Michael Gray, CPA's Tax and Business Insight
September 4, 2024
© 2025 by Michael C. Gray
ISSN 1539-395X
A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!
Route to _______ _______ _______ _______ _______
(If you find this information valuable, please pass it on to a friend!)
Table of Contents
- Happy autumn!
- Family celebrations.
- September 15, 2025 due date.
- Trusts and estate tax returns due September 30.
- October 15 will soon be here!
- Electronic payments mandate.
- New addresses for Form 1040-ES, Form 1040-V and Form 941 payments.
- Are you eligible for an extended due date as disaster relief?
- Tax advisors and attorneys - Mark your calendars.
- Loads of tax and financial planning ideas and information are included in the 2025 Edition of How to Use Roth & IRA Accounts to Provide a Secure Retirement.
- Is tax legislation "done" for 2025?
- California considers some conformity.
- Court of Appeals says tariffs are unconstitutional.
- LLC loss disallowed under at risk and basis rules.
- IRS guidelines for termination of energy credits.
- IRS information about expiring energy credits.
- Thinking of making a Roth conversion and you're subject to required minimum distributions?
- Cold food sales tax exemption didn't apply because seating was provided.
- Microcaptive arrangement disallowed.
- Charitable deduction SALT Cap workaround disallowed.
- Do you sell products, services or software to CPAs?
- Attention CPAs-would you like help with marketing your services?
- Attention CPAs-do you need support for tax issues?
- Attention Accountants! Speed up processing your business closings!
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly past episodes.
- Visit our new book review: Leadership for Innovation
- Follow me on social media!
- Check out my blogs.
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Janet and I joined her sister, Gail Johnston, and our brother-in-law, Lane Johnston, for a cruise on Lake Chelan in Washington state on August 13, 2025. Lake Chelan is the third-deepest lake in the U.S. after Crater Lake and Lake Tahoe. It's popular for jet-skiing and wake boarding. Happy autumn!
Summer ends and autumn begins on September 22. The year is 2/3 over! Are you ready for the year end?
Family celebrations.
My daughter, Holly Baker and her son, Kyan, are both celebrating birthdays during September. Happy birthdays! Thi Nguyen and her husband, Allen Le, are celebrating their wedding anniversary during September. Happy Anniversary!
September 15, 2025 due date.
The due date for extended income tax returns for calendar-year partnerships and S corporations is September 15.
Federal estimated tax payments for individuals are also due September 15. There is no California regular estimated tax payment due September 15 because estimated payments for April and June are "front loaded."
The federal estimated tax payment can be based on the income tax reported on the 2024 federal income tax return. If the 2024 federal adjusted gross income was more than $150,000 (or $75,000 if married filing separately), the payment can be based on 110% of the income tax on the 2024 federal income tax return. Alternatively, the payment can be based on 90% of the actual tax for 2025. Although the tax payment is 25% of the annual tax liability, the computations can be made using income and deductions through August 31. (The computations have become so complex that I recommend using the "protected estimate" based on 2024 tax approach.)
Individuals with California adjusted gross income for the current year that is equal to or exceeding $1 million ($500,000 for married persons or registered domestic partners filing a separate return) must figure their California estimated tax based on their current year tax and aren't eligible for estimated tax payments based on their 2024 income tax.
If you aren't making your payments based on your 2024 income tax, you might want to get professional help with your estimated tax payments this year.
Trusts and estate tax returns due September 30.
The due date for 2024 calendar-year trusts and estates for which timely extensions were filed is September 30, 2025.
October 15 will soon be here!
The extended due date for 2024 individual income tax returns is October 15, 2025. If you've been putting off getting your tax returns finished, now is the time to get in motion.
The extended due date to report foreign financial accounts on FinCEN 114 is also October 15, 2025.
The extended due date for 2024 calendar-year C corporations is also October 15, 2025.
Electronic payments mandate.
President Trump issued an executive order on March 25, 2025 mandating electronic payments to and from the federal government and discontinuing issuing and accepting paper checks effective September 30, 2025. The IRS hasn't determined how to implement that order, yet.
