The recently enacted One Big Beautiful Bill Act (OBBBA) ushers in some of the most significant tax law changes since the Tax Cuts and Jobs Act. While many provisions are designed to simplify or stimulate economic activity, they also create traps for the unwary. CPAs need to remain alert to compliance challenges, client misperceptions, and liability exposures as the IRS and state taxing authorities continue to issue implementing guidance.
As professionals who help CPA firms manage risk, we recognize that major tax legislation is a leading source of malpractice claims. The OBBBA introduces both planning opportunities and new stress points that can easily evolve into disputes if expectations are not clearly communicated and documented. Although not meant to be all-inclusive, this article highlights several current risk areas and practical strategies for managing them through communication, documentation, and engagement-scope clarity.
Depreciation and Expensing Provisions — The Timing and Documentation Trap
The restoration of 100% bonus depreciation for property placed in service after Jan. 19, 2025, and the increased Section 179 expensing limit to $2.5 million (with a $4 million phase-out threshold) are welcome, but the effective dates create traps for accurate application.
Determining when an asset was “acquired” — based on the binding contract date — remains one of the most frequent sources of bonus depreciation errors. This rule, unchanged under the OBBBA, still governs when property qualifies as newly acquired for purposes of the 100% deduction. Eligibility depends on both when the asset is placed in service and when the binding purchase contract was executed. Property acquired under a contract signed before Jan. 20, 2025, is treated as acquired under prior law and may qualify only for the reduced bonus percentages in effect at that time.
From a best-practices perspective, practitioners should obtain and retain supporting documentation — such as contracts, invoices or purchase orders — confirming both the contract date and the placed-in-service date to avoid potential risks associated with timing errors. The IRS enforces these transitional rules strictly, and missteps can easily lead to audit adjustments and potential professional liability.
Taxpayers who benefit from increased bonus depreciation and Section 179 expensing may assume those tax benefits will continue in future years, even though these provisions are temporary. Without proactive communication, clients may be unprepared for the higher tax liabilities that will follow once the provisions sunset after 2028 and normal depreciation patterns resume. This misunderstanding can create frustration or even allegations of poor planning. CPAs should confirm in writing how clients intend to time asset purchases, emphasize that these accelerated deductions are temporary, and remind them of state conformity differences that may sharply limit the benefit. Engagement letters and planning correspondence should frame projections as estimates subject to change. Clear, written communication — supported by signed client acknowledgments — remains the best safeguard for managing expectations.
Research and Development Costs — The Retroactive Burden
The Act restores immediate expensing of domestic Section 174 R&D costs for tax years beginning after 2024 while foreign research must continue to be amortized. This makes it important to distinguish domestic from foreign research activities; misallocating these costs can result in material errors, particularly where research is spread across multiple locations or functions.
For many taxpayers, the shift back to immediate expensing of domestic R&D will require an Accounting Method Change, filed on Form 3115, along with a Section 481(a) adjustment to reconcile prior-year treatment. Errors in Form 3115 preparation are a frequent audit trigger and often lead to broader examinations. To help manage this exposure, firms should treat the preparation of Form 3115 as a separate engagement — identified in the engagement letter with its own scope, timeline, and fee structure — rather than incorporating it into standard tax return preparation.
The Act also permits taxpayers to amend prior-year returns (2022–2024) to retroactively expense domestic R&D costs. While doing so may produce refunds, it also introduces the audit-risk-of-amendment — the risk that filing the claim opens the entire return to IRS review, not only the R&D adjustment. In other words, while the refund may be justified, amending a return effectively invites the IRS to take another look at every item reported on that return. Practitioners should document discussions weighing the potential benefit of the refund against the increased examination risk. Written client acknowledgment is particularly important where the refund amount is relatively small compared to the cost and risk of an IRS examination, where prior-year documentation may be incomplete or uncertain, or where the taxpayer has other positions on the return that could draw scrutiny. In these situations, obtaining a signed acknowledgment helps ensure the client understands both the benefit and the associated exposure before choosing to proceed.
Business Interest Expense, QSBS and Opportunity Zones
The easing of Section 163(j) limitations through EBITDA-based calculations expands deductibility, but risk remains where intercompany debt allocations, thin capitalization, or aggressive financing structures exist. CPAs should limit their role to tax compliance and planning guidance and refer clients to legal counsel or other advisors for any questions involving the terms of financing arrangements or the structure of the underlying debt.
