October 6, 2022
Hurricane Ian victims throughout both North Carolina and South Carolina now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today. This is similar to relief announced last week for Ian victims in Florida.
The tax relief postpones various tax filing and payment deadlines that occurred starting on September 25, 2022 in South Carolina and September 28 in North Carolina. As a result, affected individuals and businesses will have until February 15, 2023, to file returns and pay any taxes that were originally due during this period.
This means individuals who had a valid extension to file their 2021 return due to run out on October 17, 2022, will now have until February 15, 2023, to file. The IRS noted, however, that because tax payments related to these 2021 returns were due on April 18, 2022, those payments are not eligible for this relief.
For the rest of us with extensions, October 17 remains the deadline.
Auto Dealers Org Still Hopeful for Legislative Inventory Relief - Nathan Richman, Tax Notes ($):
Car dealers should be in a good position for post-election legislative relief from trade disruptions that might induce inventory-related tax bills, according to the National Automobile Dealers Association (NADA).
Taxpayers with section 471 inventory who use the LIFO method of accounting can apply their most recently purchased stock as the basis of their most recent sales rather than using the oldest purchases or tracking specific items sold. Without new inventory to replace what’s sold, LIFO users will have to recognize as income the decades-old LIFO layers of tax benefits they’ve built up.
Lame duck looks stuffed - Katherine Tully McManus, Politico: "Heading into the midterms, the legislative back burner is packed with things that Democrats hope to get back to in the lame duck session once some steam is let out from the midterm political pressure cooker."
Under a category of "Probable (but no promises) is this:
Tax extenders: There will be taxes on the table. Democrats want to revive the Child Tax Credit enhancement. Republicans want to revive a tax benefit for businesses that allowed them to immediately write off their research expenses. Those are just two items on a larger slate of tax breaks that could be in play in the lame duck, plus further incentives for retirement savings.
I put the tax extenders as possible, but not probable. I think it's more likely that they are dealt with in the next Congress.
Mo. Cuts Top Income Tax Rate And Extends Farm Credits - Michael Nunes, Law360 Tax Authority ($):
Republican Gov. Mike Parson signed into law H.B. 3 and combined bills S.B. 3 and S.B. 5, which were passed by the Legislature as part of its special tax session. Lawmakers passed the extension and creation of the agriculture and energy tax credits as part of H.B. 3 on Tuesday, and passed the combined S.B. 3 and S.B. 5 last week. The combined measures reduce the top individual income tax rate from 5.2% to 4.95% in 2023 and eliminate the lowest tax bracket.
The Missouri Senate passed H.B. 3, introduced by Rep. Brad Pollitt, R-Sedalia, on Tuesday by a 26-3 vote. The law extends the state's meat processing facility investment tax credit and agricultural product utilization contributor tax credit until Dec. 31, 2028. The law also establishes an urban farms tax credit that, starting in 2023, can equal half of a taxpayer's expenses incurred in the construction or development of a farm in an urban area. There is a cap of $5,000. A sales tax exemption for utility vehicles used for agriculture is also included in the law.
IRS Doubles Down on ‘Outdated’ IT Against Watchdog’s Urging - Jonathan Curry, Tax Notes ($):
The IRS may be exposing itself to security vulnerabilities by sticking with an archaic platform for one of its core mainframes, according to the Treasury Inspector General for Tax Administration, but the agency isn’t budging.
That’s not how the IRS sees it, though. In her response to the report, IRS Chief Information Officer Nancy A. Sieger insisted that the IRS’s mainframe systems are “highly effective and secure” and that the agency has no intention of phasing out the platform in question in the near term. Sieger’s response, dated September 30, came two weeks after the Inflation Reduction Act (P.L. 117-169), with its extra $4.75 billion in funding for modernization, was signed into law.
