December 15, 2021
Victims of this weekend's tornadoes in Kentucky will have until May 16, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.
Following the recent disaster declaration issued by the Federal Emergency Management Agency (FEMA), the IRS is providing this relief to taxpayers affected by storms, tornadoes and flooding that took place starting on December 10 in parts of Kentucky. Currently, relief is available to affected taxpayers who live or have a business in Caldwell, Fulton, Graves, Hopkins, Marshall, Muhlenberg, Taylor and Warren counties. But the IRS will provide the same relief to any other localities designated by FEMA in Kentucky or neighboring states. The current list of eligible localities is always available on the disaster relief page on IRS.gov.
The tax relief postpones various tax filing and payment deadlines that occurred starting on December 10. As a result, affected individuals and businesses will have until May 16 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on April 18, as well as various 2021 business returns normally due on March 15 and April 18. Among other things, this means that affected taxpayers will have until May 16 to make 2021 IRA contributions.
Kay Bell has more at Don't Mess With Taxes: "In addition to the devastating twisters, the line of storms that erupted on Dec. 10 also produced other wind damage and flooding rains that led to disaster designations for the Kentucky counties of Caldwell, Fulton, Graves, Hopkins, Marshall, Muhlenberg, Taylor and Warren."
Build Back Better is having its own supply chain problems, Punchbowl News reports:
Despite heavy lobbying by Schumer and President Joe Biden, it doesn’t appear that Senate Democrats are that close to getting the Build Back Better Act done by Christmas. Sen. Joe Manchin (D-W.Va.) hasn’t committed to voting for the $1.7 trillion package, or even beginning debate on it. Some of the Senate panels have yet to meet with the parliamentarian’s office to begin vetting their committee titles to make sure they’re in compliance with the Byrd Rule, which controls consideration of reconciliation bills. And Democrats don’t have consensus on the state and local tax deduction (SALT), a major issue for blue state Democrats like Schumer, who is also up for reelection this cycle.
One of the keys, of course, are the talks between Manchin and Biden. They spoke Monday and Tuesday. As far as we can tell, there hasn’t been much progress made.
Optimism waning in Senate about budget reconciliation vote this month - Lindsey McPherson, Roll Call. "Senate Majority Leader Charles E. Schumer has repeatedly said his goal to get the package through the Senate before Christmas. But when questioned about the feasibility of that timeline Tuesday he declined to provide a firm commitment."
Opinion: It’s time to entertain the possibility that the Build Back Better bill won’t pass - Henry Olsen, Washington Post ($). "Democrats thus face the specter of progressives’ irresistible force meeting Manchin’s immovable object. That clash looks increasingly likely, and the resultant explosion could easily blow up BBB along with it."
Democrats push forward with EV tax credits - Joseph Morton, Roll Call. "The budget reconciliation package would grant up to $7,500 in tax credits for plug-in electric vehicles, but those credits would get a $4,500 boost for cars and trucks assembled at an American plant operating under a union-negotiated collective bargaining agreement."
Build Back Better Budget Deficits Could Mean More Inflation, More Policy Uncertainty - Garrett Watson, Tax Foundation. "As the Senate weighs changes to the spending and tax portions of the Build Back Better Act, the Congressional Budget Office (CBO) and Tax Foundation find the bill would increase the cumulative budget deficit over the next 10 years—contrary to claims the legislation is 'fully paid for.' The deficit impact may contribute to short-run inflation and will grow if the temporary policies are extended and the budget gimmicks used to minimize the potential long-run cost of the legislation are removed."
The Retirement Plan Impacts of the Build Back Better Bill - Ava Archibald and Melissa White, Eide Bailly.
Prohibit the conversion of after-tax contributions in qualified plans and IRAs to Roth accounts after 2021.
The proposal would prohibit after-tax IRA and plan contributions from being converted to Roth accounts, regardless of income level. This would eliminate the backdoor Roth IRA conversion and Mega backdoor Roth IRA conversion strategies. This provision would be effective for distributions, transfers, and contributions made after 2021.
Prohibit the Roth conversion of IRAs and employer-sponsored plans for taxpayers over certain taxable income limits.
The bill would eliminate Roth conversions for both IRAs and employer-sponsored plans for single taxpayers with taxable income over $400,000 (or taxpayers married filing separately), married taxpayers filing jointly with taxable income over $450,000, and heads of household with taxable income over $425,000 (all indexed for inflation after 2028). This provision would be effective for taxable years beginning after 2031.
There's lots more.
*Action Needed by Year End* - Possibly Last Chance for Back-Door ROTH IRAs - Tax Warrior Chronicles. "Many who do Back-Door ROTH conversions typically wait until they are close to the April tax-filing deadline. The economics, however, are unlikely to be much different for the account holder if the conversion is completed now, before year-end 2021, instead of the usual April conversion."
