IRS Issues Transition Guidance
Published: December 26, 2025
As the 2025 tax year draws to a close, the IRS has released a series of critical updates that will significantly impact tax planning and compliance for the upcoming 2026 filing season. From transition relief for new legislative requirements to substantial increases in retirement contribution limits, here is what CPAs need to know.
1. OBBB Transition Relief: 2025 Forms to Remain Unchanged
The IRS has confirmed that for Tax Year 2025, there will be no mid-stream changes to core information returns despite the enactment of the One Big Beautiful Bill Act (OBBB).
- Forms Impacted: Forms W-2, 1099, and 941 will remain in their current format for the 2025 reporting cycle.
- Transition Year: The IRS is treating 2025 as a transition period for new provisions regarding the reporting of cash tips and overtime pay. Practitioners should advise clients to maintain internal records for these items, even if they are not yet broken out on federal forms.
2. Significant Increases to 2026 Inflation-Adjusted Limits
The IRS recently finalized the cost-of-living adjustments for the 2026 tax year. Due to persistent inflationary pressures, several thresholds have seen significant jumps:
- Retirement Contributions: The 401(k), 403(b), and most 457 plan limits will increase to $24,500 for 2026. The IRA contribution limit is set to rise to $7,500.
- Standard Deduction: For married couples filing jointly, the standard deduction will rise to $32,200 for 2026.
- Gift Tax Exclusion: The annual gift tax exclusion will increase to $19,000 per donee.
3. Business Interest & Premium Tax Credits
Following Fact Sheet 2025-09, the IRS provided clarity on the revised Section 163(j) business interest limitations. Under the new guidance, practitioners must carefully evaluate the interaction between interest expense carryforwards and the new OBBB deduction thresholds.
Additionally, Fact Sheet 2025-10 outlines the sunsetting of repayment limitations for the Premium Tax Credit (PTC). Taxpayers who received excess advance credits in 2025 may face higher-than-expected reconciliation liabilities on their upcoming returns.
4. Practice Management Alert: Digital Form 211
The IRS Whistleblower Office has officially launched a digital version of Form 211 (Application for Award for Original Information). This move toward digitalization is part of a broader IRS effort to increase enforcement via third-party reporting. CPAs should be aware that the submission process for tax noncompliance leads is now significantly faster and more accessible for whistleblowers.
5. Looking Ahead: The "Trump Account" IRA
Practitioners should begin familiarizing themselves with the draft Form 4547. This form will be used for the newly established "Trump Account" IRAs—a specialized retirement vehicle for children—which are expected to become a major component of family wealth planning in 2026.
Strategic Note for CPAs: With the 11th Circuit recently upholding the constitutionality of the Corporate Transparency Act (CTA), year-end reviews should include a final check on Beneficial Ownership Information (BOI) reporting for all domestic entities to avoid non-compliance penalties in the new year.
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