April 20, 2021
Former Taxpayer Advocate Contests Rettig’s $1 Trillion Tax Gap - William Hoffman, Tax Notes:
Olson, who headed the Taxpayer Advocate Service from 2000 to 2019, faulted the IRS commissioner’s sourcing, methods, and assumptions in calculating a $1 trillion tax gap.
Rettig’s inclusion of underreported taxes on cryptocurrency transactions, as well as research the IRS contributed to finding up to $175 billion in offshore entity underreporting, “still doesn’t add up to $1 trillion,” Olson said.
Olson also took issue with Rettig’s statement to the committee that “there’s no part of the tax gap [that] should include legal transactions that are authorized by the [tax] code and courts and whatnot.”
“Equating the entire tax gap [with] tax evasion is just so disingenuous,” Olson said. “And it’s also wrong. It’s incorrect.”
The Commissioner has made an extraordinary claim. The extraordianary evidence remains to be seen.
Smaller Corporate Tax Increase Floated at White House Infrastructure Meeting - Andrew Duehren, Wall Street Journal ($). "Rep. Charlie Crist (D., Fla.) said lawmakers discussed the potential for some “compromise wiggle room” on raising the corporate rate to help pay for the plan. 'You could see a 2 or 3% increase—maybe not all the way to 28 but 25,' he said of the percentage rate."
SALT Cap Could Become Hurdle In Infrastructure Talks - Alan K. Ota, Law360 Tax Authority:
For example, Rep. Lauren Underwood, D-Ill., has promoted a plan, in H.R. 2439, to raise the cap on deductions for state and local taxes to $15,000 for single taxpayers and $30,000 for married couples. Underwood said she believed some lawmakers would line up behind her proposal to raise the SALT cap because it would address criticism that the uniform SALT deduction cap is too low and delivers fewer benefits to single individuals after they get married, resulting in a so-called marriage penalty.
Democrat Floats Paying for SALT Cap Repeal With More Tax Audits - Laura Davison, Bloomberg News ($). "The New Jersey Democrat said Monday that increasing funding for the Internal Revenue Service to boost enforcement efforts could yield enough money to pay for reinstating the full SALT deduction as well as a portion of President Joe Biden’s $2.25 trillion infrastructure package."
Arizona Conforms to Federal Pandemic Relief for Taxpayers - Paul Jones, Tax Notes. "The legislation’s April 14 approval by Gov. Doug Ducey (R) means the state now conforms to tax relief approved by Congress to counter the impact of the pandemic, including the exclusion of forgiven PPP loans from state taxable income and the deduction of eligible expenses that were paid for with forgiven loans."
House Again Passes Pot Banking Bill That Would Ease Tax Compliance - Wesley Elmore, Tax Notes ($). "Supporters of the SAFE Banking Act say that increased access to banks will lead cannabis businesses to rely less on cash, improving public safety and increasing tax compliance. Because the majority of cannabis businesses are unbanked, most operate on a cash-only basis and pay federal and state taxes in cash and only at designated offices where the tax authorities can accept it — roadblocks that most other legal businesses don’t face."
IRS Names Acting Chief of Office of Promoter Investigations - William Hoffman, Tax Notes ($). "The OPI was established in 2020, along with the Office of Fraud Enforcement, to combat syndicated conservation easements, abusive microcaptive insurance, and other suspect transactions, IRS Commissioner Charles Rettig said."
Fourth Class Action Suit Against Syndicated Conservation Easement Promoters - Peter Reilly, Forbes ($). "The whole SCE industry is based on a theory that I find preposterous, but I believe many people seriously embrace. The theory is that when property is being valued for conservation easement purposes, due to the perpetuity, the valuation is somehow dethatched from the current market for similar property."
COVID relief bill, IRS decision ease some pandemic-affected health care costs - Kay Bell, Don't Mess With Taxes. "If your advance premium payments exceeded the amount of the actual premium credit you're entitled to for the 2020 tax year, you don't have to repay the extra."
