Tax News & Views Year-end Crunch and Apple Roundup

December 1, 2022

Tax Proposals, Military and Domestic Spending Frame Lame Duck - Doug Sword, Tax Notes ($):

A day after leadership committed to pushing for a year-end budget deal, Democrats and Republicans were lukewarm about the likelihood of an agreement that would span a gulf between their positions on tax provisions.

Democrats want any tax bill to include an increase in the child tax credit (CTC). A temporary pandemic increase in the credit has expired. The article has this from ranking Ways & Means Republican Kevin Brady:

Brady argues that an extension of the CTC would annually cost about six times what it would cost for a four-year rollback in changes to section 174 research and development expensing, net interest expensing, and bonus depreciation.

Chair Neal is quoted as saying any tax bill this year will be "a heavy lift." Yet tax bills often seemed doomed, right until they pass.

State of Play for Passing a Year-End Tax Bill - Jay Heflin, Eide Bailly:

There is political disagreement over expanding the Child Tax Credit (CTC) to what is was in 2021.

By and large, one political party supports this expansion while the other party does not.

The party supporting a CTC expansion says that it would reduce childhood poverty. Many in this party have also threatened to oppose the extension or modification of business tax breaks if the CTC measure is absent from a year-end tax package.

Lawmakers opposing the CTC expansion contend it is too expensive (costing roughly $1 trillion over a ten-year period, according to the Joint Committee on Taxation), and that increasing payments to families would exacerbate inflation.

The disagreement between the political parties over this issue has existed for months, and it has not abated since the elections.


House Panel Gets Access to Trump Tax Returns, Chairman Guarded as to What Comes Next - Richard Rubin, Wall Street Journal.

The next move falls to committee Chairman Richard Neal (D., Mass.), who was guarded Wednesday about his plans for analyzing the documents or releasing them publicly.


Mr. Neal said his next step would be to meet with Democrats on the Ways and Means Committee to discuss the issue and get legal advice. He wouldn’t say whether he intended to release any of the documents or portions of them publicly; that would require a vote by the full committee. Mr. Neal’s written request for the records said he plans to study how the Internal Revenue Service audits presidents under an agency procedure that isn’t codified into law.

With only about a month left before the committee reverts to GOP control, it's unclear what will happen. One possibility is sharing the returns with the Senate Finance Committee, as the Senate will be in Democratic hands in the next Congress.

House Is in Possession of Trump’s Tax Returns, Treasury Says - Mary Katherine Browne, Doug Sword, and Alexander Rifaat, Tax Notes ($). "Another option is to punt the matter to the Senate, which the Democrats will still have control over next year. Senate Finance Committee Chair Ron Wyden, D-Ore., has already said he stands ready to step in if the clock runs out for the Ways and Means Committee."


Washington High Court Stays Lower Court Ruling Against Capital Gains Tax - Paul Jones, Tax Notes ($):

In a November 30 orderthe supreme court stayed the March ruling by Douglas County Superior Court Judge Brian C. Huber that overturned the tax as unconstitutional in the consolidated cases of Quinn v. Washington and Clayton v. Washington. The state is appealing Huber's decision, and a hearing has been scheduled for January 26, 2023.


The court's decision to grant the stay doesn’t mean it will uphold the tax, according to Jason Mercier with the Washington Policy Center, a group that opposes the tax. “Stays are usually granted,” he said in a November 30 email to Tax Notes, though he added that he has heard from attorneys that “it is highly unusual, if not unprecedented, to wait eight months between a ruling and a stay request.”

Mercier said that if the tax isn’t overturned before the filing deadline, it’s not certain whether taxpayers will be able to take a federal deduction for it, since the state’s position is that it’s an excise tax.


Danish Tax Agency Accuses Ohio Man Of $26M Refund Fraud - David Hansen, Law360 Tax Authority ($):

An Ohio man defrauded Denmark of at least 188 million kroner ($26.3 million) as part of a multibillion-dollar tax refund scheme that has spawned multiple lawsuits, Denmark's tax authority told a federal court.


The plans submitted false tax refund claims under a double-tax treaty between the U.S. and Denmark, Skat (the Denmark tax agency0 said. The treaty allowed for the refund of the tax, set at 27% of dividends, on U.S.-domiciled pension plans that are exempt from U.S. federal taxes. The plans falsely represented that they owned shares in some of Denmark's largest corporations, Skat said in its complaint.

That's many Legos.


GAO: COVID Decimated IRS’s Paid Preparer Oversight Program - Jonathan Curry, Tax Notes ($). "The GAO noted that a 2021 report from Treasury found that about half of all taxpayers claiming refundable credits get help from paid preparers to assist them as they work through the complex eligibility requirements. However, that same report also observed that a substantial number of those tax returns are prepared by unenrolled preparers who are generally outside IRS oversight authority, and returns prepared by that group of preparers have higher error rates than those prepared by taxpayers themselves."

