Form 1099-K Changes Under the One Big Beautiful Bill

The Internal Revenue Service (IRS) recently issued updated guidance (FS-2025-08, Oct. 2025) clarifying how individuals, businesses, and third-party settlement organizations must handle Form 1099-K, Payment Card and Third-Party Network Transactions, under the One Big Beautiful Bill (OBBB). These changes aim to simplify compliance and provide clear direction after years of shifting reporting thresholds.

1. Key Reporting Thresholds

The OBBB retroactively reinstated the pre-American Rescue Plan Act (ARPA) threshold for third-party settlement organizations (TPSOs).

• New rule: A TPSO is only required to issue Form 1099-K if the gross amount of payments made to a payee exceeds $20,000 and the number of transactions exceeds 200 during the calendar year.

• Prior rule: ARPA had lowered this to $600 for any number of transactions, creating confusion and administrative burden.

Note: Individual states may impose lower thresholds, so it’s important to review your local reporting requirements

2. Who Must File Form 1099-K

Under IRC § 6050W, Payment Settlement Entities (PSEs), including merchant acquiring entities and TPSOs such as payment apps or online marketplaces, must file Form 1099-K to report certain payments for goods and services.

• Merchant acquiring entities must report all payment-card transactions—there is no de minimis exception. Even a $0.01 credit-card payment triggers reporting.

• TPSOs only report when both the $20,000 and 200-transaction thresholds are met. However, they may choose to file for lower amounts voluntarily

• Foreign PSEs and governmental units are also covered by these requirements if they settle reportable payment transactions involving U.S. taxpayers.

3. Filing Deadlines

The IRS provides strict due dates for filing and furnishing Form 1099-K:

• To payees (Copy B): Must be provided by January 31 of the year following the transactions.

• To the IRS:

• Paper filers – due February 28

• Electronic filers – due March 31
  Any entity filing 10 or more information returns during a calendar year must file electronically through the IRS Information Returns Intake System (IRIS) or the FIRE System

4. Backup Withholding and TIN Verification

If a payee fails to provide a correct Taxpayer Identification Number (TIN), including SSN or ITIN, the TPSO or merchant acquirer must perform backup withholding under IRC § 3406(a). The withheld amounts must be reported on Form 945, Annual Return of Withheld Federal Income Tax, and reflected in Box 4 of Form 1099-K.

Entities can verify TINs using the IRS TIN Matching Program to prevent penalties and reduce erroneous withholding

5. De Minimis Exceptions and Penalties

Under IRC §§ 6721 and 6722, penalties apply for failure to file or furnish correct information returns. The OBBB provides relief to TPSOs by clarifying that they are not subject to penalties unless the gross payments exceed $20,000 and the number of transactions exceeds 200.

There is no de minimis exception for payment card transactions, which must always be reported

6. Avoiding Duplicate Reporting

If a payment is reportable under both IRC § 6041 (Form 1099-MISC or 1099-NEC) and § 6050W (Form 1099-K), the IRS clarifies that only Form 1099-K should be filed to avoid duplication

7. Information Required on Form 1099-K

Each Form 1099-K must include:

• Gross amount of reportable payment transactions (Box 1a)

• Merchant Category Code (MCC) for merchant acquiring entities (Box 2)

• Payee’s Taxpayer Identification Number (TIN)

• Federal income tax withheld (Box 4, if applicable)

TPSOs do not need to complete Box 2 because they do not use MCCs to classify payees

8. How the OBBB Impacts Individuals and Businesses

Individuals and business owners using apps like Venmo, PayPal, or online marketplaces such as eBay and Etsy should note:

• Form 1099-K is issued only when sales of goods or services exceed the federal threshold.

• Personal transactions (such as gifts or reimbursements among friends and family) should not be reported.

• Good recordkeeping is critical—separate personal and business accounts to avoid incorrect reporting and potential audits

9. Electronic Filing and Third-Party Preparation

A PSE may contract a third-party provider to prepare and file Forms 1099-K, but the original entity that submits the funds transfer instructions remains liable for any non-compliance penalties. They cannot charge payees fees for furnishing required statements

10. Special Considerations for Ticket Sales and Crowdfunding

The IRS emphasizes that income from ticket resales and crowdfunding is potentially taxable. Under Executive Order 14254 (Combating Unfair Practices in the Live Entertainment Market), ticket scalpers and resale platforms must comply fully with Form 1099-K reporting to ensure transparency and fair market practices

Need Assistance?

For expert assistance, contact JCox CPAs & Advisors, P.C. Our experienced tax professionals will guide you through each step from verifying FEMA eligibility to preparing amended or extended filings, ensuring you receive every available deduction and relief benefit with full IRS compliance.

Source: IR-2025-107, Oct. 23, 2025_ IRS Fact Sheet 2025-08

IRS Grants Tax Relief to Texas Residents Impacted by July 2025 Severe Weather

The Internal Revenue Service (IRS) has announced special tax relief measures for individuals and businesses in Texas affected by the devastating storms and flooding that struck the region in July 2025. This relief provides additional time to file federal tax returns and make certain tax payments. Eligible taxpayers now have until February 2, 2026, to meet these federal filing and payment obligations.

Who Is Eligible

This relief follows the Federal Emergency Management Agency (FEMA) disaster declaration, which applies to individuals and entities located in or operating businesses within the following Texas counties:

Coke, Concho, Edwards, Hamilton, Kendall, Kerr, Kimble, Lampasas, Llano, Mason, McCulloch, Menard, Real, Reeves, San Saba, Schleicher, Sutton, Tom Green, Travis, Uvalde, and Williamson.

Deadlines Extended to February 2, 2026

Taxpayers in these areas now have until Feb. 2, 2026, to complete the following actions:

• File 2024 individual, business, or nonprofit returns with valid extensions expiring in the fall of 2025.

• Submit quarterly estimated income tax payments that would otherwise be due on Sept. 15, 2025, and Jan. 15, 2026.

• File quarterly payroll and excise tax returns originally due July 31, Oct. 31, 2025, and Jan. 31, 2026.

• File partnership, S corporation, and corporate returns with extensions ending in September or October 2025.

• File calendar-year exempt organization returns with extensions ending Nov. 17, 2025.

Relief is also available to government and charitable organization workers providing disaster assistance in these designated counties, and to individuals injured or killed during the disaster while visiting or working in the affected area.

Note: This extension applies to filing deadlines, not to payments originally due. Taxes owed must still have been paid by the original due date to avoid interest and penalties.

 Additional IRS Relief Provisions

Casualty and Property Loss Deductions

Taxpayers who sustained uninsured or unreimbursed losses may claim those losses on either:

• The 2025 return (to be filed in 2026), or

• The 2024 return (filed earlier in 2025).

