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Annual Tax Season Update: 2026 Filing Season #292425-2

Course Overview

Credit

Amount

CPA

10.5

CDFA^®

10.5

EA / OTRP

Course Author: Paul J. Winn CLU ChFC Field of Study (CPA): Taxes Field of Study (CDFA): Taxes Field of Study (EA/OTRP): taxes

Course Description

This course does not qualify for the Annual Filing Season Refresher Course (AFTR) requirement.

Publication/Revision Date: 8/11/2025.

Each year, various limits impacting income tax return preparation and tax planning are affected by inflation-related changes. In addition, various new tax laws may be passed. This course will examine many of those changes.

The Annual Tax Filing Season Update course discusses new tax law and recent updates for the 2026 filing season, including the retroactive provisions of the One Big Beautiful Bill Act (OBBBA), impacting 2025 income. In addition, it provides a general tax review, and examines important rules governing tax return preparer ethics, practices and procedures.

Table of Contents

Chapter 1 – New Tax Law/Recent Updates2

Introduction	2
Chapter 1 Learning Objectives	2
Annual Inflation Adjustments	2
Education Expenses of Elementary and Secondary School Teachers	2
Income Limitation for a Qualifying Relative	3
Interest on Education Loans	3
Amounts Included as Interest	3
Student Loan Interest Deduction	3
Foreign Earned Income Exclusion	4
Earnings Excluded in Foreign Earned Income	4
Limitation on Foreign Earned Income	5
Unified Credit Against Estate Tax	5
Annual Exclusion for Gifts	5
Education Savings Bond Program	6
Qualified Long-Term Care Insurance Premiums and Benefits	6
Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits	7
Adoption Credit Benefit and Phase-Out	7
AMT Exemption for Child Subject to Kiddie Tax	7
Capital Gains and Losses – Changes for 2025	7
Average Annual Wage Limitation	8
Threshold for Excessive Business Loss	8
Social Security Limits	8
Standard Mileage Rates	9
Business Use of a Taxpayer's Personal Vehicle	9
Personal Vehicle Use for Charitable Purposes	9
Use of a Taxpayer's Personal Vehicle to Obtain Medical Care	10
Basis Reduction Amount	10
Payment Card and Third-Party Transaction Reporting Requirements	10
Transactions that Require Reporting	11
Transactions not Requiring Reporting	11
Reporting Sale of Personal Items	11
IRS Direct File Program	11
Participating States	12
Eligible Identification	12
Eligible Income	12
Direct File and the Standard Deduction	13
Direct File Eligibility based on Health Insurance Coverage Status	13
Direct File and ID.me	14
Higher Catch-up Contribution Limits for Individuals Aged 60 -63	14
Qualified ABLE Programs Increased Age of Onset for 2026 and Later	14
One Big Beautiful Bill Act	15
Standard Deduction Made Permanent	15
Deduction for State & Local Taxes (SALT Deduction)	15
Reduction of Limitation Based on Income	16
Senior Deduction	16
Child Tax Credit	16
Tax on Tips	16
Tax on Overtime	17
Car Loan Interest Deduction	17
Clean Energy Incentives – Non-Commercial	18
Bonus Depreciation	18
Summary	19
Chapter 1 Review	19

Chapter 2 – General Income Tax Review I21

Introduction	21
Learning Objectives	21
Filing Status Name Review	21
Benefits of Filing as Qualifying Surviving Spouse	21
Criteria for Filing as Qualifying Surviving Spouse	22
Exceptions and Special Circumstances	22
Income Limitation for a Qualifying Relative	23
Taxability of Earnings	23
Advance Commissions and Other Earnings	24
Allowances and Reimbursements	24
Back Pay Awards	24
Bonuses and Awards	25
Differential Wage Payments	25
Government Cost of Living Allowances	25
Nonqualified Deferred Compensation Plans	25
Notes Received for Services	25
Overtime Pay	26
Severance Pay	26
Sick Pay	26
Social Security and Medicare Taxes Paid by an Employer	26
Stock Appreciation Rights	26
Tip Income	26
Schedule B, Interest, Dividends, Foreign Accounts and Trusts	27
Retirement Income Reporting and Taxability	27
Social Security Benefits	27
Taxability of Benefits	28
Temporary Deduction for Seniors	28
Reporting	29
Qualified Retirement Plans	29
Contributions to Qualified Employee Plans	29
Employee Plan Contributions	29
Qualified Retirement Plan Distributions	30
Early Distributions	30
Required Qualified Plan Minimum Distributions	30
Qualified Plan Rollovers	30
Plan Death Benefits	30
Designated Roth Account Distributions	30
Qualified Roth Account Distributions Tax-Free	30
Nonqualified Roth Account Distributions	31
Annuities	31
Nonqualified Annuity	31
Individual Retirement Accounts	32
Traditional IRAs – Contributions & Distributions	32
Premature Distributions	33
Premature Distributions Avoiding Tax Penalty	33
Required Distributions during Owner's Lifetime	33
Roth IRAs	33
Limits on Roth IRA Contributions	33
Non-Qualified Roth IRA Distributions of Gain before 59 ½ Subject to Tax Penalty	34
No Required Roth IRA Lifetime Distributions	34
IRA Rollover Per-Year Limit	34
Summary	35
Chapter 2 Review	35

