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Giving Home > Professional Advisor Resources > Washington News > Passwords Can Protect Data from Identity Thieves

Passwords Can Protect Data from Identity Thieves

Published October 10, 2025

There will soon be major promotions by online companies for the upcoming holiday shopping season. The holiday season is a prime opportunity for identity thieves to target consumers. With the growth of online shopping, millions of individuals are potentially exposed to online fraudsters. The first line of defense against online attacks is strong passwords.

The IRS cautions taxpayers to take a few simple steps to protect your passwords, which can in turn protect sensitive financial information from identity thieves. Protecting personal information makes it more difficult for an identity thief to file a fraudulent tax return on a taxpayer’s behalf.

Cybersecurity experts have changed their strategies for passwords. Previously, they suggested complex passwords that were different for every online account. Because most individuals have accounts for financial services, social media, online shopping and other purposes, the number of complex passwords was too great. 

As a result, many security experts now recommend longer phrases such as “SomethingYouCanRemember@30.” The IRS offers nine tips to help you protect your online accounts. 

  • Password Length – Create a password with eight or more characters.
  • Combination – Use upper and lowercase letters, numbers and symbols in your password.
  • Personal Information – Do not use your city, street, or other personal information in a password. This information is widely available to identity thieves.
  • Default Password – Do not use “password” for your password. Change all default passwords.
  • Reuse of Passwords – Do not use the same or similar passwords for multiple accounts. For example, avoid “Begood!17, Begood!18 and Begood!19” as your passwords.
  • Email Address – Do not use your email address in a password. This email address is easily known by fraudsters.
  • Security – If you have a written list of passwords, store them in a safe or locked file cabinet.
  • Disclosure – Never give out passwords over the internet. Be on guard if an email sender claims to be from your bank, the IRS or your employer.
  • Password Manager – Consider using a password manager program. Do a search to find password programs for multiple devices. The best password programs typically have 256-bit encryption.

2026 Tax Tables, Exemptions and Deductions

In Rev. Proc. 2025-32; 2025-44 IRB 1 (9 Oct 2025), the IRS published tax tables, exemptions and deduction limits for 2026. There are substantial increases in many tax provisions.

The 2026 standard deduction will be $32,200 for couples filing jointly and $16,100 for single individuals. The head of household standard deduction increases to $24,150. All three standard deductions were nearly doubled for 2018 and later years by the Tax Cuts and Jobs Act (TCJA) and made permanent in the One Big Beautiful Bill Act (OBBBA).

Some taxpayers must calculate both regular and alternative minimum tax (AMT) amounts. The tax payable is the higher of the two numbers. The 2026 AMT exemptions are $140,200 for married couples and $90,100 for single individuals. The AMT exemption begins to phase out for married couples with income from $1,000,000 and is completely phased out at $1,280,400. For single individuals, the AMT exemption beings to phase out at income of $500,000 and completely phases out at $680,200. The AMT tax is 26% at the lower level and 28% over $244,500. 

Cafeteria plans set aside pre-tax dollars for medical reimbursement of qualified expenses. One type of cafeteria plan is a flexible spending account (FSA), which has a funding limit in 2026 of $3,400.

Charities are permitted to transfer token gift premiums to donors who make gifts above a specific level. In 2026, a donor who makes a gift over $69.50 may receive a premium with the logo or other identification of the nonprofit with a value of $13.90 or less. Donors who make larger gifts may receive a premium up to 2% of the value of the gift, with a limit of $139.00.

The estate tax exclusion amount increases from $13.99 million to $15 million, as established in OBBBA. Thus, a married couple in 2026 may have an estate of $30 million with no estate transfer tax. 

Special use agricultural land under Sec. 2032A may qualify for $1.46 million of reduced value. If an estate qualifies for installment payments of the estate tax under Sec. 6166, the 2% interest amount is levied on the first $1.94 million.

Finally, the annual gift exclusion remains at $19,000. This is a per donor-per donee exclusion. An individual or couple with a large family may make substantial tax-free transfers each year through use of the annual gift exclusions.

Gated Community HOA Denied Exempt Status

In Mira Vista Homeowners Association Inc. v. Commissioner; No. 14901-22X; T.C. Memo. 2025-102, the Tax Court determined that a homeowners’ association (HOA) was not exempt from federal income tax under Sec. 501(a).

Mira Vista is a Fort Worth, Texas-gated community with 657 single-family homes. It includes greenbelts, private streets, nature trails and a recreational facility with a lake, restrooms, fishing dock and a playground. The HOA provides some assistance to local government through code enforcement, security patrols, maintenance of roads, fences and greenbelt and a 24-hour guard. Mira Vista Country Club (Country Club), located in the development, is a separate entity. The Country Club hosts various charitable and community events each year.

The HOA submitted an application to be a tax-exempt organization under Sec. 501(c)(4). The IRS denied the application on the basis that the HOA was not qualified, since it does not benefit the public community. The HOA appealed the denial of exempt status and noted that there were at least six similar homeowner associations in Texas that had been granted Sec. 501(c)(4) status.

However, IRS Appeals Officer Daniel Frisch stated, "Your organization does not promote the social welfare or provide a community benefit because it does not allow public access."

Under Sec. 501(c)(4), an exempt entity must be a civic organization not organized for profit, and it must be operated exclusively for the promotion of social welfare. The IRS argued that the HOA does not operate exclusively for the promotion of social welfare because it does not allow public access.

The Supreme Court has previously held under Sec. 501(c)(3) that a single, substantial nonexempt purpose will result in a denial of exempt status. The U.S. Court of Appeals for the Fifth Circuit similarly has stated that a single substantial nonexempt purpose blocks tax exemption as a welfare organization. In addition, the Fifth Circuit found that an organization that operates primarily for the benefit of members and not the general public is "not an organization described by Section 501(c)(4).”

The HOA claimed the standard for exempt status should be public benefit, rather than public access or use. It argued that it should be exempt because Mira Vista provides public benefits through various facilities and services, charitable events sponsored by the Country Club and a patrol service.

The Tax Court noted “the public benefits, if any, are incidental.” In addition, the charitable events and facilities are not conducted or owned by the HOA, but rather by the Country Club. While the HOA provides some quasi-governmental functions, the Tax Court noted that the services of the  HOA "are principally undertaken for the benefit of its members and guests and only offer an incidental public benefit."

Finally, the HOA noted that there are at least six similar homeowner associations that have been granted Sec. 501(c)(4) status. Therefore, it argued that the IRS would be arbitrarily engaging in selective granting of tax-exempt status if it denies an exemption to the HOA and it should be granted an exemption to the HOA. However, the Tax Court stated that the treatment of another taxpayer is not the deciding factor. Each HOA must "establish its own exemption qualifications." Therefore, the HOA is not qualified as a Sec. 501(c)(4) organization.

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.”