Tax News & Views Filing Deadline Delayed Roundup

April 15, 2022

When is the deadline to file taxes this year? It’s not April 15. – Karin Price Mueller, “You’ve got less than a week to file your tax returns for the 2021 filing season.”

Monday, April 18 is the deadline this year, due to a holiday in Washington, D.C. on April 15 — Emancipation Day — punting the tax deadline by a few days.

Emancipation Day commemorates a day in 1862 when President Abraham Lincoln signed the District of Columbia Compensated Emancipation Act, freeing 3,000 slaves in the D.C. area.

This year, the holiday would fall on April 16 but it’s a Saturday, so the holiday is celebrated on April 15, moving the tax deadline.


Tax Day 2022 Is Arriving: Here’s What to Know – Richard Rubin and Laura Saunders, Wall Street Journal ($):

What if I need to call the IRS?

Good luck. The agency’s toll-free telephone lines have been jammed, partly due to short staffing and partly due to the new tax-code provisions that are causing more questions. This ties to the backlog, because some of the same employees who process returns and correspondence are also those who take phone calls. 


New Traders Face First Big Tax Bills After Last Year’s Rally - Claire Ballentine, Bloomberg ($). “Newbie traders are about to find out the downside of massive stock gains: larger-than-usual tax bills.”

As the April 18 U.S. filing deadline quickly approaches, the hordes of retail investors who funneled cash into last year’s rally are discovering that learning how to trade is one thing, but figuring out the U.S. tax system — and paying your dues — is another beast entirely.

In fact, Morgan Stanley estimates the 2021 capital gains tax bill could be the largest ever, with at least $325 billion due, a 75% increase over the 2020 season. That’s because of the influx of new traders, along with big run-ups in stocks and cryptocurrencies.


Here’s who can claim the home-office tax deduction on their 2021 tax return – Carmen Reinicke, CNBC:

The general rule is this: Those who are self-employed and working out of their homes may be eligible for the tax break. People who work remotely but get a W-2 tax form from their employer don’t qualify.


House lawmakers launch investigation of face-scan contractor – Cat Zakrzewski, Washington Post. “House lawmakers on Thursday launched an investigation into the efficacy and security of the identity verification contractor, after government agencies’ use of the software to identify people accessing tax records and unemployment assistance led to a rapid expansion of facial recognition in everyday American life.”

In a sweeping 10-page letter addressed to chief executive Blake Hall, lawmakers requested that the company turn over detailed records about its contracts with federal, state and local governments, as well as answer questions about how it investigates potential inaccuracies in its systems. Lawmakers wrote of ‘serious concerns’ about 10 federal agencies and 30 state governments contracting with, given questions about the accuracy of the facial recognition service and reports of long delays in using the service to access pandemic assistance.

IRS Still Has Contract With Facial ID Co., Lawmakers Say – David van den Berg, Law360 ($). “Despite the Internal Revenue Service saying it would stop using an outside facial recognition firm for identity verification, the agency appears not to have canceled its contract, two House Democratic lawmakers said Thursday.”

The agency appears to be continuing to use's identity verification technology while it works with the U.S. General Services Administration to resolve problems with its sign-on service, the lawmakers wrote in a letter. apparently also will keep collecting and retaining some biometric information, including selfies, and the IRS has said that can keep all biometric data identified as suspicious or possibly fraudulent, the lawmakers said.

‘This is concerning, given the large volume of data that regularly misidentifies as fraudulent,’ wrote House Oversight and Reform Committee Chair Carolyn Maloney, D-N.Y., and Rep. James Clyburn, D-S.C., the House majority whip and chair of the Select Subcommittee on the Coronavirus Crisis.


Schumer Aims to Introduce Cannabis Bill Before August Recess - Lauren Dezenski, Bloomberg ($):

Senate Majority Leader Chuck Schumer, Senate Finance Committee Chair Ron Wyden and Senate Democrat Cory Booker say a bill establishing a federal standard for cannabis legalization and regulation is on track to be introduced before the August recess.


