March 10, 2021
House Committee clears Senate-approved rescue bill for House floor debate - Jay Heflin, Eide Bailly. "After the House approves the bill, the legislation will be backed by both chambers and is expected to go to the White House where President Joe Biden will sign it into law."
Final House passage is expected today.
Neal Signals Child Tax Credit Permanence in Near Future - Jad Chamseddine, Tax Notes. "A child tax credit expansion would likely be paired with an expansion of the earned income tax credit, another priority for Neal, who has previously stated that the EITC helps low-income individuals stay afloat."
Neal, Pascrell Demand That IRS Extend Filing Season - Alexis Gravely, Tax Notes ($).
The April 15 deadline doesn’t give taxpayers enough time to accurately file their returns, especially once the next pandemic relief package becomes law and changes some of the tax laws applicable to unemployment benefits, Ways and Means Committee Chair Richard E. Neal, D-Mass., and Oversight Subcommittee Chair Bill Pascrell Jr., D-N.J., said in a March 8 joint statement.
The number of returns filed is lower than it was this time last year, as is the number of returns processed by the IRS, and only 27 percent of phone calls to the agency are being answered, indicating that “taxpayers cannot get the help they need from the IRS,” the lawmakers said.
With the IRS months behind in processing mail and returns it already has, you wouldn't think they wouldn't be in such a hurry to get more.
Ways and Means Chair Joins In Calling for the IRS to Push Back the April 15 Due Date - Ed Zollars, Current Federal Tax Developments. "The Chairman coming out in favor of postponing the April 15 due date will likely increase the pressure on the Treasury Department to take this step."
IRS has mail urging it to make Tax Day 2021 later - Kay Bell, Don't Mess With Taxes. "Federal lawmakers and organizations representing members of the tax community have mailed letters over the last week to the U.S. Treasury and IRS urging the delay this year of April's usual Tax Day."
Based on how they are processing notice responses, they will open these letters by September.
18 Months and Counting - Russ Fox, Taxable Talk.
I do have to use eventually because I have no idea when the IRS will resolve the issues. For example, in August 2019 we responded to an IRS notice alleging that Mr. Smith’s business owed payroll taxes and a civil penalty (for not paying those taxes) for 2012. We responded with all backup paperwork showing the taxes were timely paid. We have received a string of letters from the IRS–the first one was on October 21, 2019–stating:
We haven’t resolved this matter because we haven’t completed all the processing necessary for a complete response. We’ll contact you again within 60 days with our reply. You don’t need to do anything else for now.
The eighth such letter (dated March 8, 2021) arrived in yesterday’s mail. This is more annoying than anything else, but it gives the reality of corresponding with the IRS today: Corresponding with the IRS today is broken.
Another Court Upholds Constitutionality of U.S. Passport Denial - Andrew Velarde, Tax Notes ($). "Under section 7345, enacted in 2015 as part of the Fixing America’s Surface Transportation Act, if the IRS certifies a seriously delinquent tax debt of more than $50,000 (indexed for inflation), Treasury transmits certification for passport revocation or denial to the secretary of state. The IRS also contemporaneously notifies an individual of any certification."
Holding passports hostage to tax disputes never was a great idea. It's even worse now, with the IRS still months behind in processing mail. It's easy how a computer error or a lost check could quickly lock a taxpayer out of a passport with no effective recourse.
Link to decision: USDC SD-GA No. 1:19-cv-00222
PPP Updates: Sole Proprietors and Forms 3509/3510 - Adam Sweet, Eide Bailly:
Previous governmental guidance limited a sole proprietor’s payroll expense for PPP loan purposes (generally, and subject to certain limitations, the PPP loan is based upon a borrower’s average payroll over 2.5 months) to the sole proprietor’s actual employee payroll expenses plus an amount of the sole proprietor’s net taxable income (referred to as the “owner-compensation replacement"). The owner-compensation replacement amount is capped at $20,833...
