Tax Year 2024: Major Changes and What to Expect in 2025

As the 2024 tax year ends, it’s clear that businesses face evolving challenges and opportunities. Let’s explore the key developments that shaped this year and what lies ahead.

Congressional Gridlock and Missed Tax Reform Despite bipartisan support, the Tax Relief for American Families and Workers Act failed in the Senate, leaving key business-friendly provisions unfulfilled. These included extending bonus depreciation, delaying research expenditure deductions, and enhancing the child tax credit. However, disaster relief provisions provided critical support to affected regions.

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Uncertainty Around Beneficial Ownership Reporting The Corporate Transparency Act (CTA) faced significant legal pushback over its reporting requirements for business owners. Critics argue that these regulations impose unnecessary burdens on businesses, while proponents highlight their importance in combating fraud. As courts deliberate, companies must stay updated on compliance expectations.

IRS Direct File: A Mixed Bag The IRS expanded its Direct File pilot, enabling taxpayers to save millions in preparation fees. The program’s success has prompted plans for further functionality in 2025, including new credits and deductions. Yet, political opposition casts doubt on its longevity. For eligible taxpayers, Direct File remains a cost-effective option for filing returns.

Lingering Challenges with the ERC The Employee Retention Credit (ERC) continues to create headaches for businesses and the IRS. Fraudulent claims have led to increased scrutiny and significant backlogs. With over a million claims still pending, businesses should prepare for delays and consider professional guidance for filing or appealing claims.

Lower 1099-K Thresholds on the Horizon The IRS plans to reduce reporting thresholds for third-party payments, reaching $600 by 2026. While these changes aim to improve tax compliance, they also introduce new administrative burdens for businesses. Keeping accurate records will be essential to avoid penalties.

Looking Ahead Tax regulations are becoming increasingly complex, requiring businesses to stay proactive and informed. By understanding these changes and seeking expert advice, businesses can better navigate the challenges and opportunities of 2025 and beyond.