New addresses for Form 1040-ES, Form 1040-V and Form 941 payments.
The IRS has announced new addresses for making Form 1040-ES payments, Form 1040-V payments and Form 941 payments for certain states in IRS Publication 3891. https://www.irs.gov/pub/irs-pdf/p3891.pdf Although the Publication says its for 2026, the IRS has confirmed the new addresses are currently effective.
According to the IRS, they will forward any returns and payments mailed to the wrong address and no late-filing or late-payment penalties should be imposed.
The address for California estimated tax payments is P.O. Box 1300, Charlotte, NC 28201-1300.
The address for California Form 1040-V payments is P.O. Box 931000, Louisville, KY 40293-1000.
The address for California Form 941 payments is unchanged P.O. Box 932100, Louisville, KY 40293-2100.
It's interesting to note the IRS is issuing instructions for making payments by check while there is an Executive Order in effect that payments should be made electronically.
(Spidell's Flash E-Mail, August 22, 2025, "IRS changes certain mailing addresses, including for 1040-ES and 941 payments", Spidell's Flash E-Mail, August 26, 2025, "Mailing address changed for some Forms 1040-V for 2024 tax year".)
Are you eligible for an extended due date as disaster relief?
The IRS has a web site where you can look up disaster relief by state. https://www.irs.gov/newsroom/tax-relief-in-disaster-situations
Tax advisors and attorneys - Mark your calendars.
Michael Gray will be giving lunchtime update webinars about Tax Provisions of the One Big Beautiful Bill Act during September 2025.
The Silicon Valley Bar Association webinar update for attorneys will be at noon on September 18, 2025. Here is a link for registration. https://www.svba.org/events/EventDetails.aspx?id=1983832
The California Society of Certified Public Accountants (CalCPA) Tax Tuesday webinar updates will be in two parts: Provisions Effective in 2025 at noon (Pacific Time) on September 23, 2025 and Provisions Effective After 2025 at noon on September 30, 2025.
For September 23, 2025
- Register with CPE https://store.calcpa.org/catalog/activity/tax-tuesday--obbba-tax-provisions-effective-2025-part-1---134361
- Register without CPE https://store.calcpa.org/catalog/activity/tax-tuesday--obbba-tax-provisions-effective-2025-part-1--no-cpe----134362
For September 30, 2025,
- Register with CPE https://store.calcpa.org/catalog/activity/tax-tuesday--obbba-tax-provisions-effective-2025-part-2---134363
- Register without CPE https://store.calcpa.org/catalog/activity/tax-tuesday--obbba-tax-provisions-effective-2025-part-2--no-cpe----134364
Loads of tax and financial planning ideas and information are included in the 2025 Edition of How to Use Roth & IRA Accounts to Provide a Secure Retirement.
For more information and a 25% discount go to www.rothirainvestingbook.com. Also available at www.amazon.com.
Is tax legislation "done" for 2025?
As Congress returns from its recess, it faces another spending limit deadline of September 30, 2025 or a possible shutdown. It seems likely Congress will "kick the can down the road" with a Continuing Resolution, keeping current spending limits in place while they are negotiated. When Congress eventually negotiates the limits, it seems likely tax law changes will be enacted to fund them. In addition, technical corrections will likely be adopted to clarify provisions in the "One Big Beautiful Tax Bill" Act that was hurriedly adopted.
California considers some conformity.
The California legislature is working on SB 711, which would update California's specified conformity date from January 1, 2015 to January 1, 2025. It moved out of the California Assembly's Appropriation Committee on August 29, 2025 and should be voted on by the California Assembly this week. If it passes, it will return to the Senate to concur on changes made by the Assembly.
Since OBBBA was passed after January 1, 2025, those provisions will not be conformed to by California.
There are a number of other exceptions. For example, California will not conform to the qualified business income deduction, repealing 2% miscellaneous itemized deductions, the business interest limitation under Internal Revenue Code §163(j), and the $750,000 cap for mortgage interest deductions.
