Michael Gray, CPA's Tax and Business Insight
April 3, 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!
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Table of Contents
- Happy Easter!
- Family celebrations.
- Introductory offer for the 2025 Edition of How to Use Roth and IRA Accounts to Provide a Secure Retirement ends April 11, 2025.
- Due date for 2024 individual, calendar year estates and trusts, and calendar year corporation income tax returns is April 15, 2025.
- Remember that an estimated tax payment is also due on April 15.
- Remember the second California real estate tax payment is due April 10.
- Remember the Foreign Financial Accounts Report, FinCEN Form 114, is also due on April 15 with an automatic extension (no form required) to October 15.
- Federal Budget Continuing Resolution includes tax-related items.
- IRS guidance for Theft Losses of Victims of Scams.
- Federal government taking an IRA account wasn't taxable income.
- Noncash donations disallowed.
- Microcaptive Insurance Arrangement 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: Unreasonable Hospitality
- Follow me on social media!
- Check out my blogs.
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Our weeping cherry tree is blossoming Happy Easter!
Easter this year is April 20, 2025. Hope you enjoy celebrating with your family.
Passover will begin the evening of April 12 and end the evening or April 19.
Ramadan ended March 31.
Whatever holidays you celebrate, be safe.
Family celebrations.
April is a big birthday month for my family. My daughter and office manager, Dawn Siemer, her husband John and her daughter, Kara, all have April birthdays! Allen Le, Thi Nguyen's husband, is also celebrating his birthday this month. Happy Birthdays!
Introductory offer for the 2025 Edition of How to Use Roth and IRA Accounts to Provide a Secure Retirement ends April 11, 2025.
We are offering the book to our subscribers for half of the list price, only $19.98 plus $6.00 shipping and handling and California sales tax for California residents. Get the details and order the book online here: www.rothirainvestingbook.com.
Due date for 2024 individual, calendar year estates and trusts, and calendar year corporation income tax returns is April 15, 2025.
Despite what you might have heard, federal income tax returns and payments are due as they normally are.
What if you don't have the money to pay the tax? The IRS will allow you to file an extension without paying the tax. You are still required to include an estimate of the tax due on the form. (The extension will not be accepted without this amount being entered.) The late filing penalty will be waived provided your income tax returns are filed on the extended due date, which is October 15, 2025 for most individuals.
Remember the payment date has also been extended for taxpayers who are residents in a disaster area where the IRS has announced filing relief, so late payment penalties won't apply provided the balance of the tax is paid by the designated date for the disaster. Here is the URL for the IRS web page summarizing disaster relief. https://www.irs.gov/newsroom/tax-relief-in-disaster-situations
At this time, Los Angeles County is the only California county eligible for relief. The automatic extended due date is October 15, 2025. The California Franchise Tax Board has announced it will conform to the federal extension for San Diego County. Here is a link to the details. https://www.ftb.ca.gov/file/when-to-file/los-angeles-county-fires.html
California automatically allows the extension without filing a form, and requests that taxpayers write the disaster at the top of Form 540 or follow the efile provider's instructions.
A late payment penalty of 1/2% per month will apply for any tax due not paid by April 15, 2024, unless at least 90% of the tax finally determined was paid by that date.
Interest will also be charged for the unpaid tax and can't be waived. (The current rate is 7.71% for individuals.)
If a 2024 individual income tax return isn't filed by April 15, 2025 and a valid extension isn't filed by that date or the due date hasn't been extended as disaster relief, the late filing penalty is 5% of the unpaid tax per month filed late, to a maximum of 25%. (In some cases, California will assess a penalty on the entire tax without reduction for payments received. See your tax advisor for details.)
Remember that an estimated tax payment is also due on April 15.
