In updated FAQs, the IRS has announced a new procedure for taxpayers who receive an ERC refund related to wages paid in prior tax years, but have not filed an amended return to reduce their wage expenses for the year the wages were paid (2020 and/or 2021). (www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit#incometax)

ERC refunds issued

For situations where the prior-year return is a closed year, taxpayers must include the overstated wage expense amount as gross income on their income tax return for the tax year the ERC refund was received. This means that if a taxpayer receives an ERC refund in 2024 related to 2021 wage expenses, they must include the 2021 overstated wage expenses as gross income on their 2024 tax return. The IRS also reiterates that taxpayers in this situation remain eligible for penalty relief. (IR-2022-89)

For open tax years, taxpayers may file an amended return, administrative adjustment request (AAR), or protective claim for refund to deduct their wage expense for the year in which the ERC was claimed. Alternatively, these taxpayers could elect to report the refund as income in the year it is received.

Many taxpayers were filing amended returns and paying associated taxes due for the closed tax year only to have the IRS return the tax payments because the tax year was closed. These taxpayers now know that they can cash these refund checks without repercussion and use these payments to pay the resultant taxes due when the wages are reported on the tax return for the year the ERC refund was received.

ERC credits disallowed

The IRS also provided guidance for taxpayers whose ERC was disallowed, who had previously reduced the wage expense on their return for the year the ERC was claimed. These taxpayers may, in the year the ERC claim disallowance is final, increase their wage expense on their income tax return by the same amount that it was reduced when they made their original ERC claim.

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The FTB began sending out corrected 1099-Gs on March 19, 2025.

As we previously reported, due to a calculation oversight, some of the Forms 1099-G, Certain Government Payments, issued by the FTB for the 2024 tax year contained incorrect information. According to the FTB, this issue was limited to taxpayers who itemized their deductions and transferred estimates from the 2023 tax year to the 2024 tax year. The transferred amount may not have been included in the 1099-G amount.

The FTB estimates that this impacted about 3% of the 1099-Gs, which according to our calculations comes to about 100,000 forms.

Tax professionals should verify that the information reported on previously received 1099-Gs is correct. If not, they should hold off filing until they receive the corrected 1099-Gs. Tax professionals can also check their client’s MyFTB account to see if the corrected 1099-G has been posted.

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The Federal Emergency Management Agency (FEMA) has extended the deadline for survivors of the Los Angeles County fires to register for federal aid. (Governor’s Press Release (March 7, 2025), available at: www.gov.ca.gov/2025/03/07/governor-newsom-announces-deadline-extension-to-apply-for-federal-assistance-for-los-angeles-fires) The deadline to apply for Disaster Unemployment Insurance with the EDD has also been extended.

FEMA assistance

Homeowners and renters who have incurred damage or losses from the Los Angeles County wildfires now have until Monday, March 31, 2025, to apply for FEMA Individual Assistance and Small Business Administration assistance. The previous deadline for registration for disaster aid was March 10, 2025.

Affected taxpayers can apply at:

www.disasterassistance.gov

EDD Disaster Unemployment Insurance

The deadline to apply for Disaster Unemployment Assistance has also been extended until March 31, 2025. Taxpayers can apply at:

www.edd.ca.gov/en/unemployment/Disaster_Unemployment_Assistance

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On Sunday, March 2, 2025, FinCEN continued with its rollercoaster guidance by announcing that it will not enforce any penalties or fines associated with the beneficial ownership information (BOI) reporting rules under existing regulations. Additionally, FinCEN will not enforce any penalties or fines against U.S. citizens or domestic reporting companies, or their beneficial owners.

The reason for the relief is that the Department of the Treasury will propose new rulemaking that will narrow the scope of the beneficial owner reporting rules to apply to foreign reporting companies only. This means that domestic entities will not be required to file any BOI reports.

At this time there is no information on what, if anything, will need to be done for domestic entities that have already filed. We will continue to update you as information is released on this issue.