Inflation Threatens to Erode Tax Benefits – Benjamin Guggenheim, Tax Notes ($). “Record-setting inflation threatens to create distortions in the tax code, potentially putting pressure on lawmakers to index provisions more uniformly.”

With the March report by the Labor Department indicating that consumer prices rose 8.5 percent in the past year — the fastest inflation rate since 1981 — nonindexed provisions such as the state and local tax deduction, exemption from capital gains for primary residences, and the mortgage interest deduction cap will see their value as tax benefits eroded.


Biden Tax Plan Would Grow Economy Modestly, Forecaster Says – Alexander Rifaat, Tax Notes ($). “President Biden’s fiscal 2023 budget “taken as a whole” would result in a 0.3 percent increase in GDP by 2032 and reduce overall debt, according to a Penn Wharton Budget Model (PWBM) analysis.”

The PWBM estimates, released April 14, are based on the budget proposal and a modified version of the Build Back Better Act (H.R. 5376), and they take into account a line item in the budget indicating a deficit-neutral reserve fund that the analysts say effectively represents legislation similar to Build Back Better without the state and local tax deduction provision.  


Business Owners Must Produce Returns in Damages Suit – Tax Notes ($):

A U.S. district court ordered a couple to turn over their federal tax returns in their suit for damages against a railway that barred access to their property and gravel business, finding that their returns are not privileged and that reviewing income derived from past sales is relevant for determining lost future sales and profits. 


Former Employees Can't Sue to Recover Tax Withholdings – Tax Notes ($):

A U.S. district court granted FedEx Ground Package System Inc.’s motion to dismiss three former employees’ suit seeking to recover tax withholdings from their gross pay that were not turned over to the government, finding that their claim is barred by statute, they allege no injury in fact, and they lack standing.


Court Holds Return Wasn’t Timely Filed; Refund Suit Dismissed – Tax Notes ($):

A U.S. district court dismissed for lack of jurisdiction an individual’s suit for a tax refund, finding that since he was neither able to show that his return had been sent by certified or registered mail nor that it was physically delivered to the IRS, the return was untimely filed and the court lacked jurisdiction to hear the suit.


Va. Trust Pursues $650K Tax Refund In Court – Emlyn Cameron, Law360 ($):

A Virginia trust is owed a tax refund of more than $650,000 after the Internal Revenue Service failed to properly process its return from 2018, the trust said in a complaint filed in Virginia federal court.


Apple Undercollected Tax On Discounted Tech, NY Court Says – Asha Glover, Law360 ($). “The New York Tax Appeals Tribunal correctly ruled that Apple undercollected sales tax on devices sold during a back-to-school promotion in 2011 and 2012, a state appeals court said Thursday.”

The tax tribunal correctly denied Apple Inc.'s challenge to a determination by the New York Division of Tax Appeals, which upheld a state Department of Taxation and Finance determination finding the company owed more than $730,000 in sales and use taxes and interest, the five-judge Appellate Division panel said. The tribunal had upheld that Apple undercollected sales and use tax because the tax was not collected on the full price of the products.


New York Business Owners Flock to SALT Cap Workaround – Donna Borak, Bloomberg ($). “Tens of thousands of New York business owners seized on a state-backed workaround during the first quarter of 2022 to cushion the pain of the $10,000 federal cap on state and local income tax deductions.”

Around 87,000 businesses elected to use the optional pass-through entity tax as of March 31, James Gazzale, a spokesman for the New York Department of Taxation and Finance, told Bloomberg Tax on Thursday.

New York is among more than 20 states that have agreed to provide a pass-through entity tax to help businesses bypass a limit on state and local income tax deductions following changes in the 2017 tax law.


Virginia’s SALT Cap Workaround Gives Plenty of Time for Choice – Donna Borak and Angélica Serrano-Román, Bloomberg ($). “Virginia partnerships and other pass-through businesses will have an extended period to decide whether to take advantage for 2021 of the state’s new device for cushioning the $10,000 federal cap on individual deductions for state and local taxes.”

Because the cap workaround passed so late in this year’s tax season, it allows the businesses to file their 2021 returns without deciding to pay the new pass-through entity tax, which Gov. Glenn Youngkin (R) signed into law April 11. Owners of the businesses would have to wait until after the business makes its choice in order to determine whether they can claim the corresponding state tax credit.


