As tax season unfolds, millions of taxpayers are beginning to receive their W-2 forms and preparing to file their returns. Tax Day — the deadline to file returns, pay taxes, or request an extension — is April 15, although state deadlines may vary. Typically, the IRS processes most refunds within 21 calendar days.
While many will find their filing process relatively straightforward, there are a few important changes that could impact taxpayers in 2025. Although President Trump proposed several tax reforms during his campaign, including potential changes to taxes on Social Security benefits and an increase in state and local tax deductions, none of these proposals have been implemented yet. As a result, taxpayers can generally expect to encounter few surprises when filing this year.
However, some adjustments and new rules will affect certain groups of taxpayers.
Online Sales Income Through Third-Party Apps
For freelancers, business owners, and others earning income through online sales, a key change requires individuals who earn $5,000 or more from online sales to fill out a 1099-K tax form. This rule applies to transactions processed through platforms such as PayPal, Venmo, Cash App, and other third-party services.
While platforms like PayPal and eBay may issue a 1099-K tax form even if users have not exceeded the $5,000 threshold, it’s crucial to note that only the profit from these transactions is taxable, not the total income. For example, if you sell an item for $200 but paid $150 for it, only the $50 profit is subject to taxation.
“The new reporting requirements mean that individuals will need to be more diligent with their recordkeeping,” says Tim Rupert, a professor of accounting. “In our tax system, to deduct an expense related to your business, you must have a proper record of it. With increased reporting, there is a greater chance that the IRS may audit your return or scrutinize your transactions.”
To stay organized, consider using accounting or business budget apps designed to track receipts and expenses. The reporting threshold for 2025 will drop to $2,500, and by 2026, it will further decrease to $600.
Deductions and Credits
The IRS encourages taxpayers not to overlook specific tax credits that could significantly reduce their tax bills. Among the most commonly overlooked credits are the child tax credit, the earned income tax credit (EITC), and credits for higher education expenses.
“The eligibility for the earned income tax credit can be complex, so it’s important to take the time to ensure you qualify,” Rupert advises. “There’s often noncompliance with the earned income tax credit, which is something the IRS closely monitors.”
Be sure to review eligibility requirements carefully to maximize these credits. Neglecting to claim them could lead to missed opportunities for reducing your tax liability.
IRS Direct File Software
For those looking to file their taxes directly through the IRS, the agency’s own software system, Direct File, is available for the 2025 tax season. Last year, the IRS launched this pilot system in 12 states, and this year, it has expanded to 25 states. The system now supports more income types and deductions, offering a convenient, free way for individuals to file their taxes.
Potential Future Changes to Tax Law
Several potential changes to tax law are expected over the next fiscal year. A significant portion of the Tax Cuts and Jobs Act (TCJA), passed in 2017, is set to expire at the end of 2025. This law provided tax cuts for the middle class, among other provisions. As these provisions near their expiration, lawmakers are left with the challenge of determining whether they will extend them.
“There’s been a lot of uncertainty about how long Congress will continue these tax benefits and what the impact on the federal deficit will be,” Rupert explains.
With the expiration of the TCJA’s provisions, including lower individual income tax rates and enhanced deductions, taxpayers should stay informed about potential changes that could affect their returns in future years.
Conclusion
While tax filing for 2025 will largely follow familiar procedures, there are key changes that taxpayers need to be aware of, particularly regarding online sales income and available credits. Taxpayers should take advantage of all available credits and ensure they’re keeping accurate records of their transactions. With new tools like the IRS Direct File system, filing taxes may be easier than ever, but staying informed about potential future changes remains crucial. As we approach the expiration of the TCJA provisions, it’s important to keep an eye on how legislative actions could impact tax filings in the coming years.
