Tax News & Views Shakes off Expiring Provisions Roundup

October 27, 2022

W&M Republicans Take TCJA Extension Front and Center - Doug Sword, Tax Notes ($):

Republicans describe their 2017 tax overhaul as laying the groundwork for the greatest U.S. economy ever while Democrats call it a giveaway to the wealthy and corporations.

How Americans view the results of the Tax Cuts and Jobs Act could be a deciding factor in the upcoming elections as both parties focus on the tax code overhaul as November 8 approaches.

Key items in the 2017 legislation include the 21% corporation tax rate, the 20% QBI deduction, the $10,000 limit on state and local tax deductions, a number of important international provisions including the GILTI rules, and limits on business interest deductions and losses. Many of these provisions expire after 2025.  

House GOP Pushes TCJA Permanency Ahead Of Midterms - Asha Glover, Law360 Tax Authority. "Republicans in the House Ways and Means Committee want to make several of the 2017 tax overhaul's provisions permanent before they expire in 2025 to combat increasing economic uncertainty, they said during a roundtable discussion Wednesday."

Permanent 100 Percent Bonus Depreciation Even More Important When Inflation Is Elevated - Garrett Watson and Huaqun Li, Tax Policy Blog. "Starting next year, 100 percent bonus depreciation for short-lived investment—originally enacted in the 2017 Tax Cuts and Jobs Act (TCJA)—will begin to phase down through the end of 2026."

GOP Tax-Writers Discuss Permanency for Individual Tax Reform Measures - Jay Heflin, Eide Bailly. "The individual tax cuts included in the reform bill are scheduled to expire after December 31, 2025. Corporate tax cuts in the legislation were made permanent. Republican lawmakers now seek to even things out by making the individual provisions permanent."


New Dems push for Child Tax Credit action during lame duck - Punchbowl News:

A group of 51 members of the New Democrat Coalition are urging Democratic leaders to “prioritize the enhanced [Child Tax Credit] in any end-of-year package.”


The letter also calls for the House to “fix the punitive Republican R&D tax change to foster the competitiveness and cutting-edge innovation of the U.S. economy and American businesses.”

The article says passage of either provision this year is "unlikely."


Recent Tax Court Case Emphasizes Importance of Maintaining Partner Capital Accounts - Adam Sweet, Eide Bailly:

In Clark Raymond and Company PLLC v. Comm’r, the Tax Court held that a partnership failed to maintain capital accounts in accordance with the substantial economic effect rules, resulting in certain special allocations being disregarded for lack of substantial economic effect.


The findings of Clark Raymond and Company PLLC v. Comm’r have noteworthy implications for how partnerships track and maintain partner capital accounts. The experienced tax attorneys and accountants that make up our passthrough consulting team know the ins and outs of partnerships and can help ensure that your capital accounts are tracked correctly.

IRS Surveys the Landscape for Passthrough Software Tool - Lauren Loricchio, Tax Notes ($). "The IRS released a request for information (RFI) seeking 'information on potential tax software for passthrough entities to improve operational efficiency and security' that would 'automate tax calculations and generate IRS examination reports for income tax examinations of pass-through entities (including partnerships, S corporations and trusts).'"

IRS Adds Domestic Filing Exception to Schedules K-2 and K-3 - Kristen Parillo, Tax Notes ($):

The IRS has heeded tax professionals’ calls for expanded relief and clarity by adding a new filing exception for purely domestic partnerships in draft instructions for the 2022 schedules K-2 and K-3.


The notification regime requires the partnership to send a letter to all its partners no later than two months before the due date (without extension), and to complete specific parts of schedules K-2 and K-3 if it receives a response from any of its partners on or before the “one-month date,” which is one month before the partnership’s due date for filing its Form 1065.

Should this rule be incorporated in the final instructions, partnerships wanting to avoid the K-2/K-3 filing requirement for 2022 returns will have to send letters to all partners by January 15 of next year. 

Link: Draft 1065 K-2 / K-3 instructions.


Washington DOR: Patent Law Firm Is Subject to State’s B&O Tax - Andrea Muse, Tax Notes ($). "Tax Review Officer Ryan Johnson concluded in Determination No. 21-0044 that the law firm’s receipts from its patent acquisition services are attributed to its customers’ headquarters, finding that the law firm’s services relate to the customers’ strategic planning and general corporate management and the headquarters are where the customers receive the benefit of the services."