To claim the loss, write the FEMA declaration number 4798-DR at the top of the return. The election to claim such losses must be made no later than six months after the due date of the return for the disaster year—October 15, 2025, for individual taxpayers.

Free Copies of Tax Returns

The IRS will waive fees for affected taxpayers requesting past return copies. To obtain them, write “Texas Severe Storms – FEMA 4798-DR” in bold letters on Form 4506 or Form 4506-T when submitting your request.

Exclusion of Qualified Disaster Payments

Payments received from government agencies or recognized relief organizations to cover essential living expenses, home repairs, or funeral costs due to the disaster may be excluded from gross income under federal tax law.

Special Retirement Plan Provisions

Individuals participating in an IRA or employer retirement plan may qualify for special disaster-related distributions. These withdrawals can avoid the 10% early distribution penalty and may allow income to be spread over three years. Taxpayers should contact their plan administrator for detailed guidance and eligibility requirements.

Need Assistance?

If you or your business were impacted by the July 2025 storms, it’s essential to understand how these relief provisions may apply to you. Working with a tax professional can ensure you take advantage of all available deductions and extended filing opportunities while remaining compliant with federal tax law.

For personalized guidance, reach out to JCox CPAs & Advisors, P.C. — we can help you navigate these relief programs, file the appropriate claims, and optimize your tax position following a federally declared disaster.

Understanding Payroll Tax Implications Under the New Tip and Overtime Tax Breaks

The One Big Beautiful Bill Act (OBBBA) introduces significant but temporary changes affecting how tips and overtime income are taxed. While these new tax breaks provide relief for many employees, they also add new layers of complexity for employers, payroll processors, and tax professionals managing compliance.

New Deduction for Tip Income

From 2025 through 2028, qualifying workers can claim a temporary federal income tax deduction of up to $25,000 annually for qualified tip income. The deduction phases out when modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for joint filers.

This deduction applies to individuals in occupations where tips are customary, as determined by the IRS. Surprisingly, the Treasury Department’s proposed list includes not only servers and bartenders but also plumbers, electricians, HVAC specialists, digital content creators, and home movers.

Professionals in industries such as healthcare, law, accounting, finance, and investment management are not eligible for this deduction.

Qualified tips may come from cash, credit card transactions, or tip-sharing programs, and the deduction is available regardless of whether taxpayers itemize deductions.

New Deduction for Overtime Income

The OBBBA also introduces a temporary overtime income deduction of up to $12,500 per year, or $25,000 for joint filers, during the same 2025–2028 period. The phase-out thresholds mirror those of the tip income deduction.

Under Section 7 of the Fair Labor Standards Act (FLSA), “qualified overtime income” refers to the additional half-time portion of overtime pay (the premium above regular wages). This means only the extra 50% portion of time-and-a-half pay qualifies for the deduction.

Excluded from this benefit are:

• Overtime required solely by state laws,

• Overtime premiums set by union or collective bargaining agreements, and

• Any form of tip income.

Payroll Tax Implications and Common Misconceptions

Despite headlines claiming “no tax on tips” or “no tax on overtime,” these provisions are deductions—not income exclusions. As such:

• Federal income tax may still apply to a portion of wages,

• Payroll taxes (Social Security and Medicare) remain fully applicable to qualified tip and overtime income,

• Federal income tax withholding rules are unchanged, and

• State and local taxes may continue to tax all tips and overtime earnings in full.

For employers and payroll processors, the key challenge is maintaining accurate reporting and tracking to ensure workers can claim these deductions correctly.

Reporting Requirements

The tip income deduction applies to both employees and self-employed individuals. Qualified tip amounts must be properly reported using Form W-2, Form 1099-NEC, or another IRS-approved reporting form that’s furnished to both the worker and the IRS.

Similarly, qualified overtime income must be reported to employees on Form W-2 or a comparable information return. Proper reporting ensures compliance and allows employees to substantiate their deductions when filing returns.

IRS Guidance for 2025

The IRS recently confirmed that for tax year 2025, there will be no immediate updates to federal payroll or information reporting forms due to the OBBBA. That means Forms W-2, 1099, 941, and other payroll filings remain unchanged.

According to the IRS, this approach is meant to minimize disruptions during the upcoming tax season while giving employers, payroll processors, and tax professionals time to prepare for implementation in future years.

Next Steps for Employers and Payroll Departments

To prepare for these changes, employers should:

1. Start tracking qualified tips and overtime income immediately.

2. Implement systems to identify and record payments made before July 4, 2025, when the OBBBA was enacted.

3. Establish internal controls for retroactive adjustments; and

4. Monitor future IRS updates, which are expected to include transition relief for 2025 and revised reporting forms for 2026.

Early preparation will ensure compliance and accurate employee reporting under the new rules.

If you need help implementing compliant payroll systems or understanding how these new deductions affect your business, JCox CPAs & Advisors, P.C. can help you navigate the OBBBA’s provisions and ensure your payroll operations remain tax-efficient and audit-ready.

Proven Cash Flow Strategies for Construction Businesses

In today’s unpredictable economy, with fluctuating tariffs, interest rates, and supply chain costs, cash flow management is one of the most critical priorities for construction companies. Whether you are managing multiple projects or preparing for seasonal slowdowns, staying proactive with liquidity planning can determine your company’s long-term stability.

Below are nine practical strategies to help you strengthen cash flow and keep your construction business financially resilient.

1. Maintain Accurate and Ongoing Cash Flow Forecasts

Effective forecasting allows you to predict upcoming cash surpluses and shortfalls. Consider preparing rolling 13-week cash flow forecasts that are continuously updated. This approach helps you adapt to seasonal trends, unexpected project delays, or material cost fluctuations, ensuring your team can make informed financial decisions in real time.

2. Secure Upfront Payments Before Work Begins

Construction projects often require significant outlays before any revenue is received. Negotiate contracts that include a percentage of upfront payment to cover mobilization costs and early expenses. In some cases, it may even be beneficial to arrange for vendors to bill the project owner directly for materials and supplies, which can reduce administrative burdens and preserve your working capital.

3. Streamline and Strengthen Your Invoicing Process

Late or inaccurate invoicing often leads to delayed payments. Implement a formal billing schedule for each contract, clearly outlining payment milestones and acceptable payment methods such as online portals, ACH, or checks. Ensure that invoices are clear, current, and complete, and establish a consistent follow-up process for overdue accounts.

4. Offer Early Payment Discounts When Feasible

If your clients frequently pay late, consider introducing a small early-payment incentive, such as a 1 to 2 percent discount for payment within 10 days. Before implementing, assess how this impacts your profit margin. The trade-off of slightly reduced revenue may be worthwhile when weighed against faster cash inflows and fewer collection challenges.

