Less than two months after he was sworn in, Billy Long is now out as IRS Commissioner. The move, which happened Friday afternoon, shocked IRS staffers and taxpayers alike.

Counting the procession of acting IRS heads that followed Werfel’s departure (Werfel was forced out by President Donald Trump when Long was nominated), Long was the sixth person to run the IRS since the beginning of the year. He will be replaced by Scott Bessent, who will serve as Acting Commissioner at the same time he serves as the Secretary of the Treasury.

It’s not just those at the top who are exiting the agency. As I reported earlier, the IRS workforce dropped from 103,000 employees in January 2025 to approximately 77,000 in May 2025 (a 25% reduction).

The departures of leadership and the general workforce come just as the IRS is gearing up for next year's tax season–the start date has not been determined. Long raised eyebrows last month when he suggested that the filing season should start around Presidents Day (February 16). The IRS quickly walked that back, noting, “The IRS looks forward to another successful tax filing season next year, and we will announce the timing of its opening in the regular course."

The IRS has also announced that, despite new tax breaks for tipped and overtime income that take effect, retroactively for all of 2025, there will be no changes to withholding tables for 2025 or changes to certain information returns, including Form W-2, Forms 1099, Form 941 and other payroll return forms for 2025. Employers and payroll providers should continue using current procedures for reporting and withholding.

According to the IRS, these moves are "intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.” But not all tax professionals agree. Among other questions raised by the move, with no changes to Form W-2, it’s now unclear how that income will be reported for purposes of claiming the deduction for overtime (overtime is currently not separately stated on Form W-2).

Another issue related to the One Big Beautiful Bill Act that’s making news: recent headlines suggesting that certain tax issues could lead to the loss of U.S. citizenship. This fear is now being amplified on various platforms and stems from a case involving Vanessa Ben, a Houston woman facing denaturalization over her admission of tax fraud prior to naturalizing. Taxpayers should be cautious of overly alarmist narratives or unscrupulous tax professionals who may be seeking to profit from the overwhelming sense of panic. False tax returns, for example, may constitute tax fraud if the return was filed with intent to evade taxes. Distinguishing between honest errors and willful misconduct is key.

Tax evasion was also in the news this week following a guilty plea from Timothy McPhee, a Colorado man who promoted the use of an illegal tax shelter. A tax shelter is a financial strategy used to reduce taxable income. Not all tax shelters are illegal—Iegal tax shelters include tax-favored accounts like retirement account. But illegal tax shelters—those created to generate unintended tax “benefits”—are created for the purpose of evading tax.

McPhee promoted an abusive tax shelter made up of a private family foundation and three trusts: a business trust, a family trust, and a charitable trust. The trusts were successively layered, meaning that each trust named the next trust in the series as its beneficiary. McPhee taught clients who purchased the tax shelter how to use the trusts and foundation to evade paying federal income taxes on nearly all their income.

More than two hundred taxpayers nationwide purchased the abusive tax shelter. These clients collectively sheltered approximately $159 million in income, which resulted in the underpayment of about $45 million in federal income taxes.

While willful behaviors can land you in big tax trouble, you can also fall into tax trouble. As meme stocks have made something of a comeback this summer, investors risk running afoul of the too-often neglected “wash sale” rule.

Here’s how that can happen. When you’re buying and selling stocks quickly, you may trade winners and losers within days of each other. But when you sell a stock or other security at a loss and then buy the same security—or a similar one—within 30 days before or after the sale, it’s considered a wash sale. The loss is then disallowed, meaning you can't use it to offset any capital gains. That can result in an ugly tax bill.

Buying and selling within a short time frame may be done deliberately as part of a strategy that some taxpayers use to reduce their tax bill. Sometimes referred to as tax-loss harvesting, the goal is to sell stocks that are losing money and use the loss to offset the money-makers. That still works, so long as you don’t run afoul of the wash sale rules.

Importantly, the transaction doesn’t have to be intentional to trigger the wash sale rule. Dividend reinvestment and employee stock plan acquisitions may create a wash sale, as could buying and selling quickly. It’s important to keep good records and double-check at tax time to see whether your transactions might count as wash sales. Or better yet, avoid wash sales when you trade. The rules involving wash sales and a lot of other tax rules too, are complex, so even when you’re aware of them, it’s easy to fall into a tax trap. A financial or tax advisor may be able to help you avoid the pitfalls—and a hefty tax bill.