The full text of the Treasury press release is available at:

https://home.treasury.gov/news/press-releases/sb0038

As a result of this development, Spidell’s BOI Reporting Update webinar has been canceled. Customers who were registered for the March 25, 2025, webinar will receive an e-mail from us today with options to transfer to another webinar or request a refund.

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On February 27, 2025, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports until a new interim BOI reporting final rule becomes effective, and the new relevant due dates in the interim final rule have passed.

FinCEN stated that it intends to issue an interim final rule no later than March 21, 2025, which will extend the BOI reporting deadlines.

FinCEN’s announcement is available here.

In light of this latest development, to ensure that our customers have the most current information, Spidell will postpone our BOI Reporting Update webinar originally scheduled for March 4, 2024, until March 25, 2025. Sign up for the webinar here.

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The Los Angeles City Council approved a business tax relief program for taxpayers with a business location that was destroyed by the wildfires, including home-based businesses. Under the program, a business destroyed by the wildfires is deemed to have terminated the business as of December 31, 2024. This means the taxpayer will not be required to renew their business license or pay the business license tax for the 2025 tax year. When the taxpayer reopens, they will need to reregister as if they were a newly established business.

Businesses whose property was not physically destroyed but that experienced severe economic disruption for at least 45 days can also qualify.

All eligible taxpayers must apply for relief by April 14, 2025, at:

http://finance.lacity.gov

Additional information is available at:

http://finance.lacity.gov/blog/business-tax-relief-people-and-businesses-directly-impacted-wildfires-faq

In addition, all business locations within ZIP codes 90049, 90272, and 90402 will automatically be granted an extension of the annual business tax renewal filing deadline to April 14, 2025. A taxpayer with a business located outside of these ZIP codes, but whose business was interrupted as a direct result of the fires, may be granted an extension as well. To qualify, the taxpayer must submit a written request, including reasonable proof of the interruption, to the Office of Finance before the February 28, 2025, renewal deadline at:

http://finance.lacity.gov/blog/wildfire-business-tax-filing-extension

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We have heard from numerous tax professionals that the Forms 1099-G being sent by the FTB contain incorrect amounts. We reached out to the FTB, and they confirmed that there are some Forms 1099-G that need to be corrected. They are working on making these corrections and hope to release additional information shortly. In the interim, tax professionals should verify that the amounts reported on Form 1099-G are correct and, if not, should hold off preparing those returns until we receive guidance from the FTB.

We will send a follow-up Flash E-mail once we have additional information from the FTB.

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FinCEN announced that the beneficial ownership information (BOI) filing mandate is now back on, with a new filing due date of March 21, 2025. (FinCEN Notice FIN-2025-CTA1 (February 18, 2025)) The reinstatement was triggered by the U.S. District Court for the Eastern District of Texas’s February 18, 2025, decision to lift the preliminary injunction that it had issued in the Smith case. (Smith, et al. v. U.S. Department of the Treasury, et al.(February 18, 2025) U.S. Dist. Ct., E.D. Tex., Case No. 6:24-cv-00336)

The new March 21, 2025, due date applies to the vast majority of reporting companies to file an initial, updated, or corrected BOI report, including those entities formed prior to January 1, 2024. Entities formed in 2025 must file by the later of March 21, 2025, or 30 days from the date of formation.

FinCEN indicated that during the next 30 days it will “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce the burden for lower-risk entities, including many U.S. small businesses.”

Additional information is available at:

www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf

Spidell is offering a one-hour webinar to provide all the information you will need to meet this new March 21, 2025, deadline. To register, go to:

www.caltax.com/shop/webinars/live-upcoming-webinars/boi-reporting-update-webinar

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The House has unanimously passed the Protect Small Businesses From Excessive Paperwork Act of 2025 (H.R. 736), which would delay the beneficial ownership information (BOI) mandatory reporting requirement due date to January 1, 2026, for entities formed prior to January 1, 2024. The bill has now been sent to the Senate.