(Spidell's Flash E-Mail, August 29, 2025, "Conformity legislation moves forward.")
Court of Appeals says tariffs are unconstitutional.
The U.S. Court of Appeals for the Federal Circuit upheld the Court of International Trade, ruling 7:4 on August 29, 2025 that President Trump exceeded his authority by imposing broad-based tariffs. "It seems unlikely that Congress intended to . grant the President unlimited authority to impose tariffs."
According to the U.S. Constitution, tax laws (taxes on imports) are supposed to be written by Congress.
President Trump believes he is entitled to impose the tariffs in response to a national emergency of unfavorable balances of trade with almost all countries.
The Court is allowing the continued imposition of tariffs while the Trump administration appeals the issue to the U.S. Supreme Court.
(https://www.cafc.uscourts.gov/opinions-orders/25-1812.OPINION.8-29-2025_2566151.pdf San Jose Mercury News, August 30, 2025, "Court finds tariffs illegal use of emergency power.")
LLC loss disallowed under at risk and basis rules.
Anthony Bryan owned 99% of the Watley Group, LLC. The Watley Group was a 20% owner of Pool Boy the Movie, LLC. Under the operating agreements of The Watley Group and Pool Boy, the owners had no liability for entity debts.
In 2007. Bryan gave Watley a promissory note for $2.7 million. The note was neither secured nor collateralized and didn't have a repayment schedule. Watley gave Pool Boy a promissory note with the same terms. No payments were made on either note.
Pool Boy borrowed $5,500,000 from Palm Finance Corp. during 2007. Neither Pool Boy, Watley, nor Bryan made any payments on the note. In the event of default, Palm Finance wasn't entitled to collect from Bryan or Watley. Neither Bryan nor Watley guaranteed the Palm Finance loan.
Watley issued a 2007 Schedule K-1 to Bryan, showing a nonpassive $2.6 million loss, including a nonpassive ordinary loss of $3 million attributable to Pool Boy.
The Ninth Circuit Court of Appeals upheld the IRS and Tax Court in disallowing the loss.
Under Reg. § 1.752-2(h)(4), a promissory note contributed to a partnership to secure a partnership liability isn't taken into consideration in determining the partner's risk of loss unless the note is readily tradeable on an established securities market.
Bryan had no economic risk of loss because he wasn't liable on the Palm Finance loan in the event of a default and didn't guarantee the loan.
(Bryan v. Commissioner, Ninth Circuit No. 23-3011, July 23, 2025.)
IRS guidelines for termination of energy credits.
The Big Beautiful Bill Act of 2025 (OBBBA) included provisions for early termination of energy credits. The IRS issued guidelines for determining the beginning of construction for Wind and Solar facilities for determining whether a facility qualifies for energy credits.
(Notice 2025-42. https://www.irs.gov/pub/irs-drop/n-25-42.pdf)
IRS information about expiring energy credits.
The IRS has posted FAQs on its website about expiring energy credits under OBBBA.
(FS-2025-05.)
Thinking of making a Roth conversion and you're subject to required minimum distributions?
Remember, required minimum distributions must be made before making a Roth conversion. The initial distributions aren't eligible for a rollover or a conversion.
Cold food sales tax exemption didn't apply because seating was provided.
A bakery's sales of food were subject to California sales tax because seating areas were adjacent to both of the taxpayer's locations.
Note that sales of cold food as take-out or to go generally isn't subject to California sales tax unless an 80-80 rule applies. A retailer is subject to the 80-80 rule if both the following are true:
- More than 80% of the seller's gross receipts are from the sale of food products; and
- More than 80% of the seller's retail sales of food products are taxable as either hot prepared food, food sold at a drive-in, or food prepared for consumption on the retailer's premises.
Sales of alcoholic beverages, carbonated beverages, or cold food to go and not suitable for immediate consumption should not be included in the computation.
Sellers that meet both criteria of the 80-80 rule may elect to separately account for the sale of take-out or to go orders of cold food products, which are in a form suitable for consumption on the seller's premises.
