In a series of letters, the Internal Revenue Service (IRS) provided advice to late filers, those who have extended their deadline to file until October and nonprofits. Taxpayers who missed the April 15 filing deadline should file promptly. Those who filed for an extension have until October 15 to file. The nonprofit filing date is usually May 15, 2025.

1. Automatic Filing Extension — There are several groups that qualify for an automatic extension. Military members serving in a combat zone have an extension of at least 180 days. Support personnel in the combat zone generally also qualify for this extension. Taxpayers who reside outside the United States usually qualify for a two-month extension. Finally, disaster victims in federally designated areas may qualify for an extension.
2. Refunds Issued Without Penalty — Taxpayers who missed the April deadline but qualify for a refund may file without penalty. They are encouraged to use IRS Free File on IRS.gov. These individuals may benefit from the Earned Income Tax Credit (EITC), Child and Dependent Care Credit or Child Tax Credit (CTC). The late filers who use an electronic method will usually receive a refund within 21 days. The “Where’s my refund?” tool on IRS.gov is helpful in tracking the status of your refund.
3. Reduced Penalties for Late Filers — If you have missed the filing deadline, you still should file and pay as soon as possible. The penalty for filing late is normally 5% of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25% of your unpaid taxes. If you have filed and paid your taxes timely for the past three years and meet specific requirements, you may qualify for penalty relief. The “Administrative Penalty Relief” page on IRS.gov offers additional information.
4. Payment of Your Taxes — If you owe taxes, you may pay with an IRS Online Account, IRS Direct Pay, a debit or credit card, a digital wallet or you may apply online for a payment plan. If you pay electronically, you should receive prompt confirmation by email.
5. Extensions to October 15 — Taxpayers may file for a six-month extension until October 15, 2025. There are specific automatic extensions for military members in combat zones and taxpayers living outside the U.S. Many victims in specific areas of the nation with federally declared disasters may delay filing.
6. Nonprofit Organizations — The information and tax returns for tax-exempt organizations have a May 15, 2025, filing deadline. These organizations should file IRS Form 990, 990-EZ, 990-PF or 990-T by this date. The nonprofit forms must be filed electronically. The IRS offers a series of pre-recorded online workshops. These workshops guide officers, board members and volunteers on how to maintain tax-exempt status, including how to properly file annual information returns.

Editor's Note: If a nonprofit did not file by May 15, it should file IRS Form 8868, Application for Extension of Time to File an Exempt Organization Return. If tax is due for unrelated business taxable income, that payment is required by May 15. However, most organizations are permitted to obtain the six-month extension with no tax payments.

House Ways and Means Version of 2025 Tax Bill

While the 2025 tax bill is in its initial version and there will be multiple changes by the House and Senate before the final bill is enacted, the general framework of the plan is now clear. This tax and budget bill is likely to have significant impact on all Americans. Since many tax provisions are scheduled to sunset at the end of 2025, it is essential for the House and Senate to pass a new tax bill that will establish rules and guidelines for 2026.

There are substantial provisions in the proposed bill that affect individual taxpayers.

1. Child Tax Credit— The child tax credit for 2025 through 2028 increases from $2,000 to $2,500. The taxpayer(s) and the child must have Social Security Numbers.
2. Credit for New Children— There will be a one-time $1,000 credit for a new "Money Account for Growth and Advancement" or “MAGA” account. This credit is available from 2025 through 2028, and the contribution limit will be $5,000, and is indexed for inflation. The MAGA funds may be available after age 18 for higher education or first-time home purchase.
3. No Tax on Tips— Those occupations that traditionally receive tips will be able to avoid tax. The benefit for tax-free tips will phase out for individuals with incomes over $160,000. Currently, an estimated four million workers receive tips.
4. No Tax on Overtime— There are approximately 80 million hourly workers in the U.S. They would no longer be required to pay tax on their overtime.
5. Increased Standard Deduction for Seniors— Seniors would qualify for an additional $4,000 increase in the standard deduction. This benefit from 2025 through 2028 phases out for individuals with incomes over $75,000 or married couples with incomes over $150,000.
6. Car Loan Interest Deduction— Purchasers of new cars with final assembly in the U.S. may deduct up to $10,000 in annual interest. The 2025 through 2028 deduction phases out for individuals with incomes over $100,000 or married couples over $200,000.
7. Increased Standard Deduction— Most taxpayers would have an increase in the standard deduction of $1,000 for individuals, $1,500 for head of households and $2,000 for married couples filing jointly.
8. Estate Tax Exemption— The estate exemption, currently set at $13.99 million in 2025, increases to $15 million in 2026.
9. Additional Pass-Through Deduction— The existing 20% deduction for pass-through businesses increases to 23% in 2026.
10. State and Local Tax Deduction Limit— The existing $10,000 limit is increased to $15,000 for individuals and $30,000 for married couples filing jointly. The SALT deduction will be phased out with incomes over $200,000 for individuals or $400,000 for married couples.
11. Clean Energy Credits— The credits under the Inflation Reduction Act would generally be reduced or eliminated. The $7,500 credit for an electric vehicle, credits for home energy conservation and the 30% credit for solar panels and storage batteries are phased out at the end of 2025.