Judge scraps Trump lawsuit to shield tax returns from Congress - Josh Gerstein and Kyle Cheney, Politico.
Judge Trevor McFadden, a Trump appointee to federal district court in Washington, said Trump was “wrong on the law” and that Congress is due “great deference” in its inquiries.
McFadden ordered the Biden administration not to turn over the records to the House in the next 14 days. The judge urged both sides to reach an agreement to govern the records during an appeal, but said that if they cannot agree, Trump’s lawyers can ask the D.C. Circuit Court of Appeals for relief.
The story says the Ways and Means can make the returns public if they win the inevitable appeals.
Don’t hold your breath on expiring tax breaks - Roger Russell, Accounting Today
Some provisions are specific to charitable contribution deductions:
The charitable deduction for non-itemizers. Taxpayers claiming the standard deduction may claim a deduction for 2021 of up to $300, or $600 for married filing jointly. “I haven’t seen proposals to extend this, although the long-term goal was to promote more deductions for charities,” said Luscombe.
The enhanced itemized charitable deduction. For itemized charitable deductions, the adjusted gross income limit was raised from 60% to 100% for 2020 and 2021. “I don’t expect a lot of effort to extend this,” Luscombe commented. “It would affect a lot of wealthier people, so they should take advantage of the 100% limit before it goes away.”
The enhanced corporate charitable deduction. The enhanced limit of 25% of taxable income is scheduled to revert back to a 15% limit.
IRS Issues Lengthy List of Substances to Face Superfund Tax - Mary Katherine Browne, Tax Notes ($):
In Notice 2021-66 released December 14, the IRS said its initial list of taxable substances under section 4672(a) includes 101 chemicals and hazardous substances, as well as the 50 that were on the list when the excise tax was allowed to expire 26 years ago.
One key change in the law since 1995 is the lower threshold for when the excise tax will apply. The tax will be imposed on products that are composed of at least 20 percent of a listed substance, rather than the more generous 50 percent under prior law.
Crypto IRS Reporting Rules Promise Tax Compliance—And Enforcement - Robert Wood, Forbes. "Starting January 1, 2024, a crypto transaction may trigger a Form 8300 filing when any "person" (including an individual, company, corporation, partnership, association, trust or estate) receives digital assets in the course of a trade or business with a value exceeding $10,000. Valuation is done on the day of receipt, and as with all things crypto, valuation matters a lot. Again, structuring transactions into smaller receipts to avoid reporting is a felony. And since receipts must be aggregated if they are related in a series of connected transactions, virtually any receipt of digital assets is potentially reportable, regardless of dollar value."
New Form 1099 Reporting Coming in 2022 - Debbie Flieger, Bloomberg. "Beginning in tax year 2022, individuals, partnerships, LLCs, and corporations that earn more than $600 through various online venues will start receiving Form 1099-K, Payment Card and Third-Party Network Transactions, on which that income will be reported to themselves and the IRS. This change will substantially increase the number of Forms 1099-K required to be filed with the IRS and furnished to recipients in early 2023."
Ex-Illinois Rep. Pleads Guilty To Tax Evasion - Celeste Bott, Law360 Tax Authority. "Acevedo was first charged in February in a six-count indictment, with prosecutors saying he received cash payments and deposited that cash to hide where the money was coming from, 'handling his affairs in a manner so as to avoid the creation and maintenance of customary business and accounting records concerning actual revenues received and expenses incurred.'"
Lessons from the 2009 Recovery Act for an Inclusive Recovery from the Pandemic - Aravind Boddupalli, TaxVox. "The federal government and many state and local governments are placing equity at the forefront of their pandemic relief efforts. But to effectively follow through on this important goal, policymakers can learn from initiatives undertaken in response to the Great Recession."
IRS Stymies Making Of Film About George Washington And Alexander Hamilton - Peter Reilly, Forbes. "So what is stopping Aegis For Dreams ? Right now it is the IRS. On August 10, 2021 IRS issued PLR 202144028. The ruling informs Aegis For Dreams Foundation, Matthew W. Ryan, Trustee that IRS has determined that the Foundation does not qualify for exemption under IRC Section 501(c)(3)."
To be sure, you don't need a tax-exempt entity to make a film.
Delinquent State and Local Taxes Are Paid, Arizona Coyotes Says - Paul Jones, Tax Notes. "The payment of state and local tax liabilities may help prevent the team from losing its business license in the city of Glendale and from being barred from the Gila River Arena, its home stadium in the city. However, the team's future in the city appears headed for a close at the end of the season because the city has decided not to renew its operating agreement with the team."
The Coyotes are 5-22 so far this year in the NHL, so eviction might not be without its consolations.
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.