Forbes - Up-To-Date Tax Info On IRS Direct File, VITA, And More
The host, Kelly Phillips Herb, discusses various IRS programs and tax credits, such as the Earned Income Tax Credit (EITC) and the Volunteer Income Tax Assistance (VITA) program, which provides free tax preparation for low-income individuals. Concerns are raised about potential cuts to these programs under the Trump administration. The IRS's new Direct File tool is highlighted as a way to help eligible taxpayers claim credits like the EITC and Child Tax Credit (CTC). The tool was piloted successfully in 12 states and is now available in 25 states. Additionally, the video covers the impact of tariffs imposed by the Trump administration on countries like Canada, Mexico, and China, explaining how tariffs are used to protect domestic industries and raise revenue. The video also addresses the student loan interest deduction, explaining eligibility and limitations, and provides updates on IRS staffing and recent legal developments affecting tax reporting requirements.
Key Points:
- VITA program provides free tax preparation for low-income individuals, potentially threatened by budget cuts.
- Direct File tool helps taxpayers claim credits like EITC and CTC, available in 25 states.
- Tariffs imposed by Trump administration aim to protect domestic industries and raise revenue.
- Student loan interest deduction allows up to $2,500 deduction, with specific eligibility criteria.
- IRS staffing and legal updates impact tax reporting and filing processes.
Details:
1. 🎙️ Welcome to Tax Breaks with Kelly Phillips Erb
1.1. Introduction
1.2. Topics Overview
2. ✈️ Adventure in Alaska: Volunteer Tax Assistance
- The Alaska Volunteer Income Tax Assistance (VITA) project collaborates with the Alaska Business Development Center to train volunteers for tax preparation services in remote villages, crucial for residents lacking access to paid services.
- These services are vital as they offer free income tax preparation, which is essential for residents in isolated communities that may not have other options.
- Volunteers face logistical challenges, such as the absence of local restaurants or food stores, requiring them to bring dehydrated food due to space and weight restrictions when flying in on seaplanes.
- This experience demands adaptability and preparation from volunteers, who test various dehydrated food options to manage in the remote environment.
- The program significantly impacts these communities by providing necessary financial services, fostering economic well-being.
- Volunteers also gain unique insights and experiences, enhancing their skills and understanding of diverse environments.
3. 📉 The Future of VITA and EITC Under Budget Cuts
- The Trump Administration's budget priorities could lead to cuts in VITA and EITC, as it emphasizes reducing costs across federal agencies, excluding the military, veterans affairs, and Homeland Security.
- VITA and EITC are at risk of elimination, impacting families that depend on tax credits such as the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC).
- The EITC is a particular target for some Republicans because it is a refundable tax credit for low-income workers, classified as a spending program.
- Budget cuts to the EITC could have a direct impact on VITA programs, which support taxpayers in claiming these credits.
- Although EITC has not yet been cut, there is a risk that eligible taxpayers might not receive its benefits due to ongoing budget discussions.
- If EITC is cut, it could reduce the number of families receiving critical financial support and increase financial strain on low-income workers.
4. 🖥️ IRS Direct File: Simplifying Tax Credits
4.1. Introduction to IRS Direct File
4.2. Expansion and User Feedback
5. 🔍 Debunking Myths: IRS Program Updates
- The IRS Direct File program remains operational and available on the IRS website, despite misinformation circulating on social media.
- The 18F team, a part of the General Services Administration (GSA), played a role in developing the technology for Direct File but is not affiliated with the IRS itself.
- Treasury Secretary Scott Bessent has confirmed the program's availability for the current tax filing season, ensuring taxpayer access.
- The White House has reiterated that the IRS Direct File website is still online and continues to accept tax returns, ensuring uninterrupted service.
- The IRS will keep its workforce intact throughout the filing season to maintain service continuity and support for taxpayers.
- The IRS Direct File program offers taxpayers a streamlined way to file their taxes directly with the IRS, which can reduce errors and expedite processing.
6. 👥 IRS Staffing: Navigating the Deferred Resignation Program
- The Office of Personnel Management (OPM) has implemented the Deferred Resignation Program (DRP), offering over 2 million federal workers the option to resign but remain on the payroll until September 30, 2025. This aims to manage staffing levels while maintaining workforce flexibility.
- The IRS has exempted specific critical roles from the DRP until May 15, 2025. These roles include positions in taxpayer services, information technology, and the taxpayer advocate service, highlighting the IRS's strategy to maintain essential operations during key filing seasons.
