May 12, 2021
Texas Bill Excludes PPP Loans From Franchise Taxpayers’ Income - Tax Analysts ($). "Texas H.B. 1195 as signed into law excludes from a franchise taxpayer’s gross income 'qualifying loan or grant proceeds,' including funds received from federal Paycheck Protection Program loans; any expense paid using such proceeds may be included as a cost of goods sold."
Bipartisan Accord on Tax Gap Crumbles Over What to Do About It - William Hoffman, Tax Notes ($):
“I am very disturbed about guesstimates about the tax gap,” said former National Taxpayer Advocate Nina Olson. “I think that sends a message . . . to IRS employees that there are lots of people out there cheating, and so whomever they may see, they may view” as tax cheats, she said.
Sen. Crapo Asks IRS' Rettig To Explain $1T Tax Gap Claim - Theresa Schliep, Law360 Tax Authority:
Rettig needs to provide more information on his remarks at a recent congressional hearing that the tax gap could exceed $1 trillion, which is much higher than the most recent $441 billion tax gap estimate, Finance Committee ranking member Sen. Mike Crapo, R-Idaho, said in a letter to Rettig. He should specify the portion of that $1 trillion figure that is attributable to the proliferation of cryptocurrencies as well as income held offshore or in pass-through entities, Crapo said in the letter dated Monday.
Don't distract us with facts, please.
Senator urges Crack Down on Wealthy Individuals and Corporations to Shrink Tax Gap - Jay Heflin, Eide Bailly. "During the hearing, Whitehouse noted that as IRS budgets have declined over the past decade, audits on wealthy taxpayers and international corporations have plummeted."
Judge Dismisses Missouri's Suit Over Restriction on Federal Funding - Lauren Loricchio, Tax Notes. "A federal judge has dismissed Missouri’s case over a provision in the recently adopted federal COVID-19 relief act that restricts states from using the aid it provides to offset reductions in net tax revenue, on grounds that the state lacks standing and the challenge is not yet ripe."
Fed Court Tosses Mo.'s Bid To Block Virus Tax Cut Prohibition - James Nani, Law360 Tax Authority. "A Missouri federal court Tuesday dismissed the state's bid to bar the federal government from enforcing a prohibition against using federal coronavirus aid to offset tax cuts, finding Missouri lacks standing and the case isn't ripe for review."
Why Your IRS Refund Is Late This Year - Ellen Chang and Lisa Rowan, Forbes Advisor:
Ideally, it’s best to be patient and hold out for your refund for as long as you can. People need to allow more time for their return to be processed and plan for delays, says Benjamin Peeler, partner-in-charge of IRS tax controversy services at Eide Bailly, a Fargo, North Dakota-based certified public accounting and business advisory firm.
“There aren’t real options to push a refund sooner and there are even fewer options than there were before the covid delays with the IRS,” he says.
Calling your accountant or the IRS to try to speed up a refund is as effective as repeatedly pressing an elevator button is in speeding up the car's arrival.
Biden Tax Proposal Would Squeeze Apartment-Building Owners - Will Parker, Wall Street Journal ($). "The tax treatment enables investors to defer capital-gains taxes if they invest profits from a real-estate sale into another property."
Retroactive Tax Hikes Could Produce ‘Outrageous Results’ - Jonathan Curry, Tax Notes ($):
An individual wanting to take advantage of the Tax Cuts and Jobs Act’s “window of opportunity” to use the temporarily increased estate and gift tax exemption could make a gift of $11.7 million and not pay any gift tax, even if they die after the exclusion amount is reduced, thanks to the act’s anti-clawback regulations, [Stephen R. Akers of Bessermer Trust] said.
But if lawmakers retroactively change the gift tax exemption to, say, $1 million beginning January 1, 2021, a taxpayer who made a gift this year could be faced with a gift tax bill in excess of $4.5 million, Akers said.
“That result is so outrageous, it is extremely unlikely that this would happen, that 50 Democratic senators would agree to such an outrageous result,” Akers said.
Related: Change May Be on the Horizon for Estate and Gift Tax Exemptions.
