January 6, 2022
Business E-filing starts tomorrow. The IRS Modernized e-File Status page says that e-filing of business returns will be available tomorrow. So it begins.
Keep an eye out for IRS letters on COVID relief money, advance Child Tax Credit payments - Kay Bell, Don't Mess With Taxes.
It's the first week of January and some people are already working on their taxes. They're expecting a refund and they want the Internal Revenue Service to have their forms as soon as possible so the agency can process them when tax season 2022 officially starts.
Those enthusiastic filers, however, might want to take a break. In order to properly file their 2021 tax returns, many likely will need one or both tax statements the IRS is sending out this month."
Don't try to file using bank statements, paystubs, and the like. Wait until you get all of your tax information. Filing without all your information can slow down your refund, and may even lead to an amended return later.
State of Play on Build Back Better - Jay Heflin, Eide Bailly:
This means that mid-February is likely the earliest that the Senate embarks on passing the tax and spending reconciliation bill. Once this process begins, there are time-consuming procedural hurdles that must be cleared, which could take weeks to accomplish. Under this scenario, a final vote on the legislation in the Senate could occur in late February or early March.
Again, Manchin and all other members within his Caucus must support this bill for it to pass the upper chamber. The House would then have to approve any Senate changes to the bill before it could be signed into law.
Biden economic agenda still stuck as Manchin reports no talks - Erik Wasson and Laura Litvan, Accounting Today:
“There is no negotiation going on at this time,” the West Virginia Democrat, a pivotal vote in the evenly divided Senate, told reporters as he returned to his Capitol Hill office for the first full Senate legislative day of 2022. “To do some of the things that have been proposed takes more of a majority than we have.”
Climate advocates hopeful after Manchin spending comments - Rachel Frazin and Aris Folley, The Hill: "'The takeaway is — I definitely think there’s a path forward, not just on climate but broadly on BBB' said Sierra Club legislative director Melinda Pierce."
IRS Issues More Information on Research Credit Claim Changes - Mary Katherine Brown, Tax Notes ($):
In a January 3 memorandum, the IRS provided procedural guidance for claiming a refund for research credit claims under section 41 as well as guidance on what is required for a claim to be valid. The IRS also posted an FAQ page on its website.
According to the memorandum, taxpayers will now be required to provide the following when applying for research credit refunds:
all the business components that form the factual basis for the section 41 research credit claim for the claim year;
all research activities performed by business components;
all individuals who performed each research activity by business component;
all the information each individual sought to discover by business component; and
the total qualified employee wage expenses, supply expenses, and contract research expenses.
Another reason you can expect more extended returns this year.
Fed. Circ. Says Couple Can't Claim Foreign Income Exclusion - Joshua Rosenberg, Law360 Tax Authority ($):
"The Browns admit that they neither signed their refund claims nor tendered powers of attorney to permit their tax preparer to sign the claims on their behalf," U.S. Circuit Judge Alan David Lourie said in the court's opinion.
We can buy almost anything we want with the touch of a button. Yet wet-ink signatures are still required in the income tax system.
St. Louis Defeats Bulk Of Teleworkers' Earnings Tax Suit - Maria Koklanaris, Law360 Tax Authority ($):
Judge McGraugh also wrote that class action status is not available under the state refund statute. Therefore, he wrote that workers must file individually if they wish to be refunded for taxes paid in 2020, the year many workers began working at home as the pandemic upended traditional office arrangements.
The case stems from a March 2021 federal lawsuit in which Mark Boles, Nicholas Oar and Kos Semonski said the city and its revenue collector, Gregory Daly, violated the state and U.S. constitutions by limiting nonresident refunds of the city's 1% earnings tax on salaries, wages and other compensation. The individuals argued the city was "brazenly and unlawfully" keeping their money.
Related: Telecommuting Workers in Refuge States Complicate State Taxes. 2020/11
Eight Tax Reforms for Mobility and Modernization - Jared Walczak, Tax Policy Blog. "Policymakers can choose to see geographic mobility as a blessing or as a curse—as an opportunity to attract individuals and businesses through robust state competition, or as a threat as people decamp for greener pastures. What they cannot do is wish this increased mobility away."
Reforms proposed include:
Higher Filing and Withholding Thresholds. Many states theoretically require individuals to withhold, or to file a tax return, in a state if they work there for even a single day—a highly unrealistic expectation in an era of greater mobility and increased workplace flexibility. States should raise thresholds to avoid costly compliance burdens for taxpayers with little or no actual liability in a nonresident state.
Convenience Rule Repeal. Five states impose income taxes where a worker’s office is, whether or not the employee works out of that state. Other states rarely provide credits for taxes paid to other states under a convenience rule scenario, leading to double taxation of remote workers’ income. States should scrap these discriminatory taxes that stand in the way of remote work arrangements, and which could drive away employers who value the ability to offer remote work flexibility.