The bill would not impact the reporting requirement for entities formed after 2023, which means that if the preliminary injunction issued in the Smith case is stayed, entities formed after 2023 would still be required to file their initial reports and any updates or corrections to these reports. (Smith vs. U.S. Treasury (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036) However, it is important to note that FinCEN has indicated that if the injunction is lifted, it will postpone the filing deadline for 30 days, during which time period it will revise which entities may be required to file the reports. See our Flash E-mail from February 6, 2025, “Mandatory beneficial ownership reporting may soon be back in play,” for more details.

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On February 5, 2026, the Department of Justice (DOJ) filed an appeal with the Fifth Circuit Court of Appeals of the U.S. district court’s preliminary injunction in Smith v. U.S. Department of the Treasury, which blocked the enforcement of the beneficial ownership information (BOI) reporting requirement. (Smith et. al. v. U.S. Department of Treasury, et al. (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036)

The DOJ asked that the injunction be put on hold while the appeal proceeds. Although it is not guaranteed, given that the U.S. Supreme Court reversed the Fifth Circuit’s reinstatement of the preliminary injunction in the Texas Top Cop Shop decision (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653), it is likely that the Fifth Circuit will grant the DOJ’s request for a stay of the injunction. This means the beneficial ownership reporting mandate may be reinstated shortly.

In an alert posted today, FinCEN stated that if the injunction is lifted by the Fifth Circuit, it will extend the filing deadlines for all reporting companies by 30 days. FinCEN also stated that during this 30-day period it “will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.”

However, while the Smith court’s injunction remains in place, businesses are not currently required to file any initial reports or any updates or corrections, although they may do so voluntarily.

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According to an alert posted on FinCEN’s beneficial ownership information (BOI) reporting webpage, BOI reporting is still voluntary for now despite the U.S. Supreme Court’s stay of the preliminary injunction issued by a federal district court in Texas Top Cop Shop Inc. v. McHenry. ((January 23, 2025) U.S. Supreme Court, Case No. 24A653)

This is because another judge in a separate case has also issued a nationwide injunction against the BOI reporting requirements. (Smith v. U.S. Department of Treasury (January 7, 2025) U.S. Dist. Court, Eastern Dist. of Texas, Case No. 6:24-CV-336)) To date, the Department of Justice has not filed an appeal in Smith. It is not known whether the new administration will appeal the case.

This means that, for now, businesses are not required to file BOI reports and cannot be penalized for failing to do so.

It is also important to note that two bills (HR 425 and S 100) have been introduced in Congress to repeal the Corporate Transparency Act, which created the BOI reporting mandate.

We will keep you apprised of any further developments as they occur.

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Today, the U.S. Supreme Court stayed the order from the Fifth Circuit Court of Appeals that reinstated the lower court’s nationwide injunction against the beneficial ownership information (BOI) reporting requirement. (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653)

FinCEN has yet to issue any additional guidance after the U.S. Supreme Court’s ruling, so it is unclear at this point whether businesses will be required to comply with the BOI reporting mandate. We anticipate we will hear more from FinCEN and/or Congress shortly and will keep you apprised of any further developments.

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As a result of an executive order issued by Governor Newsom today, taxpayers in the following zip codes may postpone their property tax payments until April 10, 2026, and business personal property tax statement filings until April 1, 2026, without being subject to penalties and interest:

However, the postponement relief does not apply to payments made through an impound account nor to any taxes on the property that were delinquent as of January 6, 2025.

In addition to the relief provided in the executive order, taxpayers may also seek relief from the Los Angeles County Assessor’s office to have damaged or destroyed property reassessed. Taxpayers may also seek further suspension of penalties and interest for up to four years by submitting a penalty cancellation request form with the Los Angeles County Treasurer and Tax Collector.

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For taxpayers affected by the Los Angeles wildfires, the Governor’s office announced that California will provide postponed income and franchise tax filing and payment deadlines in alignment with the filing postponement provided by the IRS. This means taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file California tax returns on 2024 income and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This applies to all taxpayers located in Los Angeles County, even if they were not directly impacted by the fires.