Speaking of double-checking, eagle-eye readers may have noticed that last week’s email edition of the newsletter had some duplicated paragraphs. When I put together the newsletter each week, it gets edited and then moved over into two different applications–one for the email newsletter and one for the online version. That usually happens on Friday evenings to make sure that you have the most up-to-date news possible. In my zeal to transfer the copy over, I apparently pasted it twice and didn’t catch it when I sent out my test versions. On an early Saturday morning read, you might have thought you just needed a second cup of coffee. Nope–that was just my mistake. My apologies for the error.

Enjoy your weekend,

Kelly Phillips Erb (Senior Writer, Tax)

Questions

This week, a reader asks:

There are a lot of dates in the One Big Beautiful Act. With school starting soon, can you tell me when the new 529 provisions kick in? Is it next year?

A section 529 plan is a tax-advantaged savings plan designed to encourage saving for education expenses. As written, earnings in 529 plans grow tax-free, and withdrawals for qualified education expenses are also tax-free.

The new tax law allows up to $10,000 in tax-free distributions this year from section 529 plans to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary school, including private schools and religious schools. Those expenses include tuition, curricular materials, books and other instructional materials, online materials, and tuition for tutoring. Expenses may also include educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies.

Finally, it also includes test fees for achievement tests, Advanced Placement (AP) exams, and college admissions exams (such as the SAT) and fees for dual enrollment in an institution of higher education (college courses that count for both high school and college credit).

The law also allows tax-free distributions to be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses”—this is similar to the criteria for the Lifetime Learning Credit.

Account owners can begin using 529 funds for the new expenses as of July 5, 2025. So, if you have expenses to pay, you can make your withdrawals now. A little extra good news? Beginning January 1, 2026, the expense limit will rise to $20,000 per year.

Do you have a tax question that you think we should cover in the next newsletter? We'd love to help if we can. Check out our guidelines and submit a question here.

Statistics, Charts, and Graphs

How did the IRS spend $79.5 billion in supplemental funding allocated by Congress as part of the Inflation Reduction Act of 2022 (IRA)? Here’s a hint: It didn’t.

While Congress IRS initially earmarked $79.4 billion in supplemental funding to be spent over ten years as part of the IRA, that didn’t last long. Congress subsequently clawed back more than half of that funding, leaving the agency just $37.6 billion, which is expected to last through September 30, 2031. Of the $41.8 billion rescinded by Congress, all of it was taken from money previously earmarked for enforcement.

As of March 31, 2025, the IRS has spent approximately $13.8 billion of that money.

The remaining funding has been earmarked to help improve taxpayer services, modernize technology, and increase compliance and enforcement actions. As you can see from the charts, which shows the split between funds that have been spent versus what remains, by percentages, funding skewed towards enforcement and taxpayer services.

As of March 31, 2025, the IRS has spent money on the following activities:

  • Operations Support - $6 billion of $25.3 billion
  • Business Systems Modernization - $2.7 billion of $4.8 billion
  • Enforcement - $2.7 billion of $3.8 billion
  • Taxpayer Services - $2.2 billion of $3.2 billion
  • Energy Security - $63.6 million of $500 million

The IRA funding was intended to supplement, not replace, the agency’s annual appropriation. Notably, the IRS has received the same annual appropriation each year since the IRA took effect, with no adjustments for inflation. As a result, approximately $2 billion in IRA funds has been used to supplement the IRS annual appropriations, since, according to the IRS, appropriations did not cover normal operating expenses.

A Deeper Dive

Would former President Ronald Reagan have embraced President Trump’s tariffs?

Tax historian Joseph Thorndike says no, writing, “Ronald Reagan was no fan of tariffs. In fact, he was an ardent (if inconstant) champion of free trade and open markets.”

Thorndike suggests that efforts to persuade taxpayers that the opposite is true is historical revisionism. In particular, he notes, it brushes aside Reagan’s many public statements extolling the virtues of free trade — and denouncing the politics of protection.

“A creative, competitive America is the answer to a changing world, not trade wars that would close doors, create greater barriers, and destroy millions of jobs,” Reagan declared in one typical statement. “We should always remember: Protectionism is destructionism.”

