IRS to Add 3,000-Plus Customer Service Reps Ahead of Tax Season - Allyson Versprille, Bloomberg ($). “The IRS plans to hire more than 3,000 additional customer service representatives as it prepares for next year’s filing season, an agency official said Tuesday.”
The IRS struggled to respond to an unprecedented number of calls from taxpayers last season—in large part due to confusion and questions about Covid-19 relief programs enacted by Congress. The agency is also still working through a backlog of unprocessed returns from the 2021 season that were pulled for manual review owing to possible errors taxpayers made in claiming that relief.
IRS Details Planned Tax Pro Authorization Tool Upgrades - Allyson Versprille, Bloomberg. “The IRS will roll out new features in phases for an online tool tax professionals can use to request authorization to represent taxpayers or view their tax records, an agency official said.”
The Tax Pro Account, launched in July, allows practitioners to digitally initiate powers of attorney and tax information authorizations for their clients. Individual taxpayers can also use new features on the IRS’s Online Account system to approve or reject the authorization requests.
IRS Moving More Online Tools to New ID Verification Platform - Allyson Versprille, Bloomberg ($). “Over the next few weeks the IRS will transition more online applications to a new platform for authenticating user identities, an agency official said Tuesday.”
Under the new Secure Access Digital Identity program, the IRS partners with third-party service providers, like ID.me, to verify users. The system is already being used for the child tax credit update portal, which helps people manage monthly advance payments of that credit.
IRS Priorities Include Offshore Issues, Employment Tax Evasion - Aysha Bagchi, Bloomberg ($). “The IRS is concerned about offshore noncompliance with tax laws, employment tax evasion, fraud, virtual currency, and issues with high-wealth and high-income taxpayers, an agency official said Tuesday.”
Douglas O’Donnell, deputy commissioner of Services and Enforcement at the agency, identified the priority areas during remarks at the Tax Executives Institute and San José State University’s High Tech Tax Institute annual conference.
IRS Making a List of Rule Challenges for 2017 Tax Law - Aysha Bagchi, Bloomberg ($). “A centralized team at the IRS is keeping an inventory of challenges to regulations for implementing the 2017 tax law, according to a presentation Tuesday from agency officials.”
- The challenges are being forwarded to a team at the IRS’s Large Business & International Division, according to the presentation.
- The IRS could ultimately provide settlement initiatives, if its regulations are found to be invalid, Hinding said. Revenue agents have been instructed to continue following the regulations in the meantime.
- Challenges to rules implementing the 2017 tax overhaul have included lawsuits from major companies such as FedEx Corp. and Liberty Global Plc.
IRS Fielding Questions on Reporting Small Business Stock Gains - Aysha Bagchi, Bloomberg ($). “The IRS is on notice that taxpayers need guidance on a statute governing how gains from selling small business stock should be reported, an agency official said Tuesday.”
The law in question, tax code Section 1202, excludes from an individual taxpayer’s gross income 50% of any gains from selling the stock of a qualified small business held for more than five years.
Tax Pros Prepare for Another Filing Season Reshaped by Pandemic – William Hoffman, Tax Notes ($). “Two years of extraordinary stress and change have transformed many small and midsize tax practices in ways it might not be possible, or desirable, to reverse in time for the 2022 filing season.”
An online practice management tool propelled Donald A. Nelson’s tax practice ‘about five years into the future’ and persuaded him to launch his own software.
Employees at David Miles’s 2020 Tax Resolution Inc. were surprised how successfully they transitioned to remote work, though Miles added, ‘It also reaffirmed for us how important that office experience is.’
National Association of Enrolled Agents President David Tolleth said he hasn’t told his mid-Atlantic clients yet, but he plans to switch to an almost virtual service environment because ‘between Zoom and . . . DocuSign, it’s working pretty well to work virtually.’
Treasury Sets Big Goals for Delivering Electronic Payments - Allyson Versprille, Bloomberg ($). “The U.S. Treasury Department has set a goal to deliver 99% of the payments it distributes, including tax refunds, electronically by 2030, a department official said Tuesday.”
Paper checks are problematic for several reasons, including that they’re more susceptible to fraud, Timothy Gribben, commissioner of Treasury’s Bureau of the Fiscal Service, said at a conference hosted by the Council for Electronic Revenue Communication Advancement. He also noted there are currently 11 million paper checks issued by the department that haven’t been cashed by recipients.
Yesterday’s Roundup touched upon this subject, which can be found here.
