Stephen Merritt, CPA, PC  |  Certified Public Accountants  |  (757) 420-5778
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What’s Inside

March, 2025

March, 17:

– Due date for partnership and S corporation tax returns (Forms 1065, 1120S)

Reminders:

– Daylight savings time begins Sunday, March 9

With a tax code that’s now up to 6,871 pages, you may not be too shocked to learn that the IRS has more than 1,000 tax forms to help you report every conceivable type of income you may earn.

With so many tax forms to keep track of, it’s easy to lose track of one every now and then. To lend you a helping hand this tax season, this newsletter edition goes through several pieces of tax return information that are easy to miss.

Also read about how tax laws scheduled to expire at the end of 2025 may leave you with a higher tax bill, how banks try to avoid paying loyal customers top interest rates, and scammers that are upping their game with the help of AI.

Please pass this information on to anyone that may find it useful and call if you have any questions or concerns.

In this issue:

• Tax Return Information That’s Easy to Miss
• Tax Uncertainty Requires Preparedness
• Scammers Up Their Game With AI

Tax Return Information That’s Easy to Miss

To ensure your tax return is filed quickly and without error, double-check this list of commonly-overlooked items. These little pesks are among the commonly missed items reported as hold ups to filing individual tax returns:

• Missing forms. Using last year’s tax return as a checklist, double check that all your W-2s and 1099s are received and applied to your tax return. Missing items here will be caught by the IRS mismatch program, creating an unwanted correspondence audit. If you are missing a form, contact the company responsible for issuing them as soon as possible.
• Dependent information. If you added a new dependent in 2024, provide the name, Social Security number and birth date to have them added to your tax return. If you have a dependent that shares custody with someone else, discuss the plan for who is going to claim this person. Your tax return cannot be filed if there is a conflict in this area.
• Cost basis information. If you sold any assets (typically investments or real estate), you need to know how much it cost you to determine your taxable capital gain or loss. Check your investment statements to ensure that your broker includes the required information and that you believe it is accurate. Sometimes it’s difficult to find this information on the Form 1099-B summary, but it might be listed later in the statement details.
• Schedule K-1s. As an owner of a partnership or S corporation, you will need to receive a Form K-1 that reports your share of the profit or loss from the business activity. When you receive your K-1, pay special attention to box 17 (code V) for S corporations and box 20 (code Z) for partnerships. This is where information is included for the Qualified Business Income Deduction.
• Digital asset transactions. If you are buying or selling cryptocurrency or other digital assets, provide details to support the cost basis and sales price of each transaction.
• Forms or documents with no explanation. If you receive a tax form, but have no explanation for the form, questions will arise. For instance, if you receive a retirement account distribution form, it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.
• Missing signatures. Both you and your spouse need to review and sign the e-file approval forms before the tax return can be filed. The sooner you review and approve your tax return, the sooner it can be filed.By knowing these commonly missed pieces of information, hopefully your tax filing experience will be a smooth one.

Tax Uncertainty Requires Preparedness

You will soon have to confront a higher tax bill if Congress doesn’t extend many credits, deductions, and lower tax rates that are set to expire at the end of this year. Here’s who should be considering ongoing tax planning sessions as this uncertainty plays out in Congress and the Executive office:

• Your income will increase in 2025. Maybe you are looking to move jobs or obtain a promotion. This should trigger a planning session as marginal rates currently max out at 37% at a fairly high income, but that could all change beginning in 2026.
• You were an itemized deductions taxpayer. A number of taxpayers may begin itemizing deductions again in 2026 if the rules expire as they are currently scheduled to. This means planning your expenses in light of this impending roll back of rules will take some thought. This is especially true if you have high state income and real estate taxes.
• You have a large estate. The current estate exemption ($13.99 million in 2025 for single taxpayers, $27.98 million for married) drops back to $5 million in 2026. While this reset amount will be adjusted for inflation going forward, gifting money or other assets can help reduce the size of your taxable estate while taking advantage of this historically high exemption amount.
• You have investments. Review your investments to be as tax efficient as possible. Municipal bonds and tax-deferred plans like 401(k)s and IRAs may also become more attractive after 2025. Also consider tax-loss harvesting strategies to offset future gains. Another idea: if your tax rate will be lower in 2025 compared to 2026, consider selling appreciated assets in 2025 at a lower tax rate, then immediately purchase the asset again. Remember that wash sales rules only apply to losses, not gains!
• You have pass-through business income. If you are a small business owner, assess how the loss of the Qualified Business Income deduction will affect your tax liability. Review whether you should change your entity type to minimize the loss of this deduction.

By starting to plan now, you can be ready for whatever tax environment you’ll be navigating in 2025.

Scammers Up Their Game With AI

Scammers are becoming increasingly sophisticated, with more emails, phone calls and text messages crafted to look and sound like the real thing. This is often because thieves are adding artificial intelligence to its arsenal of tools to transform their tricks into messaging that genuinely looks like its coming from a person you know and trust.

Here are the top ways that scammers are using AI and what you can do to protect yourself.

How Scammers are Using AI

• AI-Powered Phishing Attacks. Phishing attacks have been around for decades, but AI makes them far more convincing. AI can analyze large amounts of data to craft messages that look and sound authentic, increasing the chances of tricking victims into clicking malicious links or providing personal information.
• Deepfake Scams. Deepfake technology allows scammers to create realistic videos and audio clips that impersonate real people. Some examples include fake videos of CEOs instructing employees to transfer money or of celebrities endorsing fraudulent products.
• Generate Realistic Conversations. Scammers are using AI chatbots that can hold realistic conversations with potential victims. These bots can appear very convincing while pretending to be customer service agents, a friend or family member, or even government officials. The goal is to trick you into sharing sensitive information or sending money.
• Fake Profiles. AI can scan all of a person’s online footprint to create a realistic profile and social media accounts. Scammers then use these fake personas to try and steal information and money from you.

Protect Yourself from AI-Driven Scams

• Be skeptical of unsolicited messages. If you receive an email, text, or call from a company or person you don’t recognize, verify its authenticity before responding. Do this by contacting the company or person directly using official channels.
• Use multi-factor authentication (MFA). Constantly using MFA on every website you visit may cause some frustration, but it’s nothing compared to the frustration you may experience if your identity or money are stolen. Even if scammers steal your password, they’ll need an additional verification step to access your accounts.
• Verify identities. If someone claims to be a friend, boss, or family member requesting money, first verify their identity through another channel, such as a phone call or video chat.
• Look for red flags. AI-generated scams often contain small inconsistencies—such as unnatural speech patterns in voice messages, slight facial distortions in deepfake videos, or unusual grammar in AI-generated texts. Trust your instincts and independently verify whenever you can.
  As always, should you have any questions or concerns regarding your tax situation please feel free to call.

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