October 13, 2022
CPE Time! Eide Bailly has announced its schedule of Audit & Accounting and Federal Tax Updates. These are a great way to brush up on important developments in the business while keeping up on your continuing education requirements. Sign up is open.
Most taxpayers who requested an extension to file their 2021 tax return must file by Oct. 17 - IRS:
People who have a extension and are in – or affected by – a federally-declared disaster area may be allowed more time to file
Special deadline exceptions may apply for certain military service members and eligible support personnel in combat zones. Several resources are available for service members and their families who may be eligible for these exceptions.
Not all states accept all federal disaster deadlines. For a specific state, check the state tax agency website or contact the agency directly.
Individual Income Taxes See Biggest Jump Since Korean War - Doug Sword, Tax Notes ($):
Individual income tax collections jumped 29 percent during fiscal 2022 — the biggest percentage rise in 70 years.
Total federal receipts of $4.9 trillion were 21 percent higher than in fiscal 2021 — the biggest percentage jump in a year since 1969. Payroll tax collections rose by 13 percent, the most since 1984; and corporate income tax collections were up a robust 14 percent, though far below the 76 percent rise in 2021, which was the highest since World War II.
SEC Statement Highlights Role of Auditors in Corporate AMT Regime - Lauren Loricchio, Tax Notes ($) "Even before the tax was passed, accounting scholars raised concerns that intertwining financial statement income with the tax base could prompt members of Congress to lobby the Financial Accounting Standards Board for changes to financial statement income reporting. They were also concerned that FASB would have some control over tax liability. The scholars said that including financial accounting as part of the tax base carries risks, including that companies might report lower financial accounting earnings than they would otherwise."
Retirement Bill Is Glass Half-Full for Democrats - Doug Sword, Tax Notes ($):
It’s not the home run some wanted, but two provisions in legislation possibly headed for year-end action partly address huge gaps in the American retirement system that progressives and Democrats have long wanted to fill.
The Senate Finance Committee’s attempt to fulfill a two-decade effort to help low-income savers by making the savers credit fully refundable has sparked support for the retirement bill from progressives, some of whom had criticized the large package of provisions as favoring the wealthy and the financial services industry.
Related: Former Treas. Official Casts Doubt on Passing Retirement Bill this Year.
Buyback Tax Could Hit SPACs With Higher Costs - Tom Zanki, Law360 Tax Authority ($):
The Inflation Reduction Act signed by President Joe Biden on Aug. 16 included a 1% excise tax that would be tacked onto stock repurchases conducted by corporations. Such repurchases, also called buybacks, are a common way that corporations return money to shareholders. Skeptics have pressed for a tax, concerned that repurchases benefit corporate insiders.
Attorneys and academics say the Inflation Reduction Act as written could also potentially apply to redemptions involving domestic SPACs. In such redemptions, shareholders get their money back from the issuing company, either by choice or in the event of a liquidation where the SPAC fails to find a merger target.
Top 10 Red Flags for IRS Audits and Current IRS Campaigns - Eide Bailly.
7: Vehicle Expenses. The IRS often flags returns with large deductions for business vehicles, especially if they reflect double-digit depreciation allowances. You are required to keep an updated log of your driving activities, along with proper substantiation. Collect all proof needed to withstand an IRS challenge.
10: Checking the box on Schedule B indicating you have a foreign bank account could increase your chances of an audit. While failing to check the box when you should do so may also trigger an audit. The IRS matches up information it receives on foreign bank accounts. Generally, a taxpayer must file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of assets in foreign bank accounts exceeded $10,000 during the prior year.
Noem: No special legislative session for food tax repeal - Stephen Groves, AP via Washington Post. "The Republican governor, speaking at a news event at a Sioux Falls grocery store, acknowledged her campaign proposal does not currently have the votes necessary for passage in the state Senate. She will have to win over lawmakers when they are scheduled to reconvene in January."
Iowa DOR Drops Whole-Dollar Requirement for Tax Returns - Tax Analysts ($). "The Iowa Department of Revenue amended the rule regarding forms and communications by removing the requirement that whole dollars be used on specified business income and franchise tax returns, applicable to tax years starting on or after January 1, 2022." Note the effective date, and don't count your pennies just yet.
The Case of the Disappearing Ink—A US Tax Court Mystery - Kelly Phillips Erb, Bloomberg. The Tax Girl explains how the irradiation of mail to the Tax Court erased the ink on the $60 filing fee check written by a taxpayer, and of the difficulty of finding a pen with Tax Court-safe ink:
All of this made me wonder: What’s a taxpayer to do? As I called around, the clear answer was not to panic. This isn’t a common problem, and most non-erasable pen ink likely can withstand irradiation done by the postal service. And if you’re super worried, pay by money order, credit card, or debit card.
As for my research, it wasn’t all for naught. Determined not to come up empty-handed, I bought a Space Pen—the brand claims to have been on every NASA manned space flight since 1968. I can’t guarantee that it can survive the postal service, but if you need to write something while floating in a gravity-free zone or in temperatures of up to 250 degrees Fahrenheit, I can help.
