IRS Online Shopping Security Tips

Published September 19, 2025

Each year the Internal Revenue Service (IRS) offers safety tips for online shoppers. With many online stores offering their versions of “Cyber” holidays and other online specials, millions of shoppers can benefit from knowing how to protect themselves from cybercriminals. Here are some simple things to remember.

1. Familiar Online Stores – Use online stores with known reputations and familiar names. The URL or online address should start with “https.” The “s” represents that the website has a security certificate.
2. Unprotected WiFi – Many restaurants and stores offer free public WiFi. Avoid using public WiFi sites for online purchases. Cybercriminals can monitor the public WiFi sites. Exercise caution if you use your credit card to purchase items with a public WiFi site, a cybercriminal may be able to steal your financial information.
3. Security Software – Anti-virus software is reasonable in cost and should be used by everyone. The software will usually update automatically each day when you are on the internet. Do not use “free” security software, and do not click on offers for “free” security scans.
4. Passwords – Use ten-to-fourteen-character passwords. The best passwords have a capital letter, a number, a special character and lower-case letters. Use a password manager with encryption to save all your passwords.
5. Phishing emails – Be cautious if an email claims to be from the IRS or a financial institution. Do not click on any links if you do not know the sender of the email. If you receive an email claiming to be from a retail store, bank or a government agency, do not click on a link. Instead, visit the website or app for that organization or call directly for assistance.
6. Authentication – Many banks and financial institutions now offer multi-factor authentication. One method of authentication is to send a text to your mobile phone when you are logging in to your account. To log in, you will have to enter the word or number that is texted to your phone.
7. Encrypt Data – Your sensitive financial data should be encrypted if you store it on your hard drive. If you change computers, be sure to clean or destroy the hard drive of your old computer.

Here are two other helpful safety steps. First, you can obtain a free credit report from the three major credit bureaus each year. To obtain one, search online for “free credit report” and follow the recommended steps. You should check your credit report annually to verify that there are no unfamiliar financial actions on your account. Second, you may go online to SSA.gov and create a “my Social Security” account. With this account, you will be able to monitor your Social Security records.

Final Regulations on Catch-Up “Rothification”

On September 15, the Internal Revenue Service (IRS) and the Department of the Treasury published final regulations (T.D. 10033) on employer retirement plan catch-up contributions and the Roth requirement for high-income employees.

Catch-up retirement plan contributions are available for individual employees who are age 50 or older. These are in addition to the standard deferral limit each year. The 401(k), 403(b) and 457 limits for 2025 are $23,500 for the standard deferral and an additional “catch-up” contribution of $7,500 for those age 50 or older.

The SECURE 2.0 Act added an additional "super catch-up” for employees age 60 to 63. This limit is generally 150% of the standard catch-up contribution. It is $11,250 in 2025 for non-SIMPLE plans and $5,250 for SIMPLE plans.

An employee is eligible to make a catch-up contribution even if his or her 50th birthday is on December 31. The contributions are indexed for inflation and will increase in 2026 and subsequent years. A catch-up contribution is permitted if the employer plan provides for them. A plan amendment is also required for "super catch-up” contributions.

Commencing in 2026, employees with Federal Insurance Contributions Act (FICA) wages over $145,000 will be required to use a Roth method for a catch-up contribution. This is termed a "Rothification" rule. The original plan in SECURE 2.0 was to start Rothification in 2024, but the IRS delayed that requirement until 2026. The delay was the result of hundreds of plan administrators demanding more time to modify their plans to comply with the Rothification of catch-up contributions.

The National Association of Government Defined Contribution Administrators, Inc. (NAGDCA) was instrumental in the delay of Rothification and the publication of proposed and final regulations. Matt Petersen of the NAGDCA noted, "We are thankful that our members are going to have time to react and time to think about this."

The option exists for some plans to have 110% of the regular catch-up limit if an employer has 100 or fewer employees who were paid at least $5,000 the previous year and have a SIMPLE plan. Alternatively, if an employer has 25 or fewer employees who received at least $5,000 in pay the previous year, the catch-up limit increase is automatically available.

Employer plans will need to track FICA incomes. If the 2025 Social Security wage exceeds $145,000, then in 2026 the employee may elect to not make the catch-up contribution, or it must be a Roth contribution.

Because it is inevitable there will be a need for corrective payments to ensure that all of the proper Rothification rules are followed, there are two options that may be included in the plan. A pre-tax catch-up contribution may be transferred to a Roth account and reported on IRS Form W-2. If the W-2 was previously filed, then the conversion to the Roth must be reported on IRS Form 1099-R.

Proposed Regulations for “No Tax on Tips” Deduction

On September 19, the Internal Revenue Service (IRS) and the Department of the Treasury published proposed regulations on the potential $25,000 deduction for tip income. The One Big Beautiful Bill Act included a new deduction for tips. The deduction is limited to single individuals with income up to $150,000 or joint filers who earn up to $300,000. The “No Tax on Tips” deduction is available for years 2025 through 2028.

The proposed regulations state "qualified tips" are cash tips received through "an occupation that customarily and regularly received tips on or before December 31, 2024.” The tip must be voluntarily paid by a customer and may not be in a specified service trade or business as defined under Section 199A.

The "cash" tip is defined to include multiple options. It could be a tip completed by cash, check, credit card, debit card, gift card, tangible or intangible tokens. This could also include smartphone mobile payments that are denominated in cash. A cash tip does not include an event ticket, meal or similar item.

The tip is paid voluntarily by the customer who must have the right to determine the tip amount. Revenue Ruling 2012-18 notes that an 18% charge automatically added to a bill for a large group is a service charge and not a tip. Any mandatory amount added to a bill is not a tip for purposes of the deduction because it is a charge dictated by the employer.

There are multiple employment fields that are defined as a specified service trade or business (SSTB) which do not qualify for the deduction. These include “health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners." The nonqualified groups also include services such as investment management, trading or dealing in securities.

There are other limitations. Any service that involves a violation of law does not qualify. Finally, as mentioned above, the $25,000 amount is phased out for a single individual with over $150,000 in income or a married individual filing jointly who exceeds $300,000 limit.

The IRS admits this is going to be complex because there are nearly 70 different employee categories. The IRS noted, "We do recognize that these rules are confusing…As we go through the comment period, we do hope to do whatever we can to provide clarity."

The general categories are determined under the Fair Labor Standards Act (FLSA). The basic FLSA definition of a tipped employee includes servers, counter personnel who serve customers, bellhops, server helpers and service bartenders.

The IRS has carefully studied the various professions and created Treasury Tipped Occupation Codes (TTOCs). The main categories are: Beverage and Food Service, Entertainment and Events, Hospitality and Guest Services, Home Services, Personal Services, Personal Appearance and Wellness, Recreation and Instruction and Transportation and Delivery. Within each of the TTOC categories, there are specific lists of the types of employees that qualify.

Editor's Note: The proposed regulations include multiple pages that list all employee types in the eight TTOCs. It will be challenging for employers in all of these categories to educate employees and ensure compliance with the complex law.

Applicable Federal Rate of 4.6% for October: Rev. Rul. 2025-19; 2025-41 IRB 1 (15 September 2025)

The IRS has announced the Applicable Federal Rate (AFR) for October of 2025. The AFR under Sec. 7520 for the month of October is 4.6%. The rates for September of 4.8% or August of 4.8% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2025, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”