President-elect Donald Trump offered up a long list of promises during his campaign, and next year will bring a major test with the upcoming expiration of many of the provisions from his first administration’s Tax Cuts and Jobs Act of 2017.

“No one has a crystal ball on what’s going to happen here, but certainly it’s a little bit clearer based on a Trump victory than it would have been based on a Harris victory,” said Brian Newman, a tax partner at Top 25 Firm CohnReznick in Hartford, Connecticut. “Obviously the big point is going to be either to extend or to make permanent TCJA provisions.”

Trump has also called for lowering the corporate tax rate, which was supposed to be made permanent with the TCJA. He has proposed to lower it to 20%, or 15% for companies that manufacture their products in the U.S. 

“Going from 21% down to 20% may be a much easier sell than layering on something that would get the corporate rate down to 15%,” said Newman.

Trump has also called for bringing back 100% bonus depreciation. “Right now the bonus rate is at 40% and scheduled to go down to 20% next year,” Newman continued. “There’s been a push to get that back up to 100%. If that occurs, we’ll be talking to our clients for year-end tax planning about deciding on whether to delay placing an asset in service a month or two if, in fact, we think that we’re going to go back to 100% bonus, versus buying something this year and placing it in service this year. There are always transition rules. That’s something that we have to be cautious about. That’s something that is going to be closely watched, because it could have a significant impact on clients.”

On the other hand, parts of the TCJA could be jettisoned. Trump has also called for eliminating the act’s $10,000 limit on state and local tax deductions, also known as the “SALT cap,” for individuals, or raising it. 

KC McGinnis/Bloomberg

“It’s an easy discussion to tell clients, if you have property taxes to pay, you’re probably better off paying the property taxes January 1 versus December 31 in the hopes that something does get passed,” said Newman. “You might get a benefit for it, versus now in 2024 you know you’re not going to get a benefit.”

The treatment of R&D expenses involves another provision of the TCJA that could be eliminated. “The last couple of years, taxpayers have had to capitalize their R&D costs and then amortize them over a five-year period,” said Newman. “That’s had a significant impact on compliance and the bottom line of taxable income. Trump has said that he would like to get those expenses currently deductible again, which would be helpful for businesses that have R&D expenses. 

The Section 163(j) limitation on business interest could be another area where TCJA provision would be eliminated. “Currently, your adjusted taxable income does not include adding back depreciation and amortization like it did in the first few years of the TCJA. President-elect Trump has said that he would be in favor of going back to an EBITDA calculation so that you can add back your depreciation and amortization, which would make the limitation less painful for clients. That’s another area that I think you’re going to see some tax law changes.”

Some of these business tax changes were passed by the House earlier this year as part of the Wyden-Smith Tax Relief for American Workers and Families Act of 2024 but never got through the Senate because of disagreement over other provisions, such as expansion of the Child Tax Credit.

Trump has also called for not taxing income from tips, Social Security and overtime, as well as eliminating taxes on firefighters, police officers and members of the military.

However, that could encourage people to reclassify their income as the tax-exempt kind. 

“It will always be interesting to see exactly how those things work and how they’re calculated, because everyone’s always looking to maximize what income is not subject to tax or may have lower tax rates,” said Newman. “But you have to make sure that you know, things are properly defined, and that ultimately, you know, we have a clear guidance on what the calculation should be.”

Trump has also called for eliminating the stock buyback excise tax for public companies that buy back their own shares of over $1 million in a taxable year. “Right now, there’s a 1% tax on that,” said Newman. “The Biden administration has proposed increasing that to 4%, but President-elect Trump has said that he would be in favor of eliminating that tax.”

He believes the qualified business income deduction under the TCJA will also be closely watched, “People would be looking for that to either get extended or made permanent,” said Newman. “That’s a 20% deduction on certain flow-through income, which has been very beneficial to people who it applies to. Unfortunately, it does not apply, for the most part, to accountants and other professional services organizations.”

Trump has also called for doubling the standard deduction as it was in the TCJA. That could cause even fewer people to itemize their deductions. “There’s a good amount of people who don’t itemize because the SALT cap is limited to $10,000 and then if you don’t have large home mortgage interest or other itemized deductions, you’re not getting over the standard deduction threshold as it currently stands,” said Newman. “If you double the standard deduction, there will be less and less itemizers, and those types of deductions don’t become as valuable.”

That may prompt donors to reduce their charitable contributions if they can’t itemize the deduction.

Trump has also called for other tax breaks, such as tax credits for family caregivers taking care of parents or loved ones, and allowing those who buy an automobile made in the U.S. to write off the interest on their car loans.

