December 28, 2021
IRS reminder: For many employers and self-employed people, deferred Social Security tax payment due Jan. 3 - IRS. "As part of the COVID relief provided during 2020, employers and self-employed people could choose to put off paying the employer's share of their eligible Social Security tax liability, normally 6.2% of wages. Half of that deferral is now due on January 3, 2022, and the other half on January 3, 2023."
IRS Reminds Employers and Self-Employed Individuals of Rapidly Approaching Tax Deferral Payment Deadline - Ed Zollars, Current Federal Tax Developments. "But the IRS warns that claiming the taxpayer did not receive a billing will not excuse the taxpayer from the consequences of not timely paying the amount due"
Beneficial Ownership Regs Spark Worries Over Burden and Liability - Andrew Velarde, Tax Notes ($):
Under the rules, reporting requires identifying information — such as names, addresses, and identifying numbers — from the reporting entity, the beneficial owner, and the company applicant. The company applicant is the individual that files or directs and controls the filing of the formation or registration documents.
Exempt from the reporting requirement are large operating companies with 20 or more full-time U.S. employees, more than $5 million in sales, and a physical operating presence in the United States. Many high-net-worth international individuals would not meet those thresholds, Ortiz surmised.
The new reporting requirements passed with little fanfare in January as part of a defense spending bill. There are many U.S. companies with fewer than 20 employees and less than $5 million in sales - just the sort of companies that might not get the memo on this sort of paperwork requirement. Missing it can be expensive:
Penalties for reporting failures under the regime can be high. Persons that willfully fail to provide the beneficial ownership information to FinCEN are liable for civil penalties of $500 a day, and criminal penalties can amount to $10,000 and two years' imprisonment. The regs also state that a “person” includes individuals and reporting companies. A person provides beneficial ownership information to FinCEN if they do so directly or indirectly, including by providing the information to another person for reporting purposes.
This new filing requirement will cause a lot of grief to otherwise law-abiding taxpayers.
Manchin told White House he would support version of tax on billionaires - Jeff Stein, Washington Post ($). "Despite its endorsement from the most conservative Democrat, the tax on billionaires still faces long odds to approval as part of the final legislation, as it has been greeted skeptically by other Democratic lawmakers in both the House and Senate. It was also left out of the House Democrats’ version of Build Back Better after Manchin publicly criticized it in October."
Sen. Kyrsten Sinema (D-Ariz.), long the biggest hurdle to Democrats’ tax aspirations, has again in recent days raised concerns about some of the revenue measures the party is pursuing.
There have been rumors that Sen. Sinema was ready to go along with more tax increases. This is evidence to the contrary.
In particular, Sinema has questioned whether owners of “pass-through” entities — companies structured so the owner “passes through” income onto their personal income tax returns — should be exempted from a new “surtax” intended to fall on the very rich, two people familiar with the matter said.
Manchin told White House he would back version of billionaire tax: report - Mychael Schnell, The Hill. "Manchin’s openness to implementing a tax on billionaires appears to be a shift in his position. He said in October that he did not like the idea of targeting only the 700 wealthiest Americans to finance a large part of the party’s spending package."
Maryland senator sees possible comeback for Build Back Better - David Cohen, Politico:
Sen. Ben Cardin said Sunday he’s not convinced that the Democrats’ Build Back Better legislation is dead.
“There is unanimity in our caucus that we want to get a bill to the president, and we are working to see what that bill will contain. President Biden is directly involved in these negotiations,” the Maryland Democrat said on “Fox News Sunday.”
An Omicron Aid Bill? Mixed Signals On BBB - John Buhl, Daily Deduction. "Rep. Tom Cole (R-OK) told Bloomberg Radio that Congress might agree to a bipartisan supplemental funding bill in early 2022 if the latest surge in COVID-19 cases requires new fiscal support. 'My hope would be on something like this, we could find common ground and move forward.'"
Rental Income Is Excludable Based On Services, IRS Says - Emlyn Cameron, Law360 Tax Authority ($):
The Internal Revenue Service said in CCM 202151005 that the net rental income in those situations is excluded from net earnings from self-employment under Internal Revenue Code Section 1402(a)(1) if the occupants aren't provided services for their convenience that go beyond making the rental suitable for occupancy. But, the agency said, if occupants are provided additional services and those services are substantial enough to be a material part of the rent, then the net rental income is included.
The IRS provided two examples applying the conclusions to short-term rentals, in one of which net rental income was included because occupants were provided services such as daily maid service and ride-share vouchers. In the other example, net rental income was excluded because the rental was merely cleaned ahead of occupancy to make it suitable, the agency said.
Link: CCM 202151005.
