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Service workers in the U.S. are eagerly awaiting the elimination of taxes on their tips, but the fine print in Republicans' new law could limit savings for some workers. Only the first $25,000 in tips is free from income taxes, and tipped workers will still face the 7.65% combined payroll taxes that fund Social Security and Medicare. Workers won't be able to benefit if federal officials say their type of service job doesn't qualify. The "no tax on tips" measure, which started as a campaign promise by President Trump during a 2024 stop in Nevada, is now a key element of the tax-and-spending megabill signed into law Friday. The cut could save some service workers thousands of dollars a year in federal taxes. More than a third of tipped workers don't make enough to pay federal income taxes, including many low-income workers with children and students who work in part-time tipped jobs. The relief will take effect this tax year, including for tips already received.

 

Wall Street Journal

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Elon Musk has announced the formation of the America Party, in response to President Donald Trump's recent tax cuts law, stating: “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy.” This marks a significant break from his previous support for Mr. Trump, While new political parties often struggle to gain traction, Mr. Musk's wealth and influence could impact the upcoming 2026 elections. Despite the announcement, it remains unclear if the America Party has been formally established, as several similar entities have emerged without authenticity. Musk is actively seeking feedback on the party's direction and aims to engage in the midterm elections. Treasury Secretary Scott Bessent expressed concerns about Mr. Musk's political ambitions, suggesting that his business interests may be at odds with his new political endeavors.

 

CBS News

CNBC

New York Times

US News and World Report

In 2024, the IRS mistakenly sent incorrect data to the Department of Education, affecting approximately 7.2m student financial aid applications, according to a new TIGTA report. The error arose from a 2019 law that permitted the IRS to share certain tax information to streamline the Free Application for Federal Student Aid (FAFSA) process. The IRS began work on an API to facilitate that data sharing in April 2020, and launched the FUTURE Act-Direct Data Exchange (FA-DDX) system in December 2023 as a way for the Education Department to make requests for federal tax information.  With that data in hand, the Education Department was then able to calculate results for Income-Driven Repayment Plan Request (IDRPR) submissions and for FAFSA, the form that determines a student’s eligibility for federal aid. Eligibility is based on the income of the student and/or their parents or spouse.  But during the development of the FA-DDX system, the IRS “implemented an incorrect business requirement,” according to TIGTA. The watchdog traced that fateful error back to a cross-functional project team, including IRS personnel, who “did not understand” the education credit data elements for federal tax information. The report highlights that the incorrect data transfer could hinder students' access to financial aid, complicating their application experience.

 

FedScoop

Bloomberg Tax

Louisiana Gov. Jeff Landry has enacted a new law that revises the assessment, payment, and allocation of ad valorem taxes. Key changes include the clarification of various terms, the stipulation that interest accrues until obligations are settled or a tax lien certificate is issued, and the establishment of a lien and privilege for delinquent obligations. This law ensures that such liens take precedence over all other claims, enhancing the state's ability to collect owed taxes. As stated in the law, "a delinquent obligation be secured by a lien and privilege in accordance with the provisions of current law."

 

Bloomberg Tax

Wisconsin Gov. Tony Evers has signed a two-year state budget that introduces over $600m in annual tax cuts aimed at middle-income earners and retirees. The budget, enacted after passing the state Assembly and Senate, expands the income threshold for the state's second-lowest tax bracket of 4.4%. Joint filers earning up to $67,300 and single filers up to $50,480 will benefit from these changes. According to the Legislative Fiscal Bureau, over 800,000 joint filers will see an average tax reduction of $230, while more than 750,000 non-joint filers will receive an average reduction of $143. Additionally, the budget includes a new tax break for individuals over 67, allowing them to exclude a portion of retirement income from state taxes. The budget also features a $5m tax credit for film production and eliminates sales tax on household utility bills, projected to reduce revenue by $178m over two years.

 

Bloomberg Tax

AICPA has expressed support for the transition to electronic federal disbursements and receipts, as mandated by Executive Order 14247. This order requires the cessation of paper checks by September 30th, 2025, aiming to enhance efficiency and reduce costs. However, AICPA has highlighted potential challenges, particularly for vulnerable groups like seniors and the unbanked, who may be excluded by the requirement for a U.S. bank account. Daniel Hauffe, Senior Manager for Tax Policy & Advocacy at AICPA, commented: “Although this executive order is a step in the right direction, there are many considerations before implementing changes.” AICPA has proposed several recommendations, including exemptions for non-U.S. individuals and expanding the Electronic Federal Tax Payment System capabilities.

