12/2/25 Newsletter

On December 2, 1913, the modern federal income tax officially went into effect. Over a century later, the IRS is still keeping us on our toes.

This week’s lineup:

• 🧾 How one wrong line on your W-4 or W-9 can shrink next year’s refund.

• 🏠 The SALT cap glow-up that might save you thousands (or absolutely nothing).

• 🌴 Why working from a beach chair could get you taxed by multiple states.

• 💸 The wild story of how the IRS (not rival gangs) took down Al Capone.

Filing 101

🧾 Stop Overpaying the IRS: Fix Your W-4 (or W-9) Before 2026

Most people fill out a Form W-4 on their first day at a new job, file it with HR, and never think about it again. But that simple form is one of the most powerful tools you have for managing your year-end tax bill.

Its one and only job is to tell your employer how much federal income tax to withhold from your paycheck. Get it right, and you'll end up owing very little (or getting a small refund) at tax time. Get it wrong, and you're either giving the government an interest-free loan all year (a giant refund) or setting yourself up for a nasty tax bill and potential penalties.

If you’re a gig worker or freelancer, you won’t fill out a W-4 at all. You’ll fill out a Form W-9 so the company knows your name, SSN/EIN, and how to issue your Form 1099. The key difference: a W-9 does not withhold any taxes for you, so you’re responsible for quarterly estimated payments or increasing withholding at your day job to cover that income.

Life changes, and so should your W-4. Here are the most common reasons to make an adjustment and exactly how to do it.

Common Reasons to Adjust Your W-4

You can submit a new W-4 to your employer at any time, for any reason. It's a smart idea to review it at least once a year, or immediately after any major life event.

Top reasons to update your form:

• You got a second job: This is a classic "surprise tax bill" scenario. Your first job doesn't know about your second, so neither is withholding enough tax to cover your combined income, which likely pushes you into a higher tax bracket.

• Your spouse got a job (or changed jobs): Just like having a second job, your household income has now jumped, and your combined withholding is probably too low.

• You had a baby or adopted a child: This is a happy reason! A new dependent likely qualifies you for the Child Tax Credit, which means you can reduce your withholding and get more money in each paycheck.

• You got married or divorced: Changing your filing status (from Single to Married Filing Jointly, or vice versa) has a huge impact on your tax rate and standard deduction.

• You have a "side hustle": If you earn self-employment income (like freelancing or driving for a ride-share) and don't pay quarterly estimated taxes, you can use your W-4 at your "day job" to withhold extra money to cover that side income.

• You have other income: You might have income from interest, dividends, or retirement that isn't automatically having taxes withheld. You can adjust your W-4 to cover this.

• You got a shocking tax bill (or refund): The easiest sign you need an adjustment is what happened last April. If you owed a lot of money, you need to increase your withholding. If you got a massive refund, you're letting the IRS use your money all year and should decrease your withholding to get bigger paychecks.

👉 Want to know the exact boxes to tweak? Read the rest here →

Money Moves

🏠 SALT Cap Jumps to $40K: What It Means for Your 2025 Taxes

Well, here we go. The annoying $10,000 State and Local Taxes (SALT) cap we’ve complained about since 2018 has been quadrupled.

Yes, $40,000.

While we were distracted by beach plans and barbecue arguments, Congress passed the “One Big Beautiful Bill Act” on July 4, 2025. A patriotic little surprise for your 1040. Depending on where you live and how much you earn, this could save you thousands. Or, in classic Congress fashion, it could do almost nothing.

How We Got the SALT Cap in the First Place

Before 2018, the SALT deduction was practically bottomless. You could pile on state income taxes, sales taxes (if you lived somewhere like Florida), and those brutal property tax bills. All of it went on your federal return.

Then the 2017 Tax Cuts and Jobs Act showed up with scissors. It capped the deduction at $10,000 and told itemizers to deal with it. Most people didn’t itemize anyway, but those in high-tax states sure felt it.

