Tax Update Blog

Tax News & Views Days not Weeks and Rings Roundup

Blog
By Joe Kristan, CPA

White House Nearing Ultimatum on Bipartisan Infrastructure Talks - Jonathan Curry, Tax Notes ($):

The bipartisan framework avoids the tax increases on corporations sought by Biden as pay-fors, but reportedly proposes to index the federal gas tax to inflation and to impose a fee on electric vehicles.

That won’t fly with Biden, according to [White House Press Secretary Jen] Psaki. “His view is that there are plenty of ways to pay for these proposals, that there are plenty of ways that will not leave the burden on any individuals across the country making less than $400,000 per year,” she said. Imposing fees on electric vehicles would also run counter to the Biden administration’s objective of expanding that industry, she added.

The White House says negotiators have "days, not weeks" to come up with a deal, according to the article.

 

Senators Say They’re Nearing Agreement on Infrastructure Plan - Eric Wasson, Bloomberg ($):

One of the sticking points continues to be coming up with a way to pay for their $579 billion plan. Two of the negotiators, Jon Tester, a Montana Democrat, and Susan Collins, a Maine Republican, said the idea of indexing the motor fuels tax to inflation is all but dead.

The administration has been pushing Biden’s plan to bolster funding for Internal Revenue Service enforcement to collect from tax cheats. The group has proposed limited new revenue from bolstering IRS enforcement but far short of the amount the White House estimates could be recouped in unpaid taxes. Portman said they also are looking at raising revenue from airwaves sales and fees from major polluters.

 

The Fate Of Biden’s Corporate Tax Hikes May Rest On Who Voters Think Pay Them - Howard Gleckman, TaxVox. "On average, middle-income households still would get a tax cut, though it would fall to about $300. That’s mostly because, as workers, they’d bear some of the burden of those corporate tax hikes through lower wages. But about three-quarters of those households would see their after-tax incomes fall compared to current law. It would be by just a few hundred dollars in 2022. But that would be enough to make an attack ad credible."

 

Some Advance Child Tax Credit payments might have to be repaid - Kay Bell, Don't Mess With Taxes. "So when your do file your 2021 tax return next year, you'll have to reconcile the remainder of the Child Tax Credit that you claim with the Advance Child Tax Credit payments you get now... During this reconciliation process, some taxpayers might discover their advance payments total this year was more than what they're actually entitled to claim on their 2021 tax return. In these cases, they'll have to repay that excess when they file next year."

Update on advance payment of child tax credit - National Association of Tax Professionals Blog. "The IRS created a special Advance Child Tax Credit 2021 page that provides up the date information about the credit and advance payments."

 

Louisiana Governor Signs Mobile Workforce Bill - Lauren Loricchio, Tax Notes ($). "Under S.B. 157, signed into law as Act 383 June 16, employers will not be required to withhold wages paid to nonresident individuals who worked in the state for 25 days or fewer during the calendar year. Nonresidents who work in the state for more than 25 days in a year will be subject to state income tax, including for the first 25 days, and their employers would be required to withhold and remit the tax."

Related: Telecommuting Workers in Refuge States Complicate State Taxes.

 

Capital Gains: A Century-Old Tax Break Gets a Rush of Attention - Laura Saunders, Wall Street Journal ($): "For a century the U.S. tax code has given favorable treatment to investment profits called capital gains, in part to compensate for investment risks. Capital gains are the difference between the original cost (plus adjustments) and the selling price of assets such as stock shares or real estate, if there’s a profit. If you buy stock for $5,000 and sell it for $30,000, you have a $25,000 capital gain."

The article includes a great chart showing corporate rates and individual ordinary income and capital gain rates over the years.

43.4% Capital Gain Tax? 10 Things To Know - Robert Wood, Forbes. "Most income is ordinary, including pay for services, interest, business profits, dividends, money for winning the lottery, and most other payments. But for generations, there’s been a big tax break for long-term capital gains, those held over a year."

A Record Buyout Is Just the Start as Wealthy Flee U.S. Tax Hike - Melissa Karsh, Michelle F Davis, and Devon Pendleton, Bloomberg. "Meanwhile, company owners are eager for certainty -- pressing tax experts, bankers and even their congressional representatives to specify how much higher tax bills will jump if they wait to sell in the future. Many are concerned that Democrats might thwart such an escape anyway, by making any capital gains tax hike retroactive. Biden’s proposal assumes the increase would be retroactive to late April, when it was proposed. But it’s unclear whether Congress would approve such a measure."

 

Automated POAs Promise Big Time Savings - William Hoffman, Tax Notes ($):

The IRS’s announcement that it will launch online tax professional accounts in July is a big win for practitioners, but as always with agency programs, implementation could be tricky, tax industry veterans say.

