From the Fine Print to the Front Page: IRS Updates That Deserve a Closer Look
Tax developments don’t always make headlines—but that doesn’t mean they’re not worth your attention.
Behind every regulation and court decision is a ripple effect that can impact how you report income, claim deductions, or respond to an audit. These recent updates are reminders of how complex the landscape remains—and how important it is to stay ahead of both policy and enforcement trends.
IRS Proposes to Ease Reporting Rules for Partnership Interest Sales
The IRS has proposed delaying and revising reporting requirements under IRC §751(a) for partnership interest exchanges. The purpose is to address compliance challenges and improve accuracy by aligning certain reporting deadlines with a partnership’s annual tax return.
Why this matters:
If you’re involved in partnerships—whether managing them or advising clients—this proposal could reduce administrative burden and confusion. While still in the public comment phase, it reflects the IRS’s effort to improve practicality in complex filing situations.
Court Upholds IRS Taxation on Missouri Woman's $1.51M Defamation Settlement
In Mennemeyer, T.C. Memo 2025-80, a Missouri business owner unsuccessfully challenged the taxation of a $1.51 million employment-related defamation settlement. The Tax Court upheld the IRS’s position: the settlement was taxable. It also disallowed deductions related to her small business and confirmed a late-filing penalty tied to her 2018 return.
Why this matters:
When a settlement stems from an employment dispute, it’s often treated as taxable income—even if labeled differently. This case underscores the importance of proper legal and tax structuring for any settlement agreement.
Employees Need a New Form W-4 When Transferring Between Subsidiaries
According to IRS Tax Topic 753, when an employee begins working for a new legal entity—even if it’s part of the same parent company—they must complete a new Form W-4. Each EIN is treated as a separate employer. Without a new form, employers must default to withholding at the highest rate (single or married filing separately, with no adjustments).
Why this matters:
This is an easy detail to overlook, but it can lead to over- or under-withholding and create unexpected tax issues. Employers and HR teams should be sure that transitions between subsidiaries trigger the correct paperwork.
IRS Releases 2025 “Dirty Dozen” Tax Scams
Each year, the IRS releases its Dirty Dozen list—a public education initiative spotlighting the most common tax scams affecting individuals, businesses, and tax professionals. While scams often spike during tax season, they happen year-round.
Why this matters:
Staying aware of these tactics helps you protect personal data, avoid costly mistakes, and recognize when something seems off. This year’s list includes:
Email Phishing Scams: Fraudulent IRS-style emails or texts that install malware or steal info.
Bad Social Media Advice: Misleading posts encouraging improper use of forms or credits.
Fake IRS Account Help: Scammers posing as professionals offering to set up IRS accounts.
Fake Charities: Illegitimate organizations targeting donors after disasters.
False Fuel Tax Credit Claims: Credits meant only for specific off-highway use.
Misuse of Sick/Family Leave Credits: Claims for credits that expired after 2021.
Bogus Self-Employment Tax Credit: Promoters pushing non-existent pandemic-era credits.
Fake Household Employment Claims: Filing Schedule H for employees who never existed.
Overstated Withholding Scams: Using fake W-2s or 1099s to inflate refund claims.
Misleading OIC Promoters: “Offer in Compromise” schemes targeting vulnerable taxpayers.
Ghost Preparers: Return preparers who refuse to sign or use PTINs.
New Client Spear Phishing: Criminals posing as prospective clients to steal tax firm data.
Also flagged: abusive trust, retirement, and offshore arrangements. These remain high-risk areas for scrutiny and enforcement. If you see or suspect a scam, the IRS encourages reporting through Form 14242 or the Whistleblower Office.
The Details Matter—So Does Your Strategy
Each of these updates points to a common theme: tax compliance is about more than filing on time. It’s about understanding how changes in law, IRS enforcement priorities, and even administrative oversights can affect your financial picture.
At Kundra & Associates, we help clients across Washington, D.C., Maryland, Virginia, the U.S., and internationally navigate complex tax matters with clarity and confidence. Whether you’re facing an audit, managing business operations, or ensuring proper reporting across entities and borders, our team brings deep experience and practical guidance to every case.
Let us help you make informed decisions—and avoid costly missteps.