All those tax breaks may prove difficult for states that rely on income taxes from their residents and can’t afford to let their deficits run wild. “Year after year, the state tax liabilities on transactions and income are becoming more and more a larger component of the total tax burden of both companies and individuals,” said Newman. “One of the things that states like to do is decouple from federal provisions. We always want to keep in mind, even if you get new provisions at the federal level, if they’re not already decoupled, you may get decoupled on provisions for the state. For instance, if President-elect Trump is successful in exempting, say, overtime pay, you may get a lot of states decouple from that, and the states will still tax that.”

Trump’s tax policy will also depend on what Congress does and how much control Republicans will be able to exercise, especially in the House.

“Tax was not the focal point of the campaign, and when it did emerge as an issue, former (and future) President Trump presented tax policy ideas largely in broad strokes, though he also had no small number of new ideas for voters to consider,” said Jonathan Traub, managing principal and tax policy group leader at Deloitte Tax LLP, in a statement. “Of course, tax legislation generally originates in Congress, not the White House, so any new tax laws enacted will bear the imprint of the legislative branch with its many competing interests and priorities. And, just as importantly, the ability of the Republicans to use budget reconciliation to fast-track major tax and spending bills to the White House depends on the outcome of a handful of uncalled House races around the country.” 

The first two pages; a Rainy day; in all modesty; and other highlights of recent tax cases.

Freeport, Texas: Tax preparer Krystal Wright has been sentenced to two years in prison to be followed by a year of supervised release for aiding and assisting in the preparation and filing of false income tax returns.

Wright, who pleaded guilty earlier this year, was the sole owner and only tax preparer at the tax prep firm WW2F. Most of her clients did not have a business nor did they discuss any business income or expenses with her. From 2017 through 2020, she prepared and filed some 83 federal income tax returns that contained false and fraudulent items, including qualified solar electric property costs, gifts by cash or check, business expenses, wages, salaries, tips and supplies. After Wright completed a return, she did not review the completed documents with clients and only provided them with the refund amount and first two pages of the return.

The filings resulted in a total tax harm of $525,404. Wright was also ordered to pay that amount in restitution.

Terrell, Texas: Tax preparer Toronto Henderson, 49, has pleaded guilty to conspiracy to aid, assist, counsel or advise in tax fraud and has been sentenced to two years in prison.  

Henderson owned two tax prep businesses and recruited tax preparers to prepare and file income tax returns for clients. Henderson or others at his instruction personally trained the preparers and instructed them to create, among other things, fraudulent Schedule Cs; preparers used taxpayer information unrelated to the operation of any business or created fictitious and false information with respect to operation of a business to allow the claiming of undeserved losses.

The tax loss totaled $373,230, which Henderson was also ordered to pay in restitution.

Columbus, Ohio: Tax preparer Ali Kasimu Alston, 48, has pleaded guilty to aiding in the preparation of false and fraudulent returns.

From at least 2015 through at least 2022, Alston owned and operated the prep business in Columbus Overtime Ventures LLC, d.b.a. Raining Cash Tax Service. He admitted to systematically falsifying client tax returns to maximize federal refunds, filing Schedule Cs with fake businesses to maximize tax credits. He also tried to bribe one of his former employees with $4,000 to provide false information to law enforcement that was investigating the tax prep business.

Aiding in the preparation of a false and fraudulent return carries up to three years in prison. Alston will also pay more than $1.2 million in restitution to the IRS.

Beaumont, Texas: Tax preparer Michelle Denise Johnston, 42, has been sentenced to 15 months in prison and ordered to pay $196,177 in restitution for federal tax violations.

Johnston worked at Allen and Johnston Tax Service, which she formed with Yolanda Allen Morris in 2011; each had worked as Jackson Hewitt office managers at Wal-Mart locations and had decided to open their own tax prep business. The company existed until Allen and Johnston split in February 2021.

Johnston requested refunds on clients’ federal returns that were not based on the clients’ actual income, expenses, deductions and qualifying credits. She inflated refunds based on fabricated income, expenses, deductions and credits reported by Johnston without clients’ knowledge.

The IRS deposited the refunds with a third-party vendor; Johnston then caused the third party to pay the clients a modest tax refund that she’d originally made known to them. Before the vendor paid, however, Johnston deducted what was essentially a second tax prep fee from the refunds, the amount generally being the difference between the filed, larger refund and the modest refund made known to the client.

Johnston also signed an income tax return and falsely stated the amount of gross receipts and fraudulently stated taxpayers’ total expenses on returns, knowing the information was false.