The first 2025 estimated tax payment for individuals and most other calendar year entities is also due on April 15, 2025. The penalties for late payment of estimated taxes are computed as simple interest, but the interest rate has been increasing. The federal estimated payment can be based on 25% of last year's tax liability. California "front loads" the first estimated tax payment as 30% of last year's tax liability. California taxpayers with taxable income of $1 million or more must make their estimated tax payments based on their actual income and deductions.
Remember the second California real estate tax payment is due April 10.
Remember the Foreign Financial Accounts Report, FinCEN Form 114, is also due on April 15 with an automatic extension (no form required) to October 15.
Here's a link to an IRS explanation for when you are required to report ($10,000 or more of foreign financial accounts). https://www.irs.gov/pub/foia/fincen-form114-fbar.pdf
Federal Budget Continuing Resolution includes tax-related items.
On March 14, 2025, Congress passed and President Trump approved the Full-year Continuing Appropriations and Extensions Act, 2025 (H.R. 1968), a Continuing Resolution to mostly continue the Federal Budget at the previous levels through September 30, 2025.
The Act includes two important tax-related items.
One cuts $20 billion from a previous $80 billion appropriation to the IRS for modernization and compliance, leaving $40 billion of the original appropriation. In response to DOGE cuts, the IRS has stopped its modernization efforts and is cutting staffing for tax audits and other IRS functions. Analysts predict fewer tax audits could add $140 billion to the national debt over the next decade, due to reduced compliance by high-income taxpayers.
The second item is a resolution by Congress not to challenge tariffs imposed by President Trump. That resolution is important because many commenters have suggested President Trump is exceeding his authority by imposing broad tariffs. Congress is supposed to "control the purse strings" and the President is supposed to execute laws passed by Congress, including tax legislation.
IRS guidance for Theft Losses of Victims of Scams.
The IRS Chief Counsel has issued a memorandum outlining the tax consequences of various scam scenarios. Losses may be currently deductible when discovered by a taxpayer when the transaction was entered into for profit and if, at the end of the year, there is no reasonable prospect of recovery.
The Ponzi loss safe harbor set forth in Rev. Proc. 2009-20 is not available for the scenarios discussed in the memorandum.
There are many taxpayers who are victims of financial scams that will find this memorandum to be an invaluable reference.
(CCA 202511015, released March 14, 2025.)
Federal government taking an IRA account wasn't taxable income.
A drug dealer's IRA was forfeited to the federal government when he was jailed under the criminal forfeiture laws. The Tax Court previously upheld the IRS claim the forfeiture was taxable income as a constructive distribution to pay a criminal judgment. The Sixth Circuit Court of Appeals reversed the Tax Court. According to the Sixth Circuit, the forfeiture shifted the ownership of the IRA to the federal government. Since the drug dealer no longer owned the account, the distribution wasn't taxable income for him.
(Hubbard v. Commissioner of Internal Revenue, United States Court of Appeals, 6th Circuit No. 24-1450, March 19, 2025.)
Noncash donations disallowed.
A couple claimed a charitable contribution deduction of $284,553 on an amended federal income tax return. The donations included jackets and coveralls, granite cobblestones and vinyl tiles. The couple attached Form 8283, including appraiser declarations to the amended return. The Tax Court upheld the IRS in disallowing the deductions. The Tax Court said the appraisals weren't qualified appraisals and the appraisers weren't qualified appraisers.
(William J. Cade, T.C. Memo. 2025-20, March 10, 2025.)
Microcaptive Insurance Arrangement disallowed.
The Tax Court upheld the IRS in disallowing an S corporation's microcaptive insurance arrangement. According to the Tax Court, the arrangement wasn't insurance for federal income tax purposes because (1) the microcaptive insurer did not achieve risk distribution and (2) the arrangement didn't resemble insurance in the commonly accepted sense.
Therefore, the "insurer" couldn't exclude the premium payments from income and the S corporation couldn't deduct the premiums as ordinary and necessary business expenses.
(Genie Jones, T. C. Memo. 2025-25, March 25, 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
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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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