Chapter 3 – General Income Tax Review II37

Introduction	37
Chapter 3 Learning Objectives	37
Reporting and Taxability of Unemployment Compensation	37
Unemployment Compensation Taxable	37
Nondeductible Contributions to Governmental Unemployment Compensation Plan	37
Repayment of Unemployment Compensation	38
Alimony – Pre 2019 and Post 2018 Divorce Agreements	38
Schedule C, Profit or Loss from Business (Sole Proprietorship)	38
Income & Expenses Defined	38
Business vs. Hobby	39
Business Use of a Home	40
Methods of Figuring the Home-Office Deduction	40
Actual Expense Method	40
Simplified Method	42
Recordkeeping Requirements	43
Gross Receipts	43
Inventory	44
Expenses	44
Entertainment Expenses	44
Exceptions to Food and Beverage Expenses	44
Section 179 Expense Limits	45
Depreciation	45
Bonus Depreciation	45
Qualified Property	46
Luxury Auto Depreciation Limits	46
Listed Property Updates	46
Deduction for Employees	47
Business-use Requirement	47
Passenger Automobile Limits and Rules	47
Summary	47
Chapter 3 Review	48

Chapter 4 – General Income Tax Review III49

Introduction	49
Chapter 4 Learning Objectives	49
Capital Gains and Losses	49
Short-Term and Long-Term Capital Gains and Losses	49
Reporting Capital Gains and Losses	49
IRS Form 8949, Sales and Other Dispositions of Capital Assets	50
Schedule D, Capital Gains and Losses	50
Standard Deduction Eligibility	50
Standard Deduction Amounts	50
Standard Deduction for Blind and Senior Taxpayers	51
Standard Deduction Summary	51
Itemized Deductions Schedule A	51
Medical and Dental Expenses	51
State and Local Tax Deduction	52
Home Mortgage and Car Loan Interest	52
Home Mortgage Interest and Home Equity Loans	52
Mortgage Debt Refinancing	52
Car Loan Interest	53
Charitable Contributions	53
60% AGI Limit for Cash Contributions	53
Contemporaneous Written Acknowledgement	53
Content and Timing of Contemporaneous Written Acknowledgement	53
Casualty Loss Deduction	54
Special Rules for Qualified Disaster-Related Personal Casualty Losses	54
Moving Expense Deduction	54
Moving Expenses in Active Military Relocations	54
Recordkeeping and Documentation of Deductions	54
Tax Credit Eligibility	55
Child Tax Credit	55
Child Tax Credit Phaseout and Nonrefundable Amounts	56
Social Security Number Requirement	56
Credit for Other Dependents	56
Limits on the CTC and ODC	57
Claiming CTC and ODC	57
Additional Child Tax Credit	57
Child and Dependent Care Credit	57
Eligible Care Recipients Limited to Qualifying Persons	58
Eligible Taxpayers	58
Education Credits	58
American Opportunity Credit	58
Figuring the American Opportunity Credit	59
Lifetime Learning Credit	59
Figuring the Lifetime Learning Credit	60
Summary	60
Chapter 4 Review	60

