Michael Gray, CPA's Tax and Business Insight
October 2, 2025
© 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!
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Table of Contents
- Boo! The year is almost over!
- Family celebrations.
- Individual and C corporation tax returns due October 15.
- Foreign bank account form due October 15.
- October 15 will soon be here!
- Electronic payments mandate.
- California employers plan on more FUTA tax due January 2025.
- New addresses for Form 1040-ES, Form 1040-V and Form 941 payments.
- Are you eligible for an extended due date as disaster relief?
- 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.
- Federal shutdown.
- Premium Tax Credit cutback coming.
- California legislature passes conformity bill.
- Transfer of decedent's IRA allowed to inherited account for surviving spouse.
- Opportunity Zone guidance issued.
- AMT headaches from OBBBA changes to research deduction.
- Corporate Alternative Minimum Tax guidance issued.
- Franchise Tax Board changes market-based sourcing rule.
- Draft 2026 Form W-4 released.
- Draft 2026 Form W-2 released.
- Draft 2025 Schedule 1A released.
- Proposed excise tax on payments to foreign service providers.
- 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: The CEO Who Sees Around Corners
- Follow me on social media!
- Check out my blogs.
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Our living room is decorated for Halloween! Boo! The year is almost over!
Halloween is already almost here! And after Halloween, the year roars to a close with the holiday season
Halloween decorations are out in my neighborhood and in my home.
Children will soon be out for tricks and treats. Hope your family has some fun.
Family celebrations.
My wife, Janet Gray, celebrates her birthday during October. Janet is a great blessing to me and our family. Happy birthday!
Individual and C corporation tax returns due October 15.
The due date for 2024 individuals and calendar year corporations for which timely extensions were filed is October 15, 2025. (The California extended due date for C corporations is November 17, 2025, one month later than the federal date. C corporations receive a seven-month extension from the original due date, April 15.)
Foreign bank account form due October 15.
FinCEN Form 114 is due April 15, and the due date is automatically extended to October 15, 2025 for 2024. FinCEN Form 114 is required to be filed when an individual has $10,000 or more of foreign financial assets, including foreign bank accounts and foreign brokerage accounts. See your tax advisor about foreign insurance policies, annuities and retirement accounts.
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.
The IRS has issued information about how it will implement President Trump's Executive Order 14247 mandating electronic payments to and from the federal government and discontinuing issuing and accepting paper checks effective September 30, 2025.
Taxpayers should continue filing their income tax returns and make tax payments as normal through December 31, 2025.
The IRS will move to avoid making refund payments using checks after September 30, 2025. Most refunds will be paid by direct deposit to taxpayers' bank accounts. Options such as prepaid debit cards, digital wallets or limited exceptions will be available for taxpayers who don't have access to bank accounts.
Further guidance about making payments to the IRS will be issued in the future.
(IR-2-25-94, September 23, 2025.)
California employers plan on more FUTA tax due January 2025.
California had to borrow from the federal Unemployment Insurance fund to pay unemployment claims during the pandemic.
This means an additional "credit reduction" Federal unemployment tax of .3% on the first $7,000 of wages paid each employee in California during 2025 will be added on Form 940 for 2025, due on January 31, 2026.
The credit reduction is 0.3% for the first year and an additional 0.3% for each succeeding year until the loan is repaid.
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 it's 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
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.
Federal shutdown.
The federal shutdown is here. The IRS says it will continue business as usual. Here is a link to their lapse contingency plan. Democrats in Congress are fighting to further extend premium tax credit benefits that are scheduled to expire December 31, 2025. (See the article below.) https://home.treasury.gov/system/files/266/Treasury_IRS_Lapse_Plan.pdf
Premium Tax Credit cutback coming.
The premium tax credit provides financial assistance to those without access to subsidized medical insurance coverage, such as from an employer or Medicaid.
Post-COVID legislation temporarily extended the credit to those with income exceeding 400% of the federal poverty level when medical insurance was acquired through an Affordable Care Act individual exchange. Previously that was the threshold for receiving the benefit. In addition, the credit was increased. That credit extension and credit increase expires on December 31, 2025, so many individuals will lose that assistance, possibly making medical insurance unaffordable.
See your medical insurance agent if you have been relying on the premium tax credit for medical insurance coverage.
(Checkpoint Newstand, September 5, 2025, "Premium Tax Credit Changes Ahead".)
California legislature passes conformity bill.
The California legislature has passed SB 711, which would update California's specified conformity date from January 1, 2015 to January 1, 2025. Governor Newsom signed the bill on October 1, 2025 to enact it into law. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB711
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, September 12, 2025, "California Conformity bill sent to Governor.", Spidell's Flash E-Mail, October 2, 2025, "Governor signs conformity bill.")
Transfer of decedent's IRA allowed to inherited account for surviving spouse.
The named beneficiary of an Individual Retirement Annuity was the decedent's estate. The decedent died intestate and the decedent's surviving spouse was named as the executor for the estate. Under the state law applicable for intestate decedents in this case, the surviving spouse was entitled to all property of the estate, including the IRA.
