last week:

A First Look At The New Tax Form For Claiming Deductions For Tips, Overtime, Car Interest And Seniors

Projected 2026 Tax Brackets, Rates And Deductions. Here’s What To Know.

You can find the entire newsletter here.

Trivia Answer

The answer is (C) 50%.

About half of U.S. workers in the private sector contribute to 401(k) plans.

Approximately half of private-sector workers are contributing to a 401(k) plan.

As of September 30, 2024, 401(k) plans held $8.9 trillion in assets on behalf of about 70 million active or retired workers. Additionally, savings rolled over from 401(k) and other employer-sponsored retirement plans account for approximately half of the $15.2 trillion held in IRA assets as of September 30, 2024.

How did we do? We’d love your feedback. If you have a suggestion for making the newsletter better, submit it here or email me directly.

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