Kentucky on Path to Phase Out Income Tax After Veto Override – Michael Bologna, Bloomberg ($). “Kentucky has joined the parade of states slashing income taxes this year, after its Republican-controlled Legislature overrode Gov. Andy Beshear’s veto of a plan that could eventually lead to a phase-out of the personal income tax.”

The legislation, H.B. 8, aspires to a full phase-out of the state’s 5% personal income tax over several years, if certain revenue thresholds are met. An analysis of the bill and the state’s finances by the Tax Foundation concluded Kentucky is on track to cut taxes on personal income to a flat 4.5% by Jan. 1, 2023, and 4% by Jan. 1, 2024. The law creates a framework for future tax cuts, coming in 0.5 percentage point increments, but the cuts are contingent on legislative approval.


Biden Budget's Int'l Tax Tweaks May Muddy US Pillar 2 Plan – Dylan Moroses, Law360 ($). “Changes proposed by the White House to the U.S. international tax code would move it closer to the global tax plan proposed by the OECD, but passing legislation including those reforms faces an uphill battle.”

The international tax provisions included in President Joe Biden's fiscal 2023 federal budget request include several changes that would go further than previously proposed to harmonize the U.S.' tax regime on foreign earnings with the system proposed by the Organization for Economic Cooperation and Development.

But it remains unclear whether Congress could reach an agreement to advance such legislation as midterm elections loom in November, tax lawyers told Law360.


Companies Ask for ‘Safe Harbors’ to Ease Burden of Minimum Tax – Michael Rapoport and Isabel Gottlieb, Bloomberg ($). “Companies and business groups are proposing a host of ‘safe harbor’ ideas to make it simpler for them to comply with the pending 15% global minimum tax.”

Many of the ideas center on allowing companies to skip some of the detailed calculations they would otherwise have to perform to determine whether they have to pay the minimum tax. This would be in countries where the tax regimes are already tough enough that it’s unlikely they would fall below the 15% minimum rate, part of the 2021 global tax deal’s Pillar Two. Providing such exemptions and shortcuts would help ease the compliance burden that the new tax will impose, the companies and groups said.

Safe harbors ‘will be critical to manage complexity and reduce the compliance burden, both for tax administrations and taxpayers,’ Unilever said in its comment letter. The rules ‘should provide for a broad set of safe harbors and clarity on the form of such safe harbors should be provided as early as possible,’ the company said.


Treasury Has Options After Court Loss on Corporate Deduction Fix - Aysha Bagchi, Bloomberg ($). “The Treasury Department has an array of steps it can take in what will likely be a years-long legal battle over what it sees as a multi-billion dollar loophole in the 2017 tax overhaul.”

A federal district court judge in Colorado—in a case brought by telecommunications company Liberty Global Inc. over a nearly $110 million dollar refund claim—held earlier this month that temporary Treasury rules blocking foreign-sourced corporate income from qualifying for a tax deduction were invalid.

Tax practitioners and former government officials said the big-dollar issue is far from settled. The federal government could opt to appeal, continue to fight for more favorable rulings in other federal courts, and explore another regulatory solution.


Since it’s not Tax Filing Day, and with Easter right around the corner, let’s pay tribute to Good Friday.

From National Day Calendar:

Christians around the world recall the biblical story of Jesus’s crucifixion on this day. The day goes by other names as well, such as Holy Friday, Black Friday, and Great Friday. Though sources conflict, the phrase “Good Friday” may have been derived from “God’s Friday,” though sources conflict.

The observance is central to the Christian holy season that leads up to Easter when Jesus Christ was resurrected. While Easter has become a traditional celebration in the secular world, Good Friday has remained a holy and spiritual observance.


It's also Jackie Robinson Day!


Jack Roosevelt Robinson (January 31, 1919 – October 24, 1972) was an American professional baseball player who became the first African American to play in Major League Baseball (MLB) in the modern era

If you watch an MLB game today, every player should be wearing Robinson’s number 42 in honor of him.



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