5. Use Financing Strategically

Paying upfront for equipment, insurance, or other major costs can quickly drain liquidity. Instead, explore financing or leasing options to spread payments over time and maintain adequate working capital. The recently enacted One Big Beautiful Bill Act also expanded deductions for business interest expense, potentially improving your tax position.

6. Strengthen Internal Communication

Cash flow management should be a cross-departmental effort. Encourage collaboration among accounting, operations, estimating, and project management teams. For instance, estimators can flag upcoming revenue changes early, while project managers can ensure billing milestones are met on schedule. Regular meetings keep everyone aligned and minimize surprises.

7. Build a Robust Cash Reserve

Every construction company should maintain a cash reserve for emergencies such as equipment breakdowns, weather disruptions, or unexpected project delays. Aim to hold nine to twelve months of operating expenses in reserve to protect your business from downturns and reduce the need for emergency borrowing.

8. Monitor Key Performance Indicators (KPIs) Regularly

Data-driven decision-making is essential for identifying cash flow risks. Track KPIs like net cash flow and days sales outstanding (DSO) to detect early warning signs. A consistently negative cash flow or DSO exceeding 30 days could indicate issues in collections or project billing cycles that require immediate attention.

9. Partner with Professionals Who Understand Construction Finance

Cash flow challenges are common in the construction industry, but you do not have to face them alone. A qualified CPA firm experienced in construction accounting can help you:

• Develop rolling forecasts

• Refine accounts receivable processes

• Create customized KPI dashboards

• Establish effective banking and financing strategies

At JCox CPAs & Advisors, P.C., we specialize in helping contractors, developers, and construction businesses strengthen financial stability and improve liquidity management. Reach out today to schedule a consultation and ensure your business is building a solid financial foundation for the future.

Government Shutdown Won’t Immediately Impact IRS Operations (09-30-25)

The IRS has released its 2026 Lapsed Appropriations Contingency Plan, and here’s the key takeaway: if a government shutdown begins tomorrow, IRS operations will keep running as usual—at least for the first five days.

Why? The IRS still has funding available from the Inflation Reduction Act, which allows them to cover operations even during a lapse in appropriations. For taxpayers and tax professionals, this means there should be little to no disruption in IRS services as we head toward the critical October 15 filing deadline.

In short, while a government shutdown may cause concern in other areas, IRS functions are expected to remain stable in the immediate term.

Purpose in Every Detail: How Our Gift Box Reflects Our Larger Mission

When we designed our client gift box, we wanted it to be more than a thoughtful gesture; we wanted it to embody the same intentionality that drives our work at JCox CPAs & Advisors, P.C. Every detail, down to the box itself, was chosen with care. The box doubles as a practical storage solution, giving clients a dedicated place to collect receipts, invoices, and important documents as they go about their busy lives.

Our goal was simple: to help clients stay organized and focused on running their businesses, without the added stress of clutter or misplaced paperwork. Too often, valuable time and energy are lost in the search for missing documents when it matters most. By offering a tool as simple as this box, we provide clients with peace of mind, knowing everything they need is in one place. And when tax season or financial planning comes around, this intentional design pays off even more. Clients can simply request a pickup of their documents, confident that their records are already gathered, secure, and ready for review.

The Meaning Behind Each Client Gift

Each item inside the gift box was selected with the purpose of reflecting not only practicality but also the values of our firm:

• JCox Notebook – A place for clients to jot down thoughts, goals, or meeting notes, serving as a reminder that clear planning leads to clear results.

•  JCox Dual USB/USB-C Flash Drive – A modern tool that makes it easy to back up and share files, symbolizing how we bridge traditional accounting with today’s digital demands.

•  JCox Flask Bottle – A reminder to stay refreshed and take care of one’s health, because running a business requires balance as much as it requires effort.

•  JCox Pen & Sticky Notes – Simple, everyday tools to capture ideas and track reminders, reinforcing our belief that no detail is too small when it comes to success.

•  JCox Tote Bag – A practical, reusable way to carry materials, representing our commitment to sustainability and providing clients with resources they can use beyond the office.

Together, these items serve as a toolkit for staying organized, connected, and prepared. They are not just branded tokens; they are a reflection of our values: commitment, engagement, and responsiveness. From keeping receipts in the gift box to saving files on the flash drive or carrying essentials in the tote, each piece was chosen to support our clients in meaningful, practical ways.

One of our clients, Bryce Crawford [1], has found the JCox power bank to be an essential tool. As he travels across states sharing the gospel through street evangelism and social media, Bryce uses the power bank to keep his devices charged and his ministry connected. What may seem like a simple gift serves a greater purpose, supporting his mission to bring the hope and love of Jesus to communities everywhere.

At JCox CPAs & Advisors, P.C., even the smallest details are designed with purpose. Just as our professional services are tailored to help clients succeed, our client gift box is a tangible reminder that we are here to walk alongside them every step of the way.

JCox Partnership Alliance: Gifts as a Reflection of Our Commitment

When we designed our client gift box, we wanted it to represent more than appreciation. It was created with purpose, giving clients practical tools to stay organized, connected, and prepared. In the same way, our broader mission at JCox CPAs & Advisors, P.C. is to design solutions, not just for individuals, but also through the partnerships we build.

Just as we are intentional in financial reporting, tax strategy, and advisory, we are intentional in how we honor and strengthen our partnership alliance. Our gifts represent a small but meaningful way of saying that at JCox, we view every partnership as a true alliance, one designed to create lasting impact for both our collaborators and the clients we serve together.

Over the past two years, we have taken intentional steps to form partnerships that create greater value and peace of mind for our clients. These partnerships extend the same thoughtfulness we put into our gifts into the way we serve on a larger scale.

Here are some of the key initiatives we’ve developed:

• Partnering with local CPA firms to provide specialized expertise for complex client engagements. This allows us to collaborate and ensure that no challenge is too large for our clients to navigate.

• Partnering with law firms through our JCox Legal Concierge [2] initiative, offering clients access to attorneys in areas such as business litigation, business transactions, and family matters.

• Partnering with wealth management firms to help clients plan for the future with confidence, providing holistic guidance on everything from retirement planning to asset protection.

• Partnering with technology leaders to enhance accounting processes, streamline payroll, and strengthen financial reporting. These collaborations allow us to integrate advanced tools directly into our clients’ businesses, improving accuracy, efficiency, and real-time insights.

Together, these partnerships create a one-stop platform for our clients, a place where accounting, advisory, tax, legal, and wealth management needs are not separate hurdles but part of one seamless experience.