(Spidell's California Taxletter, September 2025, p. 10, "Bakery's sales tax exemption claim crumbles under pressure.")
Microcaptive arrangement disallowed.
Dr. Bernard Swift is the founder and sole proprietor of an urgent care center with 18 locations. Dr. Swift consulted with an attorney, Celia Clark, who specialized in setting up and maintaining microcaptive insurance companies. Ms. Clark helped set up a microcaptive arrangement for Dr. Swift, including having 30% of premiums paid to the Captives come from unrelated businesses. To accomplish this, the Captives participated in two reinsurance pools affiliated to Clark.
The IRS disallowed more than $1 million in premiums paid to the Captives on the joint income tax returns of Dr. Swift and his wife for 2012 through 2015.
The Fifth Circuit Court of Appeals upheld the IRS and the Tax Court in disallowing the deductions.
The Court agreed with the Tax Court there wasn't sufficient risk distribution from the arrangement, because (1) the reinsurance arrangement looked suspiciously like a circular flow of funds; (2) the Captives did not enter into arm's length contracts with the pools for reinsurance coverage; and (3) the pools were thinly capitalized and could struggle to pay claims, raising questions about whether a reasonable business would enter into the contracts without tax motivations.
(Swift v. Commissioner, Fifth Circuit No. 24-60270, July 16, 2025.)
Charitable deduction SALT Cap workaround disallowed.
The Second Circuit Court of Appeals upheld the IRS and the Tax Court in disallowing a taxpayer's charitable contribution deduction by the amount of any state or local tax credit the taxpayer receives in consideration of the taxpayer's payment or transfer. The credit is a quid-pro-quo for the contribution.
(New Jersey v. Bessent, Second Circuit Docket Nos. 24-1499-cv(L); 24-1503-cv(CON), August 13, 2025.)
Do you sell products, services or software to CPAs?
Maybe I can help with writing promotional material and marketing ideas. Call me, Michael Gray, at 408-918-3161 or email mgray@taxtrimmers.com.
Attention CPAs-would you like help with marketing your services?
Maybe I can help with writing promotional material and marketing ideas, including encouraging referrals from your current clients. Call me, Michael Gray, at 408-918-3161 or email mgray@profitadvisors.com.
Attention CPAs-do you need support for tax issues?
Michael Gray, CPA can help you with research and guidance on complex tax planning and tax return reporting issues. mgray@taxtrimmers.com.
Attention Accountants! Speed up processing your 2019 business closings!
Do you still have 2019 business income tax returns on extension that need to be done? Check out this trial balance software, EZ Trial Balance, that's super-easy to set up and use. There is a desktop version and an online version. The online version includes consolidations and ratio analysis for analytical review. http://www.eztrialbalance.com
Please share your good experiences with Michael Gray, CPA.
As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm. One of the sites where you can share your experiences is yelp.com.
We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.
Financial Insider Weekly past episodes
After eight years of production, I have discontinued producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes available at https://www.youtube.com/user/financialinsiderweek.
Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.
For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.
Visit our new article!
Follow me on Social Media!
LinkedIn: If you enjoy LinkedIn, please follow me at www.linkedin.com/in/michaelgraycpa and www.linkedin.com/company/the-marketing-alchemist/
I'm also on Bluesky! You can also follow me on Bluesky at https://bsky.app/profile/michaelgraycpa.bsky.social.
I'm also on Instagram. You can also follow me on Instagram at www.instagram.com/michaelgray690/
I'm also on Threads.net. My user name is michaelgray690
Facebook: I've been suspended on Facebook and I'm working on getting my account restored.
Check out my blog.
I have also started a blog at www.michaelgraycpa.com. Check it out!
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links
Michael Gray, CPA2482 Wooding Ct.San Jose, CA 95128(408) 918-3162FAX: (408) 938-0610email: mgray@taxtrimmers.comHours: 8am - 5pm PDT Monday - Friday
© 2025
Connect on LinkedIn
Connect on BlueSky
Connect on Instagram
Our Blog
