Be sure to have the following items ready for preparing your 2025 tax returns:

New Clients

• Please have a copy of your 2024 tax returns (or the last year you filed)

Income Documents

• W-2 form(s) from your employer(s)
• 1099-SSA if you received Social Security benefits in 2025
• 1099-G form if you received unemployment benefits in 2025
• 1099-R if you received retirement or pension payments
• 1099-K if you received payments from PayPal, Venmo, Square, etc.
• 1099-DA if you traded cryptocurrency in 2025 (NEW FOR 2025)
• Any other 1099s you received for interest, investment income, etc.
• Income & expenses from self-employment or rental properties

Deductions

• Be sure to notify your tax preparer of any changes in your family (marriage, divorce, new children, etc.) during 2025
• 1098 Form(s) received for Mortgage Interest paid in 2025
• The amount you paid for Property Taxes in 2025. Note: If you paid in two installments, this will usually be Installment 2 of your 2024-25 tax bill, and Installment 1 of your 2025-26 tax bill.
• Charitable contributions you made in 2025
• Auto Registration renewal statement(s) received from the DMV in 2025
• If you financed a new car purchase in 2025, check the year-end statement from your lender to determine how much interest you paid on the loan in 2025. This is not the total of the car payments you made; only the interest portion is deductible. (NEW FOR 2025)

Health Care

• California requires everyone on your tax return (including your spouse and dependents) to have health coverage or you may have to pay a fine.
• If you receive health coverage through your employer, please provide Form 1095-B to your tax preparer. Your employer should have given you this form.
• If you obtained health coverage from Covered California, please provide Form 1095-A to your tax preparer. Covered California mailed you this form in January. If you have not received it, please click here for instructions.

Identity Protection PIN

• If you have experienced identity theft, the IRS may issue you an Identity Protection PIN. You will receive a new IP PIN each year. The IRS will send you a letter in the mail in January with your IP PIN. This is required to file your tax returns. If you received an IP PIN in the mail, please provide it to your tax preparer.
• If you did not receive your IP PIN or you lost it, click here to retrieve it or have a new one issued to you by the IRS.

What is NOT changing

• Tax Brackets revised in 2018 and set to expire in 2025 are now permanent.
• Standard Deductions that were increased in 2018 and set to revert lower in 2025 are now permanent.
• Social Security Benefits are still taxable up to 85% for taxpayers with additional sources of income. (If Social Security is your only source of income, your benefits are not taxable, as before.)
  
• Miscellaneous Deductions, including deductions for Employee Business Expenses, that were eliminated in 2018 and set to come back in 2025 are now permanently eliminated.
• Mortgage Interest Deduction limited to first $750,000 of loan balance (set to revert back to $1M in 2025) is now permanent.
• Deductions for Moving Expenses and Casualty Losses that were limited in 2018 and set to come back in 2025 are now permanently limited.
• Alternative Minimum Tax threshold increased in 2018 and set to revert lower in 2025 is now permanent.

Expiring Tax Credits

• The Clean Vehicle Credit expired on September 30, 2025.
• The Energy Efficient Home Improvement Credit expired on December 31, 2025.
• The Residential Clean Energy Credit expired on December 31, 2025.
• The Alternative Fuel Vehicle Refueling Property Credit expires on June 30, 2026.

Child Tax Credit increase

Beginning with the 2025 tax year, the Child Tax Credit is increasing from $2,000 per child to $2,200 per child (up to age 16). It was previously set to revert to $1,000 in 2025.

• The amount of the credit will be adjusted for inflation each year beginning in 2026.
• The amount of the credit will be reduced for taxpayers whose Adjusted Gross Income (AGI) is higher than $200,000 (or $400,000 if married filing jointly). There is no credit for taxpayers with AGI over $240,000 (or $440,000 if married filing jointly).
• The child and at least one parent (filing a joint return) must have a valid Social Security Number to claim the credit.

Temporary Tax Breaks starting in 2025

Additional Deduction for Seniors. Taxpayers who are 65 by the end of 2025 will receive an additional $6,000 deduction. For married seniors both 65 and over filing a joint return, the additional deduction will be $12,000.

