Tax News & Views Lost Credit Clawback Roundup

December 7, 2021

IRS Addresses Erroneous Employee Retention Credit Payments - Caitlin Mullaney, Tax Notes ($):

The IRS has provided some penalty relief regarding the retroactive early termination of the employee retention credit provided in infrastructure legislation.

IRS Notice 2021-65, 2021-51 IRB 1, released December 6, provides guidance for employers that received advance payments of the ERC or reduced employment tax deposits in anticipation of receiving the credit for the fourth quarter of 2021, before the retroactive early end of the ERC enacted in the Infrastructure Investment and Jobs Act (P.L. 117-58)

The bill, signed into law November 15, eliminated the ERC for the fourth quarter of 2021 for all businesses except recovery start-ups, changing the end date of the credit from December 31 to September 30.

Link to IRS guidance: Notice 2021-65


IRS issues latest guidance on ERC - Daniel Hood, Accounting Today. "Businesses that reduced their employment tax deposits in anticipation of being eligible for the credit must deposit the amount of that reduction on or before the relevant due date for wages paid on Dec. 31, 2021 (even if they don’t actually pay wages on that date), and report the appropriate tax liability."

Guidance Provided for Employers to Make Deposits for Payroll Tax Deposits Reduced Due to ERC They No Longer Qualify for and to Repay Advances on that Credit - Ed Zollars, Current Federal Tax Developments. "The Notice modifies previously issued guidance to take into account the termination of the employee retention credit for other than recovery startup businesses for the fourth quarter of 2021, as well as providing certain penalty relief for employers who had reduced payroll tax deposits, received advance payments of the ERC or both prior to the retroactive repeal of the credit for the fourth quarter of 2021."


IRS and Prince’s Estate Settle Tax Court Case - Kristen Parillo, Tax Notes:

The Tax Court has called off a March 2022 trial between the estate of pop superstar Prince and the IRS after the parties reached a settlement on the values of the singer’s assets.

The latest development in Estate of Prince R. Nelson v. Commissioner was revealed in a November 30 order from Tax Court Judge Mark V. Holmes, who noted that a trial had been scheduled to begin March 21, 2022, at the court’s St. Paul, Minnesota, trial session.

“On November 23, 2021 we spoke with the parties and learned that they have settled,” Holmes wrote. “Because the Estate remains under the supervision of a state probate court, the settlement has to be approved at the state level. Because one of the heirs has died, a representative for that heir has to be found and put in place. This will take some time and all agree that this case should be shunted to a status-report track.”

Perhaps the IRS loss in the Michael Jackson estate case softened the IRS negotiating position here.


Prince's Estate, IRS Settle Valuation Dispute In Tax Court - Eric Kroh, Law360 Tax Authority ($):

Comerica Bank & Trust NA, the executor of the estate, filed its suit in August 2020, disputing the nearly $39 million in taxes and penalties imposed by the IRS. According to the petition, the agency pegged the value of Prince's estate at about $163.2 million at the time of Prince's death in April 2016, while Comerica asserted it should have been valued at about $82.3 million.

The two also had different estimates of the fair market value of NPG Records Inc., a record company Prince founded. The agency valued that label at about $46.5 million, while the estate's appraisal valued it at about $19.4 million.

The IRS also valued Prince's name, image and likeness rights at about $6.2 million, as compared with the estate's valuation of about $3.2 million.


Nunes to Retire, Take on Big Tech as CEO of Trump Media - Doug Sword, Tax Notes "Rep. Devin Nunes, R-Calif., will leave Congress next month to become CEO of social media start-up Trump Media & Technology Group (TMTG), leaving his status as the front-runner to become chair of the House Ways and Means Committee if Republicans win a House majority in the November 2022 elections."

Punchbowl News explains why this is a big deal:

Nunes was nearly certain to become the chair of the Ways and Means Committee if Republicans take the majority, which is one of the most coveted positions in the House. Instead, he’s going to run a media company that’s already in the crosshairs of the Securities and Exchange Commission for a former president who remains hugely controversial, to say the least. This is just a stunning choice. No one walks away from a shot at Ways and Means’ gavel like this.


