Sellers CPA May 2025 Alabama Tax Newsletter

Welcome to the May 2025 Tax Newsletter from Sellers CPA

This month, we highlight recent executive actions by President Donald J. Trump that may impact tax law, alongside Alabama-specific updates and strategies tailored to keep you compliant and financially secure. Let’s explore how these changes affect you and your business in Alabama.

Executive Orders from President Trump Impacting Tax Law

As the 47th President of the United States, Donald J. Trump has issued several executive orders and memoranda since his inauguration on January 20, 2025, that could influence tax policy, both federally and in Alabama. Below, we outline key actions relevant to our local clients, based on current information.

1. Regulatory Freeze and IRS Oversight

On January 20, 2025, President Trump issued an executive order freezing all regulatory rulemakings not yet published in the Federal Register and directing agencies to consider a 60-day delay for recently published rules. This freeze, a standard practice in new administrations, includes IRS regulations and could delay or alter guidance on tax reporting, deductions, or credits. For Alabama taxpayers, this may pause updates to federal tax forms or procedures, potentially affecting how you file 2025 taxes.

Local Impact: Alabama’s Department of Revenue often aligns with federal tax rules, so delays in IRS guidance could slow state-level clarifications on deductions or credits. Keep detailed records to ensure compliance with existing Alabama tax requirements.

2. America First Trade Policy and Tariffs

President Trump’s “America First Trade Policy” memorandum, issued January 20, 2025, calls for a review of U.S. trade policies, including imposing tariffs to address trade imbalances. On April 2, 2025, he declared a national emergency under the International Emergency Economic Powers Act (IEEPA), imposing a 10% tariff on all countries starting April 5, 2025, with higher tariffs on nations with large trade deficits effective April 9, 2025. These tariffs aim to counter foreign taxes like value-added taxes (VAT) that disadvantage U.S. businesses.

Local Impact: For Alabama’s online sellers and small businesses importing inventory, tariffs could increase costs for goods sourced from countries like China or Canada. These costs may reduce profit margins or raise prices for Alabama consumers, indirectly affecting sales tax collections. Track import expenses closely, as they may qualify as deductible business costs on your Alabama tax return.

3. Tax Policy Priorities

President Trump has outlined tax priorities through executive actions and public statements, including:

• No Tax on Tips, Overtime Pay, or Social Security Benefits: These proposals aim to reduce taxable income for Alabama workers, particularly in service industries or retirement.

• Renewing the 2017 Tax Cuts and Jobs Act (TCJA): The TCJA, set to expire in 2025, lowered individual and corporate tax rates. Extending it could maintain lower federal tax liabilities for Alabama residents and businesses.

• Adjusting the SALT Cap: Increasing the state and local tax (SALT) deduction cap could benefit Alabama homeowners with high property or income taxes, though Alabama’s low tax rates make this less impactful locally.

• Potential Tax Relief for Low Earners: A proposal to eliminate taxes for those earning under $150,000, mentioned by Commerce Secretary Howard Lutnick, could significantly reduce federal tax burdens for many Alabama households.

  
  

Local Impact: If implemented, these changes could increase disposable income for Alabama residents, boosting local spending and sales tax revenue in Dadeville and Chambers County. However, until legislation passes, these remain proposals. Consult with Carol Sellers to adjust your withholding or estimated payments in anticipation of potential changes.

4. IRS Restructuring and Workforce Changes

An executive order issued February 18, 2025, enhances White House oversight of federal agencies, including the IRS, by requiring review of significant regulatory actions. Additionally, Trump’s administration has nominated former Rep. Billy Long to lead the IRS, signaling a potential shift in enforcement priorities. Posts on X also suggest plans to freeze IRS operations for 90 days to investigate fraud and reduce staff, though these are unconfirmed.

Local Impact: Reduced IRS staffing or a temporary freeze could delay federal tax processing, affecting Alabama taxpayers awaiting refunds or audit resolutions. Alabama’s Department of Revenue operates independently, but federal delays may complicate state filings that rely on IRS data. Ensure your records are audit-ready to avoid issues.

Note: Many of these executive actions are under review, and some face legal challenges. Their full impact on Alabama taxpayers will depend on Congressional approval and court rulings. Sellers CPA will monitor developments and provide updates in future newsletters.

Reflecting on April’s Newsletter

Last month, our April 2025 edition focused on wrapping up the 2024 tax season and preparing for 2025 in Alabama. We covered:

• Finalizing 2024 Alabama Tax Returns: Strategies to maximize state-specific deductions and credits.

• Q1 Estimated Tax Payments: Guidance for Alabama’s self-employed and small business owners.

• Q2 Tax Planning: Adjusting withholdings based on 2024 Alabama tax outcomes.

• Federal Oversight of Online Sellers: How IRS scrutiny affects Alabama’s e-commerce community.

This month, we expand on these themes with a focus on Alabama’s tax obligations and the potential impact of federal executive actions.

Alabama Tax Updates for May 2025

1. Alabama’s Focus on Online Seller Compliance

The Alabama Department of Revenue, in alignment with IRS efforts, is increasing scrutiny of online sellers using platforms like eBay, Etsy, or Amazon. The federal Form 1099-K threshold of $600 in annual transactions means more Alabama sellers will receive tax forms for 2024 sales, which the state uses to verify income tax compliance.

What This Means for Alabama Sellers:

• Personal vs. Business Sales: Selling personal items at a loss is generally not taxable in Alabama, but profits on high-value items (over $6,000) may trigger capital gains tax. Resale activities are considered taxable business income.

• Record-Keeping: Maintain records of sales, expenses (e.g., shipping, platform fees), and item costs to support your Alabama tax filings and avoid discrepancies.

