Tax Coda Weekly Digest — November 9, 2025
This week, the tax world saw policy reversals, power checks, and credibility tests.
Treasury pulling the plug on Direct File, courts cutting back regulatory reach, and the IRS balancing compliance relief with enforcement. The theme is accountability. Each branch is reclaiming its lane.
1. Treasury moves to shut down IRS Direct File
Treasury told Congress it wants the IRS to stop running Direct File, the government’s in-house free filing system. The report says Direct File reached less than 1% of taxpayers, cost too much per return, and was distracted from modernization priorities. Treasury says the IRS should instead improve Free File and volunteer prep programs.
Why It Matters:
Marks an official retreat from government-run return prep after one year of testing.
Signals a stronger reliance on private software and community programs for free filing.
Indicates Treasury wants to reallocate resources to core modernization work.
Takeaway:
Direct File is done. Expect free filing efforts to shift back to private-sector partnerships.
2. Liberty Global Inc. v. Commissioner — Courts push back on expansive Treasury regulations
The Tenth Circuit said Treasury’s regulations can’t rewrite the tax code. It limited reliance on regulatory text alone and ruled that the statutory language controls when the two conflict. The case involved Liberty Global’s cross-border stock sale and the timing of foreign tax credits.
Why It Matters:
Reinforces that statutes, not regulations, are the ultimate authority.
Narrows Treasury’s interpretive power in complex corporate transactions.
Encourages taxpayers to evaluate positions under the statute first, not only the regs.
Takeaway:
Regulations are no longer a safe harbor when they drift from the statute’s words.
3. IRS Notice 2025-62 — Penalty relief for reporting tips and overtime
The IRS granted one-year penalty relief to employers and payors that make mistakes reporting cash tips and qualified overtime pay under the One Big Beautiful Bill. The relief covers 2025 information returns and payee statements.
Why It Matters:
Gives employers extra time to adjust payroll systems to new reporting categories.
Waives penalties for incorrect or incomplete filings during 2025.
Clarifies that separate reporting of tip amounts and occupations isn’t required this year.
Takeaway:
For 2025, mistakes in reporting tips or overtime won’t trigger penalties—but only for this transition year.
4. Trump pardons Binance founder Changpeng Zhao
President Trump pardoned Changpeng Zhao, founder of Binance, less than two years after Zhao pleaded guilty to anti-money-laundering violations. The move came amid growing political connections between crypto firms and Trump-aligned investors.
Why It Matters:
Highlights the politicization of crypto enforcement and executive clemency.
May complicate ongoing regulatory actions against Binance entities.
Signals shifting treatment of digital-asset leaders in Washington.
Takeaway:
Crypto’s fate now depends as much on politics as on compliance.
5. Foulds v. Commissioner — Tax Court upholds IRS levy
The Tax Court upheld a levy against a Kansas doctor who ignored IRS deficiency notices. The court said the notices were mailed correctly so that the taxpayer couldn’t challenge the underlying liability at the collection stage.
Why It Matters:
Confirms that proof of mailing is enough to establish notice.
Shows taxpayers can’t relitigate old liabilities in Collection Due Process cases.
Demonstrates that nonresponse leads directly to enforced collection.
Takeaway:
Ignoring IRS mail guarantees one thing: collection proceeds.
6. Tax Court cuts easement deduction from $10 million to $612,000
The Tax Court sharply reduced a conservation easement deduction after finding the property’s claimed quarry potential was speculative. Using comparable-sales data, the court valued the easement at $612,000.
Why It Matters:
Reinforces that easement valuations must rest on objective, market-based evidence.
Shows inflated appraisals tied to unlikely development scenarios won’t stand.
Adds to a string of decisions narrowing conservation deduction claims.
Takeaway:
Easement deductions must match market reality, not hypothetical mining dreams.