Craig Carlini, CPA
ccarlini@rubino.com

Dave Albert, CPA  dalbert@rubino.com

Lisa Hahn, CPA lhahn@rubino.com

Robert Tempchin, CPA rtempchin@rubino.com

Melanie Erickson, CPA merickson@rubino.com

Vikita Shah, EA  vshah@rubino.com

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Tax News Update:

Federal Tax Updates for Business

Beneficial Owner Reporting (UPDATE)

On March 26, 2025, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.

FinCEN revised the definition of “reporting company” to cover only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office.

Reporting companies registered before March 26, 2025, had until April 25, 2025, to file their initial BOI report. Reporting companies registered on or after March 26, 2025, have 30 calendar days from their effective registration date. These foreign entities will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report beneficial ownership information with respect to any such entity for which they are a beneficial owner.

FinCEN accepted comments on the interim final rule through May 27, 2025. They are reviewing these comments and expect to finalize the rule later this year

Employee Retention Credit (ERC) Claims (UPDATE)

The period for filing ERC claims for 2021 tax periods officially closed as of April 15, 2025. With more than 597,000 unprocessed claims and thousands of disallowance notices already issued, the Internal Revenue Service (IRS) must now turn its attention to clearing the backlog of claims. The National Taxpayer Advocate has stated that this could realistically take at least all of calendar year 2025 to complete.

On March 20, 2025, the IRS updated its Frequently Asked Questions FAQs to include new questions and answers, clarifying how you, as an employer, should handle the income tax impact of ERC payments:

  • You should have reduced wage expense on your original income tax return for the year in which you filed the ERC claim.
  • If you received an ERC refund but did not reduce wage expense on your original income tax return, you do not need to amend the prior year return. Instead, report the refund as income in the year you receive it. (see examples)
  • If your ERC claim was denied but you had already reduced wage expense, you can increase the wage expense on your current-year return to reverse the prior reduction. You may file an amended return, AAR, or protective claim for refund for the year in question, but you are no longer required.

The tax bill passed by the House on May 22, 2025, could, if it becomes law, significantly impact ERC claims.

  • This bill prohibits any “credit or refund” ERC claims filed after January 31, 2024, regardless of their statutory deadlines. If a taxpayer filed a timely ERC refund claim after January 31, 2024, and the IRS has failed to process the refund or credit, or if the IRS is currently auditing the claim, the claim is now time-barred under the bill. The retroactive disallowance would impact millions of taxpayers with pending cases.
  • The bill also has a provision which extends the statute of limitations related to ERC claims. It allows the IRS six years to audit these claims.

We understand that the delays by the IRS regarding legitimate ERC claims are frustrating for many taxpayers. Please contact us to help you track your ERC claim and pursue the funds for your business. For more information on ERC please refer to this link Income tax and ERC.  

Federal Tax Updates for Individuals

Tax Extension filing for U.S. Citizens and Resident Aliens Living or Working Abroad

U.S. citizens and resident aliens who were living or working abroad on the tax deadline (April 15, 2025, for calendar year filers) were granted an automatic two-month extension to file their federal income tax return for the 2024 tax year, this moves the filing deadline to June 16, 2025 (since June 15 falls on a Sunday). 

You will qualify for this automatic extension if, on April 15, 2025: 

  • your main place of residence and main place of business or post of duty  was outside the United States and Puerto Rico,  
  • or you were in military or naval service on duty outside the United States and Puerto Rico. 

You should attach a statement to your tax return explaining which one of the above situations apply to you. However, if you owe tax, the payments were still due by April 15, 2025 and interest will accrue on any amounts not paid by that date. 

If you are unable to file your return by the automatic two-month extension date, you may file Form 4868 by June 16, 2025, to request an additional four-month extension until October 15, 2025. For more information on this topic refer to the IRS link on U.S. taxpayers living abroad must file and pay taxes by June 16. 

Federal Tax Updates for Business and Individuals

The One Big Beautiful Bill Act Heads to the Senate (As of 6/5/2025)

The U.S. House of Representatives passed their version of the tax bill. Below are some tax provisions currently included in the bill; it now heads to the Senate where the tax proposals are subject to change. 

Adds enhanced deduction for seniors (65+) – $4,000 deduction for tax years 2025 through 2028. Phase out: single filers with income of $75,000 or more, and joint filers with income of $150,000 or more.  

No tax on tips and overtime pay – above-the-line deductions available for qualified tips (in certain occupations) and for overtime premium pay, subject to income and occupation limitations for tax years 2025 through 2028.  

Estate and gift tax exemption – increased exemption made permanent and raised to $15 million per individual (30 million per married couple) in 2026, indexed for inflation.  

Raise the child tax credit to $2,500 from its current $2,000 for tax years 2025 through 2028. 

Raise the state and local tax deduction (SALT) cap to $40,000 starting in 2025. The deduction begins to phase-out for taxpayers with modified adjusted gross income (MAGI) of $500,000. (For married-filing-separately taxpayers, the cap would rise to $20,000 and would start to phase out at MAGI of $250,000).  