According to the Governor’s announcement, this includes relief from the following deadlines:

• Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025;
• Passthrough entity elective tax payments normally due on March 15 and June 15, 2025;
• Business entity corporate or passthrough entity tax returns normally due on March 15 and April 15, 2025;
• Individual tax returns and payments normally due on April 15, 2025; and
• Tax-exempt organization returns normally due on May 15, 2025.

We confirmed that similar to the relief granted by the IRS, this relief will also apply to taxpayers outside Los Angeles County whose tax professionals are located in Los Angeles County.

In addition, the Governor’s office has announced that the CDTFA will provide an automatic three-month extension for tax filing deadlines for taxpayers within Los Angeles County for those Los Angeles County taxpayers whose 2024 third quarter return was for less than $1 million in tax. This means that the January 30 returns are now due April 30, 2025. The CDTFA will also provide Los Angeles County taxpayers relief from interest and penalties and create flexible payment plans for businesses.

The Governor’s announcements are available here and here.

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Taxpayers located in Los Angeles County have until October 15, 2025, to meet filing and payment deadlines that normally fall within the January 7, 2025, through October 15, 2025, time period. (IR-2025-10) This includes, but is not limited to:

• 2024 quarterly estimated income tax payments normally due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025;
• Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025;
• Individual income tax returns and payments normally due on April 15, 2025;
• 2024 contributions to IRAs and health savings accounts for eligible taxpayers;
• Calendar-year partnership and S corporation returns normally due on March 17, 2025;
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025; and
• Calendar-year tax-exempt organization returns normally due on May 15, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after January 7, 2025, and before January 22, 2025, will be abated as long as the deposits are made by January 22, 2025.

Ventura County is not currently listed in the FEMA disaster declaration, so the IRS cannot currently grant automatic postponement relief to taxpayers located in Ventura County. The IRS has indicated that the same relief will be provided to any other counties added later to the disaster area.

Taxpayers who have an address of record in Los Angeles County will automatically qualify for relief. Taxpayers who live outside of Los Angeles County whose records are located in Los Angeles County, such as taxpayers with tax preparers in Los Angeles County or who own businesses located in Los Angeles County, also qualify for relief, but must contact the IRS disaster hotline at (866) 562-5227 to obtain relief.

Disaster area tax preparers with clients located outside the disaster area can choose to file bulk requests. Information about bulk requests is available at:

www.irs.gov/tax-professionals/bulk-requests-from-practitioners-for-disaster-relief

To date, the California Department of Finance has not announced whether they will be providing similar relief for California income and franchise tax returns. We will continue to update you as news develops on this issue.

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Taxpayers directly affected by the Los Angeles and Ventura county wildfires qualify for relief for the upcoming sales and use tax and payroll tax deadlines, as follows:

• A 60-day extension to file with the EDD state payroll reports or deposit payroll taxes without penalties and interest. To qualify, taxpayers must make a written request within two months of an original payment or return due date; and
• An extension of up to three months to file and pay sales and use taxes or fees with the CDTFA.

We have confirmed with the EDD and CDTFA that a taxpayer will be considered “directly affected” if their tax preparer is directly affected by the wildfires (e.g., due to power outages, evacuation orders, or worse).

This relief is not automatic. Taxpayers must submit requests for relief. Details about how to apply are available from the EDD here and the CDTFA here.

We anticipate that the IRS and FTB will also be granting filing and payment deadline postponements for income and franchise taxes. We will send another Flash E-mail once they have announced the available relief.

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Today President Biden signed a major disaster declaration for the wildfires impacting various communities in Los Angeles County. This will enable affected individuals and businesses to access individual program assistance from FEMA to cover expenses such as temporary accommodations and financial assistance for destroyed property.

The IRS has not issued any announcements yet, but we anticipate that with a disaster this size they will soon be providing tax filing and payment postponement relief. We will send another Flash E-mail when this occurs.

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The BOI reporting mandate roller coaster ride continues.

