April 2025 Tax Law Recap: IRS Reversals, Court Rulings, and What They Mean for You
Tax law changes may not always trend—but they shape real-world decisions for business owners, international investors, and everyday taxpayers alike. At Kundra & Associates, our work focuses on the complex areas where most people need guidance: IRS audits and tax defense, international tax compliance, employment tax classification, and personal tax representation.
April 2025 brought several developments in these core areas, from regulatory reversals by the IRS to key court rulings affecting tax deadlines and fiduciary liability. Here’s a practical breakdown of what happened, why it matters, and how it could impact your finances or your business.
IRS Reverses Course on Partnership Basis Shifting Rules
In Notice 2025-23, the IRS announced its intent to remove recently finalized regulations that labeled certain partnership basis shifting transactions as “transactions of interest.” These complex strategies had triggered disclosure obligations, and the IRS is now also offering penalty relief and rescinding earlier guidance.
Why it matters:
For businesses or investors using partnership structures—especially in cross-border settings—this eases some short-term reporting pressure. But don’t assume these strategies are off the radar. Tax planning around partnerships still requires expert legal oversight.
Barrier Contracts Are Not Options, Says Tax Court
In TC Memo. 2025-34, the Tax Court ruled that GWA LLC mischaracterized “barrier contracts” as options for tax purposes. Since the company held the underlying securities, the court concluded the instruments lacked the economic risk and characteristics of true options.
Why it matters:
Investors using complex or international financial instruments need to understand the difference between legal form and tax substance. Mislabeling can trigger audits or penalties, even if the transaction seemed legitimate at the time.
Plans to End IRS Direct File Spark Controversy
The IRS rolled out its Direct File e-filing platform nationwide this year, but reports suggest the Trump administration may shut it down. That’s prompted strong pushback from lawmakers and tax advocacy groups who say it’s a vital no-cost tool for taxpayers. You can learn more about this debate HERE.
Why it matters:
Losing Direct File could limit access to affordable tax preparation—especially for individuals with straightforward returns. It also underscores the ongoing debate about government vs. private-sector roles in tax filing.
Tax Court: Mailing Error Doesn’t Justify Missed Deadline
In Belagio Fine Jewelry, Inc., 164 TC No. 7, the Tax Court ruled that a mailing error wasn’t enough to excuse a missed filing deadline in an employment tax classification case. The company had petitioned the court after the 90-day deadline had passed, arguing for equitable tolling—a legal doctrine that allows deadlines to be extended in rare cases where extraordinary circumstances (like fraud or external barriers) prevent timely filing. But the court, citing Boechler, P.C. v. Commissioner, held that simple mistakes like mailing delays don’t meet that standard.
Why it matters:
Even honest mistakes—like sending a petition to the wrong address—can eliminate your right to challenge an IRS decision. This ruling is a stark reminder that tax deadlines are unforgiving and require absolute precision.
Supreme Court Reinstates ERISA Prohibited-Transaction Claim
In Cunningham v. Cornell University, the Supreme Court ruled that retirement plan participants can bring a claim under the ERISA prohibited transaction rules without proving that fiduciaries actively controlled the service provider. Passive involvement may still trigger liability.
Why it matters:
If you’re a business owner or fiduciary of a company-sponsored retirement plan, this ruling raises your potential exposure. It expands what counts as fiduciary misconduct under the ERISA fiduciary rule and signals the need for stronger oversight of plan service providers.
ABA Pushes Back on IRS Third-Party Contact Rule
The call to remove or revise recently proposed regulations under Code Sec. 7602(c) stems from concerns about reduced notice for third-party contacts by the IRS. The proposed change would shorten the required notice period from 45 days to just 10 days in cases where the statute of limitations (SOL) is less than one year, and the taxpayer is either under examination or the subject of a trust fund recovery investigation. The notice period would also be shortened in collection cases where the limitations period is considered to be “nearing its end.”
Why it matters:
If you’re under audit or facing an IRS investigation, less notice means fewer opportunities to prepare. That puts taxpayers at a disadvantage and complicates legal defense strategies.
Navigating Change with Confidence and Counsel
April’s tax law changes serve as a reminder: it’s not just what’s on the books—it’s how the IRS enforces it, and how courts interpret it. Whether it’s a regulatory retreat, a filing deadline, or a fiduciary duty, the implications are real and often costly.
At Kundra & Associates, we help clients interpret and respond to tax law shifts in the areas where they matter most: international compliance, IRS audits and investigations, employment tax disputes, and personal tax resolution. If any of these changes hit close to home—or even raise questions—it’s time to talk.