At the heart of everything we do is a commitment to serve clients not just with financial expertise, but with tools, partnerships, and experiences that create clarity and peace of mind. From the smallest details to the largest collaborations, we strive to ensure that our work is purposeful, practical, and deeply rooted in values that stand the test of time.

We are grateful for the trust our clients place in us and for the partnerships that make our work possible. At JCox CPAs & Advisors, P.C., every relationship matters. Whether you are a client, a partner, or a future collaborator, we thank you for walking with us as we continue building purposeful solutions, grounded in values that last.

[1] Bryce Crawford is the Founder and CEO of Jesus in the Street, Inc., a 501(c)(3) Christian nonprofit dedicated to sharing the gospel through social media and street evangelism. After a transformative personal experience, Bryce committed his life to bringing the hope, light, and love of Jesus to urban communities and marginalized individuals. As a Gen Z influencer, he leverages digital platforms alongside in-person ministry to connect with diverse audiences, offering encouragement, biblical truth, and practical hope. His unique approach allows him to bridge generational gaps, using both technology and grassroots outreach to advance the mission of Christ. His Instagram @brycecrawford his other social media links: brycecrawfordministries  ilovejesus

[2] Details coming soon.

2025 Tax Filing Season: Get Paid to Switch

At JCox CPAs & Advisors, P.C., we’re making it easier than ever to switch from H&R Block, Jackson Hewitt, or TurboTax — and we’re willing to pay you to do it.

When you join us this tax season, not only will you receive expert, personalized tax preparation, but you’ll also:

Get Paid to Switch

We’ll credit you just for leaving H&R Block, Jackson Hewitt, or TurboTax and bringing your tax needs to JCox CPAs & Advisors, P.C. Your transition will be smooth, simple, and stress-free.

2-Year Price Lock Guarantee

Your tax preparation fee will be locked in for two full years. No surprise price hikes — just consistent, transparent pricing you can count on.

Experienced, Licensed Professionals

Unlike large retail chains or do-it-yourself software, your taxes are prepared by licensed professionals with deep expertise in both individual and business tax strategies. You’ll receive customized planning to maximize deductions, credits, and long-term tax savings.

Why Choose JCox CPAs & Advisors, P.C.?

• Personalized Service – We know your name, your goals, and your story.

• Free Personalized Tax Planning – We go beyond filing to create strategies that save you money now and in the future.

• Free Mid-Year Tax Update & Planning – A proactive review to adjust your tax strategies and keep you on track before year-end.

• Free Year-Round Support – We’re here for your tax questions any time of year, not just during filing season.

How to Get Started

1. Contact Us – Call/Text 404-775-8960 or email ncox@jcoxcpa.org.

2. Provide Your Last Tax Return – Bring or upload your prior-year 2024 and 2023 return from H&R Block, Jackson Hewitt, or TurboTax.

3. Lock in Your Rate & Claim Your Switch Credit – We’ll handle the rest.

Compare 2025 Software Costs for H&R Block, Jackson Hewitt, and TurboTax — and see how much we’ll pay you to switch to us!

One Big Beautiful Bill Signed into Law: A Comprehensive Analysis

On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill (OBBB), following a razor-thin 51–50 Senate vote, where Vice President J.D. Vance cast the decisive tie-breaker. This landmark legislation, which largely reflects the Senate’s version previously approved by the House of Representatives, represents one of the most significant tax and spending reforms enacted in recent years.

The bill’s breadth spans extensions of the Tax Cuts and Jobs Act (TCJA) provisions, targeted new tax breaks, alterations to social safety nets, and increased government spending in defense and immigration enforcement. For tax professionals, policymakers, and taxpayers, a detailed understanding of the bill’s provisions, along with their underpinning Internal Revenue Code (IRC) references, is critical to strategic tax planning and compliance.

I. Extension and Enhancement of TCJA Tax Provisions

Sections 101 and related provisions of the OBBB permanently extend critical components of the TCJA through 2028, preventing the expiration of several popular tax breaks. Key among these are:

• Individual and Corporate Income Tax Rates (IRC § 1): The marginal income tax rates for individuals and corporations remain at the lower levels established by the TCJA. This continuation provides stability and certainty for taxpayers facing planning decisions.

• Qualified Business Income Deduction (IRC § 199A): The 20% pass-through deduction remains in place, benefiting millions of small business owners and professionals organized as sole proprietors, partnerships, S-corporations, or certain trusts and estates.

II. Exclusion of Tips and Overtime from Gross Income (IRC § 61(a))

One of the most transformative provisions is found in Section 102 of the bill, which excludes tips and overtime pay from gross income for eligible taxpayers, modifying the broad gross income definition in IRC § 61(a). This provision marks a historic shift aimed at reducing tax burdens on service and hourly wage workers.

A. IRC § 61(a) Background

Under current tax law, IRC § 61(a) defines gross income as “all income from whatever source derived,” including wages, tips, and other compensation for services. Generally, tips and overtime wages are fully taxable.

B. Eligibility Criteria for the Exclusion

• Income Thresholds: The exclusion applies to taxpayers with modified adjusted gross income (MAGI) under $150,000 for single filers and under $300,000 for married joint filers. For purposes of this provision, MAGI is defined as adjusted gross income (AGI) increased by any amount excluded from gross income under section 911, 931, or 933 of the Internal Revenue Code.

• Employment Sectors: Though not explicitly limited by sector in the bill, this provision principally benefits service industry employees, such as those in hospitality, restaurants, retail, and other tip-earning roles.

• Reporting Requirements: Taxpayers must still report their tips and overtime pay accurately through payroll documentation, consistent with IRS Form W-2 reporting.

• Effective Dates: This exclusion applies for tax years 2025 through 2028, after which standard taxation rules will resume unless further extended by Congress.

C. Implications

This tax relief offers a meaningful increase in take-home pay for millions, helping lower- and middle-income earners without disrupting payroll withholding or Social Security and Medicare tax obligations.

III. Senior Tax Relief: $6,000 Deduction for Age 65+ (Section 103)

The OBBB introduces a new $6,000 deduction targeted at taxpayers aged 65 or older, effective 2025 through 2028. This deduction is codified as an amendment to IRC § 63, which governs itemized and standard deductions.

• Income Thresholds: Applies to taxpayers with MAGI below $75,000 for single filers and $150,000 for married joint filers.

• Purpose: Provides additional tax relief to seniors, many of whom live on fixed incomes and face escalating healthcare and living expenses.

• Temporary Nature: The deduction is scheduled to sunset after 2028 unless Congress acts to extend it.

This deduction supplements existing age-related tax credits and deductions, such as the additional standard deduction amount for seniors under IRC § 63(c)(1)(B).