6 tax moves to make by Dec. 31 - Kay Bell, Don't Mess With Taxes. "5. Harvest your tax losses. In looking at your portfolio for possible assets to donate, you might have discovered some holdings that just aren't worth it anymore. They've lost money, so it's time to finally dump them. Those losses could offset any profit you recognized this year, lowering possible capital gains taxes. You need to sell those stocks — harvest them in the tax vernacular — by Dec. 31 for them to be of value to you this tax year."
Livestock Indemnity Payments – What Are They? What Are the Tax Reporting Options? - Roger McEowen, Agricultural Law and Taxation Blog. "The general rule is that any indemnity payments (or feed assistance) are reported in income in the tax year that they are received. That would mean, for example, that payments received in 2021 for livestock losses occurring in 2021 will get reported on the 2021 return. Payments for livestock losses occurring in 2021 that were received in 2022 will be reported in 2022."
A Look Ahead: In Battle of Wills, Will Congress Fund? Will IRS Reform? - William Hoffman, Tax Notes ($). "The litany of complaints about the IRS is almost a catechism to tax professionals now. Single-digit levels of phone service, millions of paper and electronic returns and refunds unaccountably trapped in IRS processing, and erroneous notices and tax bills have proliferated despite months of taxpayer and practitioner complaints."
IRS Pronouncements on Representative Capacity, Restitution Assessments and E-Signatures - Keith Fogg, Procedurally Taxing. "The pandemic has become the mother of invention in a number of areas including signatures. Because of the difficulty and potential danger in requiring actual signatures on many documents, the IRS has created lists of documents on which it will accept electronic signatures. On November 18, 2021, the IRS updated its list of documents on which it would accept an electronic signature. The list approves electronic signatures through October 31, 2023 – maybe the IRS knows something about how long the pandemic will last."
IRS Extends Tax Filing Deadlines In NY, NJ, CT, PA, LA, MS - Robert Wood, Forbes. "Back in September, the IRS extended the Oct. 15 tax filing deadline for Ida victims until January 3, 2022. But now, victims of Hurricane Ida in six states have until Feb. 15, 2022 to file various individual and business tax returns and make tax payments. The updated relief covers the entire states of Louisiana and Mississippi, as well as parts of New York, New Jersey, Connecticut and Pennsylvania. The current list of eligible localities is always available on the Around the Nation section of the disaster relief page on IRS.gov."
Tax Court Christmas Donkeys - A Present For Taxpayers With Losing Side Gigs - Peter Reilly, Forbes. "Judge Urda picked the shortest day of the year to issue an opinion that can serve as a Christmas present to taxpayers vulnerable to Code Section 183, the hobby loss rule. William R. Huff TCM 2021-140 is the first, and likely the only, taxpayer victory in a Section 183 case in 2021. And keeping with the Christmas theme it is about donkeys, albeit miniature donkeys, who probably could not help Santa quite as much as Dominick did in Lou Monte's song."
Cities Provide an Early Look at How Governments Are Advancing Racial Equity - Aravind Boddupalli, Lourdes Germán, and Tracy Gordon, TaxVox. "More broadly, we found there is room to extend traditional principles of sound tax policy to address issues related to equity and inclusion."
Interview: The U.S. Should Tax Unvaccinated People - Robert Goulder and Joseph Thorndike, Tax Notes Opinions. "I suspect the behavioral response of a tax break for people who do get the vaccine is roughly equivalent to the behavioral response of imposing a tax on those who don't. Fundamentally, what we are talking about here is the federal government paying people to get the vaccine. Arguably, that's something we should have been doing from the very start."
Not every problem is a tax problem.
Cumberland County Attorney Sentenced to 14 Months in Prison for Tax Evasion - U.S. Department of Justice (defendant name omitted):
A Cumberland County, New Jersey-based attorney was sentenced today to 14 months in prison for evading more than $250,000 in federal taxes on income generated from his law firm, Acting U.S. Attorney Rachael A. Honig announced.
From 2012 through 2015, Taxpayer, managing partner of the Woodbury, New Jersey, law firm... exercised primary control over the firm’s finances and supervised the firm’s bookkeeper. Many of Taxpayer’s personal expenses, including school tuition for his children, utilities and service fees for his personal residences, student loan payments for Taxpayer and his spouse, and other expenses, repeatedly were paid out of the law firm’s bank accounts. Taxpayer directed the bookkeeper to falsely classify these payments as law firm business expenses to avoid his tax obligations. He also falsely declared, under penalty of perjury, that his personal tax returns for tax years 2012 through 2015 were true and accurate when they were not. Taxpayer ultimately concealed over $800,000 in personal income and evaded payment of over $250,000 in taxes owed to the IRS during tax years 2012 through 2015, including $368,000 in income and $120,000 in taxes for tax year 2014.
So don't do that.
175 Years! Iowa became a state on December 28, 1846. Ansel Briggs was the state's first governor, and the first session of the Iowa General Assembly met in Iowa City. The capitol was moved to Des Moines in 1857. Celebrate responsibly.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.