• Action Steps: Review your 2024 platform sales data to prepare for 1099-K reporting. Ensure records align with state income tax requirements.

Local Tip: Alabama’s streamlined tax system simplifies reporting for small sellers, but consistent income may require a state business license. Carol Sellers can clarify your obligations.

2. Alabama Sales Tax for Local and Remote Sellers

Alabama’s state sales tax rate is 4%, with local rates in Dadeville and Chambers County adding up to 6%. Businesses with a physical presence or economic nexus ($250,000 in annual Alabama sales) must collect and remit sales tax. Platforms like Amazon may handle sales tax for online sellers, but you’re responsible for confirming compliance.

Key Considerations:

• Economic Nexus: Out-of-state sellers reaching the $250,000 threshold must register with Alabama’s Department of Revenue.

• Use Tax: If you buy inventory from vendors not charging Alabama sales tax, you owe use tax to the state.

• Local Compliance: Register with both state and local jurisdictions (e.g., Tallapoosa County) for accurate tax collection.

Action Steps: Contact us right away to file state and local sales taxes efficiently. Track sales to monitor nexus thresholds.

Local Tip: Dadeville businesses benefit from Sellers CPA’s centralized filing, reducing administrative burdens. Contact Sellers CPA for setup assistance.

3. Alabama Business License Renewals

Alabama businesses, including online retailers, must renew state and local business licenses annually. In Dadeville and Chambers County, renewal deadlines often align with your business’s anniversary month or October 31 for state licenses. Non-compliance risks penalties or loss of good standing.

What to Watch:

• Verify renewal dates with the Alabama Department of Revenue or local probate office.

• Ensure your business classification (e.g., retail, e-commerce) matches your activities to avoid underpayment.

Action Steps: Contact your county probate office to confirm requirements. Budget for fees based on sales volume.

Local Tip: Carol Sellers can review your business structure to ensure proper licensing, keeping you compliant in Alabama.

4. Tax Deductions for Alabama Sellers

Alabama small businesses and online sellers can leverage deductions to reduce federal and state taxable income. Key write-offs for 2025 include:

• Marketing Expenses: Local ads, social media campaigns, or website promotions.

• Platform Fees: Costs for Amazon, Etsy, or Shopify tied to Alabama sales.

• Shipping Costs: Postage, packaging, and delivery expenses.

• Business Equipment: Items under $2,500 (e.g., cameras, computers) are deductible; larger items may require depreciation.

• Home Office: A portion of Alabama home expenses (rent, utilities) if you meet IRS and state criteria.

Action Steps: Categorize expenses monthly using tools like QuickBooks. Retain receipts for Alabama tax audits.

Local Tip: Alabama’s low property taxes may limit home office deductions, but Carol Sellers can optimize your write-offs.

Tax Planning Tips for Alabama’s Q2 2025

1. Prepare for Q2 Estimated Taxes

Alabama’s self-employed and small business owners must submit Q2 estimated tax payments by June 16, 2025, for federal and state taxes. Alabama’s income tax rates (2% to 5%) depend on income. Use your 2024 state return and 2025 projections to calculate payments.

Local Tip: Save 20-25% of self-employment income in a separate account to cover Alabama and federal taxes.

2. Mid-Year Tax Planning for Alabama Residents

Mid-year is ideal for refining your tax strategy. Consider:

• Alabama Retirement Contributions: IRA or SEP-IRA contributions reduce federal and Alabama taxable income. The 2025 IRA limit is approximately $7,000 ($8,000 if 50+).

• Local Charitable Giving: Donations to Dadeville or Chambers County nonprofits may qualify for federal deductions if you itemize.

• Business Investments: Equipment purchases for Alabama businesses may qualify for federal Section 179 deductions, lowering state taxable income.

Local Tip: Alabama’s standard deduction ($3,000 for singles, $7,500 for married filing jointly) is low, so itemizing may benefit high earners.

3. Stay Alabama Audit-Ready

With heightened federal and Alabama Department of Revenue scrutiny, audits are a concern for local sellers. To prepare:

• Retain sales and expense records for three years, per Alabama law.

• Keep business licenses and sales tax registrations current.

• Avoid red flags like underreporting income or excessive deductions.

Local Tip: Carol Sellers can perform a pre-audit review to ensure compliance with Alabama’s tax rules.

Why Choose Sellers CPA in Dadeville?

Since 1991, Carol Sellers and the Sellers CPA team have provided personalized tax and financial services to Alabama’s small businesses and families. From our Dadeville office, we’ve served Chambers and Tallapoosa Counties for over eight years, offering tailored solutions for online sellers, entrepreneurs, and retirees. Carol’s face-to-face approach ensures your Alabama tax needs are met with expertise and care.

To discuss your tax strategy or schedule a consultation, contact Carol Sellers via our website form at www.sellerscpa.net/contact or email carol@sellerscpa.net. To make an appointment, complete the contact form or call our office to arrange a time.

Your Next Step Toward Financial Confidence

As Q2 2025 progresses, staying proactive with Alabama’s tax requirements and federal changes is crucial. From navigating online sales tax to leveraging deductions and preparing for potential tariff impacts, Sellers CPA is your local partner in Dadeville. Let us guide you through Alabama’s tax landscape so you can focus on your business or personal financial goals.

Reach out to Carol Sellers today at www.sellerscpa.net/contact to schedule your consultation. We’re committed to keeping Alabama’s small businesses and families financially strong.

Disclaimer: This newsletter provides general guidance and is not a substitute for professional tax advice. Contact Sellers CPA for personalized recommendations tailored to your Alabama tax situation.