- There is currently a lack of clarity regarding the criteria for exemption from the DRP, which has led to some confusion among employees. Those already participating in the DRP and later exempted will be notified about when they are required to return to work, illustrating the dynamic nature of the program's implementation.
- Dorene Greenwald, president of the National Treasury Employees Union, has criticized the DRP, labeling it a 'bait and switch.' Her concerns underscore the potential issues in program transparency and reliability, which could affect employee trust and morale.
7. 📜 Legal Challenges: Beneficial Ownership Reporting
- In the Texas case, Smith v. States, the court temporarily halted the beneficial ownership interest reporting requirements under the Corporate Transparency Act, highlighting significant legal pushback.
- The government's appeal of this decision includes a request for a stay of the injunction during the appeals process, reflecting strategic legal maneuvers based on past Supreme Court successes.
- The proposed extension of the compliance deadline by 30 days upon any stay being granted underscores the government's strategy to balance enforcement with practical compliance timelines.
- The Treasury Department's focus on prioritizing national security risks in reporting suggests a potential narrowing of the scope for small businesses, thereby easing their compliance burden.
8. 🎓 Deducting Student Loan Interest: What You Need to Know
- Only student loan interest, not principal payments, is deductible up to $2,500 per return.
- Married taxpayers filing separately cannot claim the deduction, but those filing jointly share the $2,500 cap.
- No need to itemize deductions to claim this deduction.
- Loans must be for qualified education expenses like tuition, fees, books, and necessary costs; some restrictions apply for room and board.
- Loans can include credit cards or bank loans if solely for education expenses and not from related persons or retirement plans.
- The borrower must be the taxpayer, spouse, or dependent enrolled at least half-time in a degree program.
- Payments made by others on behalf of the borrower can still be deducted, but not if the borrower is claimed as a dependent by the payer.
- Deduction phases out for MAGI between $80,000-$95,000 (single) or $165,000-$195,000 (joint).
- Qualified education expenses must be reduced by any tax-free educational assistance or benefits.
- Lenders must issue Form 1098-E for interest payments of $600 or more by January 31st.
9. 📊 Analyzing Tax Filing Trends: Early Season Insights
- The IRS received 1,177,000 individual tax returns in the first week of the 2025 filing season, marking a 14% decline from 2024's 1,531,800 returns, and a significant 30% decrease compared to 2023.
- In 2024, early filings were sluggish due to taxpayers waiting on retroactive tax benefits that were not enacted, affecting initial numbers.
- IRS anticipates normal fluctuations in early filing numbers, projecting a balance in subsequent weeks despite early declines.
- External factors, such as the former IRS commissioner's resignation and early leave incentives for employees, may contribute to these filing behaviors.
- Understanding these trends is crucial for forecasting IRS workload and taxpayer behavior, highlighting the need for adaptive strategies in response to changing filing patterns and organizational changes within the IRS.
10. 🌍 Trade Trivia: Top U.S. Export Destinations
- The top five purchasers of U.S. goods exports were Canada, Mexico, China, Japan, and the United Kingdom, highlighting the importance of North American and Asian markets for U.S. trade.
- The United States is the world's second-largest exporter of goods, behind only China, emphasizing its significant role in global trade.
- In 2022, Canada and Mexico were the top two destinations for U.S. exports, accounting for a substantial portion of trade, reflecting the impact of geographical proximity and trade agreements like USMCA.
11. 🌐 Tariffs Explained: Economic Impact and Policy Goals
11.1. Tariffs Overview
11.2. Recent Developments and Strategic Goals
12. 🗞️ Tax News Highlights and Upcoming Topics
- The American Institute of CPAs (AICPA) has requested the IRS to add a checkbox and space on tax forms for FEMA declaration numbers to simplify the process for taxpayers in federally declared disaster areas to self-identify for eligibility. This change aims to prevent taxpayers from forgetting to write the FEMA number at the top of their return, which is part of the current process.
- The National Taxpayer Advocate emphasized the 50th anniversary of the Earned Income Tax Credit (EITC) in 2025, noting its evolution from a modest tax break in 1975 to the largest federal refundable tax credit program for low to moderate-income workers. This anniversary could lead to increased awareness and potential policy changes to enhance the program's reach and effectiveness.
- A South Carolina proposal aims to cut taxes for boat owners by offering a 50% property tax exemption on the fair market value of watercraft. This initiative recognizes the economic and recreational importance of boating and fishing in the state, potentially boosting local tourism and related industries.