 

CPA Practice Advisor

K1x, a fintech company based in Morristown, New Jersey, has announced the launch of Aggregator Plus, enhancing its K1 Aggregator tax platform with automated Form 1099 data extraction. The upgrade aims to simplify the processing of complex tax documents, addressing the annual filing of over 40m Schedule K-1s and 44m Form 1099-Ks. Chief executive John LaMancuso said: “K1 Aggregator stands alone in its ability to address the needs of overworked tax professionals facing unsustainable K-1 volume and complexity.” Key features include patented AI-powered data extraction, 100% digitization of tax elements, and seamless integration into existing workflows.

 

CPA Practice Advisor

U.S. service providers barely expanded in June, helped by a pickup in business activity and bookings even as an index of employment contracted the most in three months. The Institute for Supply Management’s index of services rose nearly a point last month to 50.8, moving above the 50-mark separating expansion from contraction. Ten services industries reported growth in June, including transportation and warehousing, utilities and recreation. Six contracted, led by agriculture and construction. The ISM employment gauge dropped 3.5 points to 47.2, marking the third month of contraction in the last four. A measure of prices paid for materials and services eased in June but remained close to the highest level since late 2022. Separately, S&P Global's Services Purchasing Managers' Index for June came in at 52.9, down 0.8 points from May, but beating the forecast 52.8. "Viewed alongside an improvement in manufacturing growth reported in June, the services PMI indicates that the economy grew at a reasonable annualized rate approaching 1.5% in the second quarter, with momentum having improved since the lull seen in April. Rising demand for services has meanwhile encouraged firms to take on additional staff at a rate not seen since January," commented S&P Global Market Intelligence chief business economist Chris Williamson.

 

Advisor Perspectives

Bloomberg

New orders for U.S.-manufactured goods surged in May on strong demand for aircraft. The Commerce Department said factory orders rose 8.2%, following a downwardly-revised 3.9% in April, in line with the expectations of economists polled by Reuters. Commercial aircraft orders soared 230.8%, reflecting at least 150 aircraft from Qatar Airways placed with Boeing. Orders for motor vehicles, parts and trailers rose 0.8%, and were up 1.5% and and 0.7% for computers and electronic products, and electrical equipment, appliances and components respectively. 

 

Reuters

The General Services Administration (GSA) has disbanded 18F, a tech unit behind major public services like Login.gov, under orders from the Department of Government Efficiency. Founded in 2014, 18F supported projects for agencies like the DOJ and IRS. The sudden move affected around 70 staff and follows cuts to the US Digital Service. Critics fear weakened federal IT security and claim the shift opens doors for unvetted contractors and aligned Silicon Valley firms to take over.

 

MSN

Tom Goldstein, founder of SCOTUSBlog, is contesting allegations of tax evasion, claiming that federal prosecutors are using "spurious legal theories" and have not fully disclosed the charges against him. He filed multiple motions in the U.S. District Court for the District of Maryland to challenge the tax charges and seek their dismissal. The legal battle has been ongoing since his indictment in January, which includes questions about whether he breached pre-trial release conditions by transferring cryptocurrency.

 

Bloomberg Tax

Joseph Stiglitz has declared the planned global minimum tax on multinational profits "probably dead in the water." After years of advocacy by Mr. Stiglitz, the OECD, and the Tax Justice Network, the initiative aimed to curb profit shifting to low-tax havens. However, the second Trump administration's opposition has derailed progress, labelling the tax regime as unfair and threatening "revenge taxes" on nations that comply. While most countries have retreated in the face of these threats, Spain is urging the European Union to resist. Mr. Stiglitz argues that the EU's economic strength could enable it to stand firm, cautioning that "if [Trump] gets what he wants, he always comes back for more." Despite the potential for resistance, he doubts the necessary political will exists within Europe.

 

The Observer

Brazilian Supreme Court Justice Alexandre de Moraes has suspended both President Lula's IOF tax hike and Congress's reversal of it, calling for mediation on July 15. The suspension aims to ease tensions between the executive and legislative branches after clashes over the tax on financial transactions. Lula’s administration claims Congress overstepped its powers, while lawmakers argue the hike was unjustified. Finance Minister Fernando Haddad welcomed the ruling, saying it will clarify constitutional boundaries.

 

Bloomberg Tax

Reuters