IRS Computer Systems Fail Security Tests In TIGTA Audit - Anna Scott Farrell, Law360 Tax Authority ($). "The report warned that failing to remediate certain medium- and high-risk security vulnerabilities 'could lead to unauthorized access, increased vulnerability to attacks and unauthorized data sharing, all of which compromise the integrity, confidentiality and availability of the platform.'"
Nah, nothing to worry about.
Treasury, IRS Request Public Input on Energy Tax Credits - Alexander Rifaat, Tax Notes ($):
Six notices issued October 5 cover the estimated $270 billion in tax credits that promote investment in such areas as clean energy manufacturing, energy-efficient home improvements, electric vehicle purchases, and labor and apprenticeship standards, according to a release.
The notices, which seek comment by November 4, are:
Notice 2022-46 on credits for clean vehicles;
Notice 2022-47 on energy security tax credits for manufacturing;
Notice 2022-48 on incentives for improving the energy efficiency of residential and commercial buildings;
Notice 2022-49 on energy generation incentives;
Notice 2022-50 on elective payment of applicable credits and transfer of specific credits; and
Notice 2022-51 on prevailing wage, apprenticeship, domestic content, and energy communities requirements.
IRS awards $1K bonuses to ‘surge team’ employees tackling tax return backlog - Jory Heckman, Federal News Network. "The IRS is telling temporarily reassigned 'surge team' employees that they will need to continue their work cutting down the agency’s pandemic-era backlog of tax returns through the end of the year. But to thank employees for their efforts, which have cut the backlog by more than half since the start of the year, the IRS is giving these frontline workers a onetime $1,000 bonus."
Historic Baseballs Are Fan Gold, Murkier for Tax Accountants - Michael Bologna, Bloomberg ($):
One of those balls, potentially worth $2 million, fell into a fan’s hands Tuesday night when New York Yankee Aaron Judge broke the American League single-season home run record. Both Yankees and Texas Rangers fans erupted as Judge belted out his 62nd, besting the 61-homer record set by Yankee legend Roger Maris in 1961.
For the lucky fan who caught the ball—identified by a local TV station as Cory Youmans—and anyone else snagging a record-setting ball this season, the Internal Revenue Service’s rules governing the immediate tax implications have all the clarity and precision of a Yogi Berra aphorism.
Billionaire Tax Case Shows IRS Can Act Fast on Risky Collections - Kelly Phillips Erb, Bloomberg. "Collections processes are in place to allow you several opportunities to resolve your tax debt. Occasionally, the IRS may believe there’s a reason to circumvent the process to protect the government’s interests. In that case, the IRS can make an immediate assessment. This is known as a jeopardy assessment—and it means that the tax, penalties, and interest become immediately due and payable under Sections 6851 and 6861 of the Internal Revenue Code."
Nov. 15 is deadline for nonfilers to claim enhanced CTC - Kay Bell, Don't Mess With Taxes. "The CTC was enhanced as part of 2021's American Rescue Plan Act coronavirus relief legislation. It upped the usual $2,000 per child credit for qualifying youngsters."
Taxes, penalties possible for PPP loan forgiveness misrepresentations - Wolters Kluwer Tax & Accounting. "The IRS has stated that many PPP loan recipients who received loan forgiveness were qualified and used the loan proceeds properly to pay eligible expenses. However, the IRS has discovered that some recipients who received loan forgiveness did not meet one or more eligibility conditions."
Guide to US Inheritance and Estate Tax for US Expats - 1040 Abroad. "Most American Expatriates who inherit property from a foreign person don’t pay any US estate taxes; however, the foreign estate might trigger additional filing requirements to the U.S."
International Tax Withholding | Chapter 3 of the Internal Revenue Code - TL Fahring, Freeman Law. "So, when a foreign person disposes of a U.S. real property interest, the transferee generally is required to deduct and withhold a tax equal to 15 percent of the amount realized on the disposition."
Nobel’s Tax Domicile and Future of Prizes Tied to Horse Stables. - William Hoke, Tax Notes. "Horses are often raced for prize money. A far more prestigious set of prizes might never have materialized if a French court hadn’t ruled that Alfred Nobel’s tax domicile depended on where he stabled his horses."
