💸 You owe the IRS. Now what?

Good morning! Mother’s Day was Sunday, which means a meaningful number of you spent the weekend telling Mom you’d “look at her tax stuff for her.” Whether you actually did or not, this week’s issue is for both of you.

This week’s lineup:

IRS Survival Guide

💸 So you owe the IRS: How to pay without selling a kidney

Owing the IRS is a uniquely demoralizing experience. You did your taxes, you played by the rules, and yet somehow the federal government is now standing on your porch with its hand out, looking mildly disappointed.

The instinct, for most people, is to panic. The second instinct, a close runner-up, is to ignore the letter entirely and hope it gets bored and wanders off. Neither of these strategies has produced results in the seventy-plus years the IRS has been sending letters.

What does work is paying attention to what the agency actually offers. If you owe under $50,000, you can set up an online payment plan in about ten minutes. Short-term plans (under 180 days) are free. Long-term installment agreements run $22 to $178 to set up, depending on how you pay. Interest still accrues, currently 7%, but the failure-to-pay penalty drops by half once you’re on a plan. That’s real money.

If you genuinely cannot pay, the IRS has options most people never hear about: Currently Not Collectible status if paying would create real hardship, an Offer in Compromise if you can demonstrate you’ll never be able to pay the full amount, and penalty abatement for first-time offenders who otherwise have a clean record.

The one thing that makes all of this worse is doing nothing. Penalties stack. Interest compounds. Wage garnishments and bank levies show up. The IRS is patient, but its patience has a price tag, and the price tag goes up every month.

Kidneys, for the record, retail for far less than people assume.

Business & Gigs

🐾 Pet pros: The Tax Code just tossed you a treat

If you run a pet business, and especially if you’re a groomer, walker, or sitter taking home cash tips, the tax code just handed you a rare and meaningful win. The OBBBA, signed last summer, is generally a hydra of provisions that grow two new heads every time you try to read them. But three of those heads, it turns out, are looking your way and wagging.

Tips are deductible now.

If a regular client hands you 40 bucks for de-skunking the terrier at 9 p.m. on a Sunday, that money is no longer fully on the IRS’s plate. The new No Tax on Tips deduction lets you write off up to $25,000 in qualified cash tips per year through 2028. The tips have to be reported (W-2, 1099, or Form 4137, stuffing twenties in the couch does not count), and the deduction phases out at $150,000 MAGI for single filers, $300,000 for joint. But the IRS officially recognizes “customarily tipped” pet service workers, so groomers and walkers are squarely in.

Working overtime? That’s deductible too.

The premium portion of overtime pay (the “half” in time-and-a-half) is also deductible under the No Tax on Overtime provision. Up to $12,500 for single filers, $25,000 for joint. Same MAGI phaseout. If your pay stub doesn’t break out the premium clearly, the IRS is letting you treat one-third of your total overtime pay as the deductible amount for 2025. Generous of them, really.

And about that car you drive to every appointment.

For the first time in decades, interest on a personal car loan is deductible up to $10,000 a year. The vehicle has to be new, assembled in the US, under 14,000 pounds, and the loan has to have originated in 2025 or later. It does not have to be a “commercial” vehicle, which is the part that matters here. The Subaru you fill with leashes and treats counts.

A few catches worth knowing. All three of these deductions get reported on a brand-new IRS form called Schedule 1-A, filed alongside your 1040 starting with your 2025 return. They’re “below the line,” meaning they don’t reduce your AGI, which is actually good news, because it means claiming them won’t accidentally disqualify you from anything else. And they all expire after 2028 unless Congress decides otherwise, which is a thing you should never assume Congress will do.

The system isn’t usually rigged in favor of small operators. This time, three doors got left unlocked at once. Track every tip, log every overtime hour, and keep your loan paperwork somewhere you can find it.

The difference between generic kibble and the artisanal organic stuff is closer than you think.

Filing 101

🚛 Moved in 2025? The IRS has mixed news

We’ve all had the fantasy. Stuck in traffic, staring at a billboard for a moving company, thinking: what if I just left?

If you packed the boxes in 2025, the tax landscape shifted beneath your feet while you were busy losing track of the spatula. The One Big Beautiful Bill Act rewrote some rules for movers. Some are good. One is not.

The bad news first. The moving expense deduction, killed by the 2017 Tax Cuts and Jobs Act, is officially staying dead. Unless you’re active-duty military with a qualifying move on PCS orders, you cannot write off the movers, the boxes, the gas, or the emotional damage. That U-Haul receipt is a souvenir.

The good news. For years, the $10,000 SALT cap was an insult to anyone living in a state with income tax. The OBBBA raised it to $40,000 for 2025 through 2029. If you moved to a high-tax state mid-year, you can likely deduct most of that new tax burden.

To claim the SALT deduction, you have to itemize. The standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples, meaning your itemized deductions need to clear that bar to be worth the effort.

The five-minute check: add up your state and local taxes, mortgage interest, and charitable giving.

Either way, the spatula is in one of the kitchen boxes. Probably.

Wild Tax Tales

👨‍🍳 A restaurateur’s $860,000 recipe for disaster

We’ve seen some bold tax moves over the years. Remigijus Mikelenas, the former owner of a café and juice bar in Canton, Mass., earns a category all his own.

Between 2012 and 2020, Mikelenas played a long game of hide-and-seek with the IRS, failing to report more than $3.5 million in gross receipts across his two businesses. The maneuver let him dodge over $860,000 in federal income taxes, for a while.

He kept two sets of books. One for the IRS. One that actually showed the money he was making. The fatal mistake was showing the real set to an undercover agent he believed was a prospective buyer of the business. During that same meeting, according to the DOJ, Mikelenas asked the agent if he worked for the IRS, then volunteered: “If I get caught, I’ll be screwed.”

A federal judge agreed. On top of one year and one day in prison (the extra day is a quirk that lets federal inmates qualify for early-release credits, federal sentencing is its own genre of strange), Mikelenas was ordered to pay more than $800,000 in restitution to the IRS and another $100,000 to Massachusetts.

Gross receipts are gross income. Trying to hide them is just an expensive way to rent a very small room for a year.

The quick (and slightly prickly) stories we didn’t have time to get to:

If you made it this far, you’re our kind of nerd. Hit reply and tell us which story you want us to dive deeper into next week.