A new panel of the U.S. Fifth Circuit Court of Appeals is reviewing the lower court’s decision to enjoin the enforcement of the beneficial ownership information reporting requirement. (Texas Top Cop Shop, Inc. et al. v. Garland (December 26, 2024) U.S. Ct. of Appeals, Fifth Circuit, Case No. 24-40792) The review will be expedited, but in the interim the new panel reversed the previous panel’s decision to allow the BOI reporting mandate to continue pending the court of appeal’s review.

As the law stands today, penalties cannot be imposed against businesses who fail to file BOI reports with FinCEN.

However, as we have seen over this last month, this can change at any point. We recommend that you keep your clients informed of the latest developments, as the ultimate decision as to whether to file lies with them. FinCEN has not yet issued any updates on this latest development, but we assume that they will continue to allow businesses to voluntarily file.

Should your clients choose not to file until they are required to do so, we recommend that they continue to gather all necessary information to be ready to file should the reporting requirement be reinstated. As we saw this past week when the BOI reporting requirement was temporarily reinstated, FinCEN only gave businesses a short extension of the reporting deadlines.

The Court of Appeal’s latest order is available at:

www.ca5.uscourts.gov/opinions/unpub/24/24-40792..pdf

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On December 23, 2025, the Fifth Circuit Court of Appeals stayed the lower court’s preliminary injunction against the beneficial ownership information reporting mandate. (FinCEN Alert) This means that the BOI reporting mandate will remain in effect while the lower court trial proceeds. However, FinCEN has announced a short delay in the deadlines for most businesses. The extended reporting deadlines are now as follows:

• Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025);
• Reporting companies created or registered on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN; and
• Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.

The deadline for those businesses formed after 2024 remains 30 days from the time of formation.

Attendees of Spidell’s 2024/25 Federal and California Tax Update will receive an updated client letter regarding these changes. Click here for details.

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Beneficial ownership information (BOI) reporting: The continuing resolution that was enacted this weekend did not defer the January 1, 2025, BOI reports for reporting companies formed prior to 2024. However, the temporary restraining order issued by the U.S. District Court in East Texas remains in place, meaning that all BOI reporting deadlines are currently on hold. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

Social Security Fairness Act sent to the president: Congress passed H.R. 82, the Social Security Fairness Act, which will retroactively increase the Social Security benefits paid to millions of individuals by eliminating the windfall elimination provision and government pension offset. This means these individuals will qualify for increased Social Security benefits, retroactive to January 1, 2024. President Biden is expected to sign the bill.

2021 Recovery Rebate Credits being sent out: The IRS announced that it will be issuing over one million 2021 Recovery Rebate Credits to eligible taxpayers who failed to claim the credit on their 2021 tax returns. (IR-2024-314) Eligible taxpayers should begin receiving these payments of up to $1,400 by late January.

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Beginning January 1, 2025, the standard mileage rates for the use of a car, van, pickup truck, or panel truck will be:

• 70 cents per mile driven for business use, up three cents from 2024;
• 21 cents per mile driven for medical purposes, unchanged from 2024;
• 21 cents per mile for moving purposes for qualified active-duty members of the Armed Forces, unchanged from 2024; and
• 14 cents per mile driven in service of charitable organizations, unchanged from 2024.
  (IRS Notice 2025-5)

The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.

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Tucked away in the proposed 1,500-page continuing resolution (CR) that Congress is hoping to pass this week is a one-year delay in the January 1, 2025, beneficial ownership information (BOI) reporting deadline for those entities subject to the BOI reporting mandate that were in existence prior to January 1, 2024. (CR Title V, Subtitle C, §122) It is unclear at this stage whether the CR will pass in its current form.

If this provision is enacted as currently proposed, it would not impact the requirement that entities subject to the mandate that are formed in 2024 file their initial report within 90 days of formation and those entities formed after 2024 file their reports within 30 days of formation. However, the preliminary injunction put in place by the U.S. District Court in East Texas has put these requirements on hold, at least for now. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

We will send another Flash E-mail with any further developments.