Road user fees becoming more popular as more EVs hit U.S. highways - Kay Bell, Don't Mess With Taxes. "NCSL says at least seven states — Maine, Nevada, New Mexico, Oregon, Utah, Virginia, and Washington — have enacted Vehicle Miles Traveled (VMT) fees or Mileage-Based User Fees (MBUF). Others have authorized studies or pilot programs examining the feasibility of RUCs."
Inflation Act includes big changes in energy-related tax credits for homeowners and car buyers - Wolters Kluwer Tax & Accounting. "The Inflation Reduction Act makes a big immediate change to the existing credit for new electric vehicles. For 2023, the credit is also renamed and restructured, and a new credit applies to used electric vehicles."
The Taxpayer Advocacy Panel Celebrates 20 Years of Making the IRS Work Better for You - Erin Collins, NTA Blog. "To give a brief history, TAP is a Federal Advisory Committee established in 2002 under the authority of the U.S. Department of the Treasury. Over the past 20 years, TAP has worked with over 700 citizen volunteers who have submitted more than 2,200 recommendations to the IRS to help them improve services for taxpayers. Every year, each TAP member must be willing to spend 200-300 hours working on finding solutions to a variety of issues that directly impact taxpayers. While the Taxpayer Advocate Service provides essential funding, technical, administrative, and clerical support to TAP, it is the more than 200,000 volunteer hours that serve as the heartbeat of this important group."
IRS Addresses Confusion over Changes to RMD Rules; Postpones Certain Deadlines - Parker Tax Pro Library. " Further, because of confusion surrounding the application of the proposed regulations under Code Sec. 401(a)(9), which were issued as a result of changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the IRS states that a defined contribution plan that failed to make a specified RMD in 2021 or 2022 (1) will not be treated as having failed to satisfy Code Sec. 401(a)(9) merely because it did not make that distribution, and (2) to the extent a taxpayer did not take a specified RMD (as defined in the guidance), the IRS will not assert that an excise tax is due under Code Sec. 4974."
New Zealand Wants to Tax Farmers When Their Cows Burp - Rebekah Barton, TaxBuzz. "Although key government officials seem to be firmly behind the motion, farming groups are leery."
Refundability and the OECD's Tax Project's Unclear Impact on the Developing World - Alex Parker, Things of Caesar ($)
How the new 15% global minimum tax affects low-income, developing countries is a new hot topic of conversation. It’s not a question with a simple answer. According to non-governmental organizations, the deal is a sham, a rich countries’ racket to reapportion the tax revenue pie amongst themselves while leaving the others out entirely.
I think it’s more complicated than that.
Understanding the Tax Treatment of Inventory: The Role of LIFO - Alex Muresianu and Alex Durante, Tax Policy Blog. "Both LIFO and FIFO are grounded in the accounting principle of deducting costs when goods are sold rather than when they are acquired. However, LIFO comes closer in effect, although not in design, to deducting inventories when they are acquired, and thus reduces the tax penalty on inventory investment."
Lawmakers Should Avoid Temporary and Retroactive Tax Policy - Kyle Pomerleau, AEIdeas. "Canceling the amortization of R&D and the phase-out of bonus depreciation is the right thing to do. However, lawmakers should avoid only temporarily delaying these changes or making them retroactive. Expensing should be a permanent part of the tax code."
Amicus Briefs in Supreme Court Bittner Case on Nonwillful FBAR Penalty Per Form or Per Account - Jack Townsend, Federal Tax Crimes. "The brief in support of the United States' per account interpretation for the nonwillful penalty filed by the National Whistleblower Center should not be surprising. The NWC wants to maximize the Government's collection of 'collected proceeds'–the base for whistleblower awards, thereby maximizing whistleblower awards."
IRS is Ruthless in Seeking “Willful” FBAR Penalties – But the Court Won’t Have it…. - Virginia La Torre Jeker, Virginia - US Tax Talk. "Even if no tax may be owed with respect to offshore accounts, expect an FBAR failure to result in astronomical penalties. Establishing “nonwillfulness” is getting harder and harder to achieve and the IRS is apparently looking back at old submissions made by taxpayers into the “Streamlined” and delinquent FBAR or foreign information return procedures."
Related: Penalty Help.
Michigan real estate developer sentenced to prison for tax evasion - IRS (defendant name omitted):
A Michigan man was sentenced to 38 months in prison today after engaging in a nearly decade-long effort to prevent the IRS from collecting unpaid taxes he and his businesses owed.
According to court documents and statements made in court, Defendant, 61, of Okemos and East Lansing, was an attorney and former CPA who operated Strathmore Development Company Michigan LLC, Terra Holdings LLC, and Terra Management Company, all of which were involved in real estate development and property management in the East Lansing area. Defendant admitted he did not pay over to the IRS employment taxes that were withheld from the wages of the three companies' employees. After the IRS began trying to collect the unpaid taxes, Defendant attempted to evade payment of those taxes by making false statements to the IRS about his and his companies' assets and income. To further hide assets from the IRS and evade payment of taxes, Defendant also concealed his vacation house on Lake Michigan and purchased real property in the names of businesses instead of in his own name.
Concealing a house would be a challenge, one that apparently was not met.
Wait, the tax deadline isn't until Monday. Today is Disaster 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.