The big news this week is that with the government shutdown finally over, the tax world was (mostly) getting back to normal.
The IRS is back to work (you can read more about the status of processing returns and returning correspondences a little further down in the newsletter) and that includes issuing more guidance, including on the One Big Beautiful Bill Act (OBBBA).
On Friday, the IRS released new guidance to help taxpayers who are eligible to claim the deduction for tips and for overtime compensation for tax year 2025.
(The guidance to help employers and other payers navigate reporting requirements for cash tips and qualified overtime compensation under OBBBA can be found here.)
The guidance clarifies how to figure your deduction without a separate accounting from your employer for cash tips or qualified overtime on information returns (such as Form W-2 or Form 1099).
Notably, since employers are not required to separately report qualified tips on Forms W-2 for tax year 2025, the guidance makes clear that employees may rely on other information. That includes the amount of Social Security tips reported in Box 7 of Form W-2, tips reported to employers on Forms 4070, and, for self-employed workers, contemporaneous records like tip logs.
Taxpayers have been clamoring for more information on how Specified Service Trade or Businesses (SSTBs) might be treated under the new law since the initial guidance was more confounding than helpful. An SSTB is generally defined as a business whose success depends on the expertise, judgment, or reputation of the owner. Examples include doctors, lawyers, CPAs, bookkeepers, enrolled agents, tax preparers and financial advisors.
SSTB owners and their employees are excluded from claiming the tips deductionâyet some of those occupations appeared on the list of traditionally tipped occupations. Now, in what can only be described as a head scratcher, for the tip deduction, transition relief applies to the SSTB exclusion for 2025 meaning the IRS will treat tips as qualified even if they might otherwise be excluded, until the regulations are finalized. According to the guidance, the Treasury intends to issue proposed regulations and solicit public comment on these issues before publishing final regulations.
(The IRS estimates that there are about six million workers who report tipped wages, and it will be interesting to see how much this number grows beginning in 2025).
The IRS also offered guidance on the overtime rules, clarifying that while the additional half (in time and a half payments) required by the Fair Labor Standards Act (FLSA) may be qualified overtime, payments in excess of the FLSA-required premium are not. That means that only the âhalfâ is deductible, even if your overtime rate is two or three (or more) times your normal rate.
Additionally, the overtime rules are dependent on eligibility for federal overtimeâan FLSA eligible employee. If you are FLSA-ineligible, but are paid for overtime under state or local law or for another reason, it is not considered qualified overtime compensation for purposes of the deduction, no matter the circumstances. In other words: federal law controls.
To help taxpayers sort it all out, the IRS included a number of examples in the guidance. You can find those and more information here.
How much taxpayers benefit from OBBBAâwhich has been touted as an economic boostâis going to be an issue as costs in some sectors continue to rise. Inflation and the economy are on the minds of many. A measurement of how Americans currently view the economy dropped to an all-time low as consumers expect prices to rise 4.5% over the next year.
This week, President Trump weighed in on rising costs, reversing course and lifting tariffs on certain agricultural products that canât be grown or produced at scale inside the U.S. including coffee, bananas, and orange juice. Trump said about the move, âWe just had a little bit of a rollback on some foods, like coffee as an example, where the prices of coffee are a little bit high now. Theyâll be on the low side in a very short period of time.â
The problem? Even the most protectionist tariffs canât spur production of items that canât be easily produced or grown in the U.S.âlike coffee and bananas. Both are products that the United States consumes heavily but produces little to none of domestically. Coffee imports from major producers like Brazil and Vietnam faced tariffs as high as 50%, while bananas imported from Central and South America were similarly targeted. By September, coffee prices had surged more than 40% year-over-year, while the cost of bananas was up nearly 9%.
In an effort to tame prices, the White House released a list that includes more than 100 products that will no longer be included in the tariffs.
Even as Trump rolls back tariffs, he continues to tout them, insisting that they are a revenue raiser. To share the wealth, President Donald Trump pitched on social media: Send everyone a $2,000 per person tariff “dividend.”
Since that time, Treasury Secretary Bessent, who initially indicated that the $2,000 could take other formsâlike tax cutsâhas also switched course, saying that the checks remain a possibility, but would likely need approval from Congress. Trump followed up this week by suggesting that the tariff dividends were still in the cards, but taxpayers wouldnât see them until the middle of 2026 (economists have cast doubt on the feasibility of Trumpâs idea for tariff dividends).
The highâand risingâcost of living hurt Republicans in the recent elections as voters blamed them for high prices. Rather than engage in a blame game, Steve Forbes suggests there are a number of constructive measures to be taken. Rolling back the tariffs, he notes, is a good start.