• Eligible seniors will receive this additional deduction even if they itemize deductions.
• The additional deduction is reduced for seniors whose AGI is higher than $75,000 (or $150,000 if married filing jointly). Seniors with AGI over $175,000 (or $250,000 if married filing jointly) will not receive any additional deduction.
• No additional deduction is allowed for taxpayers who are married filing separately.
• You must have a valid Social Security Number to claim the additional deduction.
• The additional deduction is available only for tax years 2025-2028 and expires at the end of 2028.

SALT Limit Increase. The limit on State and Local Taxes (SALT) that can be deducted when itemizing is increased to $40,000 ($20,000 if married filing separately).

• The limit will increase by 1% each year after 2025. So for 2026 the limit will be $40,400.
• The limit will decrease for taxpayers with AGI higher than $500,000 ($250,000 if married filing separately) and will be $10,000 for taxpayers with AGI of $600,000 or more ($300,000 if married filing separately).
• This increased limit is available only for tax years 2025-2029 and expires at the end of 2029. In 2030 the limit will revert back to $10,000 for all taxpayers.

No Tax on Tips under certain conditions:

• Applies only to tips reported to your employer and included on your W-2.
• Available only for certain occupations that “customarily” receive tips. A list of these occupations may be found here.
• The deduction is reduced or eliminated for taxpayers with income more than $150,000 ($300,000 if married filing jointly).
• The maximum amount that can be deducted in a given year is $25,000.
• It is not necessary to itemize deductions to receive this deduction.
• No deduction is allowed for taxpayers who are married filing separately.
• You must have a valid Social Security Number to claim the deduction.
• The deduction is available only for tax years 2025-2028 and expires at the end of 2028.

No Tax on Overtime under certain conditions:

• Applies only to overtime pay reported by your employer on your W-2.
• The deduction is reduced or eliminated for taxpayers with income more than $150,000 ($300,000 if married filing jointly).
• The maximum amount that can be deducted in a given year is $12,500 ($25,000 if married filing jointly).
• It is not necessary to itemize deductions to receive this deduction.
• No deduction is allowed for taxpayers who are married filing separately.
• You must have a valid Social Security Number to claim the deduction.
• The deduction is available only for tax years 2025-2028 and expires at the end of 2028.

No Tax on New Car Loan Interest under certain conditions:

• If you purchase a new car in 2025-2028, you can deduct up to $10,000 of the interest you pay on the loan each year until 2029.
• Applies only to new cars, SUVs, trucks, and motorcycles under 14,000 lbs that have “final assembly” in the US. Loans for used cars are not eligible.
• Does not apply to any loans for cars purchased before 2025, even if you refinance in 2025-2028.
• The deduction is reduced or eliminated for taxpayers with income more than $100,000 ($200,000 if married filing jointly).
• It is not necessary to itemize deductions to receive this deduction.
• The deduction is available only for tax years 2025-2028 and expires at the end of 2028.

The due date for 2025 personal tax returns is Wednesday, April 15, 2026.

An extension gives you extra time to file your tax returns without having a late filing penalty, as long as you file before the extended due date.

To get an extension, you must request it on or before the regular due date of your return.

For individual taxpayers, your extension gives you until October 15 to file your returns.*

However, please note that an extension does not give you more time to pay any tax due. The due date for payments is still April 15.

If you pay after April 15, even if you have an extension, you will have to pay a late payment penalty, plus interest, on the unpaid balance until it is paid off.

How to Reduce or Eliminate Late Payment Penalties

To reduce or eliminate late payment penalties, you have a couple of options:

• Make a payment with your extension. This can be arranged with your tax preparer at the time you file your extension. Or you can make a payment online at the IRS website. Be sure to specify that you are making an Extension payment for 2025.

  What if I don’t know how much tax I will owe? Your tax preparer can help you estimate what you might owe, or you can start with the tax you owed last year and adjust it depending on whether your income went up or down this year. It is better to pay something even if you don’t know exactly how much it will be. If you overpay, you will receive a refund. If you underpay, your penalty will be based only on the amount you are short, so it will be much less than it would be if you don’t pay anything.