Biden Agenda Faces Revenue Doubt With IRS Boost Likely Left Out – Colin Wilhelm and Michael Bologna, Bloomberg ($). “A major IRS enforcement boost will likely be omitted from a forthcoming top-line revenue estimate of Democrats’ tax-and-spend package, complicating the question of whether the legislation will be fully “paid for” as President Joe Biden has promised.”
The Biden administration estimates a better funded IRS could bring in $400 billion over a decade through more aggressive audits of corporations and the wealthy. But under budget rules set by Congress and the executive branch, the government’s nonpartisan analysts can’t officially count money that will be spent as also increasing revenue when estimating the cost of legislation.
Andrew Grossman, chief tax counsel for the Democratic majority on the House Ways and Means Committee, suggested Tuesday that the Congressional Budget Office will instead limit its analysis of the IRS plan to a footnote in its official report. That’s because revenue expected from that increased funding would not be ‘scoreable’ under rules guiding official government estimates, he said.
Translation: A “score” is what the bill costs or how much revenue it will raise. To get a score, the CBO makes certain assumptions that lawmakers don’t always agree with. For example, lawmakers could expect that the IRS enforcement provisions will be wildly successful and raise a bunch of revenue. The CBO might not be able to make those same assumptions and conclude that the enforcement provision will raise less revenue. If the IRS enforcement provisions are not in the score, there could be questions about whether the reconciliation bill will pay for itself. The legislation not adding to the debt is a key reason for why some Democrats are willing to support the bill. If it doesn't do that, does that support evaporate?
Congress’s bookkeeper suggests cost estimate for Budget Reconciliation may take awhile – Jay Heflin , Eide Bailly. “The Congressional Budget Office (CBO) notified lawmakers on November 9th that the cost estimate for the budget reconciliation bill that includes tax increases may take some time to complete, which could delay House action on the legislation.”
‘The analysis of the bill’s many provisions is complicated, and CBO will provide a cost estimate for the entire bill as soon as practicable,’ the CBO stated.
The CBO also stated that estimates for individual provisions could be released in short order, despite the fact that it cannot project when a finalized cost estimate will materialize for the entire bill.
Independent analysis says budget bill could add $200B to deficits - Lindsey McPherson, Roll Call. “House Democrats’ budget reconciliation bill could increase federal deficits by roughly $200 billion over 10 years, falling short of lawmakers’ ambitions to fully pay for the climate and social spending package, a nonpartisan budget watchdog group said Monday.”
The Committee for a Responsible Federal Budget said in an analysis that House Democrats’ latest version of the bill includes $2.4 trillion in spending and tax expenditures but only $2.2 trillion in offsets.
The group counts Democrats’ proposal to raise the current $10,000 cap on state and local tax deductions to $80,000 through 2030, with a brief snapback to $10,000 in 2031, as both an expenditure and an offset. The provision would cost $285 billion through 2025, when the current $10,000 cap is set to expire, and raise $300 billion after that, resulting in a net $15 billion in revenue, according to CRFB’s numbers.
Senate Set to Cut Provisions in House Democrats’ $2 Trillion Spending Plan – Eliza Collins and Siobhan Hughes, Wall Street Journal ($):
Here are some of the policies in the bill, which Democrats call Build Back better, that could run into trouble with senators…
In an effort to assuage their concerns, the House added a provision that would lift the cap to $80,000 through 2030. The cap would return to $10,000 in 2031.
That provision could be problematic in the Senate, where every Democratic member must support the legislation. Sens. Bernie Sanders (I., Vt.) and Robert Menendez (D., N.J.) have said they oppose the House version but support a version with an income cap for the state and local tax deduction.
U.S. Treasury Should Give Tax Relief to Automakers, Senators Say - Daniela Sirtori-Cortina. Bloomberg ($). “The Treasury Department should give tax relief to automakers experiencing inventory shortages due to pandemic-induced global supply chain issues, a group of senators including Ohio Democrat Sherrod Brown says.”
Otherwise, some firms could face 'significant, unforeseen tax liabilities due to their inability to replace vehicle inventory,' senators tell Treasury Secretary Janet Yellenin letter published by Brown’s office.
Companies Lobby Against Democrats’ Interest-Deduction Limits – Nina Trentmann and Theo Francis, Wall Street Journal ($). “A tax provision under consideration in Congress that is designed to get multinational businesses to pay more U.S. taxes could lead companies to move borrowing and investment offshore, some corporate executives and tax professionals say.”