Make the qualified business income deduction (tax deduction for pass-through entities such as S corporations, partnerships and sole proprietorships) permanent and increase this deduction to 23 percent from current 20 percent for tax years after December 31, 2025.   

Eliminate the clean vehicle credit (includes electric vehicles) as of the end of 2025. (exception for manufacturers who have not sold 200,000 new vehicles as of December 31, 2025).

Create a tax deduction of up to $10,000 for car loan interest on new car loans available even to taxpayers who don’t itemize their deductions for tax years 2025 through 2028. Vehicles must be assembled in the U.S. and loan must be secured by the vehicle. (Phase out: single filers with income of $100,000 or more, and joint filers with income of $200,000 or more). 

Allow non-itemizers to claim an above-the -line deduction for charitable contributions up to $150 per single filer and $300 per joint filers for tax years 2025 through 2028. 

State Tax Updates for Business and Individuals

Maryland – Key Income tax updates

On the 20th of May, Maryland Gov. Wes Moore signed House Bill 352, Budget Reconciliation and Financing Act (BRFA), enacting significant tax law changes affecting both individuals and businesses including the following: (Most of these changes will take effect for tax years beginning after December 31, 2024)  

New High-Income Tax Brackets:  

For Single Filers: 

  • $250,001–$500,000: 5.75% (no change) 
  • $500,001–$1 million: 6.25% 
  • Over $1 million: 6.5% 

For Joint Filers:  

  • $300,001–$600,000: 5.75% (no change) 
  • $600,001–$1.2 million: 6.25% 
  • Over $1.2 million: 6.5% 

Capital Gains Surtax: A new 2% surtax on net capital gains applies to taxpayers with federal adjusted gross income (AGI) over $350,000. Certain exceptions apply e.g, gains from the sale of a primary residence sold for less than $1.5 million.  

County Tax Cap Raised: Counties can now set their top local income tax rate as high as 3.3% (up from 3.2%) 

Standard Deduction Increase: The standard deduction rises to $3,350 for individuals and $6,700 for joint filers regardless of income level.   

Itemized Deduction Limitation: Taxpayers with federal AGI over $200,000 ($100,000 for married filing separately) must reduce their Maryland itemized deductions by 7.5% of the excess over that threshold, similar to the old federal “Pease” limitation, but with a steeper reduction. 

Business Income Tax Changes

Pass-Through Entity (PTE) Tax: Changes to the elective PTE tax calculation are scheduled for July 1, 2026. The amendment affects how resident and nonresident member tax liabilities are calculated and may have implications for S-corporation status. Technical corrections are anticipated in the next legislative session. 

Expanded sales tax base on services: 

 Effective July 1, 2025, Maryland will impose a 3% sales tax on a broad range of data and IT services. This includes services under NAICS sector codes 518 (data processing, hosting), 519 (web search portals, information services), 5415 (computer systems design), and 5132 (software publishers). Businesses providing or purchasing these services must prepare for new tax collection and compliance requirements. The tax applies to both business-to-business and business-to-consumer transactions. 

Certain exemptions apply such as sales of cloud computing to cybersecurity businesses and sales to a charitable, nonprofit or government tax-exempt entity. 

Maryland’s sales tax rate remains 6%, but if a product or service falls under both the regular sales tax and the new 3% tech tax, the higher 6% rate will be used. 

For more information, click the following link: https://www.marylandcomptroller.gov/individuals/2025-tax-updates.html 

Please reach out if you have questions about how these changes may affect your specific tax situation for 2025.  

District of Columbia – Key Income Tax Updates

Interest Income from Non-DC Obligations Now Taxable 

For tax years beginning after December 31, 2024, interest on the obligations of other states and their political subdivisions will be included in District gross income. Interest earned on obligations of the District or a territory of the Unites States as well as obligations issued by DC Water, the Washington Metropolitan Area Transit Authority (WMATA), and the District of Columbia Housing Finance Agency (DCHFA) remain exempt. 

DC Earned Income Tax Credit (EITC) Changes 

The DC EITC will remain at 85% of the federal credit for tax years beginning after December 31, 2024, through December 31, 2028. An earlier plan to increase it to 100% of the federal credit after 2025 has been postponed to after December 31, 2028. 

Corporate and Business Key Income Tax Changes 

Beginning January 1, 2026, the District will revise its tax calculation method for businesses operating in multiple states. Under this new approach, all companies within a combined group will be treated as a single taxpayer. As a result, when determining the portion of income subject to District tax, the District will include the District-sourced sales of all entities in the combined group even if some group members do not have a direct connection (nexus) to the District. 

Estate Tax 

For estates of decedents who die on or after January 1, 2025, and on or before December 31, 2025, the exclusion (zero bracket) amount is increased to $4,873,200.00 from the 2024 amount of $4,715,600. Any estate value above this threshold is taxed at progressive rates ranging from 11.2% to 16%. 

For more information, click the following link: DC Office of Tax and Revenue. 

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