As the 2025 tax season approaches, tax professionals are already beginning to prepare for what’s shaping up to be a year of significant shifts in regulation, compliance, and technology. Whether you’re a solo practitioner or part of a larger firm, understanding what’s changing — and how to adapt — will be key to staying compliant and competitive.
Here are five recommended changes and challenges tax preparers can track for Tax Year 2025:
1. Expanded IRS Digital Initiatives
The IRS’s continued rollout of its Strategic Operating Plan will drive more digital interactions in TY25. The agency is pushing e-communication between taxpayers and tax professionals, including more secure document upload and taxpayer account access.
This shift will likely lead to more real-time interactions with the IRS via secure portals, requiring faster response times and more streamlined workflows. To stay ahead, it’s essential that your tax software supports secure document sharing, electronic signatures, and other digital tools that enhance both compliance and client service.
2. Phase-In of Inflation Reduction Act Provisions
Several Inflation Reduction Act (IRA) incentives are being implemented or expanded in TY25, especially those involving energy efficiency credits and clean vehicle purchases.
The One Big Beautiful Bill Act would reportedly scale back several energy-related tax credits, including this one, by establishing a sunset date of December 31, 2025. It may also limit or adjust the ability to transfer certain credits between taxpayers.
3. Tighter Rules for Gig Economy and Digital Payments
TY25 could mark the first widespread enforcement of the $600 threshold for 1099-K reporting, depending on IRS guidance issued later in 2025. More taxpayers will be receiving 1099-K forms from platforms like Venmo, PayPal, and Etsy and a greater demand for help distinguishing personal vs. business income.
4. State-Level Divergence on Tax Law
Expect growing divergence between federal and state tax codes, especially as states react independently to federal legislation and inflation adjustments.
A few potential challenges for multi-state preparers include keeping track of varying income thresholds, deductions, and filing requirements and software adaptability for cross-state filings.
5. AI and Automation in Tax Practice Management
As artificial intelligence continues to evolve, TY25 will likely see broader adoption of AI-powered tools for client communication, document classification, and data entry.
But with innovation comes risk:
· Be aware of ethical considerations and data security laws
· Don’t fully rely on automation for nuanced tax judgment calls
· Prepare for client questions about how you use AI in your workflow
TaxAct Professional continual updates are designed with compliance and security in mind — check for upcoming TY25 enhancements in your product dashboard.
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