The Internal Revenue Service (IRS) is concerned because there are continuing scams on taxpayers taking place by phone, text, email, and in-person. The IRS reminds taxpayers that it normally initiates contact with a letter or written notice to a taxpayer and does not contact through phone calls, texts or emails.

With a growing number of fraudsters and scammers looking for victims, it is important for individuals to be able to distinguish legitimate IRS staff from imposters. All taxpayers should understand how to protect themselves from fraudulent text messages, emails, phone contacts or in-person visits.

1. Text Messages — The IRS does not send text messages to individuals with shortened links. Scammers will frequently send text messages that include a bogus link. If you receive an unexpected text, you should refrain from clicking on any links or open attachments.
   
   If you do receive a suspicious text message, you should send a screenshot of it as an attachment to [email protected]. For individuals with an iPhone, you can take a screenshot by clicking both the Volume Up and the Power button. The screenshot will appear at the lower left corner of the screen. Click on the screenshot to edit, select Done at the top left and save to photos. You may then select the photo of the screenshot, click the lower left button to allow you to choose your email service and send an email to [email protected] with the screenshot.
    
2. Email Scams— The IRS does not ask for personal or financial information with an initial contact through email. The standard IRS contact will be through several letters by regular mail. Any suspicious emails should also be forwarded to [email protected]. For additional instructions, visit “Report phishing and online scams" page on gov with specific instructions.
    
3. Individuals Who Owe Tax— If you owe tax to the IRS, you can expect to receive several letters prior to a phone call. The IRS may follow up the letters with a phone call if you have an overdue tax bill, a delinquent tax return or have failed to make an unemployment tax deposit. The IRS emphasizes it will not demand immediate payment by a specific payment method like a debit card or gift card, or ask for credit card numbers over the phone. They will also not threaten you with arrest by the local police or demand tax payments without giving you an opportunity to appeal the claim. These strategies all indicate you are talking with a scammer.
    
4. IRS Agent In-Person Visits— Generally, IRS officers only make visits after you have received several notices by mail. The IRS revenue agent may make a visit for the purpose of education, investigation and appropriate enforcement steps. IRS auditors also may mail an initial appointment letter and generally will call and confirm the date prior to a scheduled audit appointment. If you have an in-person visit with an IRS representative, you should always ask for his or her credentials and HSPD-12 card. This is a standard government form of identification that will contain the agent’s photo and serial number.
    
5. Resolving Tax Issues— On gov, there are several helpful sections that may assist taxpayers in creating payment plans. You can pay taxes through the Online Account with IRS Direct Pay or using your debit or credit card. There are individuals who may qualify for a payment plan or an Offer in Compromise (OIC). The IRS again emphasizes it will not demand immediate payment, will not ask for credit or debit card numbers, will not threaten to have you arrested by local police and will always offer an opportunity to appeal. An IRS appeals officer may review your case prior to any further action.

Editor's Note: The fraudsters and scammers continue to become more sophisticated. Many of them build a relationship with the victim through multiple emails or phone calls prior to taking action to complete fraud. Individuals should be careful if they are contacted by someone who claims to be from the IRS.

House Tax Bill Markup Starts May 13

The House Ways and Means Committee has tentatively scheduled a markup on a major tax bill for May 13, 2025. Representative Lloyd Smucker (R-PA) indicated there will be a bill description provided by that date.

Smucker stated, "You will be seeing language sometime soon." Major tax bills usually start with a description of the bill’s provisions, and the actual language of the bill is added after the initial markup. For bills that exceed 2,000 pages, it is expected that there will be further discussions and revisions before the final legislation is adopted.

Representatives Smucker and Jodey Arrington (R-TX) indicated the cost of the tax bill will be reduced from the tentative $4.5 trillion maximum. If spending reductions are less than the targeted amount, the cost for the tax bill must be reduced under the reconciliation rules.

Smucker noted, "It does not sound like we are going to get to the $2 trillion in spending [cuts], so it means we would have to be below $4.5 trillion."

The House Ways and Means Committee is proceeding with a tax bill prior to the final spending reductions that will be set by the House Committees on Energy, Commerce and Agriculture.

Most of the expected tax cuts will be to the individual taxpayer rates. There may also be business provisions to encourage research and development and the acquisition of equipment.

It is uncertain if the bill will address the White House proposal for reduction of taxes on tips, overtime and Social Security benefits. Without the additional proposed tax provisions, the Joint Committee on Taxation estimates the cost for extending the Tax Cuts and Jobs Act (TCJA) provisions as $4.6 trillion over 10 years.

