Tax News Roundup - January 28

January 28, 2020

This is a roundup of tax news and opinion. Opinions found at the link are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall.

TIGTA Spotlights IRS 2019 Filing Season Shortcomings, Successes - William Hoffman, Tax Notes ($)

Did you find last filing season unusually difficult? Based on a new report from the Treasury Inspector General for Tax Administration, you had company. Tax Analysts reports:

More than 880,000 taxpayers who were eligible for the section 199A qualified business income (QBI) deduction for tax year 2018 failed to claim it on their returns, the Treasury Inspector General for Tax Administration said in a recent report. 

At the same time, TIGTA identified thousands of returns filed in 2019 in which QBI deductions exceeded their statutory limit, or in which wages — which do not qualify for the QBI deduction — were the only income reported.

The new QBI deduction, which allows a 20% reduction in taxable income attributable to certain businesses, was especially challenging last year, as all of the key computations had to be done off the return. For this filing season the IRS has introduced Form 8995, which along with its instructions should help. Even so, there remain many areas of interpretation and complexity. While the new form will surely help, errors will still be plentiful.

The TIGTA report notes that many taxpayers failed to get the memo about the changes to miscellaneous itemized deductions:

As of May 2, 2019, our analysis identified 284,142 TY 2018 individual income tax returns with an adjustment to income claimed by the taxpayer for unreimbursed employee business expenses totaling more than $3.1 billion. In comparison, for this same period in the prior tax year, we identified 129,726 individual income tax returns for TY 2017 that reported an adjustment to income claimed by the taxpayer totaling over $684.4 million. This represents an increase of 154,416 (119 percent) tax returns with unreimbursed employee business expense claims, which may be an indication of taxpayers erroneously claiming this adjustment to their income that they had previously been allowed to claim as an itemized deduction.

The report gives an idea of the scope of the changes: 

In preparation for the 2019 Filing Season, the IRS updated its processes and procedures to address the Tax Cuts and Jobs Act and changes made to Form 1040. The changes included creating or updating 542 tax products, updating 128 information technology systems, developing and issuing guidance documents, and updating fraud detection systems. Despite the partial Government shutdown, the IRS began accepting and processing individual tax returns on January 28, 2019.

While working with the IRS can be frustrating, the agency’s ability to function as well as it does in the face of a new tax law is impressive. Tax is hard. It's even harder when everything changes.

6 things that could delay the arrival or lower the amount of your tax refund - Kay Bell, Don’t Mess With Taxes:

No more firm delivery dates:Years ago, the Internal Revenue Service issued a calendar of sorts giving dates when folks could expect their tax refunds if they filed them electronically.

The tax agency found, however, that produced more problems than solutions.

E-filing will almost always help the refund to arrive faster. The IRS allows you to track the status of your refund at its helpfully-named Refund Status page.

Late IRS Form 1099? Don’t Request It, Here’s Why - Robert Wood, Forbes. "If you find yourself wanting a form, you obviously know about the payment you received. So just report the income."

FEDERAL LAW CHANGES PERMIT MORE USES OF 529 PLAN ACCOUNTS - Patricia Scallon and David VanSickel, Davis Brown Tax Law Blog. "The Act expands the 529 college savings plan program to permit certain apprenticeship program expenses and student loan repayments to be treated as 'qualified higher education expenses.'"

TPC Launches A New Resource For Understanding Tax Expenditures - Fran Sammartino, TaxVox. "They are called tax expenditures because many serve the same function as direct spending but are delivered through the tax system."

NYT Article on Perhaps Biggest Tax Heist Ever - Jack Townsend, Federal Tax Crimes Blog. "The article says that the traders were reluctant to pull the scam in the U.S., so did so in Europe."

Quote of the Day from Procedurally Taxing:

I am often tasked with explaining to clients (and occasionally students) the near irrelevancy that an IRS audit (or lack of audit) for a prior year has on the year at issue. Sometimes the client misconstrues a previous lack of audit as a badge of approval: the IRS let me claim my cousin as a qualifying child for the last 4 years, how is it an issue now? Other times you have a situation like the one presented in the above order: the IRS has already audited me on this issue in the past, and I (largely) prevailed: shouldn’t they just leave me alone from here on out?

There’s no “get away once, get away always” rule in the tax law.

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