• Request a payment plan. This can be done online at the IRS website. You will still pay penalties and interest on the unpaid portion, but your balance will go down each month so your penalties and interest will decrease. As long as you keep up your monthly payments, the IRS will not pursue collection actions against you. You can always make extra payments or pay off the balance any time to stop additional penalties from accruing.
• Increase your withholding or make estimated tax payments. This option won’t help this year, but it will help you avoid penalties next year. If you are paying enough during the year to cover your tax, you don’t have to worry about penalties if you get an extension.

How Much are the Penalties?

• The late filing penalty is 5% of your unpaid tax for each month (or part of the month) your return is late.

  For example, if your tax is $1,000 your late filing penalty will be $50 if you file between April 16 and May 15, $100 if you file between May 16 and June 15, $150 if you file between June 16 and July 15, etc. The maximum is 25%.

• The late payment penalty is 0.5% (one half of 1 percent) of your unpaid tax for each month (or part of the month) your payment is late.

  For example, if your tax is $1,000 your late payment penalty will be $5 if you pay between April 16 and May 15, $10 if you pay between May 16 and June 15, $15 if you pay between June 16 and July 15, etc.

• Interest is also charged on your unpaid tax. The annual interest rate is currently 7%.

So you can see, the late filing penalty is much higher than the late payment penalty (10 times higher, to be precise). Therefore, it is better to file your returns on time (or get an extension and file before the extension due date) and pay late, than it is to file your returns late.

If you are an employee who receives a W-2 from your employer, money is withheld from your paychecks to cover your taxes at the end of the year.

If you have withheld enough, then you will not owe any taxes, and you might even get a refund if you have withheld more than the taxes you owe.

However, if you have not withheld enough, then you will owe taxes when you file your tax returns.

But even if you are withholding from your paychecks, you might still owe taxes at the end of the year. For example, if you have significant investment income like interest, dividends, or capital gains from the sale of stocks. If you are self-employed or have income from rental properties, you might also owe taxes at the end of the year. Or if the withholding on your W-4 form is not enough for your filing status, you still could owe.

What are Estimated Taxes?

If you are making money without withholding, the IRS still wants you to pay taxes throughout the year instead of waiting until the end of the year to pay it all at once. Just as they get money from employees all year ’round, they want money from people making other types of income all year ’round as well. These payments are called estimated taxes.

Estimated taxes are due quarterly, specifically:

• April 15
• June 15
• September 15
• January 15

Yes, I know this is not really quarterly as some payments are due more or less than 3 months apart, but that’s just the way it is.

What is the Estimated Tax Penalty?

If you do not make estimated taxes when you are supposed to, then the IRS (and many states as well) will charge you an estimated tax penalty. Specifically, if you owe more than $1,000 in Federal tax with your tax return, you will owe the Federal estimated tax penalty. If you owe more than $500 in California taxes, you will owe the California estimated tax penalty as well.

Often, this penalty is calculated on your tax return and added to the amount you owe. The calculation is based on the current interest rates, and is currently about 5.3% of the tax you owe.

You can check to see if you paid the estimated tax penalty by looking at Line 38 on your Form 1040 tax return. If this line is blank, you did not owe an estimated tax penalty, or your preparer did not include it on your return. If Line 37 is over $1,000 then the IRS will send you a bill if you owe an estimated tax penalty.*

*Note: Under some circumstances you might not owe a penalty even if you owe over $1,000. For example, if you owed no tax last year, or if you withheld at least as much as you owed the previous year.

How do I avoid the Estimated Tax Penalty?

• If all or most of your income comes from W-2 employment, and you are not withholding enough to cover your taxes, you need to submit a new Form W-4 to your employer to adjust your withholding. Your tax preparer should be able to help you complete your W-4 so that you don’t owe next year.
• If you are self-employed or have significant income without withholding, you should make quarterly estimated payments. Your tax preparer can prepare vouchers for you which you can send in with your check on each due date. You can also make estimated tax payments online at the IRS website. If I prepare and e-file your tax returns, I can also have your payments automatically withdrawn from your bank account on the due dates so you don’t have to remember to do it yourself.