With the sheer size of the bill, there will be a markup over several days. There may also be late night sessions. House Ways and Means Committee member Gregory Murphy (R-NC) commented, "If we are going to have to stay up, they are going to have to stay up. I am a surgeon. I will stay up all night."

Representative Darin LaHood (R-IL) is preparing for an extended markup. He stated, "This is why you get on the Ways and Means Committee, is to write a tax bill, put in the work. This is our time to defend it and advocate for it.”

A major decision will be how much to reduce the initial projected tax cuts. One of the factors will be dynamic scoring. The TCJA bill was passed based on an estimate that there would be a $461 billion increase in tax payments to reduce the total bill cost.

Editor's Note: The summary of tax bill provisions is expected next week. This organization does not take a specific position on any tax provisions in what is expected to be a large bill. The spending reductions by the House Committees on Energy, Commerce and Agriculture are expected within two weeks. House Speaker Mike Johnson (R-LA) hopes to pass a bill by Memorial Day. A final House and Senate bill may be passed during July.

Tax Cuts, Tax Increases and Budget Reductions

There is a discussion in Washington on the tax cuts, tax increases and budget reductions for the new tax bill. The budget resolution calling for $4.5 trillion in tax reductions assumes that there will be $2 trillion in spending cuts. Four members of the House Ways and Means Committee published a letter that emphasized there must be "real, enforceable spending cuts — not budget gimmicks."

House Budget Committee Chair Jodey Arrington (R–TX) indicated there is a "generational opportunity" to avoid a future major debt problem. Arrington noted, "The fiscal state of the nation, by any measure, is in a dire state and condition and is rapidly in decline."

Other Budget Committee members observed that the extension of tax cuts could result in even greater deficits in the future and a more serious financial problem.

A likely solution for reducing the cost of tax cuts may be to limit the effective duration of various provisions. Representative Ron Estes (R-KA) stated, "At the end of the day, I believe we will have some provisions that are permanent and a bunch of them will be temporary — four years, six years, eight years — just because as you slide through the dials on what things cost."

Senator Chuck Grassley (R-IA) spoke last month about the possibility of moving the top tax rate from 37% back to the former 39.6%. The President posted on social media that he is not excited about this idea, but he would consider this increase in the top rate. Several key members of the House Ways and Means Committee indicated they did not want to raise the top rate but might consider this option. Senate Finance Committee Chair Mike Crapo (R-ID) stated, "there are a number of people in both the House and the Senate who are, and if the President weighs in favor of it, then that is going to be a big factor that we have to take into consideration as well."

A major issue with House members on both sides is the $10,000 state and local tax (SALT) deduction limit. Five House members from large states have stated emphatically they expect to see a higher SALT number in the bill. Representative Nicole Malliotakis (R-NY) recognized there are widely different opinions. She noted, "Obviously you are going to have members, whether it is from the Freedom Caucus or the SALT Caucus, that may not be entirely happy, but I think that is the point. I believe it is going to be something that everyone can live with."

Representative Nick LaLota (R-NY) indicated there must be a large increase in the SALT limit. He stated, "I have a voting card, and the onus would be to vote no if they do not give me a good number."

An idea that has been proposed is to phase out the SALT deduction for upper-income taxpayers. Representative LaLota stated this is a "terrible idea" as he favors a flat limit for all taxpayers.

Another contingent of House members suggest the funding reductions should be in the green energy subsidies under the Inflation Reduction Act (IRA). They note the IRA has eight major energy subsidies. These subsidies focus on solar, wind and other renewable energy.

These members suggest the IRA subsidies "will actively undermine America's return to energy dominance and national security." They note that new electricity generation in the past two years has been primarily from solar and wind. In their view, the government is distorting the energy sector with these incentives.

The Congressional Budget Office and private analysts suggest the IRA energy subsidies over the next decade could approach approximately $1 trillion. By reducing the energy subsidies, there would be additional funding for the new tax bill.

Finally, several members sent a letter to House leaders that emphasized the importance of tax and budget limits. Under the House and Senate rules, the tax provisions must be reduced if the spending reductions are less than the projected $2 trillion. For example, if the spending reductions are $1 trillion over a decade, the tax bill cost must be reduced from $4.5 trillion to $3.5 trillion.

Editor's Note: This organization does not take a specific position on this debate. We offer this information as a service to our readers.

Applicable Federal Rate of 5.0% for May: Rev. Rul. 2025-10; 2025-19 IRB 1 (16 April 2025)

The IRS has announced the Applicable Federal Rate (AFR) for May of 2025. The AFR under Sec. 7520 for the month of May is 5.0%. The rates for April of 5.0% or March of 5.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2025, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”