What the New Law Actually Does

As of the 2025 tax year, the SALT cap jumps from $10,000 to $40,000 for single and joint filers. Married Filing Separately gets $20,000. A small 1 percent cost-of-living adjustment kicks in from 2026 through 2029.

The catch? This deal expires after 2029. In 2030, the cap drops right back to $10,000.

There’s another catch. The full $40,000 deduction only applies if your Modified Adjusted Gross Income (MAGI) is under $500,000. Go even one dollar over, and the deduction starts shrinking by 30 percent per dollar. Hit $600,000 of MAGI, and you’re stuck back at the $10,000 limit. Married Filing Separately has its own cliff at $250,000 to $300,000.

👉 Who wins, who doesn’t, and how to use the new SALT cap →

Business & Gigs

🌴 The Work-From-Anywhere Tax Trap

The dream has been achieved. The corporate overlords have finally agreed that yes, you can be just as productive from your couch as you can from a beige cubicle under the soul-sucking glare of fluorescent lights. You've traded your commute for a stroll to the coffee maker. Your work uniform is now a pristine business-on-top, pajama-party-on-the-bottom ensemble. 

You can work from anywhere! A cabin in the mountains, a beach house in Florida, your cousin's spare room in Ohio ... the world is your oyster. Except that oyster comes with a tiny, complicated, and very expensive pearl: taxes.

The Messy World of State Income Taxes

You see, tax agencies, bless their hearts, don't much care where your company's fancy headquarters are. They care about where your feet are planted when you’re tapping away on that laptop.

This introduces us to a fun little concept called "tax nexus." It's a legal term that basically means if you are physically present and working in a state for a certain number of days, you have created a connection (a nexus) with that state. And that state would now like to have a word with you about your income.

The threshold for creating a tax obligation can vary dramatically from one state to another. Many states have a "first day" rule, effectively requiring that income be reported from the very first day you work there. Others have specific bright-line thresholds. 

For example, New York requires employer withholding after you work in the state for more than 14 days in a year, while Connecticut's rule is 15 days. Some states are more forgiving; Arizona and Illinois have thresholds of 60 and 30 days, respectively. 

This lack of uniformity is exactly why tracking your workdays and doing your homework before a long "work-cation" is so critical.

👉 See the multi-state tax rules every remote worker should know →

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Wild Tax Tales

💸 How an Accountant Took Down Al Capone

Al Capone ruled Chicago’s underworld in the 1920s. He seemed untouchable. Witnesses disappeared, evidence evaporated, and prosecutors couldn’t tie him to anything. But the government didn’t need more firepower. They needed math.

Treasury investigator Frank J. Wilson led a small team that ignored the murders and bootlegging. Their strategy was simple: prove Capone made money and didn’t pay taxes on it.

First, they tracked his spending. Agents collected receipts for luxury suits, custom furniture, private phones, and his Florida mansion. Capone claimed no job and no income, yet he lived like royalty. That spending alone told a story the jury couldn’t ignore.

Then came the breakthrough. During a raid on one of his gambling operations, agents found handwritten ledgers detailing profits. Several entries were marked for “Al.” For a man who never put his name on anything, it was the closest thing to a signature.

In 1931, prosecutors brought him to trial not as a gangster, but as a taxpayer who lied. The courtroom wasn’t filled with dramatic accusations. It was filled with numbers: invoices, ledgers, and phone bills. The jury didn’t need anything flashier.

Capone was convicted on five counts of tax evasion and sentenced to 11 years in federal prison, eventually landing in Alcatraz. Rival mobs or heroic shootouts didn’t take down the most feared criminal in America — he fell because he didn’t file his taxes.

Sometimes the sharpest weapon in law enforcement isn’t a badge. It’s a balance sheet.

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

• 🌀 IRS shutdown backlogs will slow processing and responses for months.

• 🧾 IRS offers temporary penalty relief while businesses adjust to new OBBB rules.

• 📈 2026 contribution limits rise, letting taxpayers save more in 401(k)s and IRAs.

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.

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