Milburn Cain & Co.

12/24/2025

In July, the President signed the One Big Beautiful Bill Act which contained multiple tax provisions. Some of the tax changes are effective for the current year and some are not effective until 2026. I wanted to let you know about some of the provisions that are effective for this year since we may need additional information to prepare your return.

The lower tax rates and higher standard deductions from the 2018 tax act have been extended. There are 2 significant changes to the itemized deductions effective in 2025. First, the limitation on deduction of state and local taxes has been increased from $10,000 to $40,000 for those making less than $500,000.

The $10,000 cap was the primary reason many people could not itemize so more people will be able to itemize their deductions this year. Therefore, your charitable contributions which we have not been able to deduct in recent years, may be deductible again this year.

Second, if you bought a new car in 2025 you may be able to deduct the interest you paid on the loan. To qualify the car must be new and assembled in the US. To get the deduction we need to report the VIN of the car on the tax return.

Additionally, there was a change in deducting charitable contributions effective for 2026 that may impact your contributions for 2025. Beginning in 2026, people who take the standard deduction can get an additional deduction of up to $1,000 ($2,000 for married filing joint) for cash charitable deductions. However, also starting in 2026 a small portion, equal to 0.5% of your adjusted gross income, of charitable contributions will be disallowed as a deduction (similar to the floor we have had for medical deductions). While that disallowance is not large, you may want to accelerate some contributions into 2025 to avoid that disallowance.

Big campaign issues in the last presidential campaign were No Tax on Tips, No Tax on Overtime, and No Tax on Social Security. While the bill has sections titled No Tax On the law is not that simple.

If you work in a job that is normally a tipped job (servers, hairstylists, drivers) we will need to know the amount of qualified tips you received that are included in your taxable income. The starting point for employees receiving W-2s will be the amount reported on the W-2. To that amount we could add any additional tips you have documented and added to your taxable income.

Tips will probably not be broken out for those who receive a 1099. For those receiving a 1099 or maintaining some other record of income, we will need documentation of the total tips included in your taxable income. This documentation could be the total tips reported on charge slips or a manually maintained record.

If you are paid overtime, we will need to know the amount of overtime pay included in your income. You will need to get the amount of overtime from your employer since that information will not be reported on the 2025 W-2. The overtime that qualifies for the exclusion is the premium paid in accordance with the Fair Labor Standards Act (FLSA). FLSA requires overtime be paid at the rate of 1½ times the regular pay when you work more than 40 hours in a week. The overtime premium is the ½ times of pay. This means that only the ½ times is eligible for the No Tax On Overtime deduction even if you are paid more than that for overtime. Since this information is not required to be reported on the W-2 for 2025, we will probably need either your final pay stub or a statement from your employer breaking out the overtime.

While a big campaign promise was no Tax on Social Security, the taxation of social security has not changed. Instead, people over 65 will receive an additional deduction of $6,000. This deduction will phase out for those with income over $75,000 ($150,000 for married filing joint).

Starting in 2026, in addition to the changes for charitable contributions, other changes include:

Gambling losses are deductible only to 90% of gambling winnings. Therefore at least 10% of your gambling winnings will be taxable.
The existing deduction for educator expenses will be increased to $350 with additional expenses deductible as additional itemized deductions.
While all income remains taxable, 1099s will not need to be issued for under $2,000

Also starting in 2026 is a new savings strategy called Trump Accounts. These are similar to IRAs but for children under the age of 18 with no earned income. Contributions of up to $5,000 per year will be allowed. No contributions can be made to these accounts until after July 4, 2026. Contributions to the accounts are not deductible and withdrawal from the accounts will be taxable to the extent of earnings. However, the government is to make a $1,000 contribution for each child born after December 31, 2024 and before January 1, 2029. More information about these accounts will be available as the time contributions can be made approaches.

The bill contains many other provisions which may have an impact on your taxes, but these are the ones that I believe are most significant for the most people. Unfortunately, due to the government shutdown, guidance on these provisions was delayed and only recently released.

02/06/2024

Those of you who received my mailing noticed I said that we anticipated a smooth tax season. I spoke to soon.

A bill to increase a portion of the child tax credit has recently passed. Additionally, last week, the Rules Committee passed a revision to the limitation on the deduction of state and local taxes (real estate taxes) for those who file joint returns.

While we await finalization of these potential changes, we will be holding any return that may be impacted. We will notify anyone who's return is being held. Returns not impacted by these changes will be issued as soon as we are able.

02/03/2024

Things to consider when choosing someone to prepare your tax return:

IR-2024-31, Feb. 01, 2024 — The Internal Revenue Service reminded taxpayers that carefully choosing a tax professional to prepare a tax return is vital to ensuring that their personal and financial information is safe and secure and treated with care.