(Forbes also believes that the Supreme Court will likely rule that tariffs imposed by executive order are unconstitutional, which will cut the overall tariff tax by more than 50%.)
But donât expect any major moves in the next few days. Congress is on recess for a Thanksgiving break from November 20 to November 27, 2025.
Iâll also be taking time off next week to spend with my family, so there wonât be a newsletter next Friday. Thereâs a lot of cooking to doâwe always host a big Thanksgiving dinner at my house, with friends and family and students from our local university who arenât able to go home during the holidays.
But I would be remiss if I didnât say in advance how very grateful I am for all of you. The tax worldâincluding my readersâmake up such a great community. I love answering your questions, getting your notes (your emails about my dadâs recent passing have been especially meaningful), and sharing your stories. So, thank you. I appreciate you.
Enjoy your holiday,
Kelly Phillips Erb (Senior Writer, Tax)
Questions
This week, a reader asks:
Iâm planning a wedding for the end of the year. Somebody told me that I would file as married in 2025 even though Iâll only be married for a few days. Is that true?
Itâs absolutely true. Your marital status is determined as of the last day of the tax yearâDecember 31âaccording to state law. If youâre married on that day, youâre married. Itâs not more complicated than that.
And congrats on your wedding!
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Do you have a tax question that you think we should cover in the next newsletter? We’d love to help if we can. Check out our guidelines and submit a question here.
Statistics, Charts, and Graphs
The 43-day government shutdownâthe longest in U.S. historyâended after Congress approved a new funding bill. Although the government officially reopened on November 13, 2025, taxpayers should expect delays as federal agencies work through significant backlogs.
The good news is that individual taxpayers can get in-person and telephone assistance again. Taxpayer Assistance Centers (TACs) are open again, as is the Taxpayer Advocate, and telephone assistors are answering the phones.
The bad news is that while some other parts of the agency are open, there are backlogs that require taxpayers to reschedule appointments and otherwise be patient.
The IRS says that it is currently processing returns. You can see where the IRS stands on various processing times in the chart. Note that the month indicates the month receivedâso if IRS says it is working on returns received as of July 2025, it means that those returns filed after that time havenât yet been processed. (You can see the status for more forms here.)
IRS examiners are working through accumulated mail and case files, so expect delays. Documents previously sent will be acknowledged, and any canceled audit appointments will be rescheduled. Deadlines for responding to noticesâsuch as 10-day and 30-day lettersâremain in place. Statutory Notices of Deficiency still carry the usual 90-day Tax Court deadline, and the rules for signing and returning Form 872 remain unchanged.
Some collection activities continued during the shutdown, including issuance of valid Notices of Deficiency. Filing and payment deadlines were not paused, and interest and penalties continued to accrue. Taxpayers who normally pay in person at a TAC may request penalty abatement for reasonable cause. Revenue Officers will now resume reviewing lien, levy, and discharge requests, and CDP hearing requests submitted during the shutdown are being processed.
The IRS Appeals Office is reviewing backlogged correspondence. Missed or canceled conferences will be reset. Messages left during the shutdown will be returned, though it may take time. If you missed a deadline, submit your response nowâAppeals is expected to reach out before taking action. If more than 60 days pass without contact, follow up with Appeals Customer Service.
Correspondence backlogs varyâthe IRS claims that it is caught up to July 2025 for individual correspondence, March 2025 for business correspondence, and June 2025 for other categories. Practitioners, including me, report delays beyond those official time frames.
A Deeper Dive
Families just donât gather around the table on Thanksgiving Dayâsome of them gather around the TV to watch sports. Tops on the list? American football, a custom that began with the Detroit Lions in 1934. The National Football League now hosts three games annually on Thanksgiving Day. The 2025 NFL Thanksgiving games are: Green Bay Packers at Detroit Lions (1 p.m. ET, FOX), Kansas City Chiefs at Dallas Cowboys (4:30 p.m. ET, CBS), and Cincinnati Bengals at Baltimore Ravens (8:20 p.m. ET, NBC).
Some other sports, like soccer, also suit upâbut not the National Basketball Association. The NBA used to have Thanksgiving games but the players negotiated to get the day off.
The popularity of sports over the Thanksgiving holiday, as well as the run up to the day (the NBA has nine games scheduled the day before Thanksgiving), is part of a growing love affair with professional sports teams. And even though the owners tend to be billionaires, public dollars, including tax dollars, are increasingly being tapped for new stadiums and arenas, despite decades of economic research showing these deals donât pay off.
San Antonio is the latest example, where voters narrowly approved more than $300 million in county tax supportâon top of over $450 million from the cityâfor a new arena for the NBAâs Spurs. Community groups pushed back but were outmatched by well-funded campaigns and flawed consultant studies promising economic gains.