Chapter 5 – General Income Tax Review IV62

Introduction	62
Chapter 5 Learning Objectives	62
Earned Income Tax Credit	62
Adjusted Gross Income Limits	62
Valid Social Security Number Required	63
Tax Filing Status	63
Separated Spouses	63
Citizenship or Residency	63
EITC Rules That Apply Only if the Taxpayer Has a Qualifying Child	63
EITC Rules That Apply if Taxpayer Does Not Have a Qualifying Child	64
Energy Credits	64
Modified Energy Efficient Home Improvement Credit	67
Qualified Energy Efficiency Improvements	67
Energy Efficient Building Envelope Component	67
Tax Credit Limitations	68
Qualified Energy Property	68
Heat Pumps and Heat Pump Water Heaters	68
Biomass Stoves and Boilers	68
Oil Furnace and Hot Water Boilers	69
Panelboard, Circuity Replacements, or Improvements	69
Residential Energy Property Expenditures	69
Eligible Fuel	69
Home Energy Audits	69
Subsidized Energy Financing	70
Tax Credits Reduce Taxpayer's Basis	70
Product Identification Number Required	70
Qualified Manufacturer/Identification Number	70
Effective Dates	70
Modifications to the Residential Clean Energy Property Credit	70
Extension of the Credit	71
Credit Phaseout	71
Battery Storage Technology Expenditures	71
Clean Vehicle Credits After September 30, 2025 – Non-Commercial	71
New Clean Vehicle Credits Before October 1, 2025	71
New Clean Vehicle Tax Credit Requirements	72
Manufacturer's Suggested Retail Price Affects Tax Credit Eligibility	72
Income-Based EV Tax Credit Limitations	72
Transfer of Credit	72
Special Rules Applicable to New Clean Vehicle Credit	72
Previously-Owned Clean Vehicle Credits Before October 1, 2025	73
Income-Based EV Tax Credit Limitations	73
Transfer of Credit	73
Special Rules Applicable to a Previously-Owned Clean Vehicle	73
Revenue Procedure 2023-33	73
Summary	74
Chapter 5 Review	74

Chapter 6 – General Income Tax Review V76

Introduction	76
Chapter 6 Learning Objectives	76
Tax Treatment of Virtual Currency	76
Alternative Minimum Tax (AMT)	77
Alternative Minimum Tax Exemption Amount Increased	77
QBI Deduction	78
Deduction Eligibility	78
Pass-Through Deduction Generally Limited to Qualified Trade or Business	78
Qualified Trade or Business	78
IRS Forms for Qualified Business Income Deduction – 8995 & 8995-A	79
Qualified Business Income Deduction Simplified Computation - Form 8995	79
Qualified Business Income Deduction - Form 8995-A	80
Rental Real Estate Safe Harbor	82
Kiddie Tax – Unearned Income of Minor Children	82
Kiddie Tax Applicability	82
Alternative Minimum Tax	83
Section 529 Plans	83
Achieving a Better Life Experience (ABLE) Account	84
Tax-Deferred Account	84
ABLE Account Distributions	84
ABLE Account Contributions	84
TCJA Changes to ABLE Accounts	84
Additional Designated Beneficiary Contributions Permitted	84
Saver's Credit	84
Discharge of Student Loan Indebtedness	85
Net Operating Loss (NOL)	86
Premium Tax Credit	86
Federal Poverty Level	87
Amount of the Credit	87
Benchmark Plan	87
Additional Tax Limitation	87
Health Insurance Marketplace Statements	88
Employee Fringe Benefits	88
Qualified Transportation Fringe Benefits	88
Medical Savings Accounts	89
Archer MSA Tax Benefits	89
Archer MSA Eligibility	89
Archer MSA Pilot Program Ended	89
High Deductible Health Plan Requirement	89
Archer MSA Contributions	89
Health Savings Accounts	90
HSA Benefits	90
HSA Eligibility	91
HSA High Deductible Health Plan Requirement	91
HSA Contributions	91
HSA Contributions from Multiple Sources	92
Additional Contributions for Age 55 and Older Account Holders	92
Health Flexible Spending Arrangement Contributions	92
Depreciation of Rental Property	92
General Depreciation System vs Alternative Depreciation System	92
Tax Withholding and Estimated Tax Payments	93
Tax Withholding	93
Form W-4 Employee's Withholding Certificate	93
Exemption from Withholding	93
Penalties	94
Withholding from Nonwage Income	94
Estimated Tax	94
Requirement to Pay Estimated Tax	94
Balance Due and Refund Options	95
Payment of Income Tax Owed	95
Refunds	95
Limit on Direct Deposit Refunds	95
Federal Income Tax Return Filing Due Dates and Filing for Extensions	96
Calendar Year and Fiscal Year Taxpayers	96
Extensions of Time to File	96
Automatic Extension of Time to File	96
Individuals Outside the United States	97
Individuals Serving in a Combat Zone	97
Summary	98
Chapter 6 Review	98

