April 14, 2021
IRS Commissioner pegs annual Tax Gap at $1 trillion - Jay Heflin, Eide Bailly:
The tax gap is the difference between the taxes that are owed and the amount that is collected on time. Roughly a decade ago, the agency pegged the annual tax gap at $441 billion for tax years 2011 through 2013. Rettig said that calculation is outdated, for several reasons.
“It does not include any focus with respect to virtual currency, which I indicated now is about a $2 trillion market cap. It does not include much information with respect to foreign source income. It does not include information with respect to illegal source income, which is taxable and we do chase,” Rettig said.
The IRS Commissioner also noted that a narrowly focused investigation found that the top 1% of income earners account for $175 billion of the annual tax gap.
Yearly Tax Gap Could Exceed $1 Trillion, Rettig Says - David van den Berg, Law360 Tax Authority. "Rettig said the agency has lost about 17,000 employees in the enforcement area over the last decade. It has about 6,500 frontline revenue agents who now handle the most complex individual and corporate tax matters and substantially all of them are dedicated to the most egregious cases, wealthy individuals or the largest corporations, he said."
Wow! IRS Comm'r Rettig Estimates Annual Tax Gap at $1 Trillion! - Annette Nellen, 21st Century Taxation. "IRS data on its tax gap website is based on 2011 and way out of date. It estimates the net annual tax gap at about $381 billion. That is a lot of money (more than we brought in even from the pre-TCJA corporate income tax)."
IRS Looks to Authority, Tech, and Funds to Fight Preparer Fraud - Aysha Bachi and Allyson Versprille, Bloomberg Tax ($). "The IRS included 'unscrupulous return preparers' in its list of the largest tax scams last year, advising taxpayers to avoid preparers who ask them to sign a blank return or 'ghost' preparers who don’t sign the returns they prepare."
The IRS finally explains how 2020 1040 overpayments will be applied to 2021 estimated taxes - Eide Bailly Tax News and Views:
The good news is that taxpayers who have a 2020 overpayment already big enough to cover the 2021 first quarter payment can do so without penalty.
The bad news is that taxpayers who don't have that big of an overpayment and will extend will either have to spend time and money preparing a separate estimated tax payment, or accept the potential of a one-month underpayment penalty.
But also this:
Absent large estimated tax payments, it is unlikely to be cost-effective to spend professional time computing an early estimate. For example, a taxpayer with a $10,000 individual estimated tax payment made on May 17 this year, instead of April 15, would incur a penalty of about $25.
But if you want to not pay 3% APR for one month to the IRS, you can extend by tomorrow with a large enough payment, apply it forward, and avoid any penalties.
IRS Extends Penalty Waivers for Employment Tax Deposits - Kelly Taylor, Tax Notes. "In Notice 2021-24, 2021-18 IRB 1, issued April 13, the IRS extends to various dates in 2021 relief in previous guidance (Notice 2020-22, 2020-17 IRB 664) for employers that, under the American Rescue Plan Act of 2021 (P.L. 117-2), are required to pay qualified sick and family leave wages and qualified health plan expenses associated with those wages."
Some returns & tax payments are still due by April 15 - Kay Bell, Don't Mess With Taxes:
What's due this week: In addition to those payers of estimated tax, April 15 also remains the due date for the following filers.
- U.S. corporations must file Form 1120 for the calendar year and pay any tax due. To get an automatic three-month extension, file Form 7004 and deposit estimated tax.
- Foreign corporations must file Form 1120-F to report income, gains, losses, deductions, credits, and to figure U.S. income tax liability. However, Form 1120-F due dates can vary depending on if the foreign corporation has a U.S. place of business and on the year-end of the foreign corporation.
- Partnerships must file Form 8813 quarterly payment voucher and pay any tax due.
- Estates and trusts that are calendar year entities must file Form 1041 and pay any tax due.
- Tax-exempt organizations must file Forms 990-T (Section 401(a) or 408(a) trusts) or Form 1120-POL for tax years that ended on Dec. 31, 2020.
- Exempt organizations also must deposit estimated tax for the first quarter of 2021 due on Unrelated Business Taxable Income for Tax-Exempt Organizations. Use Form 990-W to determine the amount of estimated tax payments required.
If any of these federal tax filings apply to you, get to work. The deadline still is Thursday, April 15.
