IRS issues FAQs on Form 1099-K threshold under the One, Big, Beautiful Bill; dollar limit reverts to $20,000

IR-2025-107, Oct. 23, 2025

WASHINGTON – The Internal Revenue Service today issued frequently asked questions in Fact Sheet 2025-08 regarding the dollar threshold for filing Form 1099-K under the One, Big, Beautiful Bill.

The OBBB retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021 (ARPA) so that third party settlement organizations are not required to file Forms 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.

Form 1099-K is an IRS information return used to report certain payments to improve voluntary tax compliance. The requirement to file a Form 1099-K can be triggered when payments are received for goods or services through a payment settlement entity.

October 23, 2025 0

401(k) catch-up now become taxable

The main change to 401(k) catch-up contributions for 2026 is that high-income earners aged 50 or older will be required to make their catch-up contributions on a Roth (after-tax) basis. The standard and “super” catch-up contribution limits are also projected to increase due to inflation.

Roth catch-up rule for high earners

Beginning January 1, 2026, employees who meet all of the following criteria must make any catch-up contributions to their 401(k) on a Roth basis:

Age 50 or older during the year.
Contribute to a 401(k), 403(b), or governmental 457(b) plan.
Had FICA wages greater than $145,000 in the previous calendar year from the employer sponsoring the plan.

Consequences of this rule:

Loss of upfront tax deduction: High-income earners will lose the ability to lower their current taxable income with pre-tax catch-up contributions.
Future tax-free withdrawals: In exchange, the catch-up contributions and their earnings will be tax-free in retirement.
Impact on plan availability: If an employer’s plan does not offer a Roth 401(k) option, these high earners will not be able to make any catch-up contributions at all.

Projected 2026 catch-up contribution limits

The official 2026 limits have not yet been announced by the IRS, but experts project the amounts will rise from 2025 due to inflation.

Eligibility	2025 Catch-up Contribution Limit	Projected 2026 Catch-up Contribution Limit
Age 50–59, and 64+	$7,500	$8,000
Age 60–63 (super catch-up)	$11,250	Up to $12,000 (150% of the standard catch-up limit)

Other key details

Secure 2.0 Act: The Roth catch-up requirement for high earners is a provision of the SECURE 2.0 Act of 2022, which was originally set to take effect in 2024 but was delayed until 2026 to give employers more time to prepare.
Employer responsibility: Employers must track prior-year FICA wages to determine which employees are subject to the Roth catch-up requirement. Plans must also offer a Roth option to all employees if they wish to allow high earners to continue making catch-up contributions.

October 9, 2025 0

Proposing a New Corporation Tax Rate of 15%

In late 2024 and early 2025, former President Trump proposed further reducing the corporate tax rate, potentially to 15% for companies manufacturing products domestically.

Here’s some additional context regarding the current U.S. corporate tax rate and Trump’s proposals:

Current Rate: The federal corporate income tax rate is currently 21%, a flat rate established by the Tax Cuts and Jobs Act (TCJA) of 2017. Before the TCJA, the top corporate tax rate was 35%.
Trump’s Previous Tax Cuts: In 2017, the TCJA lowered the corporate tax rate from 35% to 21%.
Proposed 2025 Changes: Trump has proposed a further reduction in the corporate tax rate, possibly to 20% for all companies.
Targeted Rate for Domestic Manufacturers: His proposal specifically targets a 15% rate for companies that manufacture goods within the U.S., according to Cherry Bekaert. This is intended to incentivize domestic production and create jobs.
Reintroduction of DPAD: This policy could also involve reintroducing a modified Domestic Production Activities Deduction (DPAD), which would effectively lower the rate for domestic manufacturers to 15%. This deduction was previously eliminated under the 2017 tax law.
Fiscal Impact: While the 15% rate is proposed specifically for domestic manufacturing, a general cut to 15% for all corporations would have a significant impact on revenue, estimated between $460 billion and $675 billion through FY 2034. The more targeted approach would have a smaller fiscal impact.

It is important to note that these are proposed changes and their enactment depends on future legislative actions.

August 7, 2025 0

NEW SALT (State and Local Tax) deduction cap

President Donald Trump signed the “One Big Beautiful Bill Act” into law on July 4, 2025.
This new legislation significantly changes the State and Local Tax (SALT) deduction cap for individual taxpayers.

