IRS Issues Guidance on Permanent 100% Bonus Depreciation for 2025 Tax Year
The Treasury Department and the IRS have released interim guidance regarding the additional first-year depreciation deduction under IRC Section 168(k). This guidance reflects changes enacted by the One Big Beautiful Bill Act (OBBBA), which establishes permanent 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. OBBBA also expands the definition of qualified property to include certain qualified sound recording productions that commence in taxable years ending after July 4, 2025. The notice outlines rules for determining eligibility for the additional first-year depreciation deduction, as well as the amount allowable under OBBBA.
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Former Officials Highlight Challenges for 2025 Tax Season
A panel of former IRS and Department of Justice (DOJ) officials cautioned that the upcoming tax filing season may be particularly challenging due to significant workforce reductions and operational disruptions. The panel emphasized that the rapid decline in IRS staffing levels poses a serious concern, noting the direct impact staffing has on the agency’s ability to deliver effective taxpayer services. To help address these challenges, the officials identified emerging technologies, including artificial intelligence and automation, as important tools for improving efficiency. However, they stressed that meaningful modernization efforts require stable and predictable funding. The panel also discussed a recent DOJ reorganization that resulted in the departure of approximately 30% of its experienced tax professionals, increasing the burden on remaining staff and highlighting the critical role a fully functioning IRS will play in future tax enforcement efforts.
IRS to Phase Out Portal for Clean Vehicle Credits in February 2026
The IRS has announced that it will begin phasing out the Energy Credits Online (ECO) portal for certain 2024 clean vehicle transactions starting February 1, 2026. As of that date, dealers will no longer be able to submit edits, returns, or cancellation requests for 2024 sales through the portal. In addition, beginning March 1, 2026, the ECO portal will no longer accept late time-of-sale reports for 2024 transactions. The IRS is encouraging dealers to submit any outstanding reports or corrections as soon as possible to avoid delays that could affect customers’ ability to claim clean vehicle credits on their tax returns.
The IRS also reminded dealers of their obligation to repay any advance payments received for Clean Vehicle Credits when a time-of-sale report is returned or canceled. In such cases, the IRS will issue an invoice and access code through Pay.gov to the email address associated with the dealer’s advance payment registration. Payments will not be automatically withdrawn, and dealers are expected to remit repayment within 30 days of receiving the invoice.
IRS Proposes Backup Withholding Rules for Third-Party Network Transactions
The IRS has released proposed regulations addressing backup withholding requirements for payments made through third-party network transactions. The proposed rules implement changes enacted by the 2025 Act (formerly known as the One Big Beautiful Bill or OBBB), which restored the Form 1099-K reporting thresholds to payments exceeding $20,000 and more than 200 transactions. The regulations clarify that backup withholding applies to a payee only after both thresholds are met within a calendar year. Once triggered, withholding applies to the full amount of the transaction that exceeds the threshold, as well as all subsequent payments to that payee for the remainder of the year. The de minimis exception does not apply if the payee received reportable payments in the prior calendar year. In addition, Notices 2023-10, 2023-74, and 2024-85 are rendered obsolete. The proposed regulations are scheduled to apply to payments made in calendar years beginning after December 31, 2024.
