The 2025 filing season has been completed quietly, despite trepidation regarding the Internal Revenue Service's ability to function effectively in the face of
"It's been pretty smooth," according to Roger Harris, president of Padgett Business Services. "A very typical season. Of course, the last four or five days are always a challenge when all the procrastinators come in. There's always a hiccup during the last week."
One of the reasons it was smooth was a concerted effort to focus all IRS resources to make it smooth, according to Harris — an important lesson for the future.
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"The IRS needs to have money and technology and people to work effectively," he said. "It's easy to pick on them, but the system wouldn't work without them, so we need a well-functioning IRS. I don't know how many people or dollars that takes — like many branches, they can probably do more with less — but we don't want to cross over the line and become nonfunctional. Hopefully this smooth season is a harbinger of what's coming."
The ability of the agency to function effectively will be particularly important in the near future.
"There will be a massive tax bill, which will require the IRS to issue guidance and forms," Harris explained. "They need the resources just to issue resources and to have the ability to process returns under the new rules. Once the law is passed, the burden is on the IRS to implement it. So many senior people and talented people have left, and we don't know yet how well they will be able to function without them."
Complexity for everyone
"It seems that no matter how well we have prepared for tax season with education, conferences, chats, what we can never be ready for is America's changing taxpayer," said Beanna Whitlock, managing member and executive director of Tax Pro Fellowship LLC, and former director of national public liaison for the IRS. "I remember when my parents went to the 'tax man' to have their taxes done. Normally they went just as soon as my dad got his W-2, because of the small refund they expected, which would normally fund our modest summer vacation. Now taxpayers are looking for the 'great giveaway,' whether it is the Earned Income Tax Credit, energy credits or the Child Tax Credit. Almost every taxpayer has a credit available to them. Those that partook of the advanced premium tax credit for health insurance through the exchange were shocked at having to pay some back — in many cases, this was a lot of money. Taxpayers do not understand the complexity of anything that has to do with federal, and in some cases, state tax complexity."
Whitlock summarized her lessons learned during the busy season:
- Know your client. Much of this knowledge will come from requiring a deposit on the work to be done. If they balk now, imagine their attitude when the work is finished.
- Do not feel sorry for your client. You didn't make their decisions nor were you consulted. The tax professional's job is to prepare a complete and accurate tax return and, in the process, educate clients about our tax system.
"Our service to America's taxpayers is of quality return preparation, and representation of our taxpayer at the highest level," she said. "When we look in the mirror we should like who we see."
For those who work primarily with individual and family office clients, tax season begins in late November and December, prior to the beginning of the traditional tax season period, according to Jim Guarino, managing director at Top 100 Firm Baker Newman Noyes.
"This is primarily due to the concentrated efforts we spend working with our clients to do year-end tax planning," he explained. "Most tax seasons include a series of ebbs and flows beginning with year-end tax planning in late fall and continuing into mid-January when fourth quarter estimated tax payments are due. We then experience a minor lull between mid-January and mid-February as clients begin to receive their tax forms and assemble their documents. We typically notice an uptick in client correspondence in late February, which then leads to a period of nonstop tax preparation activity for the final six weeks of tax season, culminating on April 15."
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Guarino agreed with Harris that the 2025 season was fairly smooth: "This past tax season felt like a traditionally typical tax season without any notable hiccups or announcements other than the disaster relief provisions the IRS put in place to assist communities impacted by natural disasters in 2024 and early 2025. Although this past season was relatively uneventful, especially in comparison to tax seasons past, there are always lessons to be learned."
That doesn't mean it didn't offer lessons, however, he said. "There was less client anxiety about the December 2025 expiration date of the Tax Cuts and Jobs Act," said Guarino. "Although nothing has officially changed, there was less concern about initiating early 2025 tax planning. Taxable income spikes — required minimum distributions and capital gains — were higher than in 2023. Many of my retiree clients reported substantially larger 2024 RMDs and capital gain distributions (mutual funds) along with increased realized capital gains in their investment portfolios. This resulted in clients incurring higher tax liabilities in 2024 compared to 2023.
The importance of thinking ahead
Proper prior planning, of course, can prevent those shocks.
"For many of our planning clients who had balances due, it was not a surprise, due to the year-end planning we did in November," Guarino continued. "This prevented April tax trauma, and gave their investment advisors time to accumulate cash so they would have the necessary cash available to make their April tax payments."
"There was an uptick in the number of clients requesting additional tax planning and tax advisory services," he added. "In effect, clients are looking for holistic financial planning advice, much of which is centered on how taxes impact their financial decisions. The more frequently requested client inquiries included business owners requesting business succession and retirement planning advice, pre-retirement couples requesting advice on traditional IRA rollover and Roth IRA conversion planning, Social Security claiming options, and IRMAA threshold planning [income-related monthly adjustment amount for Medicare Part B and Part D premiums]."
Guarino described a situation in which the firm's experience and curiosity saved a client thousands of dollars.
"We encountered an unusual situation concerning a Form 1099 reporting error for one of our clients," he said. "We noticed a substantial short-term capital gain from the sale of three blue-chip type securities during one of our client engagements. The cost basis was extremely low and was not consistent with the fair market value of the securities during 2024. We suspected that the tax basis only represented the cost for an option to purchase the security instead of the actual price, and asked the client's investment advisor to review whether the assigned tax basis was correct."
On further review, they determined that the securities sold were the result of a previous stock split, the original stock had been purchased decades earlier, and the allocated tax basis to the news shares was minimal.
"This explained the very low tax basis assigned to the security sales but did not explain the short-term category of the gains," Guarino said. "We believed the gain should have been long-term gains, not short-term. If left uncorrected, the client's short-term capital gain would have been taxed at a 37% tax rate compared to a 15% rate. The difference in federal tax liability would have amounted to more than $15,000."
"We'll never know if this reporting error would have been caught by our client if they had prepared their own return, or by a less-experienced tax preparer," he concluded. "Would most taxpayers have simply input the $70,000 short-term capital gain into their software and not questioned the appropriateness of the 1099 reporting? It was gratifying that our firm's review process and sense of professional curiosity resulted in our client saving that amount."
Risks on the rise
The big news from this tax season is that liability claims for tax services are really up, according to John Raspante, senior vice president and director of risk management at McGowanPro. Until this past tax season, Raspante kept a small CPA practice in addition to his work as an insurance executive.
Part of the reason for the rise is that a lot of firms stopped doing audit work. "Audit engagements just weren't profitable, especially in government engagements," he said. "There is not much in the way of fees, and it's not worth the time needed to satisfy professional standards."
"Moreover, taxes are not getting any easier," he observed. "Staffing has caused problems, and although outsourcing has helped, there are still issues. Without outsourcing it could be a perfect storm — lack of staff combined with increased oversight by authorities, including audits and exams. Tax claims continue to be the most common, but they're the smallest in dollar amount."
More broadly, Raspante foresees more changes in ownership of accounting firms coming through private equity, as has been the case in other professions, such as dental practices.
"I get calls about this almost daily," he said. "It's a switch in traditional succession planning. Different states have different rules, but as long as the firm is 51% owned by CPAs, it's good. The problem from a liability standpoint is the fact that down the road, clients may use this as a factor once their liability goes before a jury. Where non-CPAs are involved could be an element of concern."
