As we enter 2025, tax practitioners are contending with a “perfect storm” of new and evolving reporting obligations that could disrupt even the most organized firms.
In a recent Federal Tax Updates podcast, industry experts Roger Harris, EA, and Annie Schwab, CPA, addressed these converging challenges—ranging from changes to 1099-K reporting thresholds to shifting beneficial ownership reporting requirements and revised identity protection measures. Their message was clear: practitioners should prepare for substantial bottlenecks during tax season and increased liability exposure.
Identity Protection Measures: New Tools for Managing Client Returns
The IRS introduced significant updates to its Identity Protection PIN (IP PIN) program, creating both benefits and responsibilities for tax practitioners. One key change involves dependent claims, historically a common source of delays and complications.
Under the new approach, the IRS will accept duplicate IP PINs for dependents, streamlining situations where multiple taxpayers claim the same dependent. “If the primary taxpayer has an IP PIN, the IRS will send them the refund and then let the taxpayers hash it out,” explains Roger Harris. This eliminates the need for paper filing in many scenarios, potentially cutting down on administrative tasks.
Another major development is integrating IP PIN access with online accounts. As Roger notes, “You can just go into your online account and get that number,” alleviating past frustrations with lost or delayed PIN letters.
While IP PINs remain optional for most taxpayers, they are increasingly recommended as a best practice. According to Annie, “It’s very easy to get, it does not take long, and it’s free. There’s no harm in doing it.” Many firms are proactively including IP PIN details in their end-of-year communications and adding a PIN verification step to their seasonal checklists.
Navigating the Phased Implementation of 1099-K Thresholds
The IRS’s phased approach to 1099-K reporting thresholds requires practitioners to adjust their procedures and client outreach. In 2024, the threshold stands at $5,000. It will drop to $2,500 in 2025 and then to $600 in 2026—requiring repeated process updates over the next few years.
Practitioners should note that voluntary reporting at lower thresholds is still permitted, which could lead to early issuance of 1099-K forms. “Companies can still issue 1099-Ks. Some people may already be set up to do it,” Roger points out. Firms must be prepared to handle these forms regardless of the official threshold.
Although these updated thresholds don’t alter underlying tax liabilities, they do introduce new documentation requirements. “These items have always been taxable based on the law,” Roger explains. “It’s just that now there’s a form to document the amount.” This change offers both a challenge and an opportunity for client education.
To guide practitioners, the IRS published FAQs outlining best practices, including line-by-line guidance. Proactive communication is key. “This is not a form everyone is used to receiving,” Annie says. “Encourage your clients to keep those forms and provide them to you.” Many firms are already revising their tax organizers and year-end letters to address these new reporting rules.
Beneficial Ownership Reporting: Preparing Amid Uncertainty
Beneficial ownership reporting requirements are in a state of flux due to a nationwide court injunction. Despite the December 2024 Texas court ruling temporarily blocking enforcement, appeals from the Department of Justice, Treasury, and FinCEN could quickly change the playing field.
“We’ve been telling our offices to continue gathering the information necessary to file the BOI form,” advises Roger. “But you’re under no obligation to file that form today. We don’t know how much time we’ll have actually to file if this injunction gets lifted.” Practitioners must balance readiness with patience, recognizing that delayed preparation could become problematic if the courts suddenly reinstate filing requirements.
Only about 25% of businesses complied before the injunction, so a reinstatement could create significant time pressure. Potential legislative relief remains uncertain, and relying on future government funding bills to extend deadlines is a risky strategy. The best approach is proactive: collect necessary information, devise a filing plan, and maintain clear client communication about possible requirements.
Preparing for Success in 2025
Forward-thinking practitioners are already adapting their client onboarding processes, updating tax organizers, and establishing protocols to ensure smooth implementation of the expanded IP PIN procedures, phased 1099-K thresholds, and beneficial ownership reporting.
For detailed guidance on these updates and practical strategies to manage related risks, listen to the full Federal Tax Updates podcast. Hear directly from Roger and Annie as they share insights for navigating the challenges of 2025 and beyond.