Federal Updates
Individual Updates
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The IRS has released drafts of the new 1040 form as well as a new schedule (Schedule 1A) for the new deductions that go into effect with the 2025 tax return (which we have covered in prior newsletters)
- Tip income deduction
- Overtime deduction
- Car loan interest deduction
- Senior deduction
- Click the link below for the current draft of the new 1040 and Schedule 1A
- Social security has released a number of updates
- The annual wage limit subject to the 6.2% FICA tax has increased to $184,500 (an increase of $8,400 or 4.8%)
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The annual COLA for 2026 will be 2.8% so social security benefits will increase by this amount.
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The base Part B Medicare rate for 2026 will be $202.90 per month, a $17.90 (9.6%) increase from 2025 rates.
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The IRMAA rates and MAGI thresholds for 2026 have been released. We find the Center for Medicare and Medicaid Services (CMS) site to have the best data on these so have included a link to that site below. Remember, IRMAA is based upon your MAGI from your 2024 tax return.
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For those receiving SS benefits before full retirement age (FRA), the maximum amount you can earn without reducing your benefits increased to $24,480 (from $23,400 in 2025). If you reach FRA in 2026, you can earn up to $65,160
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For those that had Social Security benefits reduced due to Windfall Elimination Provision (WEP) or Government Pension Offset (GPO), those provisions have been repealed and full social security benefits have been restored retroactive to 2024
- Some of you may have already received a lump sum payments for this reversal (and yes, these added payments are taxable income similar to other social security benefits).
- As a reminder, once you start receiving Medicare benefits, you can no longer contribute to an HSA
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IRS payment addresses - as part of IRS staff and spending reductions, several processing centers have been consolidated. For those taxpayers still choosing to mail in estimated payments (we still encourage all taxpayers to use on-line payments when possible), please note the new mailing address for payments if your primary residence is in one of the following states
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For taxpayers in states including Alaska, California, Colorado, Hawaii, Idaho, Kansas, Michigan, Montana, Nebraska, Nevada, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Utah, Washington, and Wyoming, estimated payments for Form 1040-ES must now be sent to the following address (some of these states payments had previously been sent to Cincinnati, Ohio):
- P.O. Box 1300, Charlotte, NC 28201-1300
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Due to increased identity fraud, the IRS is encouraging all taxpayers to utilize identity protection PIN's. You can use the link below obtain an identity PIN - and please remember to share the ID PIN with us as it is needed for e-filing your returns.
Business Updates
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Payroll tax notices - if your quarterly or annual payroll levels changed in 2025, you may have received a letter from the IRS indicating how frequently you need to remit payroll taxes withheld to the IRS in 2026.
- These notices are informational only (no payments are due now) but should be given to your payroll provider to make sure you make payments on time going forward.
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W2/1099 Reminders - You must provide W2's to your employees and 1099's to your independent contractors no later than January 31st or you could be subject to penalties.
- Although the 1099 limit is being raised next year to $2,000 for any independent contractors performing services for you, the 1099 limit for 2025 remains $600.
E-File Shutdown (business and personal)
Each year, the IRS suspends the ability to submit e-files as it updates its systems for the coming tax season. During this shutdown, returns can only be mailed to the IRS which further delays processing and, if applicable, refunds.
This year, the e-file shutdown will occur on December 19th, 2025. There is no set date yet on when e-file capability will open back up but it is normally toward the end of January (and coincides with the start of the new tax year). For those that have not yet filed 2024 (or prior years), keep this e-file shutdown date in mind and get us any pending data as soon as possible so that we can do our best to meet the-file deadline.
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Colorado Updates
Individual Updates
- The CO income tax rate has been permanently reduced to 4.25%
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Of the new federal deductions noted above, CO will not allow a deduction for overtime premiums so the 2025 CO tax form will require that deduction to be added back
- For now, all other new deductions (tips, car loan and senior) are allowed by CO but some of these may change in 2026
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Although eliminated at the federal level, CO still offers an EV credit for those qualifying
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The CO social security exclusion (previously only eligible for those 65 and older) has been expanded to allow an exclusion for those 55-64 receiving social security benefits (with certain income and deduction caps)
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As a result of the November election, amendment MM passed. Beginning with the 2026 tax returns (filed in 2027), taxpayers with AGI over $300,000 will have limits placed on the federal itemized deductions they can take on their state return. The limit will be $1,000 for single filers and $2,000 for joint filers.
Business Updates
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New minimum wage rates as of January 1st, 2026
- The state minimum wage for CO increases to $15.15 from $14.81 (a 2.3% increase) and for tipped employees it increases to $12.14 from $11.79 (a 3% increase)
- The state minimum wage for Denver increases to $19.29 from $18.81 (a 2.6% increase) and for tipped employees it increases to $16.27 from $15.79 (a 3% increase)
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2026 unemployment rate notices - CO has begun providing updated UI rates for 2026. These notices should be provided to your payroll TPA so that you remit the proper amount of unemployment insurance beginning in 2026
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Accounting humor
Did you know that 12 out of 10 CPA's cannot count?
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