Economists overwhelmingly agree those promised benefits rarely materialize. Research shows stadium spending mostly replaces local entertainment dollars rather than creating new ones, owners capture the gains rather than reinvesting locally, and consultant studies lack transparency and rigor. Meanwhile, team valuationsâalready soaring nearly 1,000% in two decadesâshow owners can easily afford their own facilities.
(According to Forbes, all 32 NFL teams are worth at least $5 billion, with the Cincinnati Bengals setting the floor at $5.25 billionâa figure that surpasses all 32 NHL clubs in Forbesâ ranking last year and all but seven franchises across the most recent NBA and MLB valuation lists.)
So why do subsidies persist? Heavy lobbying, civic boosterism, public enthusiasm for sports, and the diffuse cost to taxpayers all play a role. Owners also leverage relocation threatsâwhat some analysts call stadium âblackmailââtaking advantage of limited franchise supply to secure ever-larger subsidies. Recent team moves and escalating demands suggest tens of billions more public dollars may be at stake in coming years.
Given the political difficulty of defeating subsidy proposals outright, communities increasingly look to Community Benefits Agreements (CBAs) as a way to secure real, enforceable local gains. They are legally binding, transparent, and enforceable contracts linking subsidies to specific, measurable obligations. Notably, they can include clawback provisions allowing subsidies to be suspended or reclaimed if promised benefits donât occur.
Tax Filings And Deadlines
đ December 31, 2025. Deadline for required minimum distributions (RMD) for most individuals subject to RMDs. (If you turned 73 in 2024, you should have taken your first RMD (for 2024) by April 1, 2025, and you also need to take your 2025 RMD by the end of the year.)
đ January 15, 2026. Fourth quarter 2025 estimated tax payment due for individuals.
Tax Conferences And Events
đ December 11-13, 2025. American Bar Association Section of Taxation. 2025 Criminal Tax Fraud and Tax Controversy Conference, Wynn, Las Vegas. Registration required.
Trivia
State sales taxes can bump up the cost of Thanksgiving dinner. A dozen states still impose some form of sales tax on groceries. Which state got rid of its grocery food state sales tax in 2025?
(A) Alaska
(B) Kansas
(C) New Mexico
(D) Pennsylvania
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS issued guidance for a new tax benefit for certain lenders that make loans secured by rural or agricultural real property. Notice 2025-71 provides interim guidance that taxpayers may rely on until the Treasury Department and the IRS issue forthcoming proposed regulations.
Noteworthy
American Academy of Actuaries President Darrell Knapp presented David (Dave) Gustafson, MAAA, EA, former Chief Policy Actuary of the Pension Benefit Guaranty Corporation (PBGC), with the Robert J. Myers Public Service Award at the Academyâs Leadership Summit and Governance Transition event in Washington, D.C. The award, named after former (1947â1970) Social Security Administration Chief Actuary Robert J. Myers, is presented annually to an actuary who has made major contributions to the common good through service to government or other public organizations.
The American Institute of CPAs (AICPA) recognized two prominent tax division volunteer members during the 2025 AICPA National Tax Conference. Arthur Auerbach, CPA, CGMA, was presented with the Arthur J. Dixon Memorial Award and Cory Perry, CPA, received the Jonathan Horn Distinguished Service Award. Both have given their time, adding value and expertise to AICPA Tax Division initiatives that work to strengthen the accounting profession and tax system.
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If you have tax and accounting career or industry news, submit it for consideration here or email me directly.
In Case You Missed It
Here’s what readers clicked through most often in the last newsletter:
- Hereâs How Much IRA, 401(k) And Other Retirement Contributions Limits Increase In 2026
- Donât Spend Trumpâs $2,000 A Person Tariff Dividend Check Just Yet
You can find the entire newsletter here.
Trivia Answer
The answer is (B) Kansas.
Kansas eliminated the grocery tax in January 2025 after gradually reducing the tax previously.
This is something of a trick question since Alaska, New Mexico and Pennsylvania donât have sales taxes on groceries to get rid of.
Alabama, Arkansas, Hawaii, Idaho, Illinois, Maryland, Mississippi, Missouri, South Dakota, Tennessee, Utah and Virginia all still impose some kind of sales or excise tax on groceries.
How do sales taxes impact groceries? With the average cost for a classic Thanksgiving dinner for 10 people hitting $55.18 in 2025, according to the American Farm Bureau Federation, you can expect to tack on an extra $3.86 in Mississippi, where the state grocery sales tax is 7%.
Feedback
How did we do? We’d love your feedback. If you have a suggestion for making the newsletter better, submit it here or email me directly.