Here’s a breakdown of the new SALT deduction cap:
Increased Cap: The SALT deduction limit has increased from $10,000 to $40,000 for tax year 2025.
Income Threshold and Phase-out:
The full $40,000 deduction is available to households with a Modified Adjusted Gross Income (MAGI) of $500,000 or less ($250,000 for married couples filing separately).
-For those with MAGI exceeding these thresholds, the $40,000 cap is gradually reduced at a 30% rate, meaning the deduction decreases by 30 cents for every dollar over the limit.
-The deduction never falls below $10,000, even for the highest earners.
MAGI is calculated by adding back certain components to your Adjusted Gross Income (AGI), such as foreign earned income and housing costs.
*For example, if your MAGI is $550,000, you exceed the $500,000 threshold by $50,000. The deduction is reduced by 30% of $50,000 ($15,000), leaving you with a $25,000 SALT deduction ($40,000 – $15,000).
Households with MAGI above $600,000 are limited to the $10,000 SALT deduction.
-Annual Adjustments: The SALT cap and the income thresholds for the phase-out will increase by 1% annually through 2029.
Sunset Provision: The higher SALT deduction cap is temporary and is scheduled to revert to the $10,000 limit in 2030, according to SmartAsset.com.
-Important Considerations:
Itemization: You must itemize your deductions to claim the SALT deduction. If your itemized deductions (including SALT) do not exceed the standard deduction, it’s more beneficial to take the standard deduction.
Benefits: The increased SALT cap will primarily benefit individuals and families in high-tax states with incomes at or below $500,000. Many low- and middle-income households may find that the increased standard deduction is still more advantageous.

“SALT Torpedo”: Tax experts are warning of a potential “SALT torpedo” or artificially high tax rate for individuals with MAGI between $500,000 and $600,000, as the deduction phases out rapidly in this range.
Business Taxes: The changes to the SALT deduction generally do not apply to businesses. According to Optima Tax Relief, businesses may continue using existing deduction rules or state workarounds, such as Pass-Through Entity Taxes (PTETs).

August 7, 2025 0

Understanding Irrevocable Life Insurance Trusts

Way to save taxes for your heirs.

Irrevocable Life Insurance Trusts (ILITs) are a valuable estate planning tool that can help individuals in New York and other states minimize their estate tax liability. By transferring ownership of a life insurance policy to an ILIT, the death benefit can be received by beneficiaries outside of the insured’s estate, potentially avoiding significant estate taxes.

Key Benefits of ILITs in New York:

Estate Tax Reduction: ILITs can significantly reduce the size of your taxable estate, potentially saving your beneficiaries substantial amounts of money in estate taxes.
Flexibility: ILITs can be customized to meet your specific needs and goals, allowing you to control how the death benefit is distributed and used.
Asset Protection: ILITs can also provide asset protection by keeping the death benefit outside of your estate, shielding it from potential creditors or lawsuits.
Considerations for New York Residents:

New York Estate Tax: While New York has a relatively high estate tax rate, the state also offers a lifetime exemption. By effectively utilizing an ILIT, you can transfer assets out of your taxable estate and potentially avoid New York estate taxes.
Three-Year Clawback Rule: New York has a three-year clawback rule, which means any gifts made within three years of death may be included in the deceased person’s estate. It’s essential to consider this rule when planning your ILIT strategy.
How to Establish an ILIT:

Consult with a Professional: An estate planning attorney can help you create an ILIT that is tailored to your specific needs and goals.
Transfer Ownership: You will need to transfer ownership of the life insurance policy to the ILIT. This is considered a gift and may have gift tax implications.
Name Beneficiaries: Designate the beneficiaries who will receive the death benefit.
Consider Funding: You may need to fund the ILIT with cash or other assets to ensure that the death benefit can be paid out.
Conclusion:

ILITs can be a powerful estate planning tool for New York residents. By understanding the benefits and considerations involved, you can make informed decisions to protect your assets and minimize your estate tax liability. Consulting with an estate planning attorney is essential to ensure that your ILIT is properly structured and meets your specific needs.

September 23, 2024 0