Fairmont, West Virginia: Tax preparer Jack Lee Oliver, 56, of Rivesville, West Virginia, has been convicted on 26 counts of filing false returns.

Oliver owns an insurance sales and tax prep business known as Insurance Depot. He prepared returns for clients claiming business losses for non-existent businesses without the clients’ knowledge and prepared returns for clients who did have businesses, falsely inflating expenses to cause a business loss, again without the knowledge of the clients.

On his own returns, Oliver claimed the foster son of one of his clients, resulting in thousands in undeserved refundable credits.

The expected federal tax loss exceeds $500,000. Oliver faces up to three years in prison for each count. 

Lenexa, Kansas: Tax preparer Hophine Bwosinde has pleaded guilty to preparing and filing false income tax returns for clients.

Bwosinde operated the tax prep business Ambroseli Professional Services and from 2018 through 2022 prepared and filed false returns by either inflating legitimate business expenses or claiming losses related to fake businesses. He also falsely reported negative income on clients’ returns, generating undeserved refunds.

Bwosinde caused a total tax loss of more than $1.5 million.

Sentencing is Feb. 18. Bwosinde faces a maximum of three years in prison as well as a period of supervised release, restitution and monetary penalties. 

Miami: A federal court has issued an order holding Gerald Vito, James Eleby and Kwame Thomas in contempt for violating a permanent injunction that prohibited Vito and Eleby from preparing, filing or assisting in the preparation or filing of federal returns for others.

According to the complaint filed against them in March 2021, the pair prepared returns that significantly understated clients’ tax liabilities by claiming deductions for fabricated or inflated charitable deductions, medical expenses and employee business expenses. The complaint further alleged that the defendants significantly understated clients’ tax liabilities by reporting false or inflated business losses. In December 2021, the court issued a permanent injunction barring Vito and Eleby from preparing returns for others.

Following a hearing in September, the court found that the two violated the injunction by continuing to prepare returns for others. The court further found that Thomas, who was not a defendant in the original complaint, worked with Eleby to prepare returns in violation of the injunction.

The court held Vito, Eleby and Thomas in civil contempt and ordered that they disgorge, in the aggregate, $988,789.56 in fees they earned while violating the injunction. Vito and Eleby were further ordered to disclose to the government the names of all taxpayers for whom they prepared returns after Dec. 27, 2021, notify those taxpayers of the injunction, vacate the premises at which they prepare returns and file an affidavit of compliance with these terms.

San Antonio: Resident Rachel Olivia Markum has been sentenced to 15 months in prison for tax evasion.

Markum and her husband, Robert Franklin Markum Jr., prepared and signed a false joint 1040 for 2016 attesting that the couple’s sole income was gross receipts or sales from the business Camping and Fishing Outlet as $3,530,473. She was aware that the true gross receipts exceeded $4 million.

Rachel Markum pleaded guilty on May 28 to one count of tax evasion and aiding and abetting. Robert Markum pleaded guilty on April 1 to one count of tax evasion, and on Aug. 28 was sentenced to 27 months in prison. The couple was also ordered to pay $359,108 in restitution.

The Internal Revenue Service released its annual financial information Thursday in its fiscal year 2024 Financial Report, pointing to some of its main accomplishments and challenges.

One of the accomplishments included the resolution of a longstanding significant deficiency in information system controls after 11 years. The change comes after the IRS made substantial improvements and beefed up its information technology internal controls.

During FY 2024, the IRS collected over $5.1 trillion in tax revenue, plus more than $98 billion in enforcement revenue thanks to increased funding from the Inflation Reduction Act. The agency also distributed $553 billion in federal tax refunds and other outlays. 

Samuel Corum/Bloomberg

The report presents the IRS’s current financial position and discusses other financial topics, including the programs, accomplishments, challenges and management’s accountability for the resources entrusted to the IRS.

“I am proud of the transformation work we have done in FY 2024, and I am committed to completing the additional work that remains on many fronts: maintaining the outstanding level of service for our main phone line and closing gaps on other lines, expanding digital options for all taxpayers, further strengthening data security, and increasing support for vulnerable populations by such actions as increasing access to the Earned Income Tax Credit and other refundable credits, as well as protecting and supporting scam victims,” said IRS commissioner Danny Werfel in his introduction to the report..

The IRS also noted that it received an unmodified (clean) opinion on its financial statements for the 25th year in a row from the Government Accountability Office. The GAO also provided an unmodified opinion on the overall effectiveness of the IRS’s internal controls over financial reporting, meaning the financial statements are presented fairly, in all material respects, in accordance with U.S. GAAP.