September 17, 2020
PPP Deductibility May Have to Wait Until November - Jad Chamseddine, Tax Notes:
A fix to allow deductions for Paycheck Protection Program expenses may have to wait until after the November elections despite its overwhelming support among lawmakers.
The Trump administration continues to stand firm behind Notice 2020-32, 2020-21 IRB 837, released April 30, which prevents businesses from deducting expenses associated with their PPP loans, and has blocked attempts to overturn the guidance.
Taxpayers paid their third quarter estimates due this week with the disallowance of PPP expenses as the current law. Whether the rules change before the next round of estimates in December (corporations) and January (everyone else) is an open question.
Individual Ordered to Pay $3 Million for FBAR Violations - Tax Notes ($). "A U.S. district court ordered an individual to pay over $3 million to the government for her willful failure to file foreign bank account reports regarding her financial interest in a Swiss bank account, finding that she acted willfully and rejecting her claim that the penalty is excessive under the Eighth Amendment and under the Fifth Amendment due process clause."
The "FBAR" is Form 114, the annual report required of U.S. Citizens or residents who own interests, or have signature authority over, foreign financial accounts exceeding $10,000 at any time during the year. 2019 filings are due October 15.
The range of accounts potentially covered by FBAR rules can be surprising. The IRS FBAR Reference Guide points out that foreign life insurance policies with cash values are considered "financial accounts for FBAR reporting. So are Canadian Registered Retirement Savings Plans (RRSP), Canadian Tax-Free Savings
Accounts (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican
Administradoras de Fondos para el Retiro (AFORE) accounts.
As this case shows, the penalties for non-filing are severe. "Non-Willful" failures to report can be hit with $10,000 penalties per failure, and "Willful" non-reporting can trigger penalties of up to half the value of the accounts involved. Taxpayers who think they may have missed their FBAR reporting should consider participating in the Treasury's Offshore Voluntary Disclosure Programs, which can greatly reduce, penalties, and sometimes avoid them altogether.
Link to court order: USDC-MA 1:15-cv-13367
October 15 Is The Deadline For Filing Your 2019 Tax Return On Extension - Kelly Phillips Erb, Forbes. "October 15 is the same deadline to file a federal income tax return on extension in any normal year. But since this year has been anything but normal, some taxpayers may not be aware of the due date."
When tax troubles qualify for IRS penalty relief - Kay Bell, Don't Mess With Taxes. "I'm among those on social media who enthusiastically embraced Graf's strong suggestion that no taxpayer face any penalties for tax missteps this year, be they the result of a deadline day technological glitch or some other problem."
Taxpayers Reminded of Expedited Letter Ruling Option for COVID-19 Issues and Electronic Submission of Such Requests - Ed Zollars, Current Federal Tax Developments. "In News Release IR-2020-212 the IRS reminded taxpayers of the option to request an expedited letter ruling request, and that COVID-19 issues can justify asking for such expedited processing."
Senators offer disaster tax relief bill - Naomi Jagoda, The Hill. "It includes provisions to remove penalties on early withdrawal from retirement accounts, suspend limits on deductions for certain charitable contributions and provide an employee retention tax credit. It would also allow low-income individuals to use their previous year's income when claiming certain tax credits, so that they don't receive smaller credits for 2020 if their incomes declined as a result of the disaster."
Does Your State Have an Individual Alternative Minimum Tax (AMT)? - Janelle Cammenga, Tax Policy Blog. "This week’s map shows the five states that have an Alternative Minimum Tax (AMT) in their individual income tax codes: California, Colorado, Connecticut, Iowa, and Minnesota."
Are Estimated Tax Payments Required? - Jason Dinesen. "The IRS will assess a penalty against you if you don’t make estimated payments and you owe more than $1,000 when your return is filed."
Economic Analysis: Which Congressional Districts Got the Largest TCJA Tax Cuts? - Martin Sullivan, Tax Notes ($). "It is a striking political fact that when congressional districts are ranked by average adjusted gross income Democrats represent the top 10 districts as well as the bottom 10."
Where Trump and Biden Stand on Tax Policy - Richard Rubin, Wall Street Journal ($):
Because tax policy is so polarizing, neither candidate is likely to accomplish much without full control of Congress. A Republican sweep would mean more tax cuts, while a Democratic sweep would bring increases. Anything in between results in a stalemate. That would leave lawmakers addressing expiring provisions or—as they have during the pandemic—using tax policy to respond to a crisis.
A New Study Suggests Congress Could Raise Money By Increasing Capital Gains Tax Rates To 47 Percent. But There Is A Catch - Robert McCelland, TaxVox. "In fact, each revenue-maximizing tax rate for long-term capital gains income has a margin of error wide enough to include a rate of 28 percent. Moreover, the margins of error suggest that there is a good chance the revenue-maximizing rate is less than 28 percent."
The current top federal capital gains rate is 23.8%. That doesn't count state taxes.
Video Blogger Throws Shade on FATCA, FBAR, Nonresident Taxation - William Hoke, Tax Notes ($). "Evan Edinger, a U.S. citizen raised in New Jersey, moved to the United Kingdom in 2012. On August 2 Edinger posted a video to his YouTube account in which he tore into the United States both for taxing nonresidents on their worldwide income and for the invasive measures that he said the IRS takes to pry into their foreign financial affairs."
Eritrea is the only other country that taxes its non-resident citizens on their worldwide income. The story has this note:
In 2018 the Dutch government declared an Eritrean diplomat persona non grata for pressuring his countrymen who had taken up residence in the Netherlands to pay Eritrean taxes. In 2013 the Canadian government reportedly expelled the head of the Eritrean consulate in Toronto for trying to enforce his country’s “diaspora tax.”
Meanwhile the man who became British Prime Minister, Boris Johnson, had to settle with IRS on a gain on the sale of a house in London because his parents were studying in the U.S. when he was born, giving him U.S. citizenship. His parents returned to the U.K. five months later, but that was enough for him to be subject to U.S taxes until he took the legal steps needed to abandon U.S. citizenship in 2016.
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.