March 17, 2022
IRS Aims to Beef Up Tech Team With IT Hiring Spree - Jonathan Curry, Tax Notes ($):
The IRS is continuing to tout its hiring efforts, issuing a new announcement that it’s looking to bring on more than 200 technology professionals who are likely to play a key role in the agency’s modernization effort.
The March 16 announcement (IR-2022-59) indicates that this contingent of technology-related hires is part of the IRS’s wider hiring effort and will comprise a wide variety of roles, ranging from cybersecurity to modernizing the agency’s notoriously dated individual master file.
From the announcement:
"This is an excellent opportunity to join the IRS Information Technology team and make a real difference for our tax system and the nation's taxpayers," said Chief Information Officer Nancy Sieger. "This is a great opportunity for people looking to further their technology careers. We have experienced teams of programmers, IT specialists and cybersecurity experts looking to further accelerate modernization efforts."
And you might not even have to show up at the office if you sign on:
Positions are available around the country. IRS IT is currently in a maximum telework mode and will have a competitive telework policy going forward.
But you better be up to date on your taxes: "All employees must be U.S. citizens, pass an FBI fingerprint check and tax compliance verification, and meet the mandatory education and experience qualification requirements."
IRS Updates Auto Depreciation Limits for 2022 - Bailey Finney, Eide Bailly. "The tax law has special depreciation limits for motor vehicles - often incongruously called the "luxury auto" rules. The IRS has released (Rev. Proc. 2022-17) the updated limits, which apply to vehicles far below the Rolls-Royce level."
Wyden Says Republicans Are Open to Eliminating Russian Tax Breaks- Benjamin Guggenheim, Tax Notes ($):
Besides barring the use of foreign tax credits, sanctions under section 901(j) would eliminate the preferential 10.5 percent global intangible low-taxed income rate for U.S. companies in Russia and Belarus. The two countries would find themselves among those deemed by the secretary of state as sponsors of international terrorism, such as Cuba, North Korea, Iran, and Syria.
Wyden also wants to prohibit sanctioned Russian individuals from using what he called “tax goodies” provided by the United States, effectively subjecting those individuals to a full U.S. withholding tax on income of 30 percent.
Not all problems are tax problems.
Holcomb signs income tax cut into law. Here's when you'll start seeing the money. - Kaitlin Lange, Indianapolis Star:
Gov. Eric Holcomb signed a $1.1 billion tax cut package Tuesday, which could reduce Indiana's income tax rate from 3.23% to 2.9% over seven years.
After the first tax cut in 2023, future tax cuts would occur only if state revenue growth reached 2% the prior year. That threshold is usually met, unless there is a serious economic downturn like there was in 2020.
Other coverage: Indiana to lower income tax over next seven years - Monique Beals, The Hill.
More States To Adopt MTC Online Biz Tax Stance, Tax Pros Say - Paul Williams, Law360 Tax Authority:
Last year, the MTC updated its guidance on P.L. 86-272 to reflect how to apply the more than 60-year-old law to the online economy. Then in February, the California Franchise Tax Board issued a memo saying it agreed with the MTC that internet sellers, like noninternet sellers, are shielded from taxation if the only business activity in the state is the solicitation of sales of tangible personal property. And like the MTC guidance, it added in various internet activities in which the seller would not be protected by P.L. 86-272.
For example, the board said, concerning the placement of internet cookies, or identifying pieces of data on the browser of a customer, anything used only for soliciting orders of tangible personal property is shielded from taxation. But in another instance, placing cookies on the computers or devices of California customers would defeat the protections of P.L. 86-272 if the cookies gather certain customer search information.
Many taxpayers may be surprised to learn that under this guidance, they might have income tax liability in states where they have no employees, physical assets, or other traditional business presence.
Related: Is it war?
Parties Agree SCOTUS Should Settle Billboard Tax State Split - Amy Hodges, Tax Notes ($). "Lamar Advantage began when two outdoor advertising companies challenged Cincinnati’s billboard excise tax, arguing that it violates their First Amendment rights to free speech and freedom of the press. The Ohio Supreme Court agreed and enjoined the tax’s enforcement."
With Boost in Funding, IRS Plans Hiring Spree to Tackle Backlog - Kelly Phillips Erb, Bloomberg. "On March 9, 2022, the Treasury Inspector General for Tax Administration released a report on the IRS’s 2021 filing season. They noted that 'Inventory backlogs from the 2020 Filing Season continued to affect the IRS’s ability to provide timely service to taxpayers in the 2021 Filing Season.'"
The Mess At The IRS - Janet Novack, Forbes. "Nina E. Olson, a tax lawyer and the founder and executive director of the Center for Taxpayer Rights, describes the current problems at the IRS as the worst she’s ever seen—and she’s seen a lot. From 2001 to 2019, she served as the IRS’ National Taxpayer Advocate—an independent voice within the agency charged with helping individual taxpayers and making recommendations to Congress for change."
Estimated Tax Penalty Relief Applies to All Qualifying Farmers - Kristine Tidgren, Ag Docket. "On March 15, 2022, IRS announced in Notice 2022-12 that it would waive the estimated tax payment penalty for any 'qualifying farmer' who files their return and pays their taxes in full by April 18, 2022 (April 19, 2022 for taxpayers in Maine or Massachusetts)."
Russian oligarchs are target of global REPO effort, Kleptocracy whistleblower program - Kay Bell, Don't Mess With Taxes. "FinCEN will also release an alert for financial institutions about the importance of identifying and reporting suspicious transactions by sanctioned Russian elites, oligarchs, and their proxies that involve real estate, luxury goods, and high-value assets."