The measure would further tighten limits imposed by the 2017 tax overhaul—setting up the U.S. to have stricter limits than many other countries, said Michelle Hanlon, an accounting professor at the MIT Sloan School of Management who has written a book on taxes and business strategy. 'It’s harsher than the rest of the world,' she said.
Crypto Tax Could Raise Billions for EU, Research Suggests - Stephen Gardner. Bloomberg ($). “Cryptocurrency growth means European Union countries could gain billions in tax revenue by fully capturing crypto capital gains, EU lawmakers heard Tuesday.”
Realized capital gains in the EU just from Bitcoin—which represents about half the market value of cryptocurrencies—were 3.6 billion euros ($4.2 billion) in 2020, implying capital gains tax revenue of about 850 million euros ($984 million), according to figures from fiscal policy researcher Andreas Thiemann.
Superfund Excise Taxes Resurrected in Infrastructure Bill – Mary Katherine Browne, Tax Notes ($). “Modified Superfund excise taxes on chemicals and hazardous substances are set to be resurrected in new legislation after a 25-year slumber with the aim of funding resources to respond to environmental threats.”
Those two of the three Superfund excise taxes are part of the $1.2 trillion Infrastructure Investment and Jobs Act (H.R. 3684) passed by the House on November 5 and expected to be signed by President Biden in the coming days.
Streamlining Of Local Hotel Taxes Needed, Expedia Rep Says – Paul Williams, Law360 ($). “Online travel companies are facing financial burdens in complying with a multitude of local hotel taxes that aren't centrally administered at the state level, an Expedia representative said Tuesday, warning that legal challenges may be on the horizon.”
States with home-rule localities are focused on streamlining their sales tax administration to avoid imposing undue burdens on remote sellers under the U.S. Supreme Court's 2018 Wayfair decision, said Stephanie Gilfeather, director of indirect tax at Expedia Group. But states in general haven't paid attention to the hurdles that businesses experience in complying with local hotel taxes, which she called a ‘sleeper issue’ because most states have mainly concentrated on making sales tax compliance easier.
Real Estate Rental Business Fights Partnership Adjustments – Benjamin Guggenheim, Tax Notes ($). “A real estate rental business is protesting two final partnership administrative adjustments that reduced its claimed expenses by $263,272 and rejected other expense deductions.”
In a petition served October 18 in Burris Cypress Lake Ranch LLC v. Commissioner, Johnny Thompson, the company’s partnership representative, says the IRS wrongly assessed a $55,432 deficiency for tax year 2016, a $48,823 deficiency for tax year 2017, and a 20 percent accuracy-related penalty.
The petition states that Burris Cypress Lake Ranch LLC is engaged in the real estate rental business and incurred expenses ordinary and necessary to its operation. Expenses claimed on its Form 8825, 'Rental Real Estate Income and Expenses,' and deductions for insurance, legal and professional services, interest, taxes, utilities, depreciation, bank services, data processing, pest control, and postage were properly reported, it argues.
States Claim They Have Standing to Challenge ARPA Provision – Lauren Loricchio, Tax Notes ($). “Three states challenging an American Rescue Plan Act provision that restricts states from using the act’s aid to offset reductions in net tax revenue claim they have standing because they were injured when Congress offered federal funds on the condition that they accept unconstitutional terms.”
Louisiana, Mississippi, and Texas argue in a November 8 brief in Texas v. Yellen that the Biden administration’s motion to dismiss the case and motion for summary judgment should be denied. They also argue that the provision should be declared unconstitutional and permanently enjoined.
States to Focus on Uniformity With Taxes on Digital Products – Michael Bologna, Bloomberg ($). “The Multistate Tax Commission will develop guidelines for the taxation of digital products by early 2022 with the goal of promoting uniformity for state administration of levies on streaming entertainment, cloud computing, and digital advertising.”
The Uniformity Committee of the MTC, an intergovernmental agency that seeks harmony across state tax policy, will convene stakeholder meetings and review digital economy developments in the coming weeks, said commission general counsel Nancy Prosser. The committee’s goal is to develop the outlines of a whitepaper report by next April articulating model standards for the application of state sales tax regimes with digital goods and services. The comments came during the commission’s fall meeting in Alexandria, Va., Tuesday.