The text of the proposed continuing resolution is available at:

https://go.spidell.com/e/837113/billsthisweek-20241216-CR-pdf/5ywwz8/2361706954/h/NipYP-gAC36lbHc-j29GKOo-YzOsQkWr-0JzCz7kH2Q

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President Biden has signed the Federal Disaster Tax Relief Act (H.R. 5863; P.L. 118-148). As we previously reported, the bill:

• Retroactively excludes from gross income qualified wildfire relief payments paid to individuals as compensation (other than insurance payments) for losses, expenses, or damages for any wildfire declared a federal disaster after December 31, 2014 (§3, H.R. 5863);
• Treats disaster relief payments to victims of the East Palestine, Ohio, train derailment as excludable IRC §139(b) payments (§3, H.R. 5863); and
• Allows individual victims with a net disaster loss from any taxable year to claim an enhanced personal casualty loss under IRC §165(h) for certain federally declared disasters that occurred after February 24, 2021. (§2, H.R. 5863)

We anticipate that the IRS will issue additional guidance shortly, and we will keep you posted as updates become available.

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Each transferor and transferee that is a party to a sale or exchange of an interest in a partnership (or portion thereof) involving unrealized receivables and inventory (§751 property) must receive IRS Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, from the partnership by the later of:

• January 31 of the year following the calendar year in which the transaction occurred; or
• 30 days after the partnership has received notice of the exchange.

Partnerships that fail to timely furnish Form 8308 to parties involved in the sale are subject to penalties under IRC §6722 for failure to furnish correct payee statements (up to $250 per statement).

Recent changes made to Form 8308 have raised concerns that partnerships may not be able to acquire all information necessary to properly report Form 8308 by January 31, 2025, for transactions occurring in 2024.

Due to these concerns, the IRS has announced that it will not charge penalties under IRC §6722 to partnerships that are required to furnish Form 8308 for transactions occurring in 2024 as long as the partnerships:

• File Form 8308 with Parts I, II, and III completed by the later of:
  • January 31, 2025; or
  • 30 days after the partnership has received notice of the exchange; and
• File Form 8308 with Part IV completed by the later of:
  • The due date of the partnership’s 2024 Form 1065 (including extensions); or
  • 30 days after the partnership has received notice of the exchange.
    ​​​​(IRS Notice 2025-2)

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The Senate has passed the Federal Disaster Tax Relief Act of 2023 (H.R. 5863).

If enacted, the bill would:

• Exclude from gross income qualified wildfire relief payments paid to individuals as compensation (other than insurance payments) for losses, expenses, or damages for any wildfire declared a federal disaster after December 31, 2014 (§3, H.R. 5863);
• Treat disaster relief payments to victims of the East Palestine, Ohio, train derailment as excludable IRC §139(b) payments (§3, H.R. 5863); and
• Allow individual victims with a net disaster loss from any taxable year to claim an enhanced personal casualty loss under IRC §165(h) for certain federally declared disasters that occurred after February 24, 2021. (§2, H.R. 5863)

The bill previously passed the House and will now be sent to the President. It is expected that President Biden will sign the bill.

The text of the bill is available at:

www.congress.gov/bill/118th-congress/house-bill/5863/text

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A federal district court in Texas issued a nationwide preliminary injunction against enforcing the beneficial ownership reporting requirements mandated by the Corporate Transparency Act (CTA). (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

The court ruled that Congress exceeded its authority in enacting the CTA, resulting in an unconstitutional infringement on states’ rights to regulate businesses. The court granted a nationwide injunction prohibiting FinCEN from enforcing the January 1, 2025, reporting deadline for all reporting companies.

The opinion was issued on December 3, 2024, and will likely be appealed. However, for now, businesses do not have to file beneficial ownership information reports with FinCEN.

We will continue to update you as news develops on this issue.

The opinion is available at:

www.caltax.com/files/2024/ttcsvgarland.pdf

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The IRS is extending the Research Credit claim transition period through January 10, 2026. (www.irs.gov/newsroom/irs-sets-forth-required-information-for-a-valid-research-credit-claim-for-refund) This means that for refund claims filed on or before January 10, 2026, taxpayers will be given a 45-day period to provide the required information for previously submitted claims.

