Tax News & Views Congress Plods While Cookies Bake Roundup

December 18, 2020

Congress flirts with short shutdown as negotiators near stimulus deal - Heather Caygle, Burgess Everett, and Jake Sherman, Politico. "While negotiators maintained they were close and senators said an announcement could come at any time, there were no overt signs of an imminent breakthrough."

The plan is likely to include a provision allowing deductions for expenses that trigger forgiveness of Paycheck Protection Plan loans. This is a key item for many businesses and their owners as they do their year-end planning.

Lawmakers Race to Finish $900 Billion Virus Relief Package - Andrew Duehren and Kristina Peterson, Wall Street Journal ($). "Because they are planning to approve a relief bill alongside a broad government spending package, lawmakers had hoped to finish the former before current government funding expires at 12:01 a.m. Saturday. But as that deadline neared, negotiators said they might pass a short-term spending patch to tide the government over until the relief package is finalized."

GOP signals no support for relief 'down payment' - Alexander Bolton, The Hill. "The brewing Republican opposition to passing another large COVID-19 relief deal early in the new Biden administration raises the stakes of the Jan. 5 runoffs in Georgia."


As FBAR Litigation Evolves, Willfulness Standard Raises Concerns - Amanda Athanasiou, Tax Notes ($). "Jurisprudence on the foreign bank account report willfulness standard has left no room for non-willful conduct, seemingly putting the standard at odds with the applicable penalty structure, according to one practitioner."

The new requirement to disclose owners of entities to the Financial Crimes has a similar "willfulness" rule. Just as foot-fault violations of FBAR reporting rules are often treated as "willful" violators subject to harsh penalties, it's likely that forgetting to report a new member of an LLC to FinCEN will be treated as "willful" conduct worthy of expensive penalties.

Death Doesn’t Stop the IRS—Failure to File FBARs - Zachary Montgomery, Freeman Law. "Second, willfulness does not require actual knowledge. Willfulness simply requires reckless or careless disregard of one’s statutory duty."


Debt Modification Rules Become More Complicated Amid Pandemic - Emily Foster, Tax Notes:

Distressed businesses may be increasingly renegotiating terms with their creditors without understanding the nuances of the debt modification rules or assessing options to avoid potentially alarming tax consequences. 

Accounting and law firms issued alerts early during the coronavirus pandemic, warning clients of the tax effects of restructuring debt, but some practitioners say many businesses have been surprised to learn that specific loan modifications trigger taxable income. 

Be careful out there.


Can you get a 1099 and a W-2 in the same year? The IRS has posted a discussion of how the same person can be both an employee and a contractor in the same year, and how auditors should evaluate the filings: 

When the taxpayer filed both Form W-2 and Form 1099-MISC for a worker, the examiner should consider whether:

  1. The worker was treated as an employee for part of the year and an independent contractor for a separate part of the year (i.e., payments reported on Form W-2 and Form 1099-MISC were for the same services but distinct periods of time during the year). 
  2. The worker was performing two or more distinct services and the taxpayer considered the worker to be an employee for one service and an independent contractor for the other service (i.e., dual status worker). 
  3. The payment reported on Form 1099-MISC represented additional compensation to the worker in his capacity as an employee for which he received compensation reported on Form W-2 (e.g., a bonus payment).

Improperly classifying an employee as a contractor can get expensive as employer liability for payroll taxes pile up.

Related: Independent Contractor or Employee?.

Minnesota updates withholding fact sheet"This fact sheet explains how to electronically submit W-2 and W-2c information to the Minnesota Department of Revenue."


State Tax Collections Down 4.4 Percent Through September, While Local Tax Collections Rise - Jared Walczak, Tax Policy Blog. "States are not out of the woods yet. Some states, particularly those heavily reliant on tourism or the energy sector, are struggling disproportionately to their peers, and others fear that the worst is yet to come. This is particularly salient in states which fear that temporary relocations due to the COVID-19 pandemic may turn into long-term outmigration."

Mastering Economic Nexus: Everything you Need to Prepare for the Tax Season - Sarah Craig, TaxJar. "In other words, now businesses that simply exceed a state-mandated sales volume in a state must register and collect sales tax from buyers in that state."

Related: A Sales Tax Reform Game Changer: How Wayfair Changed the Sales Tax Reform Landscape.


Why Coca-Cola Could Not Rely on a 1996 Closing Agreement to Protect Itself from a $3.4 Billion Deficiency Determination - Chaim Gordon. "Coca-Cola argued that the closing agreement’s factual underpinnings should be binding in subsequent years. The court rejected this argument because the closing agreement embodied the settlement of a dispute and did not reflect an agreement as to what the best transfer pricing method for Coca-Cola to use on a going forward basis."

Oakbrook Land Holdings A Major 2020 Tax Court Decision - Peter Reilly, Forbes ($). "The Tax Court has been rather preoccupied with conservation easements this year. Oakbrook is representative of one IRS approach - denying deductions based on technical errors."

Senate Finance Committee heads demand IRS commissioner provide hacking answers - Kay Bell, Don't Mess With Taxes. "The hackers apparently used a program created by the Austin, Texas-based software company SolarWinds as the gateway into the government agencies. That's of particular concerns since, note Grassley and Wyden, the IRS appears to have been a SolarWinds client as recently as 2017."

Related: How to Prevent Detect and Respond to Cybersecurity Incidents.


Types of Taxes Imposed on Cannabis, and Compliance Requirements of Various Entities - CCH Tax & Accounting Blog. "There are different kinds of state taxes imposed on cannabis, including sales and use taxes and excise taxes. In addition, cannabis businesses, like producers, distributors, retailers, etc., are subject to a myriad of compliance requirements including registration and licensing."

Are We All Modern Monetarists Now? - Joseph Thorndike, Tax Notes Opinions. "But if MMT proper has remained a pariah in most Washington circles, MMT-lite is doing much better."


Today in history: The Nutcracker premiered on December 18, 1892 in St. Petersburg, Russia.

Cookies! Today is National Bake Cookies Day

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