A sole proprietor cannot be an employee of its business, so sole proprietors without employees were generally limited to using their net taxable income. Recognizing that certain sole proprietors without employees and/or sufficient net income may not have received as much PPP aid as needed, the government now states (here) “that a Schedule C filer may elect to calculate the owner compensation share of its payroll costs—that is, the share of its payroll costs that represents compensation of the owner—based on either (i) net profit or (ii) gross income…” capped at $20,833 no matter if net profit or gross income is used.
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He Got $300,000 From Credit-Card Rewards. The IRS Said It Was Taxable Income. - Richard Rubin, Wall Street Journal ($). "The case highlights a flaw in the IRS approach to credit-card rewards, said Stephanie Hoffer, a tax-law professor at the McKinney School of Law at Indiana University."
Tax Court Allows Taxpayer to Withdraw a Petition to Review the IRS's Failure to Abate Interest - Chaim Gordon. "The question before the Tax Court was whether it can allow the Taxpayer to withdraw the petition without entering a decision for the IRS—the entering of which would bar the Taxpayer from litigating the case in another forum."
Local Taxes on Big Business, Wealthy Underscore Challenges Facing Cities - Paul Jones, Tax Notes ($):
High-profile taxes on the revenue or payroll of larger businesses and on wealthy residents’ income were approved in or around San Francisco, Seattle, and Portland in 2020, drawing cheers from progressives and warnings from business groups. Other West Coast cities have also adopted or considered similar tax measures in the past few years...
Nonetheless, critics argue that higher local taxes, such as those on employment, carry risks.
“This is potentially quite short-sighted,” said Jared Walczak of the Tax Foundation. “A city’s economic dynamics depend on being able to attract employees and having a robust economy.”
Phasing in a Corporate Rate Hike Would Be the Worst of Both Worlds - Alex Muresianu, Tax Policy Blog. "The Biden administration has signaled its openness to raising the corporate tax rate, potentially by phasing in an increase over several years. While phasing in a tax increase, as opposed to hiking immediately, may seem like a reasonable middle ground, it would be the worst of both worlds because it provides old investment with a lower rate while penalizing new investment."
FDR Tried to Stop a Capital Gains Tax Cut — and Failed - Joseph Thorndike, Tax Notes Opinions. "In 1937 FDR was in danger of losing his battle against the conservative Democrats. But the president believed that a populist campaign against tax loopholes would help deflect conservative attacks. To be effective, however, that sort of anti-loophole campaign had to be lurid. It needed to name not just the loopholes, in other words, but the people using them."
I fought the occupation forces, and the occupation forces won. Dedicated Tax Court blogger Lew Taishoff relates a taxpayer's novel approach to getting out of taxes. Judge Copeland found one of the taxpayer's filings inadequate (Taxpayer name omitted):
Mr. Taxpayer also filed a response to the Court’s January 28, 2021 order, as a Status Report. The entirety of his response was as follows:
The status of the petitioner is one of an “Internationally Protected Person” by the proper surredner [sic] to the Occupying military forces. See attached the “Notice of Surrender to the Commander-n-Chief.” All claims have been properly filed as required by the occuping [sic] forces. The tax Court being a military court shall address all actions to the President of the United States as the holder in due course of the PERSON named: [Taxpayer].
No attachment was included. The frivolous arguments presented in Mr. Taxpayer’s response and in his filings with the Court constitute the types of arguments that we need not address “with somber reasoning and copious citations of precedent, as to do so might suggest that these arguments possess some degree of colorable merit.”
Of course, that's what the occupying power would say.
Link to order: Docket No. 15660-19
Reach out and touch someone, old school. Today is National Landline Telephone Day! "Celebrated on the anniversary of Alexander Graham Bell’s amazing invention, National Landline Telephone Day on March 10 remembers the heyday of the landline phone in all its glory—and makes a strong case for its re-adoption."
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