Maryland Appeals Court Rejects Tardy Taxpayer’s Petition - Donna Borak, Bloomberg ($). “Maryland’s Court of Special Appeals has disagreed with a circuit court’s decision to extend the filing period for a resident contesting the state comptroller’s assessment of two years of personal tax returns.”
The court, in an unpublished decision, found that the Maryland Circuit Court for Montgomery County had incorrectly denied the state comptroller’s motion to dismiss taxpayer Scott Webber’s petition as ‘untimely.’ The lower had court reasoned that a state law known as the ‘mailbox rule,’ which adds an additional three days to the 30-day period, supported the petition’s dismissal.
Louisiana Steel Company Filed Sales Tax Appeal Claim On Time – Laura Mahoney, Bloomberg ($). “The deadline for a Louisiana steel manufacturer to file a tax appeal is 90 days after receiving a tax collector’s notice of determination, not a year-and-a-half after first filing a claim for refund, the Louisiana Court of Appeal determined.”
St. James Parish improperly applied a Louisiana law that gives taxpayers 18 months from the time they file a refund claim to appeal to the Board of Tax Appeals if a tax agency has failed to act, the court said. In this case, the parish was actively examining Nucor Steel Louisiana LLC’s claim for a $821,091 sales and use tax refund after that deadline passed.
Home Inspection Not Tax-Exempt Service, W. Virginia Court Rules – Sam McQuillan, Bloomberg ($). “Home inspectors don’t qualify for a professional services tax exemption, West Virginia’s highest court ruled.”
The Supreme Court of Appeals of West Virginia on Monday affirmed in part and reversed in part a lower court’s ruling that a home inspection service owed $36,000 in unpaid consumer sales and services taxes. It also ruled that each part of the state’s four-part test used to classify a professional service doesn’t have to be satisfied for exemption.
Democrats at Global Climate Talks Signal Low Odds for Carbon Tax - Jennifer A. Dlouhy, Bloomberg. “House Democrats threw cold water Wednesday on efforts to advance a nearly $20-per-ton carbon tax being championed by Sen. Sheldon Whitehouse.”
- House Speaker Nancy Pelosi said she is “completely unaware of any deal on a carbon tax,” during a news conference at the COP26 climate summit in Scotland
- 'It is something that is talked about and may be an option for the future,' even though it’s not in the current House version of a broad climate-and-spending bill, Pelosi said
- 'In the short term, it’s going to be very hard to have a carbon fee or a carbon tax in the United States,' though “we continue to have that on the table,” said Rep. Earl Blumenauer, D-Ore.
Nations May Toss OECD Deal To Keep Digital Taxes, Pros Say – Kevin Pinner, Law360 ($). “Although most national governments agreed to discard digital services taxes as part of an international tax overhaul, some tax professionals worried Tuesday that challenges to implementing the new regime may make the existing revenue-raising measures difficult to scrap.
More than 30 countries and Maryland have enacted DSTs— taxes targeting digital companies that are levied in myriad ways — according to a virtual panel discussion hosted by the Tax Executives Institute and San José State University's High Tech Tax Institute. DSTs are meant to address companies making sales and gaining valuable data from users in places where they aren't taxable without a physical presence.
Foreign Tax Credit Rules Expected by Year-End, Treasury Says - Isabel Gottlieb, Bloomberg ($). “Treasury expects to release final foreign tax credit rules by year-end, an official said Tuesday.”
The final package will be “largely consistent” with the topics addressed in the 2020 proposed package, (REG-101657-20; RIN: 1545-BP70), said Jose Murillo, Treasury’s deputy assistant secretary for international tax affairs. He was speaking at an event hosted by the American Institute of CPAs.
But some elements of the proposed rules that are outside the “core foreign tax credit aspects” will be moved to a separate package for sometime next year, he said.
IRS Staffer Says International Tax Changes May Slow Exam Efforts - Michael Rapoport, Bloomberg ($). “The IRS’s examinations of cross-border tax issues at big companies will be affected by any changes in the law that come out of current congressional proposals, an IRS official said Tuesday.”
‘We’re trying to identify where the pressure points are going to be,’ said Donald Murray, a director of field operations for cross-border activities in the agency’s Large Business and International division. He spoke at a virtual conference sponsored by the Tax Executives Institute and San Jose State University.
Happy 246th Birthday Marine Corps! “The Continental Congress first established the Continental Marines on November 10, 1775, leading up to the American Revolution. Two battalions of Marines fought for independence both on land and at sea,” states National Day Calendar.
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