Family Settlement Agreement – Is it a Good Idea? - Roger McEowen, Agricultural Law and Taxation Blog. "While most estates are handled and the decedent’s property is distributed in the manner the decedent wanted, sometimes there might be a mistake in the will or some other unanticipated result as a consequence of poor drafting of an estate plan. In those instances, a family settlement agreement may be appropriate."
Making the IRS Answer to Taxpayer Inquiries…By Making the IRS Reasonably Inquire - Caleb Smith, Procedurally Taxing. "As far as remedies go, my bet is that the awarding of litigation costs would be enough to get IRS Counsel’s attention next time they have to file an answer."
Top 5 Cybersecurity Must-Haves - Michael Nouguier, Eide Bailly. "1. Educate your staff. Education is one of the most important pieces to the cybersecurity puzzle, and knowledge can be a better asset than any tool on the market. You’ll need to make sure your employees understand what MFA is, why it’s important and how to use it. But MFA isn’t the only thing you’ll need to provide education on. Since 95% of cyberattacks are due to human error, your employees need to know what they’re watching out for. The burden isn’t all on your shoulders; it’s not possible to implement technical solutions that can catch every potential threat."
What’s in the New Global Tax Agreement? - Daniel Bunn, Tax Policy Blog:
Pillar 1 contains “Amount A” which would apply to companies with more than €20 billion in revenues and a profit margin above 10 percent. For those companies, a portion of their profits would be taxed in jurisdictions where they have sales; 25 percent of profits above a 10 percent margin may be taxed. After a review period of seven years, the €20 billion threshold may fall to €10 billion.
Pillar 2 is the global minimum tax. It includes three main rules and then a fourth rule for tax treaties. These rules are meant to apply to companies with more than €750 million in revenues. Model rules were released in December 2021...
The third rule in Pillar 2 is the “under-taxed profits rule,” which would allow a country to increase taxes on a company if another related entity in a different jurisdiction is being taxed below the 15 percent effective rate. If multiple countries are applying a similar top-up tax, the taxable profit is divided based on the location of tangible assets and employees.
Related: Five Reasons International Businesses Should Consider GILTI.
EU Could Use WTO Against US Electric Car Tax Credits - Todd Buell, Law360 Tax Authority: "In a letter to a member of the European Parliament dated Tuesday, European Union Executive Vice President Valdis Dombrovskis said the commission, the EU's executive arm, is closely following the status of proposed tax credits for electric vehicles in the U.S. The proposal is part of President Joe Biden's landmark Build Back Better Act, which has passed the House of Representatives but remains stalled in the Senate."
Income Sourcing Rules – Foreign-Source and U.S.-Source Income - Jason Freeman, Freeman Law. "Compensation for labor or personal services is sourced to the place of performance. Therefore, compensation for labor or personal services performed in the United States generally is U.S.-source income, although there is an exception for amounts that meet certain de minimis criteria."
US Person – Made a “Loan” to a Foreign Corporation? -Virginia La Torre Jeker, Virginia - US Tax Talk. "What happens if you make a loan to a foreign (non-US) corporation and the Internal Revenue Service (IRS) later determines that the 'loan' should not be treated as a “loan” for US tax purposes?"
Related: IRS Trouble: International Penalty Abatement (video)
IRS Spotlights Criminal Investigation Law Enforcement - IRS:
For CI in particular, since 2010, the number of employees has fallen by approximately 25 percent, from 4,017 in 2010 to under 3,000 today. This at a time when investigations are getting more complex, as highly sophisticated criminals are turning to new and hard-to-detect ways to hide illicit gains from our sight.
Many of those who chose to challenge the IRS and IRS-CI have been surprised. In fact, IRS-CI has had substantial success over the course of the last several years despite being significantly under-funded. Last year, IRS-CI identified $10.4 billion from tax fraud and financial crimes and likely deterred at least an equivalent amount of such behavior, with a budget of just over $600 million. That is a direct return of more than 16:1. But this substantially understates the immensely valuable work that CI does, because having a significant IRS presence deters criminals from malfeasance.
With additional resources, CI will be able to do much more. The IRS's efforts in this space are imperative to helping CI target oligarchs and those who facilitate hiding their assets. More broadly, a well-funded investigations unit is critical to ensuring that the IRS has a workforce that is able to pursue the illicit behavior of highly sophisticated criminals who reap billions and billions of dollars of profits annually through complex financial crimes.
Despite funding challenges, IRS Criminal Investigation retains the flexibility to pat itself on the back.
Iowa business owner pleads guilty to tax evasion - US Department of Justice (defendant name omitted):
According to court documents, Defendant operated a tree trimming business under the names Ultimate Tree Service and Spruces Tree Service. She did not keep business records that listed work and gross receipts and did not have business or individual bank accounts. Defendant conducted all business in cash and knowingly and intentionally paid all her employees in cash.
When you insist that all transaction be in cash, you pretty much are telling all of your customers and vendors that you are cheating on your taxes. One of them might not keep the secret.
Run Away! Everyone knows that today is St. Patrick's Day. Fittingly, it is also National Corned Beef and Cabbage Day. But did you know it is also Evacuation Day in Massachusetts? "It is a public holiday in Suffolk County, including Boston, Massachusetts, in the U.S. It celebrates the day when the British troops evacuated Boston during the American Revolutionary War."
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.