Next in line is Florida Rep. Vern Buchanan, the wealthy 70-year old former car dealer who has represented the Sarasota area since 2007. Senior Republicans breathed a sigh of relief Monday because Buchanan is considered steeped in tax policy and comfortable around big business -- something they worried about with Nunes.

The world has changed. Somehow it's hard to imagine Paul Ryan or Dan Rostenkowski walking away from Ways and Means to go to a start-up.




Senate revs up work on $2 trillion spending proposal, aiming to complete vote on Biden-backed bill before Christmas - Tony Romm, Washington Post ($):

Yet the path to passage for Democrats’ signature spending plan appears especially precarious, as party lawmakers continue to contend with political dissent among their own ranks. A pivotal swing vote, Sen. Joe Manchin III (D-W.Va.), has yet to offer his endorsement of the legislation, even after months of wrangling with the White House.


Yet the path to passage for Democrats’ signature spending plan appears especially precarious, as party lawmakers continue to contend with political dissent among their own ranks. A pivotal swing vote, Sen. Joe Manchin III (D-W.Va.), has yet to offer his endorsement of the legislation, even after months of wrangling with the White House.


Democrats see Christmas goal slipping away - Alexander Bolton, The Hill. "Democratic senators are growing increasingly doubtful that Senate Majority Leader Charles Schumer (D-N.Y.) will be able to meet his Christmas deadline because several major disagreements are holding up the Build Back Better Act, including a fight over lifting the cap on state and local tax (SALT) deductions."


Hurry up and wait on BBB -Bernie Becker, Politico:

Meanwhile, key centrist Democrats still don’t seem in any huge rush to pass President Joe Biden’s Build Back Better agenda, especially as the other work keeps piling up on them. (Latest evidence there: Sen. Kyrsten Sinema of Arizona is predicting that the Democrats’ social spending bill will slip into next year, according to Punchbowl News.)


Plus, Senate Democrats are still working through what can make the cut in the climate and safety net package with the parliamentarian, because they’re seeking to pass the bill through budget reconciliation — with some of that work happening over the weekend.


End Of Child Credit Checks Could Spur Deal On Budget Bill - Alan Ota, Law360 Tax Authority ($):

Congressional Democrats aim to focus on the pending expiration of advance monthly payments of the expanded child tax credit to hurry along negotiations on the budget reconciliation bill that includes President Joe Biden's recovery plan.


Democratic leaders have been trying to work out a deal to advance the BBB Act with Sen. Joe Manchin, D-W.Va., and other undecided lawmakers. Manchin has expressed interest in tightening eligibility requirements to curb benefits for wealthy taxpayers and prod recipients of the refundable child credit to stay in the workforce.


Democrats’ Corporate Minimum Tax Plan Brings Late Lobbying Burst From Companies - Richard Rubin, Wall Street Journal ($). "Knowing the minimum tax probably can’t be defeated, companies and trade groups are trying to score last-minute wins to soften it as Congress includes it in the broader Biden agenda. Business groups point to unintended consequences of the proposal, which became a key piece of the Democratic plan after Sen. Kyrsten Sinema (D., Ariz.) blocked a straightforward corporate tax rate increase."


JCT Advises Strengthening Trust Tax Reporting Requirements - Dylan Moroses, Law360 Tax Authority ($):

U.S. lawmakers may want to consider strengthening reporting requirements for beneficial ownership data of trusts in light of the country's role in global tax avoidance uncovered by the Pandora Papers investigation, the U.S. Joint Committee on Taxation reported Monday.


The JCT provided a number of policy recommendations for addressing the use of "perpetual dynasty trusts," including a prohibition on any generation-skipping transfer, or GST, tax exemption that may benefit those other than the transferor's children or grandchildren.

Lawmakers could also consider limiting the GST exemption afforded to trusts to a specified time. Those proposed changes might make U.S. transfer tax laws less burdensome and increase tax collection from trusts, but they could also interact with other income tax laws.

Link to the JCT report: (JCX-49-21 (December 06, 2021))


Don't miss the year-end 529 plan contribution deadline - Kay Bell, Don't Mess With Taxes. "The state breaks, either a tax credit or tax deduction against the states' taxes, vary by jurisdiction. So do the deadlines for taking advantage of them.... To get the benefits for the tax year, most states require you to put the money into the 529 by Dec. 31."