In October 2021, the IRS initially set forth the additional information that taxpayers are now required to include for a Research Credit refund claim. (Chief Counsel Memorandum 2021401F) Taxpayers were given a transition period, during which taxpayers were given up to 45 days to perfect a previously submitted return. Since that time, the IRS has extended the transition period three times.

Pursuant to CCM 2021401F, as modified in subsequent guidance, taxpayers must provide the following information when claiming a Research Credit refund:

• Identify all the business components to which the IRC §41 Research Credit claim relates for that year;
• For each business component, identify all research activities performed; and
• Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.

This may be done using Form 6765, Credit for Increasing Research Activities.

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The IRS is providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces (e.g., Venmo, Amazon, etc.), regarding transactions during calendar years 2024 and 2025. (IRS Notice 2024-85) Although the American Rescue Plan Act required that TPSOs file 1099-Ks for all amounts paid to a payee if they exceed $600 in aggregate beginning with the 2022 calendar year, the IRS has previously delayed implementation.

According to the IRS’s latest guidance, TPSOs must file 1099-Ks to report transactions when the amount of total payments for those transactions is more than:

• $5,000 in 2024;
• $2,500 in 2025; and
• $600 in calendar year 2026 and after.

In addition, the IRS will not assert penalties under IRC §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax during the 2024 calendar year.

TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.

For calendar year 2025 and after, the IRS will assert penalties under §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax.

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The IRS announced that it is extending the deadline for third-party payers to file corrected ERC claims from November 22, 2024, to December 31, 2024. (e-News for Tax Professionals 2024-47) As we reported previously, this consolidated claim process allows third-party payers who filed ERC claims for multiple clients on a consolidated basis to withdraw the ERC claims for some, but not all, of the prior claims.

Details about who is eligible and how third-party payers can apply are available in our September 26, 2024, Flash E-mail.

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The FTB has stated that California will conform to additional federal disaster-related postponement relief related to disasters that occurred outside California (see our October 15 Flash E-mail for earlier announced relief). This additional relief includes, but is not limited to, relief provided to victims of Hurricanes Helene and Milton.

For taxpayers filing California returns, California conforms to the postponement relief provided to affected taxpayers related to the disasters listed below.

Taxpayers should write the name of the disaster (for example, “Florida Hurricane Milton relief per FL- 2024-10”) in blue or black ink at the top of their tax return to alert the FTB. If taxpayers are filing electronically, they should follow the software instructions to enter disaster information.

See the following FTB webpage for additional information:

www.ftb.ca.gov/file/when-to-file/disasters-outside-california.html

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In IRS Notice 2024-80, the IRS announced the inflation-adjusted retirement figures for 2025. Key adjustments contained in the notice include, but are not limited to:

• The IRA contribution limit and catch-up contribution limit will remain at $7,000 and $1,000, respectively. Also included in the Notice are the increased income phase-out ranges;
• The SIMPLE contribution limit for businesses with 25 or more employees is increased from $16,000 to $16,500, while the catch-up contribution amount for most employees age 50 and older remains at $3,500 ($5,250 for employees aged 60, 61, 62, or 63). For businesses with fewer than 26 employees, the contribution limit is $17,600 and the general catch-up contribution limit remains at $3,850;
• The annual contribution limit for IRC §§401(k), 403(b), 457 governmental plans, and the federal government’s Thrift Savings Plan is increased from $23,000 to $23,500, while the catch-up contribution for most employees 50 and older remains at $7,500. However, employees aged 60, 61, 62, and 63 can make a catch-up contribution of up to $11,250; and
• The qualified charitable distribution limit is increased from $105,000 to $108,000.

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Effective November 23, 2024, FTB Secure E-mail users will no longer be required to register with the FTB or log in with a password to open an encrypted e-mail. (FTB Tax News, November 2024) Instead, to view a Secure E-mail message from the FTB, users will be told to click on a button to view the e-mail and then will be given the option to either:

• Re-sign in to their e-mail account; or
• Sign in with a one-time passcode that will be sent to their e-mail account (the one-time passcode will expire after 15 minutes).