Dutch Bank Can't Close Accounts Under FATCA, Court Says - Natalie Olivo, Law360 Tax Authority ($). "A Netherlands bank can't close the accounts of a client who lacked U.S. taxpayer information under the U.S. Foreign Account Tax Compliance Act, a Dutch court ruled, finding he meets an exception under a U.S.-Dutch agreement."
Many Americans working abroad report trouble opening bank accounts as a result of FATCA reporting rules. It appears they may be catching a break in Holland.
Related: Eide Bailly Global Mobility Services.
Making Additional Work for Yourself and Others - Keith Fogg, Procedurally Taxing. "The way the IRS is processing paper returns filed in 2021 is adding significant complexity, cost and time for itself and for taxpayers. This post highlights the problems created for the clients of one preparer, which provide a lesson for everyone trying to get a paper return processed. In each of the cases discussed below, the taxpayer timely filed a paper return with the IRS and included a check with the return. The IRS quickly extracted the check from the envelope but failed to note on its system that the check was submitted with a return.
What We Expect the Tax World to Look Like in 2022 - Kelly Phillips Erb, Bloomberg. "Tax refunds can go up or down in any given year, depending on many factors. But those variations tend to be tied to personal circumstances. However, this year, there’s a potential for a lot of change based on advance child tax credit payments... First, the credit is subject to not one, but two, phaseouts. Phaseouts mean that your payment will go down as your income goes up. And second, the IRS estimated the amounts due as advanced payments based on your 2019 or 2020 tax return, or information from the IRS Non-Filer tool."
Excise Taxes on Guns and Ammo: Sin Taxes That Don’t Prevent the Sin - Renu Zaretsky, TaxVox. "So, not only could the proposed guns and ammunition tax encourage purchases from non-taxed private sellers, there remains no convincing evidence that any such tax would reduce criminal acts of violence."
2022 U.S. Tax Legislation Forecast - David Stewart and Jeremy Scott, Tax Notes Opinions. "Again, 50-50 Senate is very difficult. If I'm not mistaken, this is now the longest time we've ever had a 50-50 Senate. When elections have resulted in them in the past, one person has normally flipped or something has changed to break the 50-50 deadlock. I think the Democrats ran into that. Like passing a major overhaul of the tax system that includes a lot of new tax concepts or untried tax ideas to pay for it is very difficult when one single vote in the Senate can break it up."
Considerations When Inheriting an IRA - Matt Lebo, Tax Warrior Chronicles. "The complex rules that regulate inherited IRAs were significantly modified by the SECURE Act, which was enacted in December of 2019. Some of the more significant changes under the Act were the general elimination of the 'stretch IRA' and creation of a new 10-year rule, raising the required minimum distribution age to 72 and creating an additional class of beneficiaries called Eligible Designated Beneficiaries."
Happy New $YEAR: How to deduct crypto losses on your 2021 tax return - Fernando Juarez, Freeman Law. "As seen, investors who are victims of rug pulls, such as SQUID or YEAR, would need to show the existence of 'theft' under State law. Additionally, the amount of the loss and the specific date must be proven. "
Covered Expatriates, Exit Tax and the Principal Residence - Virginia La Torre Jeker, Virginia - US Tax Talk. "Certain individuals who give up their US citizenship or their green cards are subject to the so-called 'exit tax' imposed under Section 877A of the Internal Revenue Code (Code)."
The Taxpayer Advocate Service is welcoming 2022 by launching our website en Español - NTA Blog. "Making our website available in Spanish helps individuals get the information they need, learn about their taxpayer rights, read updates on the IRS, discover what TAS can do to assist taxpayers, find available resources, get tax news and information, learn about Low Income Taxpayer Clinics, read important information in my blog, and navigate the IRS by using our digitally interactive Taxpayer Roadmap, all in a way they can easily understand and identify with."
New TurboTax Commercials Met With Industry Criticism - Caitlin Mullaney, Tax Notes ($). "Joe Kristan of Eide Bailly said he believes that TurboTax has identified a real market demand that exists with the rise of the gig economy and the problems that arise in Schedule C businesses — a need that he doubts the traditional return preparation market is ready to deal with."
U.K. Taxpayers Urged Not to Leave Returns to the Last Minute - Andrew Goodall, Tax Notes. "Taxpayers facing the January 31 tax return deadline were reminded that while HM Revenue & Customs helplines are likely to be impaired by COVID-19-related absences, a webchat facility has been suspended for most online services."
Don't think that the UK income tax system is so efficient that you can get all of your information and file within one month. The UK Tax year ends April 5, not December 31.
It's cold, so why not? Today is National Cuddle Up Day. If that's not your thing, it's also National Bean 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.