As the year races past us, it’s nearly time to start preparing to close your books on 2024. And once you do, you’ll need to hand them over to the IRS fairly shortly. While April 2025 might feel like it’s a long way off right now, it can approach quickly. That’s particularly true if your company has a busy season that coincides with the holidays or the new year.
Whatever the case may be for your startup, some preparation always pays off when it comes to tax filings.
With that in mind, we wanted to look at some new things you’ll need to navigate this spring. Here’s a peek at what’s new in the corporate and personal tax world for 2025.
Corporate alternative minimum tax rates
Introduced by the Inflation Reduction Act, the corporate alternative minimum tax (CAMT) probably won’t impact your startup for some time. That’s because this rule only applies to companies with an adjusted financial statement income (AFSI) that averages out above $1 billion. If your company reaches that AFSI threshold, you’re subject to a 15% minimum tax on profits reported to shareholders.
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) released a Notice of Proposed Rulemaking (NPRM) very recently on September 13, 2024. It’s now open for a 90-day formal comment period, and you have the opportunity to submit a comment until December 12.
While most startups are well below the $1 billion AFSI threshold, it’s still worth calling out this NPRM. That’s because if this rule change is adopted, it dramatically alters how large companies in the U.S. get taxed. Without this change, the Treasury says that 60% of the affected corporations would have an effective federal tax rate of 1% or less.
As you scale up your company, it’s important to keep tax rules like this in mind. That’s not to say you shouldn’t reach for that $1 billion threshold — but it is worth talking with your accountant as you approach it. It’s also worth monitoring how this NPRM moves forward and if it gets adopted into the tax code in 2025.
Direct File is a permanent option
The IRS piloted a new filing option during the 2024 filing season and apparently, things went well.
More than 15,000 taxpayers used the IRS’s new Direct File system and completed a survey about it afterward. Respondents seemed to think pretty highly of this new filing option. Per data from the Treasury, 90% said the experience of using Direct File was “excellent” or “above average.” They reported that it was easy to use, too.
This new filing option could be a boon to the IRS’s reputation. Among survey respondents, 85% said using Direct File increased their trust in the agency.
Perhaps best of all, Direct File is free to use.
Generally speaking, startups benefit from working with an accountant to file their corporate taxes. This allows you to properly maximize benefits like the R&D credit to minimize your tax liability.
But Direct File can be helpful to founders for their own personal taxes. It provides a step-by-step checklist to guide you through your filing. In 2025, you might choose to work with your accountant for your startup’s taxes but use Direct File for your personal filing.
Final regulation on the excise tax on certain stock buybacks
In June, the Treasury and the IRS issued final regulations about how to report and pay the excise tax for corporate stock repurchases.
Another installment from the Inflation Reduction Act, this new requirement imposes a 1% excise tax on the aggregate fair market value of some corporate stock repurchases. And don’t assume companies can dodge this tax because they didn’t buy back any shares in 2024. This excise tax goes back to apply to any repurchases made from January 1, 2023 onward.
Now, here’s the good news for startups. This regulation only applies to publicly traded companies. So as you’re growing, you don’t need to worry about this added tax.
It does, however, benefit you to keep this relatively new rule in mind. If you grant an investor a bunch of shares with the intention to buy them back later, for example, you should factor this in.
Ultimately, this newly finalized regulation gives you yet another reason to carefully monitor how you grant equity. Keeping your cap table diligently updated goes a long way here.
Zooming out, there aren’t too many new rules directly impacting startups’ tax filings in 2025. But as these adjustments we just outlined showcase, the world of tax is continually shifting.
Make sure you’re having ongoing conversations with your accountant about new rulings and how they might affect you and your company. To chat with an experienced team of accountants who specialize in serving tech startups, contact us.