How to Spend Your FSA - Madeline Diamond and Ian Salisbury, Wall Street Journal ($). "Of the 16 million Americans who have an FSA, nearly half forfeited money in their account at the end of 2019, the last year the rollover rule was enforced. The average loss was more than $300, according to EBRI."


Here’s what to do if a payment app reports your cash gifts to the IRS - Michelle Singletary, Washington Post.

But — and this is important — money received through these payment apps from friends and relatives as personal gifts or reimbursements for expenses such as splitting a restaurant meal is not taxable.


And so begins what I predict could be a hot mess next year when tax season opens if folks incorrectly receive 1099-K forms and then have to prove to the IRS that the money was not, in fact, payment for goods and services.


Congressional Democrats: Not a chance of reopening climate law - Gavin Bade and Doug Palmer, Politico:

Members of Congress have an answer for French President Emmanuel Macron’s pleas for a relaxation of U.S. green-energy subsidies: “Non merci.”

Macron is using his visit to Washington this week to ask President Joe Biden to back off the “Made in America” requirements of the new U.S. climate law. European leaders say those provisions discriminate against the EU electric vehicle manufacturers and other clean industries — and raise the danger of a transatlantic trade war.


Partial Victory for Syndicated Conservation Easements in U.S. Tax Court - Ben Peeler, Eide Bailly. "This ruling may not even provide another similarly situated taxpayer support to withhold disclosures on their own returns. In fact, reasonable advisers may still conclude disclosure is the better answer to protect against penalties. Every potential investor or easement donor should seek independent analysis before engaging in a conservation easement transaction."


Women face more, and unique, secure retirement challenges - Kay Bell, Don't Mess With Taxes. "The survey urges women to take greater control over their future by gaining a full understanding of their situation, creating a financial plan, setting goals, factoring financial implications of taking time out of the workforce, and developing a retirement strategy."

Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad - Jim Maule, Mauled Again. "What caught my eye was the number of fake tax returns the group filed. The schemers filed more than 3,300 fraudulent tax returns for 2013 alone."

Elton John Sued His Accountants For $30 Million, Lost $12 Million Instead - Rebekah Barton, TaxBuzz. "Although the music legend wasn't present when the verdict was given, he was charged $12 million in legal fees. At the time, Judge Andrew Ferris stated in his ruling, 'I have found this case fails on the facts.'"


Making The TCJA’s Individual Tax Cuts Permanent Would Add More than $3 Trillion To The Federal Debt, Mostly Benefit High-Income Households - Howard Gleckman, TaxVox. "Because the TCJA’s individual tax provisions are not scheduled to expire until the end of 2025, taxpayers would not receive any benefit for nearly three years and the government would suffer no revenue loss. However, once the extension kicks in, the change would result in tax cuts relative to current law for the vast majority of households in most income groups. The one exception: Only about one-quarter of the lowest income households would get a tax cut."

How the Inflation Reduction Act and Pillar Two Could Shape the Future of EU Competitiveness - Sean Bray, Tax Policy Blog. "When President Biden signed the Inflation Reduction Act into law, he put many European companies at a disadvantage unless they move production to the United States because of the law’s renewable energy tax credits for American-produced goods. President Macron will attempt to negotiate European companies’ access to these credits."


Great moments in recordkeeping. From a plea agreement filed in the Southern District of Iowa (link not available): "Defendant admits that he maintained a copy of this invoice to which he affixed a post-in note upon which he had written, 'Fake Bill for Tax Savings 2016 year.'"

Minneapolis tax preparer pleads guilty to tax crimes - IRS (Defendant name omitted):

In 2010, the IRS conducted a periodic suitability review of Defendant and found that he failed to file a 2009 personal income tax return and that he owed substantial federal income taxes from tax years 2005 through 2008. The IRS notified Defendant repeatedly that his failure to resolve his tax obligations would result in sanctions, including suspension of his EFIN or his expulsion from the IRS e-file program. In August 2012 Defendant was suspended from the IRS e-file program and was no longer authorized to electronically file tax returns.

From August 2012 through April 2022, despite his suspension from the e-file program, Defendant operated surreptitiously as an e-filing tax preparer. Defendant disguised his unauthorized participation in the e-file program by enlisting others to obtain unique EFINs, which Defendant then used to file thousands of tax returns electronically on behalf of his customers. These tax returns were electronically transmitted to the IRS purporting to have been prepared by other individuals. From 2012 through 2020, Defendant impeded the IRS's suitability review and circumvented his e-file suspension by electronically filing more than 26,000 tax returns using misappropriated EFINs.

From 2018 through 2021, Defendant received approximately $765,000 in compensation from working as a tax preparer but, in order to further obscure his unauthorized conduct, he did not report any income related to his tax preparation business. Defendant's unlawful conduct resulted in a combined federal tax loss of approximately $214,297.

Seems like it would have been easier to pay the taxes. 


Keep the doctor away. It's Eat a Red Apple Day!

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