Mississippi Supreme Court Rules No Sales Tax On Wedding Digital Photo Packages - Peter Reilly, Forbes. "This is probably a case of the legislation not keeping up with changes in technology."


You can contribute much more to your 401(k) next year. Thank inflation. - Michelle Singletary, Washington Post. "The new $22,500 limit, plus the $7,500 catch-up contribution, means individuals 50 or older will be able to put as much as $30,000 of their pretax income into their workplace retirement plans in 2023."

Heirs in 2023 will get to keep even more out of Uncle Sam's reach thanks to inflation adjustments - Kay Bell, Don't Mess With Taxes. "For 2023, the inflation adjustment means an individual can leave heirs a tax-free estate of up to $12.92 million. That's per person, so a married couple can protect nearly $25.84 million from estate taxation."

2022 Year-End Tax Planning for INDIVIDUALS. - Parker Tax Pro Library. " More individuals are working from home these days, and that means that more clients will be asking whether they qualify for the home office deduction. For employees, expenses relating to working from home are not deductible."

Determining casualty vs. theft losses deductions - National Association of Tax Professionals. "For years 2018-2025, business casualty and theft losses are deductible, but only personal casualty losses within federally declared disaster areas are deductible."

Handling Expenses of Crops with Pre-Productive Periods - The Uniform Capitalization Rules - Roger McEowen, Agricultural Law and Taxation Blog. "The tax Code allows farmers that have a long-term crop (which includes a fruit, nut or other crop-bearing tree; ornamental tree; vine; bush; sod; or any other crops or yield of a plant that will have more than one crop or yield) to use a special rule for handling crop production expenses.  I.R.C. §263A.  These rules, known as the 'uniform capitalization rules' apply to taxpayers that have a long-term crop with more than a two-year pre-productive period."


Politicians Are Arguing AgainAbout Social Security. That’s Good - Howard Gleckman, TaxVox. "Suddenly, Social Security reform is back in the news. For all the wrong reasons, perhaps. But at least politicians are talking about it. And that’s a good thing. After all, in only about a dozen years, the Social Security Old Age trust fund will be insolvent and able to pay only about three-quarters of its promised benefits."


Deductions for foreign charitable giving - Wolters Kluwer Tax & Accounting. "Tax-deductible charitable contributions are not permitted for donations directly to individuals or non-U.S.-based charities. But U.S. citizens are often motivated to provide support regardless of whether their donations are deductible, and there are numerous crowd-funding websites through which such contributions are facilitated."

US Passport Denied for Delinquent Tax Debt, Actual Notice to the Taxpayer Not Required - Virgina La Torre Jeker, Virginia - US Tax Talk. "When a 'seriously delinquent tax debt' notification is sent by the IRS to the State Department, notice is simultaneously sent by the IRS to the taxpayer. Such taxpayer notice is very important because it provides the taxpayer with an opportunity to resolve the issues and not lose the rights associated with having a valid passport."

2022 3rd Quarter Published Expatriates - International Tax Blog. "The 8-quarter moving average has how now dipped down to roughly 750 names per quarter (which is the number of names published this quarter)."


What Tax and Legal Professionals Can Learn From Taylor Swift - Kelly Phillips Erb, Bloomberg. "No matter your level, name recognition is essential. Sharing that you’ve worked with or have been inspired by a respected person in your field can expand your network and potential client base."

And sometimes you just have to shake it off


Durango business owners plead guilty to federal income tax evasion - IRS:

According to the plea agreement, the defendants jointly operated a restaurant in downtown Durango, Colorado. During the tax years 2014 through 2019, the defendants willfully overstated their business expenses to reduce their tax liability. Specifically, the defendants categorized personal expenses as "customer supplies" on their accounting software, which was then transmitted to tax professionals to be filed with the Internal Revenue Service. The couple also provided a signed statement to their tax professionals indicating that the information they were providing was "complete and correct to the best of our knowledge," when in fact the defendants knew they were not providing accurate information and had unreported business income totaling $933,586. This resulted in a tax loss to the government of $160,536.

The IRS routinely looks for personal expenses buried in business accounts when it examines business filings. Don't do that. 


Which is scarier? It's both National Black Cat Day and Cranky Co-Workers Day. Be careful out there.

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