As the saying goes, “The only thing constant is change”, and the same holds true for tax laws in the US.  

New tax rules and regulations are often shaped by sweeping overhauls that introduce lower rates, new deductions, or credits designed to benefit taxpayers. However, many of these provisions come with built-in expiration dates, meaning that tax rates and deductions can revert to previous levels unless new legislation is passed.

One major tax reform at risk of expiration is the 2017 Tax Cuts and Jobs Act (TCJA), which brought significant changes to tax brackets, deductions, and credits. Many of its provisions are set to expire at the end of 2025, potentially resulting in higher tax bills for individuals and businesses alike. 

For taxpayers who owe back taxes or are concerned about their future liabilities, these changes could lead to unexpected financial burdens. But here’s the good news: You still have time to prepare. By understanding what changes are coming and taking proactive steps, you can minimize your tax burden and avoid costly surprises.

In this post, we explore what happens when past tax overhauls expire, how these changes affect taxpayers—especially those with IRS debt—and what steps you can take to stay ahead of the curve.

What Changes When Tax Laws Expire?

Tax overhauls often introduce lower rates, expanded deductions, and new credits to provide financial relief to individuals and businesses. Though when these provisions expire, taxpayers can see noticeable increases in their tax liabilities. 

With key provisions of the TCJA sunsetting at the end of 2025, it’s essential to understand how these changes may impact you.

Key Expiring Provisions

Several major tax benefits introduced by the TCJA will expire unless Congress takes action to extend them. The most significant changes include:

• Higher Tax Rates: The TCJA reduced tax rates across all income brackets, but when the law expires, rates will return to their pre-2018 levels. This means many taxpayers will see an increase in their marginal tax rate.
• Lower Standard Deduction: The standard deduction, which nearly doubled under the TCJA, will revert to its previous, lower levels. This means fewer taxpayers will benefit from taking the standard deduction, and more may need to itemize.
• Reduction in Child Tax Credit: The Child Tax Credit was increased from $1,000 to $2,000 per child under the TCJA. Without an extension, it will drop back to its lower amount, reducing tax savings for families.
• State and Local Tax (SALT) Deduction Cap: The current $10,000 cap on state and local tax deductions is set to expire, which could benefit taxpayers in high-tax states—but only if deductions remain an option after standard deduction changes.
• Estate Tax Exemption Decrease: The threshold for estate taxes was significantly increased under the TCJA, but after 2025, it will shrink, meaning more estates will be subject to taxation.

Impact on Individual and Business Taxpayers

For individuals, these changes could mean higher tax bills, reduced refunds, and more complicated tax filings. Families who have relied on the expanded Child Tax Credit, for example, may see their overall tax burden increase, while homeowners and residents in high-tax states may need to adjust their tax planning.

Small businesses could also be affected, particularly by the potential expiration of the 20% Qualified Business Income (QBI) deduction, which currently allows pass-through entities (like sole proprietorships and LLCs) to deduct a portion of their income. Without it, business owners could face significantly higher taxable income.

With these potential changes looming, taxpayers should start preparing now to adjust their tax strategies accordingly.

How Expiring Tax Laws Impact Those Who Owe the IRS

For taxpayers who already owe the IRS or struggle with back taxes, the expiration of past tax overhauls could make their financial situation even more challenging. As tax rates increase and deductions shrink, outstanding tax debts may grow faster, and IRS enforcement efforts could become more aggressive. 

Here’s what to expect:

Higher Tax Bills Could Worsen IRS Debt

When tax brackets shift and deductions decrease, many taxpayers may find themselves owing more at tax time. 

For those already dealing with IRS debt, this could mean:

• Larger balances due each year as more income becomes taxable.
• Reduced ability to pay down existing tax debt while keeping up with current obligations.
• A higher risk of falling into collections, leading to penalties, interest, and possible wage garnishments.
• Potential Increases in IRS Penalties and Interest

The IRS applies penalties and interest to unpaid tax balances, and these can add up quickly. If tax rates rise and deductions shrink, taxpayers with existing debt may find their balances growing faster than before.

