October 28, 2020
IRS ‘Back in Business’ Despite Backlogs, NOL Delays, Lough Says - William Hoffman, Tax Notes:
“We’re pretty much back in business,” Sunita Lough, IRS deputy commissioner for services and enforcement, told a CCH Inc. virtual conference sponsored by Wolters Kluwer October 27.
The difference between the 23 million backlog estimate and the oft-quoted 11 million tabulation is accounted for by additional returns, correspondence, and other mail already in process at the agency, an IRS official later explained.
“We had so much backlog that . . . after a while the post office wasn’t even delivering the mail,” which was also loaded onto tractor trailers, Lough said.
11 million, 23 million, no biggie as long as nobody is reading it. If you want motivation for electronic filing, here you go.
The report says the IRS is behind on processing net operating loss carryback refund requests. These can be filed by fax, which isn't really electronic filing, but at least the don't go under a pile of millions of pieces of paper.
Big Tax Hikes and Lots of Sin: Your Guide to 2020’s State Ballot Measures - Richard Auxier, TaxVox. The Illinois tax hike ballot measure is discussed:
But a “yes” vote would do much more because it triggers previously enacted legislation (SB 687). That bill is a bit complex (see here for a good summary), but it creates an income tax with six tax brackets: three brackets with marginal tax rates at or below 4.95 percent on taxable income under $250,000, two with marginal tax rates (7.75 percent and 7.85 percent) on taxable income above that but below $1 million, and a 7.99 percent tax rate on all taxable income if a married filer earns more than $1 million (the threshold is $750,000 if single).
That last tax rate on all income is unique. No state currently levies a top tax rate that applies to all taxable income once you reach a certain level of income.
For a good reason. That last dollar of income getting you to $1 million triggers thousands of dollars of additional tax.
IRS Posts Updated Penalty Amounts For 2021 - Kelly Phillips Erb, Forbes:
It’s not just individual tax returns that can result in penalties. You can be subject to failure-to-file penalties for certain pass-through returns even if there is no tax due. For 2021, in addition to penalties for willful failure to file, those include:
Neal and Brady Join Forces on Retirement 2.0 Legislation - Jad Chamseddine, Tax Notes. "The leaders of the House Ways and Means Committee have rolled out bipartisan legislation that would further help workers save for retirement as Democrats and Republicans failed to reach a deal on a stimulus package."
The bill would increase the often-overlooked "Savers Credit" and eliminate its phase-out. It would also boost the $100,000 cap for charitable distributions from IRAs.
Panelists Game Out Election's Likely Effects on Taxes: Transcript - Cara Griffith, Mark Prater and Jonathan Talisman. "Jonathan Talisman, founder and managing partner of Capitol Tax Partners, and former assistant treasury secretary for tax policy, and Mark Prater, managing director in the tax policy services group with PwC and former chief tax counsel and deputy staff director for the Republican staff of the Senate Finance Committee discuss what to expect in the election. They then pivot to how those potential outcomes could affect tax and budget policy."
End-of-Year Considerations for an Unprecedented Year - Kristine Tidgren, Ag Docket. "Avoiding income spikes and dips prevents overall income from being taxed at unnecessarily high tax rates. Some common techniques farmers may use to avoid this problem include income averaging, prepaying expenses, making contributions to retirement accounts, gifting grain to a charity, carefully timing the purchase or sale of assets, entering into or electing out of deferred payment contracts, and properly managing depreciation and expensing decisions."
Is A Major IRS Crackdown On Partnerships Looming? - Peter Reilly, Forbes:
The IRS put something exciting on Page 30 of the draft 2020 Instructions for Form 1065. I am going to try to explain why this is important to anybody other than the few thousand people who take this stuff seriously. In 2017 there were 3.9 million partnership returns filed. Based on anecdotal evidence, a large proportion of them are wrong in one way or another and almost nobody, including the IRS, has cared until now.
I care. So will a lot of clients when they get their bills for the time spent getting these right.
2021 inflation-adjusted income tax brackets - Kay Bell, Don't Mess With Taxes. "Do we really need this huge 2021 data dump at the end of a crazy COVID-19 tax year where we already had to spend much more time than we wanted dealing with our pandemic-affected taxes?"
COVID Impairs Debtors (and IRS) - Keith Fogg, Procedurally Taxing. "Going into bankruptcy can make taxpayers very anxious to pay the IRS, because the discharge provisions favor the IRS over many other unsecured creditors. The last thing taxpayers going into bankruptcy want is a non-dischargeable tax debt coming out of bankruptcy, while funds of the bankruptcy estate go to pay general unsecured creditors who could be discharged in bankruptcy."
Two Updates on Syndicated Conversation Easements - Jack Townsend, Federal Tax Procedure. "In many of the conservation easement cases and certainly the abusive ones, the devil is in the valuations."
Zoom Calls Not a Taxing Matter - Ulrik Boesen, Tax Policy Blog. "Last week, Zoom Video Communications announced that, come November, the company will start collecting and remitting local utility and communications taxes in California, New York, Maryland, and Virginia."
Also: "Ultimately, utility taxes on online video calls have very little legitimacy as such calls cause no negative externalities, do not result in increased costs for state and local governments, and cannot easily be distinguished from any other use of internet services which is not subject to a special tax."
Lessons in Global Mobility: Sir James Packs His Bags - Robert Goulder, Tax Notes Opinions. "Across the pond there’s a controversy involving the United Kingdom’s richest man, Sir James Ratcliffe, who is changing his personal residence to Monaco to avoid paying U.K. income taxes."
Yet some commentators insist that nobody moves because of taxes. Even so, Be careful if you are thinking of leaving the US:
These pages periodically address the tax-inspired migration of the rich and famous because they highlight the tension between residence-based taxation (RBT) and citizenship-based taxation (CBT). It raises the most basic of questions: Where should a person pay income tax?...
The United States and Eritrea are the only two nations that rely on CBT. The rest of the world adheres to RBT. There are plenty of U.S. citizens who consider the U.S. preference archaic and unfairly restrictive. This is especially true for “accidental Americans,” who live abroad and have no obvious physical or economic connection to the United States other than having been born here. Why should they be stuck paying U.S. income tax for their entire lives, when the substance of their lives is elsewhere?
But they are, as are US residents working abroad.
Arch Day. 55 years ago today, St. Louis’s Gateway Arch is completed. "The Gateway Arch, designed by Finnish-born, American-educated architect Eero Saarinen, was erected to commemorate President Thomas Jefferson’s Louisiana Purchase of 1803 and to celebrate St. Louis’ central role in the rapid westward expansion that followed. As the market and supply point for fur traders and explorers—including the famous Meriwether Lewis and William Clark—the town of St. Louis grew exponentially after the War of 1812, when great numbers of people began to travel by wagon train to seek their fortunes west of the Mississippi River."
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.