Editor's Note: This is a brief summary of some key provisions of the current draft 2025 tax bill that impact individual taxpayers. There will be major amendments by both the House and the Senate. House Ways and Means Committee Chair Jason Smith (R-MO) believes the final bill will generally follow this framework. Your editor does not take a specific position on the many provisions of this bill. This information is offered as a service to our readers.

Tax and Budget Bill Battle

House and Senate leaders plan to combine the 2025 tax bill with a budget bill. The House Ways and Means Committee passed the initial draft of the tax bill. However, on May 16, 2025, the House Budget Committee rejected the initial version of the budget bill. Five House representatives voted against the bill. This was a substantial setback for the House leadership. It will make it difficult to pass the combined tax and budget bill by the Memorial Day deadline.

Representative Chip Roy (R-TX) was one of the House members who voted against the bill. He stated, "I am a ‘No’ on this bill unless serious reforms are made today, tomorrow, Sunday."

The bill was also opposed by Representative Ralph Norman (R-SC) who commented, "Sadly, I am a hard ‘No’ until we get this ironed out, and I think we can. We have made progress, but it just takes time."

The five representatives are requesting more stringent rules for qualification for Medicaid and greater cuts to the clean energy programs.

As a result, there are multiple meetings and negotiations underway. House Speaker Mike Johnson (R-LA) and House Majority Leader Steve Scalise (R-LA) are both working to find solutions.

The Budget Committee is tasked with combining the tax provisions and the spending cuts into a single bill. Leader Scalise indicated he was working on the timing provisions of various sections of the bill.

The five representatives had previously indicated they were going to vote against the bill. However, Speaker Johnson decided to proceed with the vote. The Budget Committee Chair is Representative Jodey Arrington. The House leaders and the five members will continue to work on a compromise.

An additional factor will be the positions of various Senators. Senator Josh Hawley (R-MO) published an op-ed this week indicating he will not vote for the legislation with the Medicaid cuts.

Editor's Note: This current setback in the House is a reflection of the difficult balance between spending and budget cuts. Your editor does not take a specific position on the tax and budget changes. This information is offered as a service to our readers.

Substantial Nonprofit Impacts of Draft 2025 Tax Bill

With the efforts to find tax savings in order to pass the draft 2025 tax bill, there are many sections that will have an impact on nonprofits. Two sections are viewed as beneficial, and several are likely to be harmful for philanthropy.

The individual giving areas will have two significant provisions that may encourage charitable giving and several changes that are adverse for charitable giving. There is a new non-itemizer deduction of $150 for individuals and $300 for married couples in the draft. It excludes gifts to a donor advised fund (DAF). A second benefit is a provision that allows a tax credit for the lesser of $5,000 or 10% of the taxpayer's adjusted gross income for a gift to a scholarship organization. The organization must fund scholarships for private or religious schools at the elementary and secondary level.

However, there are several provisions that may adversely impact giving by individual donors. The standard deduction will increase by $1,000 for individuals or $2,000 for married couples. This increase will continue to reduce the number of individuals who itemize their charitable deductions.

In the draft bill, the Treasury Secretary will have new powers to designate any nonprofit as a terrorist supporting organization. This provision increases the potential power of the government to revoke the tax-exempt status of nonprofits without due process.

There are proposed changes in the unrelated business income tax (UBIT) sections. The ability of a charity to provide parking for employees will be subject to UBIT. In addition, income from name and logo royalties will also be taxed as UBIT.

There is also a proposal to increase excise tax on the investment income of certain private colleges and universities in the draft bill. The graduated plan creates a 1.4% tax for private colleges and universities with over $500,000 of endowment per student. Those with over $750,000 of endowment per student pay a 7% tax on income. Institutions with assets over $1.25 million per student pay a 14% excise tax. Finally, private universities with assets of over $2 million per student pay a 21% excise tax.

There will also be a graduated excise tax for private foundation income in the draft bill. With assets below $50 million, the tax is 1.39%. Private foundations with assets over $50 million will be subject to 2.78% tax. Those with assets over $250 million are subject to a 5% tax and foundations with assets over $5 billion pay a 10% tax.

Editor's Note: The non-itemizer deduction is a welcome change. However, the increase in the excise tax on private universities and foundations will have a substantial negative impact on philanthropy.

Applicable Federal Rate of 5.0% for June: Rev. Rul. 2025-12; 2025-23 IRB 1 (15 May 2025)

The IRS has announced the Applicable Federal Rate (AFR) for June of 2025. The AFR under Sec. 7520 for the month of June is 5.0%. The rates for May of 5.0% or April of 5.0% 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.”