November 2, 2022
Officials Lay Out Ambitions for ‘Reimagining the Possible’ at IRS - Jonathan Curry, Tax Notes ($):
National Taxpayer Advocate Erin Collins predicted the IRS would move quickly to expand the usefulness of online accounts for tax professionals, characterizing it as “low-hanging fruit” for the IRS as it ranks priorities for spending the extra $80 billion.
Collins said she envisions the tax pro account as more than a conduit for uploading power of attorney forms. Instead, tax professionals should be able to immediately and securely access the online tax account information of any client for whom they have a power of attorney. Such access should let the professional view any client’s Form-W2 and tax transcripts, as well as any letters from the IRS to the taxpayer, which the tax professional can then respond to, she said.
New IRS Office To Oversee Reform Work, Official Says - David van den Berg, Law360 Tax Authority ($):
The IRS told Law360 the new office is known as the IRA 2022 Transformation & Implementation Office, and it was established in August. It's focused on implementing provisions in the Inflation Reduction Act and overall IRS transformation efforts, the agency said.
"There is an expectation that we deliver. And it is a heavy responsibility, one that we are taking very seriously," O'Donnell said. "With this legislation over the next 10 years, we will finally be able to do the one thing that we all want at the IRS — to improve the work for taxpayers and support the United States."
Say it ain’t so: Reconciliation back on the table for raising debt limit - Paul Krawzak, Roll Call:
Top Democrats are privately discussing the possibility of using the budget reconciliation process in the upcoming lame-duck session to raise the statutory debt limit if Republicans retake one or both chambers in the midterms.
But the motive would be to take the issue off the table before Republicans assume control in January and use a “must-pass” debt ceiling bill as leverage to try and extract spending cuts that are anathema to Democrats and the White House. “The idea is very much on the table,” a former Democratic aide familiar with the discussions said.
Such an effort makes tax changes slightly more likely, but the article says it's "probably not the likeliest option at this point."
IRS Leaders Battle Back ‘Wild Inaccuracies’ About Armed Agents - Chandra Wallace, Tax Notes ($):
The IRS isn’t sending armed auditors into the field, and public rhetoric suggesting otherwise puts the safety of agency employees at risk, according to the newly named acting commissioner and other top officials.
“We are not unleashing an army of armed agents to audit and harass taxpayers,” Douglas O’Donnell, IRS deputy commissioner for services and enforcement, said November 1 at the American Institute of CPAs National Tax Conference. He clarified in stern terms that “more than 97 percent of IRS employees don’t carry weapons, and that includes our auditors,” noting that the agency is taking the safety of those employees seriously.
Key Income Tax Issues Triggered By Remote Employees - Thomas Cryan and Spencer Walters, Law360 Tax Authority ($).
As a general rule, unless a state has a reciprocity agreement with a neighboring state, most states require employers to withhold income taxes based on where the work is physically performed. For example, if a resident of Nevada works in California for a California employer, the employer must withhold California income taxes from the employee's wages.
Employers may also expose themselves to corporate income tax consequences if they have remote workers, particularly in locations where the employers may not otherwise be conducting business activities.
Related: Telecommuting Workers in Refuge States Complicate State Taxes.
Changes Planned to Form for Research Credits - Kristen Parillo, Tax Notes ($):
Some of the changes the IRS is considering would require taxpayers to report:
-the total number of business components;
-whether the taxpayer is a member of a controlled group, with information on the other members of the controlled group that contribute to the group credit;
-total wages reported on Form 1125-E, “Compensation of Officers,” that are included in qualified research expenses;
-whether there was an acquisition or a disposition in the tax year;
-whether the credit involves any new categories of activities;
-whether the taxpayer is following the Accounting Standards Codification Topic 730 directive;
-each business component, with a brief description of qualified research performed; and
-qualified research expenses by business component.
The form changes are anticipated starting with 2023 tax years, according to the article.
Related: Get Help with the R&D Tax Credit.
My Recent Kansas City Campus Experience (Part One) - Erin Collins, NTA Blog:
Imagine if you were a clerk during COVID-19, and every morning you walked toward your workstation and saw the endless carts of returns lined along every building wall, reminding you of this daunting challenge. These carts contained returns impacting individuals, families, businesses, estates, and tax-exempt entities. All were waiting to be worked, and many were requesting refunds that taxpayers needed badly to meet their basic living expenses. Each taxpayer has their own set of financial challenges, and the employees know that processing delays impact all taxpayers. Carts filled with returns not only lined the hallways, but they filled conference and training rooms. Some campuses even used the cafeteria to handle the overflow of return carts. These carts represented people in need. The Kansas City Campus is making progress, and the piles are smaller. But millions of taxpayers are still waiting for their refunds.
The annual filing season is a massive procedural undertaking and one that must be modernized and automated to improve service to taxpayers and improve the working conditions for our employees.
Or, why you don't have your refund yet.
Penalties in Transfer Pricing Cases Are on the Rise - Kristen Parillo, Tax Notes ($). "'We continue to look more closely at cases, even those with transfer pricing documentation, to determine when it’s appropriate to assert penalties,' said Holly Paz, acting commissioner of the IRS Large Business and International Division."
Related: Eide Bailly International Business Services.