Iowa allows contributions to the College Savings Iowa 529 plan as late as April 30 of 2022 to get a deduction of up to $3,474 ber donor, per donee. Still, the sooner you contribute, the sooner your savings begin to accumulate tax-favored income.


IRS Appears to Add Requirement for Individuals to Include Statement on PPP Loan Forgiveness for 2021 Personal Returns - Russ Fox, Taxable Talk. "As I read the instructions, this applies for any PPP loan for a sole proprietorship (Schedule C business) where there is PPP loan forgiveness in either 2020 or 2021. So this includes people who had the loan forgiven last year!"

The Potential Peril Associated With Deferred Payment Contracts - Roger McEowen, Agricultural Law and Taxation Blog. "Unless a farmer-seller takes steps to gain protection, the farmer is an unsecured creditor of the buyer after delivery is made and before payment is made.  If the buyer files bankruptcy in that interim period, the farmer-seller will be a general unsecured creditor and could lose out on the vast amount of income anticipated from the sale."

100-Percent Meal Deduction Applies to 2021 and 2022 Per Diem Rate or Allowance - Parker Tax Publishing. "In Notice 2021-63, the IRS states that solely for purposes of the temporary exception in Code Sec. 274(n)(2)(D) to the 50-percent food and beverage limitation, a taxpayer that properly applies the rules of Rev. Proc. 2019-48 may treat the meal portion of a per diem rate or allowance paid or incurred after December 31, 2020, and before January 1, 2023, as being attributable to food or beverages provided by a restaurant."

North Carolina Reinforces Its Tax Reform Legacy - Katherine Loughead, Tax Policy Blog. "North Carolina’s recently adopted reforms further reduce the state’s flat income tax rate, ultimately to 3.99 percent, and will eventually phase out the corporate income tax."

State of Iowa catches two false claims for $200 million in tax refunds - O. Kay Henderson, Radio Iowa. "A source in the agency told Radio Iowa two claims for a total of $200 million came from what appears to be the same source in late November. The suspect claims for those state income tax refunds were detected and no money was paid out."


Prosecutors See Double-Edged Sword in Tax Evader Sophistication - Nathan Richman, Tax Notes ($):

Over the past 12 years, tax investigators and prosecutors have gone from offshore tax evasion cases involving one financial account in the target taxpayer’s name to having to trace fund movements up to 25 years into the past, according to Mark Daly of the Justice Department Tax Division.


When the IRS and Justice Department look at those financial account files, they often find information that makes criminal tax prosecutions relatively easy, Daly said. Specifically, the bankers often asked account holders if they were U.S. persons and described what such a designation requires — such as return filing and asset declarations, he said. Documents showing defendants were asked about their connections to the United States and what their responses to those questions were help the government show they intentionally violated known legal duties, he said.

You can't set up elaborate webs of shell companies and trusts without a little help, but those little helpers leave tracks:

More enablers working on the structure means more handprints to investigate, and more countries means different sets of disclosure laws to use, Daly said. In other words, if one jurisdiction is especially reluctant to hand over financial information about the evasion structure, maybe another involved country will be more forthcoming, he said.

As a wise man says, sometimes it's better just to pay the taxes. It's a lot better than going to prison.


Coin Collector Won't Get Justices' Two Cents On IRS Seizure - David Hansen, Law360 Tax Authority ($):

The U.S. Supreme Court declined on Monday to hear arguments from a woman who said the Internal Revenue Service owed her $95,000 for selling her coin collection at face value.


Though the federal government eventually wired $364,000 back to Willis, she argued in her suit that the coins were worth more than their face value. A Missouri federal court agreed, finding that the U.S. undervalued the coins and owed her an additional $95,000.

But a three-judge Missouri federal court panel overturned the decision in April. It held that the agency employee who sent the coins for processing without accounting for their value was free to make that decision. 

Still a foolish decision.


You mean you can send a text on paper? Today is National Letter Writing Day. No character limit, no data charges, no virus risks.

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