Chapter 7 – Practices, Procedures & Professional Responsibility100

Introduction	100
Chapter 7 Learning Objectives	100
Tax Related Identity Theft (Publication 5199)	100
Assisting Victims of Identity Theft	101
Safeguarding Taxpayer Data (Publication 4557)	101
Laws and Regulations Requiring Privacy/Security	101
Best Practices to Safeguard Data	102
Extended Validation SSL Certificate	102
External Vulnerability Scan	102
Information Privacy and Safeguard Policies	103
Protection Against Bulk Filing of Fraudulent Income Tax Returns	103
Public Domain Name Registration	103
Reporting of Security Incidents	103
Individual Taxpayer Identification Numbers	103
Who Needs an ITIN?	104
ITIN Renewals	104
Preparer Penalties	105
Due Diligence in Tax Preparation	106
Head of Household Filing Status	107
Taxpayer Considered Unmarried	107
Required Marriage Test Supporting Documents	108
Keeping up the Taxpayer's Home	108
Required Keeping Up a Home Test Supporting Documents	108
Qualifying Person	109
Qualifying Child	109
Required Qualifying Person Test Supporting Documents	109
Common Head of Household Errors	110
Earned Income Tax Credit	110
EITC Due Diligence Requirements	110
Most Common EITC Errors	110
Education Tax Credits	111
Most Common AOTC Errors	111
Child Tax Credit	111
Most Common CTC/ACTC/ODC Errors	112
Compliance with E-file Procedures	112
Affected Tax Return Preparers	112
Timing of Taxpayer Signature	112
Timing of Filing	113
Recordkeeping	113
Prohibited Filing with Pay Stub	113
Proper Handling of Rejects	113
Annual Filing Season Program Requirements	114
Consent to Adhere to Circular 230 Requirements	115
Tax Return Preparer Duties and Restrictions	115
AFSP Participants' Limited Representation Rights	116
Summary	116
Chapter 7 Review	118

Answers to Review Quizzes119

Chapter 1 Review	119
Chapter 2 Review	120
Chapter 3 Review	122
Chapter 4 Review	123
Chapter 5 Review	126
Chapter 6 Review	127
Chapter 7 Review	128

Glossary130

Index132

Appendix A135

Appendix B136

Course Details

Author: Paul J. Winn CLU ChFC

Paul J. Winn CLU ChFC — Financial Writer, Editor & Trainer. Education: B.A., St. John’s University (1961–1964); Law School, University of Virginia (1964–1965); MBA program Binghamton University (1986–1989); CLU (1985); ChFC (1987). Experience: Thirty years in the life insurance and investment industry (1965–1995). Thirty-one years as a financial writer, editor and trainer (1995–2026). Paul held positions at Mutual Life Insurance Company of New York as product developer and compensation officer; at Security Mutual Life Insurance Company as general agent, marketing vice president, and agency vice president; at Principal Financial Group as agency manager; and as president of Maryland Financial Corporation, managing a financial adviser corporation providing tax, investment and financial planning. As a writer and editor, Paul is a published book author whose books include Tax Planning from the Heart, Business Succession Planning, and Dominating Obamacare. He served as writer and editor of a major mutual life insurance company’s agent training university, created more than 200 insurance, securities and tax training courses in online, print and scripted classroom formats, and is the founder and CEO of Winn Publications LLC, a tax and insurance continuing education course licensor.

Publication/Revision Date: 2/3/2026

Course Exam Questions (online): 60 (multiple-choice)

Program Delivery Method: Self-Study (NASBA QAS Self-Study)

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None
CDFA®	Intermediate	None	None
EA/OTRP	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

Registered with the Institute for Divorce Financial Analysts

IRS Qualified Sponsor I.D.: FWKKO — Course I.D.: FWKK0-U-00723-25-S

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Describe the tax law changes for 2025 affecting individual taxpayers brought about by passage of the One Big Beautiful Bill Act;
Identify the principal individual income tax changes brought about by recent legislation;
Apply the inflation-adjusted and other limits to the proper preparation of taxpayers' income tax returns;
Recognize the federal income tax filing statuses and the criteria for their use;
Identify the types of income that must be recognized;
Apply the tax rules to the various credits and adjustments to income that are available to taxpayers;
Recognize the penalties that may be imposed on a preparer for failing to meet ethical and practice standards in preparing tax returns; and
Identify the duties and restrictions imposed on tax preparers under Circular 230.

Online Book, Online Exam

$75.00

Hardcopy Book, Online Exam

$93.00