Maximize Charitable Impact and Minimize Taxes with These Year-End Gifting Strategies - Eide Bailly. "The most common type of charitable giving is through a cash donation. One way to generate cashflow for a gift is through “tax-loss-harvesting.” For example, if you have securities that have declined in value from their original cost basis, you can sell those at a loss. Then you can use that loss to offset capital gains from other investments (and up to $3,000 of ordinary income) while also claiming a charitable deduction for the total amount of cash donated."
5 tax moves to make this November - Kay Bell, Don't Mess With Taxes. "If, however, your holdings were hard hit, they still could provide some tax benefits. As part of your overall asset analysis, you might decide to sell some of those losing assets. This stock loss harvesting can offset any gains you made on other holdings."
IRS Announces 2023 Inflation Adjustments; Social Security Benefits Up 8.7% for 2023 - Parker Tax Pro Library. "In addition, the Social Security Administration announced that benefits will increase by 8.7 percent in 2023 and that the amount of earnings subject to social security tax will be $160,200 in 2023, up from $147,000 in 2022. Rev. Proc. 2022-38; 2023 Social Security Fact Sheet."
IRS Fires Warning Shot at Promoters of Employee Retention Credit (ERC) - Matthew Roberts, Freeman Law. "To the extent the IRS identifies an employer who improperly claimed the ERC when it otherwise did not qualify, the IRS has indicated that it intends to reclaim the credits with penalties and interest. In addition, given the warning shot fired at third-party promoters of ERC schemes, such promoters are now on notice that the IRS may attempt to impose civil penalties or criminal sanctions against them as well under various federal statutes that prohibit unscrupulous promoter and tax-return preparation activities."
A Marshmallow By Any Other Name Is Just As Sweet, But Maybe Not Taxable - Renu Zaretsky, TaxVox. "This summer, the United Kingdom’s First-Tier Tribunal Tax Chamber considered the Mega Marshmallow. Should a value-added tax (VAT) of 20 percent apply to a bag of 27 extra-large marshmallows because they are candy (a 'confection')? Or are Mega Marshmallows tax-exempt food? "
Details and Analysis of Canceling the Scheduled Business Tax Increases in Tax Cuts and Jobs Act - Garrett Watson, Erica York, Cody Kallen, and Alex Durante, Tax Policy Blog. "Starting in 2022 and continuing through 2026, businesses will face several tax changes scheduled as part of the Tax Cuts and Jobs Act (TCJA), including a switch to five-year amortization of R&D expenses, the gradual phaseout of 100 percent bonus depreciation, a tighter interest deduction limitation, and an increase in international tax rates."
IRS in Flux: New Funding and New Commissioner - David Stewart, Jonathan Curry, and Mark Everson, Tax Notes Opinions. "They've known since August that this $80 billion was basically guaranteed at this point. To not have someone lined up [as the new IRS Commissioner] is turning a couple heads and making people wonder what the Biden administration's been up to."
Biden Threatens Windfall Tax, Accuses Big Oil of "War Profiteering" - Rebekah Barton, TaxBuzz. "The Times noted it is unlikely, and that 'it was more of a way to pressure the oil firms than a realistic policy prescription for the short term given that Congress is not even in session and would be even less likely to approve such a measure if Republicans capture one or both houses in next week’s election.'"
Chief Justice Roberts temporarily shields Trump tax records from House - John Kruzel, Politico. "The move, which comes in response to an emergency request Trump filed on Monday, was ordered by Chief Justice John Roberts, who handles emergency matters arising in the District of Columbia. Roberts requested a response by Nov. 10."
Roberts temporarily blocks House from obtaining Trump tax returns - Kelly Hooper, Politico. "Roberts’ temporary stay represents a relatively minor win for Trump after he lost appeals in both federal District Court and the D.C. Circuit Court of Appeals, both of which ruled the House committee’s request complied with the law and did not violate the separation of powers. The federal appeals court just last week denied Trump’s request to have the full panel of judges on the court rehear his appeal to block the order for his tax returns."
Trump Organization fraud trial halted over COVID-19 case - Julia Meuller, The Hill. "The Trump Organization’s controller, Jeffrey McConney, reportedly tested positive for the virus on a rapid test taken during a lunch break Tuesday, according to Business Insider, bringing the trial to a standstill just a day after it started,"
Band of cybercriminals responsible for computer intrusions nationwide indicted for RICO conspiracy that netted millions - IRS (Defendant names omitted).
Defendants purchased on the dark web server credentials for the computer servers of Certified Public Accounting (CPA) and tax preparation firms across the country. They used those server credentials to remotely and covertly commit computer intrusions and exfiltrate the tax returns of thousands of taxpayers who were clients of those CPA and tax preparation firms. Those tax returns included the clients' names, dates of birth, Social Security numbers, and financial information.
Defendants and other conspirators then partnered... to form an enterprise through which they filed thousands of false tax returns in the names of more than 9,000 identity theft victims.
To obfuscate their cybercriminal conduct, the conspirators routinely used pseudonyms, opened business entities and bank accounts in the names of nominees and identity theft victims, and conducted their illicit business using dozens of different email addresses. Altogether, the enterprise claimed more than $36 million in false tax refunds over the course of approximately four years. The actual loss amount is still being calculated but is at least $4 million.
The consequences of having your identity stolen range from significant inconvenience to financial disaster. Be careful with confidential information, especially social security numbers and bank account details. Don't send anything with this information by unencrypted email or text messaging, or as attachments to emails. Use secure portals for these things.
Time is a flat circle. It's Look for Circles Day!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.