“The delta between nine minutes and 90 days is enormous,” said Robert Kerr of Kerr Consulting LLC, referring to the IRS accounts’ ability to deliver speedier automated approvals of individual powers of attorney (POAs) and taxpayer information authorizations (TIAs) than the current, largely manual process.

The ability to intervene timely by phone is especially important given the continuing IRS delays in processing written correspondence.

Related: Why is it Important to Read IRS Notices? 

 

What’s Reasonable for Late-Filed Foreign Information Returns? - Marie Sapirie, Tax Notes Opinions:

One example of a situation in which a taxpayer fails to file a Form 3520 and probably should have a solid reasonable cause argument is this: The taxpayer receives a gift of over $10,000 from a foreign relative and informs their return preparer, and the preparer knows that the receipt of the gift isn’t subject to federal income tax, but doesn’t know that the taxpayer must still file Form 3520 to report it.

That taxpayer doesn’t owe any taxes but is on the hook for 5 percent of the amount of the gift for each month the information return isn’t filed, up to 25 percent of the total gift. Section 6039F explains that the penalties shall not apply to any failure to report a foreign gift if the taxpayer shows that the failure is attributable to reasonable cause and not willful neglect.

As with many foreign information returns, the penalties for failing to file Form 3520 have nothing to do with whether any tax is owing on the return; simply failing to notify the IRS of a tax-free cross-border gift is enough to trigger them. 

 

Christian Group Challenges IRS on Proposed Exemption Denial - Fred Stokeld, Tax Notes ($). "Christians Engaged, which describes itself as nonpartisan, intervenes in political campaigns on behalf of a specific political party, according to the IRS. The group, which is represented by First Liberty Institute (FLI), is appealing the IRS’s proposed rejection of its exemption application."

Related: Be Vigilant in Maintaining Your 501(c)(3) Status This Election Year.

Here We Go Again: Bias in the IRS’s Tax Exempt Group - Russ Fox, Taxable Talk. "I do expect IRS Appeals to overrule the tax exempt group."

Exempt Organizations Should File Forms 990-EZ and 8868 Electronically Due to Processing Delays for Paper Filings - Ed Zollars, Current Federal Tax Developments. "The IRS is warning exempt organizations that file Form 990-EZ or Form 8868 on paper risk running into issues, either getting premature notices regarding a failure to file the Form 990-EZ or long delays in getting an acknowledgment of the approval of their extension request."

 

Last Week in Payroll: Repaying Deferred Social Security Taxes - Thomson Reuters Tax & Accounting. "The deferral of the employer’s portion of Social Security taxes from 2020 must be deposited as follows: (1) 50% of the deferred amount by December 31, 2021 and (2) the remaining amount by December 31, 2022.  The deferral of the employee’s portion of Social Security taxes from 2020 must be deposited by December 31, 2021."

Boost Semiconductor Manufacturing by Removing Tax Barriers—Not Creating Tax Subsidies - Erica York, Tax Policy Blog. "Attracting investment to the United States should start with neutral tax treatment, including full and immediate deductions for capital investment, not subsidies. By denying full and immediate deductions for investments, the tax code increases the cost of making such investments in the first place. Removing the tax code’s bias against making a domestic investment of any sort should be prioritized above exploring industry-specific tax subsidies."

Necessary But Overlooked Tax Changes We Need - Annette Nellen, 21st Century Taxation. "Create a de minimus rule for personal use of virtual currency similar to §988(e) for foreign currency which excludes personal gains under $200. This is needed for simplicity."

See where Polk County home valuations went up the most. Hint: It's not the suburbs. Kim Norvell, Des Moines Register. "Thirty-four neighborhoods in Des Moines, three in rural Polk County and one each in Grimes and Windsor Heights saw an average increase of 12% or higher in their 2021 home valuations, according to the analysis of data from the Polk County Assessor."

CPAs Should Steer Clear Of Syndicated Conservation Easements - Peter Reilly, Forbes "That sort of thing, backdating, probably goes on in lots of deals of all sorts. Or at least I once heard from somebody who heard it from somebody else that there was a lot of that going on back in the day. Doing it in these sorts of deals which are already questionable is a really bad idea. What is an even worse idea is sending emails in March about getting into a prior year deal. Sending someone an email on January 22, 2018 indicating that they need to send in a check dated December 29, 2017 is also not a very good idea."

 

The Tax is Right? Amy Lee Rosen, Senior Tax Correspondent for Law360, appeared on yesterday's edition of the CBS game show "The Price Is Right." You can see for yourself whether knowledge of tax affairs carries forward to the game show domain.

I'm hungry. Today is National Onion Rings Day!


Stay informed!


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.