As Reagan began his presidency in 1981, the United States was facing a range of challenging economic pressures; rising unemployment and high interest rates were making things hard for many Americans. Some of these problems were linked — both in reality and in the public mind — to international trade, and the new president faced immediate pressure to aid industries struggling in the face of tough foreign competition.

That feels familiar.

“The intensification of foreign competition meant that the political pressures for import restrictions increased dramatically,” explained Douglas Irwin in Clashing Over Commerce, his indispensable history of U.S. trade policy. “The Reagan administration responded by limiting imports in many sectors, but also resisted congressional pressure to do more, particularly with respect to Japan.”

But Reagan's methods were different from those of the current president. Thorndike notes that Reagan pursued international agreements to reduce trade barriers and provide mechanisms for resolving trade disputes and embraced those institutions when attempting to resolve trade disputes over the course of his presidency. And, Thorndike says, Reagan was especially optimistic about the benefits of free trade on the North American continent.

That doesn’t mean that Reagan didn’t take a pro-American stance. He declared, “I believe that if trade is not fair for all, then trade is free in name only. I will not stand by and watch American businesses fail because of unfair trading practices abroad. I will not stand by and watch American workers lose their jobs because other nations do not play by the rules.”

Thorndike says this was tough talk — and good politics, too.

Tax Filings And Deadlines

📅 September 30, 2025. Due date for individuals and businesses impacted by terrorist attacks in Israel.

📅 October 15, 2025. Due date for individuals and businesses affected by wildfires and straight-line winds in southern California that began on January 7, 2025.

📅 November 3, 2025. Due date for individuals and businesses affected by storms in Arkansas and Tennessee that began on April 2, 2025.

Tax Conferences And Events

📅 August 26-September 16 (various dates), 2025. IRS Nationwide Tax Forum in New Orleans, Orlando, Baltimore and San Diego. Registration required (discounts available for some partner groups).

📅 September 17-18, 2025. National Association of Tax Professionals Las Vegas Tax Forum. Paris Hotel, Las Vegas, Nevada. Registration required.

📅 Sept. 26-27, 2025. National Association of Tax Professionals Philadelphia Tax Forum. Sheraton Philadelphia Downtown, Philadelphia, Pennsylvania. Registration required.

Trivia

We’ve seen a string of IRS Commissioners and Acting IRS Commissioners in 2025. On the other end of the spectrum, which IRS Commissioner holds the record as the longest-serving IRS Commissioner?

(A) David Blair

(B) Guy T. Helvering

(C) Joseph S. Miller

(D) Green B. Raum

Find the answer at the bottom of this newsletter.

Positions And Guidance

The IRS has published Internal Revenue Bulletin 2025-33.

In a letter submitted to the Treasury and the IRS, the American Institute of CPAs (AICPA) submitted comments on the recently enacted section 174A, which addresses the treatment of domestic research and experimental (R&E) expenditures (domestic research costs). The AICPA is urging Treasury and the IRS to issue immediate guidance that would allow eligible small business taxpayers to immediately deduct domestic research costs on their originally filed 2024 federal income tax returns rather than being required to capitalize those amounts.

Noteworthy

A Pennsylvania proposal, which unanimously passed the House and has moved to the Senate, would update state law to explicitly exempt privately-owned campgrounds from local amusement and admission taxes.

Consumers are rushing out to buy electric vehicles (EV) before the $7,500 tax break for EVs expires. The One Big Beautiful Bill Act eliminates the tax credit after September 30, 2025. According to Cox Automotive data, consumers purchased nearly 130,100 new EVs in July, the second-highest monthly sales tally on record. The July figures represent a 26.4% increase from June and nearly 20% increase year-over-year.

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In Case You Missed It

Here's what readers clicked through most often in the newsletter last week:

You can find the entire newsletter here.

Trivia Answer

The answer is (B).

Guy T. Helvering holds the record as the longest-serving IRS commissioner, with a tenure of ten years and four months, from June 6, 1933, to October 8, 1943. David Blair served eight years, Joseph S. Miller served six years, nine months, and Green B. Raum (yes, that’s a real name) served six years and nine months.

The IRS Restructuring and Reform Act of 1998 set a five-year term of office for IRS Commissioners. Charles Rossotti was the first IRS Commissioner impacted by the new law—he served the full five years, from November 1997 to November 2002.

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