Any existing e-mail messages received from, and replied to, the FTB through FTB Secure E-mail before the November 23, 2024, update will only be retrievable through December 8, 2024. After December 8, 2024, e-mail messages received and sent to the FTB before the update will be purged and will not be retrievable.

Tax professionals should ensure they print out or otherwise memorialize these e-mails prior to December 9, 2024.

Any encrypted e-mail messages received from, and replied to, the FTB on or after the November 23, 2024, update will be subject to a 90-day retention period unless deleted earlier by the user.

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FinCEN has announced filing postponement relief of up to six months for victims of five recent hurricanes. However, as noted below, the deadlines postponed vary depending on which hurricane is involved. Only victims of Hurricane Milton qualify for relief from the original filing deadline of January 1, 2025, for businesses that formed prior to January 1, 2024.

For all hurricanes listed below, to qualify for the postponement relief the reporting company must have its principal place of business in an area designated both by:

• The Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance (see www.fema.gov/disaster/current); and
• The IRS as eligible for tax filing relief (see www.irs.gov/newsroom/tax-relief-in-disaster-situations).

In addition, FinCEN will work with any reporting company whose principal place of business is outside the disaster areas but that must consult records located in the affected areas to meet the deadline. Reporting companies with a principal place of business outside the affected areas and that are seeking assistance in meeting their filing obligations should contact FinCEN at www.fincen.gov/boi.

The six-month postponement relief only applies to reporting companies with an initial or updated BOI filing deadline that falls within the periods listed below based on the hurricane involved:

• Hurricane Milton: Between October 4, 2024, and January 2, 2025 (see FIN-2024-NTC11);
• Hurricane Helene: Between September 22, 2024, and December 21, 2024 (see FIN-2024-NTC10);
• Hurricane Francine: Between September 8, 2024, and December 7, 2024 (see FIN-2024-NTC9);
• Hurricane Debby: Between July 31, 2024, and October 29, 2024 (see FIN-2024-NTC8); and
• Hurricane Beryl: Between July 4, 2024, and October 2, 2024 (see FIN-2024-NTC7).

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The IRS has released inflation adjustment figures for over 60 tax provisions, including the 2025 tax rate tables. (Rev. Proc. 2024-40) Other key adjustment figures include:

• Standard deduction: Increased to $30,000 for married filing joint (MFJ); $22,500 HOH, and $15,000 for single and married filing separate taxpayers;
• Estate tax basic exclusion amount: Increased to $13,990,000;
• Annual gift tax exclusion: Increased to $19,000;
• IRC §179 current expense limitations: The dollar limit is increased to $1,250,000 ($31,300 for sports utility vehicles) and the investment limit is increased to $3,130,000;
• IRC §199A threshold and phase-in range amounts: The threshold is increased to $197,300 ($394,600 MFJ). The phase-in range amount is also increased to $247,300 ($494,600 MFJ); and
• Excess business loss threshold: The threshold is increased to $313,000 ($626,000 MFJ).

The retirement-related inflation adjustment figures are not included in Rev. Proc. 2024-40. These are announced separately, usually in November.

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The FTB has confirmed that California will conform to 29 instances of federal disaster-related postponement relief related to disasters that occurred outside California. However, to date, the California Department of Finance has not determined whether California will conform to relief granted to taxpayers affected by Hurricanes Helene and Milton; the Washington wildfires; the recent storms, tornadoes, and flooding in Illinois; or the September 25, 2025, deadline for the victims of the terrorist attacks in Israel.

As we’ve previously reported, due to legislative changes made by SB 167 (Ch. 24-34), the Department of Finance is now responsible for determining whether, and to what extent, California will conform to federal disaster postponements.

For taxpayers filing California returns, California is conforming to the postponement relief provided to affected taxpayers related to the disasters listed below.

Taxpayers should write the name of the disaster (for example, Iowa storms per IA-2024-04) in blue or black ink at the top of their tax return to alert the FTB. If taxpayers are filing electronically, they should follow the software instructions to enter disaster information.

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