04/03/2022

We will be filing more extensions this year than ever before. The changes in the tax law since COVID require additional time to prepare tax returns which we are not being given this year. Also, brokerage statements and other information needed to prepare returns are coming out late. We are doing our best to get returns out because we prefer not to file extensions. However, we have no choice if we are to maintain the quality review and professional standards we have set.

01/20/2022

For those planning for your upcoming tax preparation, words of advice.

1) There were stimulus payments sent out in January and the spring of 2021. The spring payment needs to be reflected in your tax filing. You will receive a letter from the IRS reporting that amount. Give that letter to us. If you were entitled to a higher payment, a credit can be claimed on your return, but we will need that letter.

2) Folks with children who qualified for the Child Tax Credit received advance payments beginning in July. Each person eligible to receive these payments will receive a letter from the IRS reporting the amount paid out. A couple who filed a joint return in the past will receive 2 letters, one addressed to each. Give that letter to us so the proper amount can be claimed on your return.

We are aware, and the IRS has acknowledged, that there are errors in the 2nd letter. Therefore, we are recommending that taxpayers set up accounts at IRS.gov which will allow access to detailed IRS transcripts to verify the amounts reported in these letters if there are discrepancies. Unfortunately, setting up these accounts require pictures of government issued identification and, I have been told, “selfie videos” to verify your identity. Because of these steps, we recommend that everyone set up these accounts now so that it can be accessed when needed.

Pay your taxes. Get your refund status. Find IRS forms and answers to tax questions. We help you understand and meet your federal tax responsibilities.

04/28/2021

This backlog has impacted those of us who prepare returns for a living. Many of us are running a month behind normal tax seasons.

The agency is answering just one in 50 calls for help on its individual tax return phone lines.

04/22/2021

There’s news floating around TaxTwitter that the IRS failed to debit 1st quarter estimate payments on time on 4/15, and that some still have not been made. This impacts only those who set up automatic debit for the payment. If you paid using automatic debit, retain any documentation you have that you set up the payment by 4/15, you will need it when notices are being issued about this starting approximately next May.

04/02/2021

If you make estimated tax payments, hang on folks, it's about to get interesting. While the filing deadline has been delayed until May 17th, the 1st quarter estimated tax payments are still due April 15th.

General practice for those who pay estimates is to apply any overpayment to the 1st quarter estimated tax payment. However, the fun part right now is there appears to be a split in the IRS about what happens to overpayments on a return filed after 4/15 but on or before 5/17 (or if you file an extension up until 10/15).

We have been told both that it will be considered a timely estimated tax payment and that it will be considered late, since the payment was due 4/15 but the return not filed at that time. Normally, any overpayment shown on a return applies to the 1st quarter estimate and is timely, but apparently even the IRS does not know how they will handle it this year at this time.

04/23/2020

If you haven't filed a tax return for 2018 or 2019, you must file the 2019 return to get your "stimulus" payment according to a new IRS notice.

COVID Tax Tip 2020-45, April 23, 2020

03/23/2020

Contrary to appearances, we are a friendly office, according to the Governor's order we are essential. However, in order to protect your health and ours, during this time period we have cancelled all appointments. Times must be scheduled to pick up or sign documents, so that we have them ready for you to sign, or to drop off information that can not fit through the mail slot. Stay safe and healthy.

03/21/2020

Today, the IRS extended the filing deadline from April 15th until July 15th. Previously, they had deferred the payment date to July 15th but required filing by April 15th.

With this new announcement nothing needs to be filed by April 15th. There are still questions, the primary one being will Illinois extend the filing deadline. No announcement has come from the state at this time, we are still waiting.

Another issue that we need answered is when IRA payments are due. Normally, they must be made by the due date of the return. At this time it is unclear whether they must be made by April 15th or whether that deadline is also extended until July 15th. We are waiting for a response from the IRS on that.

Most surprisingly today I found out that I am essential. The Governor's shelter in place order classifies accountants as essential so we can continue to go to the office. However, due to our interpretation of the requirements, our office will be open by appointment only for people to pick up and sign documents. We will not be open for people to drop by although people can use the mail slot to drop off information at any time.

03/16/2020

We continue to remain open and available to serve you during this coronavirus national emergency. However, in order to protect the health of our clients and the people in our office we are asking that information be either mailed in, uploaded through the portal or dropped off in the box inside the door or through the mail slot. We will email or call if additional information is needed.

We are cancelling all appointments at this time. If you have an appointment currently scheduled, you will be receiving a phone call.

When completed, we will deliver returns either through the portal or mail, or, to protect your information and control the flow of people in the office, schedule a time to pick up. After you have an opportunity to review your return we could schedule time to review it over the phone if you have questions.

We will resume normal operations as soon as possible. Thank you for your understanding during these unusual times.