IV. State and Local Tax (SALT) Deduction Cap Revisions (Section 104)

The SALT deduction cap remains a hot-button issue under IRC § 164(b)(6). The TCJA had limited the SALT deduction to a maximum of $10,000 annually.

A. OBBB Changes

• Raises the SALT deduction cap to $40,000 for taxpayers with incomes below $500,000.

• Caps the increase to 1% annual growth from 2025 to 2029, after which the cap reverts to $10,000.

• Phases out the SALT deduction for taxpayers earning over $500,000, increasing the threshold by 1% annually.

B. Rationale and Impact

This expanded cap primarily benefits taxpayers in high-tax states (California, New York, New Jersey), alleviating some tax burdens but raising concerns about federal revenue impacts.

V. Child Tax Credit (CTC) Enhancements (Section 105)

The Child Tax Credit, under IRC § 24, receives permanent enhancements:

• Credit Amount: Increased to $2,200 per qualifying child, indexed annually for inflation.

• Eligibility: Requires valid Social Security Numbers for both the child and the taxpayer claiming the credit to strengthen anti-fraud measures.

• Income Phaseouts: Maintains higher thresholds to retain benefits for middle-income families.

• Duration: This structure is permanent, ensuring long-term support for families.

VI. Medicaid and SNAP Reforms (Section 106)

Reflecting a policy shift, the OBBB imposes:

• Work Requirements: Medicaid recipients aged 19 to 64 with dependent children over 14 must work or engage in qualifying activities for at least 80 hours per month.

• Funding Reductions: Cuts funding for Medicaid and SNAP programs, with estimates projecting over 10 million Americans could lose health insurance by 2034.

VII. Defense and Immigration Enforcement Funding (Section 107)

The bill appropriates:

• $150 Billion for Defense Modernization: Including funding for the new “Golden Dome” missile defense system.

• $170 Billion for Immigration Enforcement: $45 billion specifically allocated to Immigration and Customs Enforcement (ICE) for detention and related operations.

VIII. Environmental and Energy Policy Rollbacks (Section 108)

The OBBB rolls back several clean energy tax credits and incentives, reversing earlier federal support under IRC §§ 45, 48, and related provisions.

• A new tax is imposed on university endowments exceeding certain thresholds.

• These policy changes may affect renewable energy investments and academic funding structures.

IX. Fiscal Considerations (Section 109)

The bill increases the federal debt ceiling by $5 trillion to accommodate expanded spending.

• The Congressional Budget Office estimates the OBBB will add approximately $2.8 trillion to the national debt over the next decade.

Source: H.R.1 - One Big Beautiful Bill Act

From Startups to Acquisitions: How JCox Supports Young Entrepreneurs

At JCox CPAs & Advisors, P.C., we are passionate about helping individuals and businesses achieve their goals by providing proactive advisory services rooted in strategy, trust, and long-term planning.

One of our recent success stories involves an inspiring young entrepreneur who started his own lawn care company at just 18 years old. After partnering with JCox a year ago, he worked closely with our team to implement financial strategies and establish a disciplined budget. Today, we are guiding him through the acquisition of an established $200,000 revenue-producing lawn care company, helping him scale and diversify his growing business.

This same driven client also launched a new Section 8 Rental Company with our firm’s support. JCox CPAs & Advisors provided strategic assistance in structuring the business, developing a cash flow strategy, and securing loan approval. As a result, this young entrepreneur is now generating additional pass-through rental income while helping provide affordable housing solutions in the community.

These stories reflect the core mission of our firm. We focus on delivering proactive advisory services that align with each client’s individual and business objectives. Whether advising on financial planning, tax strategies, business growth, or wealth building, our team is dedicated to helping clients turn ambition into sustainable success.

Our firm brings immense experience across a wide range of advisory areas, including Acquisitions and Mergers Transactions, Start-Ups, business structuring, tax optimization, estate planning, and many other specialized services. We proudly serve three generations of clients: Baby Boomers, Millennials, and Generation Z. We understand that every generation brings its own goals, challenges, and opportunities, and we tailor our services to meet their unique needs.

If you are ready to grow your business, optimize your finances, or take the next step in your entrepreneurial journey, we would love to partner with you. Contact JCox CPAs & Advisors today and let us help you turn your vision into reality.

Mid-Year Tax Planning Guide 2025: Why Planning Beats Panic

As we approach the second half of 2025, the importance of tax planning for small to middle-class families has never been clearer. Recent legislative changes, inflation adjustments, and IRS enforcement trends underscore the value of early, strategic action. At JCox CPAs & Advisors, P.C., we believe proactive tax planning should be the norm, not the exception.

Why Be Proactive With Tax Planning?

Many taxpayers are familiar with tax preparation: the annual ritual of entering figures into software or handing paperwork to a preparer, then hoping for a refund or bracing for a bill. This process, while necessary, is reactive.

Tax planning is different. It's forward-looking. Rather than waiting until the end of the year, tax planning involves consistently evaluating your income, deductions, and credits throughout the year to ensure you're making smart decisions along the way. Whether you explore strategies on your own or work with a qualified tax advisor, planning in advance reduces surprises, identifies savings, and improves overall financial health.

Exclusive Offer: Tax Return Review + Free Mid-Year Planning

Did you file your 2024 tax return yourself or through another provider? JCox CPAs & Advisors is offering:

• A detailed review of your 2024 tax return

• A 40% discount on any necessary amended return

• A complimentary mid-year 2025 tax planning session

We’ll help determine whether adjustments are needed and build a custom plan for the rest of the year, so you’re not caught off guard come filing season.

Key Legislative Changes and Relevant IRC Sections

1. Standard Deduction Increase – IRC §63(c)

The standard deduction for 2025 has increased to $30,000 for married couples filing jointly and $15,000 for single filers. This simplifies filing and reduces taxable income for many families, potentially eliminating the need to itemize deductions.

2. Updated Child Tax Credit – IRC §24

The Child Tax Credit has increased to $2,500 per qualifying child. However, income thresholds have been updated, and eligibility is now subject to tighter rules. A mid-year review helps determine whether you're maximizing your credit opportunities.

3. Raised SALT Deduction Cap – IRC §164(b)(6)

Taxpayers with adjusted gross income under $500,000 can now deduct up to $40,000 in state and local taxes. This may revive itemized deductions for those in high-tax states, especially when paired with mortgage interest or charitable contributions.

4. Tip and Overtime Income Relief – IRC §62(a)

New legislation now allows deductions for reported tip income and qualified overtime under above-the-line adjustments. This change benefits hourly and service industry workers who often face higher effective tax rates on variable income.

