Blog Single

Businesses all around could be impacted by some significant tax regulation changes the IRS proposed for 2025. Whether you manage a small business, oversee a startup, or work for a big organization, you have to keep current on these developments to respect the law and budget your money.

The main IRS changes for 2025 will be discussed in this post together with how they can affect your company and provide you useful advice on how to adapt and remain compliant.

1. New Rules for Reporting Digital Payments

One major change in 2025 is the lower reporting limit for Form 1099-K. Now, if you get $600 or more in digital payments during the year—no matter how many transactions—you’ll receive a 1099-K form.

Third-party platforms like PayPal, Venmo, Cash App, and Square must send this form to both you and the IRS. The goal is to increase transparency and close tax gaps in digital payments.

How This Affects Your Business:

• If you use platforms like PayPal or Stripe, expect more attention from the IRS.
• Even small side jobs or freelance payments count.
• These platforms will report your payments directly to the IRS.

What You Should Do:

• Keep detailed records of all digital payments you receive.
• Match your 1099-K form with your own bookkeeping to avoid errors.
• Use separate accounts for personal and business transactions to keep things clear.

2. Stricter IRS Audits on Employee Retention Credit (ERC)

In 2025, the IRS began cracking down on incorrect or fraudulent ERC claims. During the COVID-19 pandemic, many businesses claimed this credit, but now the IRS is reviewing those claims more closely.

What This Means for You:

• If your business used the ERC, the IRS may audit your claim.
• Mistakes or false claims can lead to penalties and forced repayment.

What You Should Do:

• Review your ERC claim with a trusted tax professional.
• Gather all documents that prove you qualified, like payroll records or proof of a government shutdown.
• Get ready to answer questions from the IRS and show your records if needed.

3. New Business Mileage Deduction Rates for 2025

From 65.5 cents in 2024, the IRS raised the business use standard mileage rate for 2025 to 67 cents per mile.

How This Affects Your Company:

Should your company rely on fieldwork, delivery, or sales-oriented driving—you can now claim a larger tax deduction.

You should also change your reimbursement policy if you pay staff members for driving.

What to Do Next:

• Update your mileage tracking tools with the new rate.
• Train employees to log their mileage correctly.
• Adjust your budget to account for higher reimbursement costs.

4. New Deadlines and Bigger Penalties for Late Filings

The IRS now charges higher penalties if you file or pay your business taxes late. The failure-to-file penalty is now 5% per month, up to 25% of what you owe. If you file more than 60 days late, the minimum penalty is $485 or 100% of the unpaid tax—whichever is less.

Why This Matters:

Missing tax deadlines now costs more. Late payroll or corporate tax filings can add up fast.

What You Should Do:

• Set up automated reminders so you don’t miss IRS deadlines.
• Work with a CPA to file on time, even if you can’t pay everything right away.
• If you expect delays, connect with IRS problem solvers to explore payment plans or other solutions.

5. Updates on Pass-Through Entity (PTE) Taxes

Some states now offer Pass-Through Entity (PTE) taxes to help business owners get around the $10,000 cap on state and local tax (SALT) deductions. In 2025, the IRS confirmed that businesses can deduct PTE taxes on their federal returns.

Why This Matters:

If you own part of an S corporation or LLC, this could help lower your federal tax bill. But you must choose PTE treatment the right way to benefit.

What You Should Do:

• Talk to your tax advisor to see if your state offers a PTE election and if it’s a good fit for your business.
• File all required state forms and elections before the deadlines.
• Review how the PTE tax affects both your personal and business tax returns.

6. Beneficial Ownership Reporting (BOI) – FinCEN Rules Start in 2025

Starting in 2025, many businesses must follow a new federal rule under the Corporate Transparency Act. You’ll need to file a Beneficial Ownership Information (BOI) report with FinCEN (Financial Crimes Enforcement Network), even though it’s not an IRS requirement.

What You Need to Know:

• If you started your business before January 1, 2024, you must file by January 1, 2025.
• If you form a new business in 2025 or later, you must file within 90 days of starting.
• If you don’t file, you could face fines of up to $500 per day.

What You Should Do:

• Check if your business must file a BOI report.
• Collect details on anyone who owns 25% or more of your company or has significant control.
• Submit your report through FinCEN’s online system before the deadline.

7. Retirement Plan Changes in 2025

The SECURE 2.0 Act introduces new rules in 2025 that affect how you manage your business’s retirement plans—especially 401(k)s. These changes help employees save more and encourage greater participation.

Key Updates for 2025:

• If you start a new 401(k) or 403(b) plan in 2025, you must automatically enroll eligible employees at a 3–10% contribution rate, unless they choose to opt out.
• Employees aged 60 to 63 can now make larger catch-up contributions to increase their retirement savings.
• Small businesses can now get bigger tax credits when they start a new retirement plan, making it easier to offer this benefit.

Next Steps for Employers:

• Review your retirement plan with your plan administrator.
• Follow the new auto-enrollment rules if you’re launching a plan in 2025.
• Talk to your employees about these new features and encourage them to participate by explaining the benefits.

8. Stricter Rules for Classifying Workers: Employees vs. Contractors

The IRS will increase control on worker classification in 2025. The government now follows more stringent policies that complicate the process of characterizing someone as an independent contractor. These guidelines also line up with Department of Labor recent revisions.

Why This Matters:

• Should you confuse employees, you could be subject to penalties, unpaid taxes, even legal action.
• The IRS looks for indicators of control, including your handling of the worker’s chores, money, and general relationship.

What You Should Do:

• Review your 1099 contractors to make sure they meet the legal standards.
• Switch to W-2 employee status if a contractor doesn’t meet the criteria.
• Keep detailed records of contractor agreements and clearly define job roles.

Final Thoughts

Important upgrades from the 2025 IRS modifications impact your handling of taxes, reporting, and recordkeeping. Your company may gain from several modifications like improved retirement incentives and larger deductions. Still, others introduce tougher policies, deadlines, and penalties; hence, it’s advisable to be ready and act early.