Glitches Fixed as SBA’s Shuttered Venue Program Readies to Reopen - David Hood, Bloomberg Tax. "The Small Business Administration closed the Shuttered Venue Operators Grant (SVOG) program about four hours after it opened on April 8 after technical issues from the agency’s vendor, Salesforce.com Inc., beleaguered its systems as many tried to apply."
Significant Changes to Estate Planning Suggested in the “For The 99.5 Percent Act”- Ava Archibald, Eide Bailly. "Considering the higher estate exemption available today and the ability to use some of the estate planning techniques that would be eliminated in the Act, now is the time to talk to your tax and wealth advisor to be sure you understand the tax and cash flow consequences of using your gift exemption during your life while the higher exemptions are available."
Lawsuit Tax Hinges On Settlement Wording And IRS Form 1099 - Robert W. Wood, Forbes ($). "In any event, if the IRS computer spits out a tax return that fails to account for a Form 1099, you should respond with care. Weak settlement agreement wording and failure to report a Form 1099 can be tall mountains to climb."
IRS Warns of Tax Refund Scam Targeting College Students and Staff - Jon Osborn, TaxBuzz. "Recently, the IRS sent out a public notice warning that emails are going out with the intention of scamming university and college students, as well as staff members. They are sending out phishing emails that impersonate the IRS, asking recipients to click on a link in order to either keep themselves out of some type of trouble or to expedite their receipt of a tax refund."
Most Taxpayers Needing a New ITIN Are Prohibited From Filing Electronically, Causing Unnecessary Refund Delays - National Taxpayer Advocate Blog. "Taxpayers need an ITIN if they are required to file a tax return or have a reporting requirement, and they do not have and are not eligible to receive a Social Security number (SSN). ITINs are required not only for primary taxpayers filing returns, but also for other persons included on a return who do not have SSNs, such as spouses and dependents. Taxpayers use their ITINs to file their tax returns, pay the tax they owe, and claim any tax benefits to which they are entitled under the law."
Related: The Ins & Outs of the Individual Taxpayer Identification Number.
US Treaty Limitation on Benefits Status Map - International Tax Blog. "We have created a map of the limitation on benefits (“LOB”) status of the 66 countries for which the US has income tax treaties." These are provisions to prevent "treaty shopping" to cherry-pick favorable tax treatment from different countries.
New York Delegation Threatens Tax Bill Over SALT Cap - Jad Chamseddine, Tax Notes ($):
A majority of New York’s Democratic House members threatened to stand in the way of tax legislation if the $10,000 state and local tax deduction cap is not fully repealed.
In an April 13 letter to House Speaker Nancy Pelosi, D-Calif., and House Majority Leader Steny H. Hoyer, D-Md., 17 New York Democrats said they would “reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation.”
With Democrats holding only a slim majority in the House of Representatives, this group could scuttle any tax plan, if they are serious.
Biden’s Corporate Minimum Book Tax Narrows, but Problems and Uncertainties Remain - Garrett Watson, Tax Policy Blog:
Business tax credits are a common reason why a corporation may report book profits without owing tax liability, and allowing these credits to apply to the minimum tax on book income greatly reduces the impact of the tax. Take, for example, a firm that engages in a lot of R&D spending. The firm may post $10 million in book profits to shareholders but owe no tax on this income after reducing tax liability with R&D tax credits.
Many business credits, like the R&D tax credit, are designed to incentivize investment in preferred activity. By including them in the calculation for minimum tax liability, the administration has acknowledged their importance in the tax code, which calls into question the purpose of the minimum tax in the first place
Related: The Benefit of the Research & Development Tax Credit (video).
21% Minimum Tax Wrong Starting Point, EU Lawmaker Says - Todd Buell, Law36 Tax Authority. "Lídia Pereira, a Portuguese member of the center-right People's Party, said the U.S.' desire to reach global agreement on a minimum tax is a positive development, but added that Europe shouldn't raise the tax burden on companies to that extent."
'They are being sold as paraphernalia': Iowa Legislature moving to add a steep tax to glass pipe sales - Ian Richardson, Des Moines Register. From the "not every problem is a tax problem" files.
But not at the sun. Today is National Look Up at the Sky Day. Ponder the wonders of the cosmos, but finish your taxes first!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.