5. Estimated Payments and Withholding – IRC §6654 and §3402

Now is the time to review your W-4 or calculate estimated taxes to avoid underpayment penalties. Mid-year is ideal for making course corrections based on expected year-end income.

6. Retirement Planning Opportunities – IRC §219 and §414(v)

Contributions to IRAs and 401(k)s can reduce taxable income while securing your future. Catch-up contributions for taxpayers aged 50+ allow additional savings. Planning ahead helps ensure contribution deadlines aren't missed.

7. Business Owners: Optimize Now – IRC §179 and §199A

Self-employed individuals and pass-through entities should evaluate:

• Equipment purchases for IRC §179 deductions

• Compensation and qualified income for the 20% QBI deduction under IRC §199A

These choices can significantly reduce your overall tax bill, but require proper planning before year-end.

8. Estate and Gift Strategies – IRC §2503 and §2010

Annual gift exclusions remain at $18,000 per recipient. The elevated lifetime exemption under IRC §2010 remains available through 2025, but is set to sunset. Planning now ensures your wealth transfer strategy is optimized before potential changes take effect.

Final Thoughts: Plan With Purpose by Connecting With Us Today

Tax planning is not just about minimizing taxes—it’s about building financial resilience. The sooner you identify opportunities, the more leverage you have to act. Let’s make 2025 the year you lead your finances, not follow your filing.

Connect with JCox CPAs & Advisors today to get started with your custom mid-year strategy.

Schedule your meeting here

We’re Back and Ready to Serve You!

At JCox CPAs & Advisors, we’re thrilled to announce that our IT infrastructure upgrades are now complete! After a brief closure for improvements, our team — including staff and contractors — will officially resume regular operations on April 28, 2025, at 8:00 AM.

Over the past two weeks, we’ve made significant investments to ensure your experience with us is smarter, faster, and more secure. Here's a quick recap of what’s new:

• Brand-New IT Infrastructure: We’ve installed over $30,000 worth of new servers and computers, dramatically improving the speed, security, and reliability of our operations.

• New Secure Payment Platform: Our new system is now live! Please remember:

  • Do not use the old payment platforms — they are being phased out.

  • Enjoy faster, safer options like ACH, debit/credit card payments, auto-pay features, and real-time invoicing.

• Secure Client Portal: Our portal remained active during the upgrades and continues to be available for secure document uploads and communication.

If you experience any technical issues or have questions as we fully transition into our new systems, please reach out to us at ncox@jcoxcpa.org.

We sincerely appreciate your patience and support during this upgrade period. These improvements are part of our continued commitment to deliver world-class CPA services that are efficient, secure, and tailored to your needs.

We look forward to serving you better than ever!

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JCox CPAs & Advisors

Firm IT Infrastructure Upgrade Notice

At JCox CPAs & Advisors, we’re committed to delivering smarter, faster, and more secure service to our clients. That’s why we’re excited to announce that during our firm closure from April 16, 2025, through April 28, 2025, we are rolling out major upgrades to our IT infrastructure and client-facing systems.

New IT Infrastructure + System Upgrades
We’ve invested over $30,000 in brand-new servers and computers, improving the speed, reliability, and security of our operations. This investment ensures we remain efficient, protected, and equipped to meet your needs with the highest standards of service.

New Payment Platform Is Live
Along with these upgrades, we’ve launched a new and secure client payment platform. Effective immediately:

> Clients should no longer utilize any of the old payment systems that may still appear active — they are being phased out.
> Our new platform offers fast, secure, and user-friendly payment features including ACH, debit/credit options, auto-pay, and real-time invoicing.

Secure Client Portal Access Remains Active
While our office is closed, clients may continue to access our secure client portal as normal for document uploads and viewing. If you experience any issues accessing the portal or require assistance during this transition:

Please email us immediately at ncox@jcoxcpa.org, and we’ll ensure your request is addressed promptly.

We thank you for your continued trust and patience during this scheduled downtime. These enhancements are all part of our long-term commitment to providing world-class CPA services that are efficient, secure, and tailored to your business and personal needs.

—
JCox CPAs & Advisors, P.C.
Committed. Engaged. Responsive.

How Stepped-Up Basis Reduces Inheritance Taxes

When families pass down wealth, whether through real estate, investments, or business interests, few things are more important than understanding how taxes will apply. And here's the good news: the IRS gives heirs a major break through what's called the stepped-up basis rule.

At JCox CPAs & Advisors, we specialize in strategies that preserve your legacy and keep taxes in check. Let’s walk through what a stepped-up basis is, how it works, and why it could save your family thousands—maybe even hundreds of thousands—in capital gains tax.

What Is a Stepped-Up Basis?

Under IRC §1014, when you inherit an asset, the IRS allows you to "step up" the basis (i.e., the starting value used for calculating taxes) to the fair market value (FMV) on the date of death.

That means if your loved one bought a property for $200,000, worth $800,000 when they pass away, your new basis is $800,000. So, if you later sell it for $850,000, you only pay tax on the $50,000 gain, not the $650,000 gain.

This is huge for avoiding unnecessary capital gains tax.

Why It Matters Now More Than Ever

In 2025, the federal estate and gift tax exemption is set at $13.99 million (IRC §2010(c)). While that covers most estates, capital gains taxes still apply to many inherited assets when they’re sold.

Without proper planning, heirs can get hit hard.

A Real-World Example From JCox

Let’s look at how this works in action:

One of our long-time clients at JCox CPAs Advisors, P.C., purchased a commercial property in Grayson, GA, in 1999 for $350,000. By the time they passed away in 2024, the property had appreciated by $1.2 million.

The heir—his son—sold the property in 2026 for $1.35 million.

Thanks to the stepped-up basis, he only paid tax on the $150,000 gain ($1.35M - $1.2M), not the full $1 million gain from the original cost basis.
Result: He paid around $30,000 in capital gains tax instead of $200,000. That’s a $170,000 tax savings.

What Assets Qualify?

The stepped-up basis applies to a variety of inherited property, including:

• Real estate

• Stocks and mutual funds

• Business interests

• Art collectibles

• Bank and investment accounts

However, retirement accounts like IRAs or 401(k)s are excluded under IRC §1014(c). These are taxed as ordinary income to the beneficiary upon withdrawal.

What If the Asset Drops in Value?

Here’s another twist: if the inherited asset lost value before the date of death, the step-up works in your favor, too. The basis is adjusted downward to FMV, so if the value later rises and you sell, the gain is only calculated from that adjusted point.

That said, if it keeps falling, you might even have a capital loss, which can help offset gains from other investments.