Opportunity Zone Ponzi Promoter Sentenced To Four Years - Peter Reilly, Forbes. "According the the SEC fourteen investors put in $6.3 million some of which was distributed back to them (That's the Ponzi piece). Burrell purportedly diverted $100,000 to personal use, although that is not something he pled guilty to."
Voters In Three States Will Confront The Consequences Of Earmarking Tax Dollars - Renu Zaretsky, TaxVox. "But earmarking tax dollars comes with a price: It sets state budget priorities and inevitably crowds out other priorities. That is, it gives today’s voters the power to decide how tomorrow’s state tax dollars will be spent, limiting a state’s ability to anticipate and respond to future financial challenges. Is that power worth it?"
The OECD's Pillar One Dilemma: To Be or Not B2B - Alex Parker, Things of Caasar. "There’s one overwhelming consensus from most of the comments–the complexity of the current plan could be fatal. The proposal lays out a seemingly endless number of definitions, distinctions, categories, formulas, alternative formulas, secondary formulas, fallback formulas, and other blocks of text to explain how the new income allocation system would work. This is especially true for the rules on revenue sourcing, which are likely the most important part of the plan as they will determine which jurisdictions get the biggest cuts of this new revenue pie."
"Pillar One" is the OECD proposal to allow countries to tax companies with sales into the country, but with no other presence.
The EU’s Windfall Profits Tax: How “Tax Fairness” Got in the Way of Energy Security - Sean Bray, Tax Policy Blog. "On 30 September, the Council of the European Union agreed to impose an EU-wide windfall profits tax on fossil fuel companies to fund relief for households and businesses facing high energy prices (due primarily to Putin’s war on Ukraine)... Unfortunately, it’s not sound policy. If history is any indicator, it will only make these goals harder to achieve."
Mr. FBAR – He Lurks in Every Corner – Katholos Case Expands Meaning of “Financial Interest” - Virginia La Torre Jeker, Virginia - US Tax Talk. "Even though the FBAR regulations and instructions do not clearly equate 'beneficial ownership' with having a 'financial interest' in an account for FBAR reporting purposes, the Katholos court clarifies that having beneficial ownership (even without legal title) implicates FBAR reporting. The issue when an individual has 'beneficial ownership' can get very tricky and requires a deep dive into the facts."
Related: Eide Bailly International Tax.
They were rounded up in the sky by the ghost riders. Rancher Sentenced for Running $244 Million “Ghost Cattle” Scam.
California Man Sentenced to Prison for Multimillion Dollar Tax Fraud Scheme Involving Professional Athletes and PPP Loan Fraud - US Department of Justice (names omitted):
A California man was sentenced today to 10 years in prison for conspiring with others in schemes to defraud the Internal Revenue Service (IRS) and the Paycheck Protection Program (PPP), a federal loans initiative designed to help businesses pay their employees and meet expenses during the COVID-19 pandemic.
First, Defendant conspired with his brother,... and others to prepare and file with the IRS a series of false income tax returns on behalf of at least nine professional athletes. The false tax returns reported fictitious business and personal losses to generate refunds the athletes were not entitled to receive. Defendant also filed amended tax returns for most of the athletes for prior years to correct what he falsely characterized as “errors” made by their previous accountants. Mana Tax charged the athletes a fee of 30% of the resulting refunds issued by the IRS. Defendant’s tax fraud scheme caused a total tax loss of more than $19 million.
Second, Defendant and his co-conspirators... also prepared and submitted false applications for PPP loans on behalf of small businesses, shell companies, and other business entities they controlled.
I suspect that these athletes and other clients were confident that their preparer was legitimate, and that tax pros who told them that they didn't qualify for these big refunds just were timid or badly-informed. The same dynamic is playing out now with employee retention credit claims.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.