Beta Test Success, Fixing Mistakes, Expanding A SALT Workaround
Another year of Direct File would tell the IRS—and taxpayers—a lot. TPC’s Janet Holtzblatt reviews the IRS development and rollout of Direct File, the agency’s own online tax filing software piloted in 12 states in the 2024 tax season. Her take: “This year was about beta-testing, and Direct File appeared to pass. Another year will tell us more… the IRS should resume Direct File at the start of the 2025 filing season, expand the number of eligible taxpayers, and initiate rigorous evaluations of the user experience and program costs.”
Senate bill would allow clergy to change their mind about not paying self-employment taxes. Some pastors may have inadvertently opted out of Social Security coverage by exempting their ministerial earnings from self-employment taxes early on in their ministries. The Clergy Act would allow those clergy to reverse their exemption and offer a re-enrollment window to opt back into Social Security. Clergy members would have to pay Social Security taxes for ten years in order to receive benefits. The bill would also direct the IRS to develop a plan to notify clergy of the re-enrollment option. TaxNotes reports (paywall) the bill is quickly gaining public support
California Assembly to vote on Senate-passed SALT workaround. The state’s Senate passed SB 1501 last week. The legislation, now under Assembly consideration, would create an alternative to the prepay requirement for passthrough entities that use the state’s workaround for the federal cap on state and local tax (SALT) deductions. Under the bill, entities can pay their taxes after the prepayment deadline rather than face disqualification, but they would be required to pay a penalty. The bill’s sponsor says the workaround has so far allowed passthrough entities to make $20 billion in income tax payments annually.
Portland, Oregon, voters to decide next month on local gas tax renewal. The 10-cent-per-gallon tax has generated almost $150 million for the Portland Bureau of Transportation over the past ten years. If renewed for four more years, Portland drivers who use gas-powered vehicles would pay about $2.50 per month, generating just over $70 million for street maintenance and safety projects.
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