Final Thoughts: Legacy Protection That’s Smart and Strategic

At JCox CPAs & Advisors, P.C., we believe your legacy should be passed down, not taxed away. Whether you’re updating your estate plan or navigating a recent inheritance, knowing how the stepped-up basis works can protect your wealth for the next generation.

Office Closure April 16–25, 2025

Valued Clients,

We are grateful for your continued trust and partnership throughout another successful tax season. To provide our dedicated staff and contractors with a much-needed rest following the busy season, please be advised that our office will be closed from Wednesday, April 16, 2025, through Friday, April 28, 2025.

We will reopen and resume normal operations on Monday, April 28, 2025. During this period, responses to emails and messages may be delayed until we return.

Thank you for your understanding and continued support. We look forward to serving you refreshed and energized upon our return.

JCox Extends Office Hours for Tax Season!

At JCox CPAs & Advisors, P.C., we are committed to providing top-tier service during tax season. Due to an increase in the volume of tax preparation and advisory requests, we are extending our office hours—effective immediately through April 15, 2025, at 5:00 PM—to ensure every client receives the timely and professional attention they deserve.

Starting immediately, our office will be open during the following extended hours:

Monday – Saturday: 8:00 AM – 8:00 PM
Sunday: 8:00 AM – 3:00 PM

This temporary extension allows us to better accommodate your busy schedule while ensuring we meet all filing deadlines efficiently.

For questions or to schedule an appointment, call us at (404) 775-8960 or email ncox@jcoxcpa.org.

Thank you for trusting JCox CPAs & Advisors, P.C. with your tax and financial needs—we look forward to serving you this tax season!

Navigating BOI Compliance: Key Deadlines and Updates for Small Businesses in 2025

Corporate Transparency Act: New Beneficial Ownership Reporting Requirements for Small Businesses

The Corporate Transparency Act (CTA), enacted in 2021, introduces significant changes to ownership reporting for small businesses in the United States. Designed to combat illicit financial activities, the CTA mandates that many corporations, limited liability companies (LLCs), and similar entities disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Recent Legal Developments

Initially, the CTA's enforcement faced legal challenges. In December 2024, a federal judge in Texas issued an injunction, temporarily halting the law's implementation. However, on January 23, 2025, the U.S. Supreme Court lifted this injunction, allowing the CTA's provisions to take effect. Following this decision, FinCEN announced that the reporting requirements are back in effect, setting a new compliance deadline of March 21, 2025, for most companies. Additionally, businesses impacted by Hurricanes Milton, Helen, Debby, Beryl, or Francine have been granted an extended deadline of April 23, 2025, to submit their Beneficial Ownership Information (BOI) reports.

Who Needs to Report?

The CTA's reporting obligations apply to a wide range of entities, including:

• Domestic Reporting Companies: Corporations, LLCs, and other entities created by filing a document with a secretary of state or similar office under the laws of a state or Indian tribe.

• Foreign Reporting Companies: Entities formed under the laws of a foreign country that are registered to do business in the United States.

Certain entities are exempt from reporting, such as publicly traded companies, banks, and tax-exempt organizations. It's essential for businesses to assess their status to determine if they fall under the reporting requirements.

What Information Must Be Reported?

For each beneficial owner, reporting companies must provide:

• Full Legal Name

• Date of Birth

• Residential or Business Address

• Unique Identifying Number: From an acceptable identification document (e.g., non-expired U.S. driver's license, passport) along with an image of the document.

Additionally, companies must report information about themselves, including legal name, any trade names, business address, and jurisdiction of formation or registration. (fincen.gov)

How to Submit Reports

Reports are to be filed electronically through FinCEN's secure filing system. The system is designed to be user-friendly, and there is no fee for submitting reports. FinCEN provides a Small Entity Compliance Guide to assist businesses in understanding and fulfilling their reporting obligations.

Implications for Small Businesses

Non-compliance with the CTA can result in significant penalties, including fines and potential criminal charges. It's crucial for small business owners to:

• Determine Applicability: Assess whether their business structure requires them to report under the CTA.

• Gather Necessary Information: Collect the required details for all beneficial owners.

• Meet the Deadline: Ensure that reports are submitted by the deadline of March 21, 2025, deadline. For those impacted by Hurricanes Milton, Helen, Debby, Beryl, or Francine, the extended deadline is April 23, 2025

Tax Filing & Refund Dates: What to Expect

At JCox CPAs & Advisors, P.C., we pride ourselves on delivering efficient and accurate tax preparation services.

Our current turnaround times are as follows:

• Individual Income Tax Returns: 3 days

• Partnerships, C-Corporations, and S-Corporations: 4 days

These timeframes encompass thorough review and quality control processes, ensuring that your tax filings are both prompt and precise.

Understanding the timeline for receiving your tax refund is crucial for financial planning. The IRS typically issues refunds within 10 to 21 days after accepting an electronically filed return. However, several factors can influence this timeline, including the date of filing, the method of filing (e-file or paper), and the specific credits claimed.

To provide a clearer picture, here's an estimated timeline for 2024 tax refunds based on the IRS acceptance date of your e-filed return:

Note: Returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) may experience delays until March to verify credits. Filing during peak season (late March through April 15) can also result in slightly longer waits.

TAX TIME!

Tax Filing Season officially begins on January 27th, 2025, when the IRS will start accepting returns. Whether you’re an individual or a business owner, ensuring your taxes are filed accurately and on time is crucial to avoid penalties and maximize potential refunds. At JCox CPAs & Advisors, P.C., we’re here to make your tax season stress-free and successful.

Why Tax Filing Matters

Tax season is a critical time of year for everyone. Filing your taxes properly ensures that you remain compliant with federal and state laws while also giving you the opportunity to uncover valuable deductions and credits that could save you money. However, navigating tax laws can be overwhelming and complex—especially with the ever-changing regulations.

This is where our expertise comes in. At JCox CPAs & Advisors, we bring years of professional experience and personalized service to the table, helping you make the most of your financial situation. Our licensed team works diligently to ensure accuracy and efficiency, leaving no deduction or credit overlooked.

How JCox Can Help You This Tax Season

At JCox CPAs & Advisors, we offer a full range of tax services to meet your unique needs. Here’s what you can expect:

1. Expert Tax Preparation: From individuals to businesses, we handle tax filings of all types and complexities. Our team stays up to date on the latest tax laws and regulations to ensure compliance and accuracy.

2. Strategic Tax Planning: Don’t just prepare your taxes—plan for them. We offer proactive tax planning strategies to help you minimize your tax liability and maximize your savings for the future.

3. Personalized Support: Every client is unique, and so is our approach. We’ll take the time to understand your financial situation and goals, providing tailored solutions that work for you.

4. Year-Round Assistance: Tax season might be seasonal, but our support is not. Whether you need help with IRS inquiries, audits, or financial planning, we’re here for you all year long.