Work From Home — Local Business Taxes, the Next Big Headache - Steven Wlodychak, Tax Notes ($). "As if dealing with 50 different state tax regimes isn’t difficult enough, compliance with these municipal taxes seems even more daunting."
Related: Telecommuting Workers in Refuge States Complicate State Taxes 2020/11
Most Costs Incurred By Male Couple Seeking to Have a Child Were Not Deductible Medical Expenses - Ed Zollars, Current Federal Tax Developments. "The key issue is that while these various costs are incurred to affect a human body, it’s not the body of a party for whom these taxpayers are allowed to deduct medical expenses."
Lesson From The Tax Court: Blind Reliance Is Not Reasonable Reliance - Bryan Camp, TaxProf Blog. "Yet [the Taxpayer] never bothered to even review his returns. Sure the returns may have been long and complex, but the combo of (1) his smarts and (2) the obviousness of the error meant that his failure to even review the return negated any finding of reasonable cause. This is very similar to the lesson we saw last week when a sophisticated taxpayer’s failure to notice the omission of $169,000 of income from her return negated her claim to reasonable reliance on her return preparer."
What the American Jobs Plan Could Mean for Your Financial Plan - Brad Kelley, Eide Bailly. "Any comments at this point are pure speculation. Many presidents have had some version of an infrastructure plan—and these plans have largely gone nowhere."
New Investors Discover Tax Pitfalls of Robinhood and Other Trading Apps - Laura Saunders, Wall Street Journal ($). "Most vexing for investors like Mr. Leong is that despite the new platforms’ sophisticated technology they don’t make it easy to deploy a tax-wise technique known as 'specific-lot identification.' Investors use it to lower their taxes, sometimes significantly, by choosing which shares to sell if they have lots bought at different prices and aren’t selling all of them."
New Research Finds Limited Effects on Taxpayer Behavior from Pass-through Deduction - Alex Durante, Tax Policy Blog. "While proponents of the Section 199A pass-through deduction claimed it would boost investment and critics claimed it would encourage tax avoidance and income shifting, new research casts doubt on both claims."
Too Many IRS Audits of Big Businesses Result In No Change In Tax Liability - Janet Holtzblatt, TaxVox:
To outside tax experts, the reason for the high rate of no-change audits is obvious. Sharon Katz-Pearlman, Global Head of Tax Dispute Resolution and Controversy at KMPG; University of North Carolina professor Jeff Hoopes; and University of Georgia professor Erin Towery agreed that the IRS, with its constrained budget and reductions in staff, can’t compete with the big accounting firms and the high-priced law firms that bring sophisticated models and highly-paid tax professionals to the battle.
That's probably part of it, but there is another likely reason. SEC-regulated companies have to disclose uncertain tax positions. There is a lot of pressure in public companies to avoid bad news on IRS exams, which can make for awkward quarterly earnings calls. This may lead to more careful compliance in very big companies.
IRS cracks down on prisoner tax fraud and identity theft - Michael Cohn, Accounting Today
The report, released Monday by the Treasury Inspector General for Tax Administration, found the IRS identified more than 4,500 fraudulent tax returns using a prisoner’s SSN in 2019, claiming refunds totaling over $14 million. The amounts could have been higher, but after a 2017 report from TIGTA, the IRS and other agencies at the federal and state level have been putting in place processes to stop tax refunds from being issued to prisoners and people who steal prisoners’ SSNs. One of them involves the Federal Bureau of Prisons and state departments of corrections complying with a requirement to provide the IRS with an annual list of all prisoners incarcerated within their prison system.
No honor among thieves, either: "At the same time, the IRS has to deal with the perennial problem of identity theft, including the exploitation of prisoners’ identities for filing fraudulent returns, often by their fellow inmates."
It's 4/20. What holiday might be observed today? Why National Cheddar Fries Day, of course, if find yourself strangely hungry.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.