In a private letter ruling, the IRS allowed the surviving spouse to be treated as the sole beneficiary of the IRA, permitting a tax-deferred rollover of the assets in the decedent's IRA to an IRA set up and maintained in the name of the surviving spouse within 60 days after a distribution of the assets to the estate.
Normally, an IRA with the estate of the account owner with a beneficiary isn't eligible for a rollover, so this isn't a preferred estate plan. Only taxpayers who apply for private letter rulings can rely on them as authority for guidance.
(Private Letter Ruling 202519010, released May 9, 2025.)
Opportunity Zone guidance issued.
The IRS has issued guidance on Qualified Opportunity Zone investments in rural areas as provided under OBBBA.
A rural area means any area in a State, the District of Columbia, and U.S. territories, other than a city or town with a population greater than 40,000 and any urbanized area contiguous and adjacent to a city or town with a population greater than 50,000.
OBBBA modified the substantial improvement threshold for improvements to property in a QOZ that is comprised of a rural area. As of July 4, 2025, the substantial improvement threshold for required additions to the basis for property located in these QOZs was reduced from 100% to 50%.
(IR-2025-96, Notice 2025-50, September 30, 2025.)
AMT headaches from OBBBA changes to research deduction.
Effective for tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act of 2017 required amortization of research and experimental expenses over 15 years. OBBBA has enabled all taxpayers to currently deduct domestic research and experimental expenses, effective for tax years beginning after December 31, 2024.
All taxpayers with unamortized balances of research and experimental expenses may elect to deduct the unamortized balance either in 2025 or in 2025 and 2026.
In addition, small businesses with average gross receipts of $31 million or less may elect to apply the change retroactively for tax years beginning after December 31, 2021.
Some taxpayers are finding taking these accelerated deductions will subject them to the alternative minimum tax.
Consult with your tax advisor about how the tax picture relating to your business will change.
Corporate Alternative Minimum Tax guidance issued.
The IRS has issued Notice 2025-46, providing interim guidance about the application of the Corporate Alternative Minimum Tax to domestic corporate transactions, financial troubled companies, and tax consolidated groups. It will be in IRB: 2025-43, dated October 20, 2025. https://www.irs.gov/pub/irs-drop/n-25-46.pdf
Franchise Tax Board changes market-based sourcing rule.
The California Franchise Tax Board has adopted changes to California's apportionment sales factor market-based sourcing regulations. 18 Cal. Code Regulations §25136-2 https://www.ftb.ca.gov/tax-pros/law/final-regulations/FTB-Title-18-Div-3-Amend-Art-2_5%20Sect%2025136_2.pdf
For individuals, non-residents of California are subject to California tax on California-source income.
Corporations are subject to California franchise tax on California-source income.
Inconsistency of sourcing rules among the states can cause some income to be double-taxed, including disallowance of state tax credits. California is a trendsetter, so many states eventually adopt the same rules as California.
The new rules relate to sourcing sales of professional services, including investment advisory services (other than asset management services) and tax and accounting services. Taxpayers who provide services to more than 250 customers can source the revenue from those services to each customer's billing address. Different rules apply to receipts from customers who generate more than 5% of the taxpayer's receipts.
New rules are specified for revenues from asset management services other than those asset management services covered under 18 Cal. Code Regs. §25137-14 for mutual fund service providers.
A new rule is provided for sourcing revenues for sales of a combination of services and property or sales of tangible and intangible property.
Clarifying rules are provided for sales of intangible property, including marketable securities.
(Spidell's Flash E-Mail, September 10, 2025, "FTB revamps market-based sourcing rule.")
Draft 2026 Form W-4 released.
The IRS has released a draft of 2026 Form W-4, with instructions. https://www.irs.gov/pub/irs-dft/fw4--dft.pdf
Draft 2026 Form W-2 released.
The IRS has released a draft of 2026 Form W-2. https://www.irs.gov/pub/irs-dft/fw2--dft.pdf
Draft 2025 Schedule 1A released.
The IRS has released a draft of 2025 Schedule 1A for claiming the No Tax on Tips, No Tax on Overtime, No Tax on Car Loan Interest, and Enhanced ($6,000) Deduction for Seniors. https://www.irs.gov/pub/irs-dft/f1040s1a--dft.pdf
Proposed excise tax on payments to foreign service providers.
Senator Bernie Moreno (R-OH) has proposed a 25% excise tax on payments to foreign service providers, and disallowing tax deductions for those payments, effective for payments made after December 31, 2025, the Halting International Relocation of Employment (HIRE) Act. https://www.moreno.senate.gov/wp-content/uploads/2025/09/The-HIRE-Act.pdf
It doesn't seem likely this proposal will be enacted this year, but it might in the future.
This proposal could have a broad impact, because large and small businesses depend on offshore labor as a cost-effect substitute for domestic labor. Also offshore labor can work on projects while domestic workers are sleeping.
This is even a concern for some CPA firms who rely on offshore workers for tax return preparation and bookkeeping assistance, and are finding it hard to find qualified domestic workers.
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
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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.
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