Key factors to consider:

• Failure-to-pay penalties (up to 25% of the unpaid tax) can compound over time.
• Interest rates on unpaid taxes fluctuate, but they tend to rise in response to economic conditions.
• Tax liens and levies could become more common if the IRS ramps up enforcement.

Changes to IRS Payment Plans and Relief Programs

Currently, the IRS offers options like Installment Agreements, Offers in Compromise, and the Fresh Start Program to help taxpayers resolve their debts. However, policy shifts could affect these programs, making it harder to qualify or reducing the benefits they offer. 

For example:

• Offer in Compromise (OIC) approvals may become stricter, requiring taxpayers to pay a larger portion of their debt before qualifying.
• Installment Agreements could see changes in repayment terms or required financial disclosures.
• The IRS may increase collection efforts, prioritizing enforcement actions against delinquent taxpayers.

With these potential changes ahead, taxpayers who owe back taxes should act now to secure the most favorable repayment terms while they are still available.

Proactive Steps to Minimize Your Tax Burden

With major tax law changes on the horizon, taxpayers—especially those with existing IRS debt—should take proactive steps to minimize their tax liability and avoid unnecessary financial strain. 

Here are a few strategies you can implement now to prepare for these changes and ensure you’re in the best possible position when past tax overhauls expire.

1. Review and Adjust Your Tax Withholding or Estimated Payments

If tax rates increase and deductions shrink, your current withholding or estimated tax payments may not be enough to cover what you owe. To avoid an unexpected tax bill:

• Review your W-4 form and adjust your withholding if necessary.
• Increase estimated tax payments if you are self-employed or own a business.
• Consult with a tax professional to calculate your projected liability under the new tax rates.

2. Maximize Deductions and Credits While They’re Available

With standard deductions expected to decrease and certain credits potentially becoming less generous, it’s wise to take full advantage of them now. 

Consider:

• Making additional contributions to tax-advantaged accounts like 401(k)s, IRAs, or Health Savings Accounts (HSAs).
• Accelerating deductible expenses before the tax rules change (e.g., charitable donations, business expenses).
• Claiming any eligible tax credits now, such as the Child Tax Credit or the Earned Income Tax Credit, while they are still at their expanded levels.

3. Address IRS Debt Before Collection Efforts Intensify

If you currently owe back taxes, now is the time to explore repayment and relief options while they remain favorable. 

Steps to take include:

• Applying for an Installment Agreement to spread out payments over time.
• Considering an Offer in Compromise (OIC) if you qualify for a reduced settlement.
• Requesting Penalty Abatement if you’ve faced financial hardship.
• Using the IRS Fresh Start Program to prevent liens and levies.

4. Work with a Tax Professional

Tax laws are complex, and with upcoming changes, it’s more important than ever to have expert guidance. A tax professional can:

• Help you understand how expiring tax provisions affect your specific situation.
• Identify strategies to reduce your liability and manage IRS debt.
• Assist in negotiating with the IRS if you owe back taxes.

By acting now, you can stay ahead of tax law changes and avoid potential financial hardship when past tax overhauls expire. 

[Traxion Tax has helped thousands of taxpayers get peace of mind by bringing structure and planning to complicated tax situations. An initial 20-minute consultation is completely free; schedule yours right now.] 

Where to Go from Here

The expiration of key tax provisions from past overhauls could bring higher tax bills, reduced deductions, and increased IRS enforcement. 

Don’t wait until it’s too late to prepare. The best way to navigate these tax law shifts is to work with professionals who understand the complexities of the tax system. Traxion Tax offers a free 20-minute consultation to help you assess your situation and explore the best strategies for managing your tax obligations.

Our team includes Enrolled Agents (EAs), federally licensed tax professionals who are authorized to represent taxpayers before the IRS. 

From negotiating a settlement, setting up a payment plan, or simply understanding how these tax law changes will affect you, Traxion Tax can provide expert guidance and work toward a favorable tax resolution on your behalf.

Schedule your free consultation today and take control of your tax future before the laws change.