Many Small Businesses Could Be Impacted by Biden Corporate Tax Proposals - Alex Durante, Tax Policy Blog. "Contrary to the image some may hold of corporations, not all are necessarily large employers. New Census data from its County Business Patterns survey for 2019 show that 99.4 percent of C corporations have fewer than 500 employees, the Census definition of a small business. These small C corps also would be subject to the Biden administration’s proposed hike in the corporate tax rate to 28 percent, not just the largest corporations."
Interview: Analyzing the American Families Plan - David Stewart, Jonathan Curry, and Dean Zerbe, Tax Notes Opinions. "Jonathan Curry of Tax Notes recaps the tax provisions of President Biden’s American Families Plan and discusses with Dean Zerbe of Alliantgroup LP the finer details and its likelihood of passing Congress."
IRS Expands Automatic Consent for CFC Accounting Method Change - Andrew Velarde, Tax Notes ($). "The IRS released Rev. Proc. 2021-26 May 11 in recognition that some CFCs not using the alternative depreciation system (ADS) in computing their income and earnings and profits may want to change to ADS to conform their calculations to those they make for their qualified business asset investments."
Amazon Wins Appeal Over $300 Million EU Tax Bill - Sam Schechner, Wall Street Journal ($). "In its decision, the court backed Amazon, saying that EU regulators had failed to prove that the company got an illegal advantage from tax rulings issued by Luxembourg, and saying that the commission’s analysis had been 'incorrect in several respects.'"
IRS bumps up amount you can put into a 2022 HSA to cover high-deductible medical costs - Kay Bell, Don't Mess With Taxes:
For 2022, you can contribute up to $3,650 to your HSA if you have individual HDHP coverage. That's a $50 bump from the 2021's $3,600 HSA maximum.
Family HDHP coverage will let you put up to $7,300 in your HSA. That's $100 more than the $7,200 allowed for these family plan HSAs this year.
Policy holders who are 55 or older by Dec. 31 can sock away an additional $1,000 for the tax year.
Claims for Refunds: 2019 and 2020 Tax Year Trap for the Unwary - National Taxpayer Advocate Blog:
Specifically, a claim for refund must be filed:
three years from the date the return was filed; or
two years from the date the tax was paid, whichever of such periods expires the later.
This is why it's dangerous to assume you have three years to file to claim withholding refunds. If no return was filed, you may only have the two-year payment deadline to claim the withholding.
Bozo Tax Tip #3: Move Without Moving! - Russ Fox, Taxable Talk. "Did you move? Or did you just move in name? The Bozo strategy is the latter: moving in name only." A certain former Minneapolis patrolman allegedly used this "strategy."
Thrifty accountant wishes he had sprung for certified mail. As we approach the May 17 1040 deadline, taxpayers of a certain age remember when post offices would stay open until midnight on deadline day and postal workers would stand outside to collect filings from last-minute taxpayers driving by. And you could reasonably assume that the filings would be postmarked and delivered reasonably quickly.
A couple in Tax Court yesterday found out that it is unwise to live on nostalgia. Their accountant sent in their Tax Court petition by mail, but it arrived days after the deadline. Lacking a certified mail postmark, they tried to convince the court that they had filed on time. They failed:
The regulations warn taxpayers and their advisers that “the sender who relies upon the applicability of section 7502 assumes the risk that the postmark will bear a date on or before the last date * * * prescribed for filing. To avoid this risk, the regulations advise the use of certified mail. Had [their accountant, who mailed the filing] used certified mail, he would have a receipt postmarked by the employee to whom he presented the envelope, and that postmark would be treated as the postmark date of the document. In this case petitioners have no persuasive evidence of timely mailing, and they have therefore failed to meet their burden to “establish affirmatively all facts giving rise to our jurisdiction.” Because the petition was not filed (or deemed filed) within the statutorily prescribed period, we must dismiss this case.
When filing tax documents, file electronically when you can. You get immediate online documentation of timely submission.
If you must file by paper, use Certified Mail, Return Receipt Requested, and put that postmark in a safe place.
Cite: T.C. Memo. 2021-58.
This should coincide with the tax deadline. Today is National Root Canal Appreciation Day!
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.