Why Choose JCox CPAs & Advisors?

Choosing the right CPA firm can make all the difference during tax season. At JCox, we pride ourselves on being committed, engaged, and responsive to every client’s needs. Our professional team works with precision and care to ensure that your taxes are done right—the first time.

Additionally, we’re offering a 30% discount on all services for the first year to new clients who make the switch to JCox. Don’t wait until the last minute to get started; the earlier you begin, the smoother the process will be.

Get Started Today

The clock is ticking, and tax deadlines will be here before you know it. Don’t let procrastination lead to unnecessary stress or missed opportunities. Schedule your appointment with JCox CPAs & Advisors, P.C. today, and let us take the worry out of tax season by visiting us at jcoxcpa.org!

Contact us at ncox@jcoxcpa.org or call us at 404-775-8960 to get started.

Get Prepared for Tax Filing 2024!

Here are some essential steps to help you get prepared:

1. Gather Your Documents:

• W-2s, 1099s, or other income statements

• Business expense records if you're self-employed

• Mortgage interest statements

• Proof of charitable donations

• Health insurance documentation

2. Review Last Year's Return:

• Look over your prior year’s tax return to ensure you don't miss any carryovers (e.g., deductions or credits) and to identify any possible changes.

3. Plan for Deductions & Credits:

• Don't forget about possible deductions for things like student loans, retirement contributions, or education expenses.

• Consider tax credits like the Child Tax Credit or Earned Income Tax Credit.

4. Track Any Life Changes:

• Changes like getting married, having a baby, or buying a home could affect your tax situation. Make sure you account for these.

5. Set Up Your Tax Payment Plan:

• Estimate if you will owe taxes and start setting aside money now, or adjust your withholdings to avoid surprises.

6. Consider Professional Help:

• Tax laws are always changing, and getting professional advice ensures you don’t miss out on any savings or deductions you may qualify for.

Don't wait until the last minute! Plan ahead to ensure a smooth and stress-free tax season. If you need help getting started, reach out to us at JCox CPAs & Advisors! We’re here to make your tax filing easy and efficient.

Comprehensive Tax Strategies for Traders in Securities

At JCox CPAs & Advisors, P.C., we specialize in helping traders navigate the complexities of the tax code. Whether you're an investor, trader, or dealer, understanding the nuances of IRS rules and leveraging available tax strategies can make a significant impact on your bottom line. Here, we provide a detailed look at tax rules for traders and how to maximize opportunities using provisions from the Internal Revenue Code (IRC) and IRS Topic No. 429.

Understanding the IRS Classifications: Investor, Dealer, Trader

The IRS categorizes market participants into three groups—investors, dealers, and traders. These classifications determine the tax treatment of income, losses, and expenses.

1. Investors

Investors typically buy and hold securities for dividends, interest, or capital appreciation. By default, most individuals fall into this category.

• Tax Rules:

  • Capital gains are taxed at short-term or long-term rates depending on holding periods.

  • Losses can offset gains and up to $3,000 of ordinary income annually (IRC §1211(b)).

  • The wash sale rule (§1091) may disallow certain losses if identical securities are repurchased within 30 days.

  • Expenses like commissions and acquisition costs are not deductible but must adjust the cost basis.

• Reporting: Use Schedule D (Form 1040) and Form 8949 for capital gains and losses.

2. Dealers in Securities

Dealers engage in marketing securities to customers in the ordinary course of business and may maintain an inventory.

• Key Features:

  • Dealers report income using mark-to-market accounting as required under IRC §475(c)(1).

  • Securities held for personal gain must be clearly distinguished from business securities.

• Reporting: Dealers must adhere to stricter record-keeping and inventory reporting standards.

3. Traders in Securities

Traders buy and sell securities for their own account with the intent to profit from market fluctuations. Unlike dealers, they do not have customers or maintain an inventory.

• Eligibility for Trader Tax Status (TTS):

  • Substantial Activity: Frequent, consistent trades.

  • Short Holding Periods: Primarily daily market fluctuations, not long-term gains.

  • Continuity and Regularity: Dedication of significant time and effort to trading.

  • Documentation: Detailed records of trades and intent.

• Tax Benefits:

  • Ordinary business expense deductions on Schedule C (Form 1040) or a business tax return for entities.

  • Exemption from self-employment tax on trading gains.

• Limitations: Gains and losses from trading do not qualify as self-employment income.

Exploring the Mark-to-Market (MTM) Election

The MTM election, under IRC §475(f), provides an alternate accounting method for traders who qualify for TTS. It offers significant tax advantages but requires careful planning and adherence to IRS rules.

Key Advantages:

1. Ordinary Income Treatment: Gains and losses are treated as ordinary, bypassing capital loss limitations and wash sale rules (§475(d)(1)).

2. Expanded Loss Deductions: Losses can offset any type of income without a $3,000 limit.

3. Streamlined Reporting: Gains and losses are reported on Part II of Form 4797, Sales of Business Property.

MTM Election Process:

• File a written statement electing MTM by the original due date (excluding extensions) of the prior year's return.

• Include details like the effective tax year and applicable trade or business.

• If approved, submit Form 3115 to change your accounting method per Revenue Procedure 2024-23.

Revoking the Election:

• Requires filing a notification and a new Form 3115.

• Strict deadlines apply, and revocations within five years face additional scrutiny (Revenue Procedure 2015-13).

Practical Guidelines for Traders

Qualifying for TTS:

To demonstrate eligibility for TTS, consider these factors:

• Frequency and dollar volume of trades.

• Typical holding periods (primarily short-term).

• Time and effort devoted to trading activities.

• Intent to generate income through trading, not dividends or long-term appreciation.

Record-Keeping Essentials:

• Maintain separate accounts for trading and investment securities.

• Keep detailed trade logs and records of expenses to substantiate deductions and elections.

Effective Tax Planning:

1. Assess Trading Activity: Evaluate whether your volume and patterns meet TTS thresholds.

2. Consult Early for Elections: Seek professional advice to make timely MTM elections.

3. Optimize Entity Structures: Consider whether forming an S-Corp or LLC could further reduce taxes.

4. Leverage Expert Guidance: Partner with CPAs experienced in IRC §§475, 1091, and related regulations.

Why Choose JCox CPAs & Advisors, P.C.?

Our expertise in trader-specific tax rules ensures you make the most of IRS provisions while avoiding common pitfalls. Whether you're navigating TTS qualifications, implementing an MTM election, or planning for year-end tax efficiency, our tailored approach positions you for long-term success.

Contact JCox CPAs & Advisors, P.C., today to schedule a consultation and take control of your tax strategy!