Both Qualified Small Business Stock (QSBS) and Opportunity Zone provisions received extensions and modifications, including expanded exclusion limits. These remain complex and closely scrutinized. Practitioners should refrain from offering definitive advice until the IRS and Treasury issue regulations. Any interim planning guidance should be accompanied by written disclaimers clarifying that the advice is preliminary and subject to change.
Energy Credits — A Renewed Source of Risk
The OBBBA modifies and consolidates several energy-related credits, including provisions affecting solar investments, electric vehicles, and energy-efficient property. As with prior legislation, these areas are frequently associated with aggressive marketing claims, promoter involvement, and inflated valuation assumptions. CPAs should not endorse or recommend specific investment programs and should document all client communications regarding energy-credit eligibility and substantiation.
When assisting clients with credit calculations or filings, engagement letters should clearly limit the firm’s role to compliance — based on client-provided documentation — and disavow responsibility for the underlying economic or legal validity of these investments.
Individual Provisions — The 2029 “Tax Cliff” and Temporary Deductions
For tax years 2025 through 2028, taxpayers may claim new temporary deductions: up to $25,000 for tips, $25,000 for overtime pay (joint filers), and $10,000 for car loan interest on new U.S.-assembled vehicles. The SALT deduction cap also increases to $40,000 through 2029.
These benefits create a significant “tax cliff” beginning in 2029, when they expire and the SALT cap reverts to $10,000. CPAs should incorporate these reversions into projections to prepare clients for higher future liabilities and avoid allegations of poor planning.
The 20% Qualified Business Income (QBI) deduction is now permanent, but eligibility — particularly for specified service trades — must still be tested carefully. Documenting the assumptions used in determining QBI eligibility is a key risk-management safeguard.
Compliance, Credits and Penalties
The Act increases due diligence obligations across multiple credits and deductions. Some examples include:
Ongoing Employee Retention Credit (ERC) scrutiny reinforces the need for separate, detailed engagement letters and client representation letters confirming eligibility. CPAs must not assume responsibility for verifying eligibility — this distinction is central to malpractice prevention.
For self-employed clients, the Form 1099-K reporting threshold increases to $20,000 and 200 transactions. This change can heighten the potential risk of income understatement and reinforces the best practice to issue engagement letters and clarify the clients’ responsibility to provide complete and accurate information for preparation of their tax returns.
The Act also makes the Alternative Minimum Tax (AMT) exemption permanent but reintroduces phase-outs beginning in 2026 and expands Disaster Relief provisions to cover certain state-declared events. Practitioners should confirm eligibility, secure documentation, and avoid filing claims prematurely.
Practical Loss Prevention Takeaways
The OBBBA is a complex mix of permanent, temporary, and transitional provisions. Effective risk management depends on communication, documentation, and clear scope definition.
- Communicate early and often. If engaged to do so, model estimated impacts and emphasize that all projections are subject to change as guidance evolves.
- Obtain written authorization. Confirm elections and timing decisions — especially for depreciation, R&D, and energy credits — in writing.
- Clarify your role. CAMICO recommends that your tax engagement letters specifically detail the scope and limits of the engagement, which should define the firm’s services as limited to tax compliance and planning (if applicable).
- Document thoroughly. Maintain comprehensive workpapers, including if applicable eligibility analyses, and client representation letters for all high-risk positions.
- Monitor developments. Stay current on IRS and Treasury guidance. If appropriate, inform clients when prior advice may need to be revisited.
Final Word
The OBBB Act presents both opportunity and exposure. By staying proactive — communicating clearly, confirming assumptions, and documenting diligently — tax practitioners can help clients benefit from new provisions while minimizing professional risk. Large, accelerated deductions and temporary relief should be clearly communicated as timing benefits rather than permanent tax reductions. Clear communication, sound planning, and thorough documentation remain a tax practitioner’s strongest defense.
CAMICO policyholders with questions regarding this article or other risk management topics should contact the Loss Prevention department at lp@camico.com, or call our advice hotline at 1-800-652-1772 and ask to speak with a Loss Prevention Specialist.