May 4, 2022
Rettig Bats Down Taxpayer Advocate’s Paper-Scanning Tech Advice - Jonathan Curry, Tax Notes ($):
The IRS isn’t fully on board with National Taxpayer Advocate Erin Collins’s recent memo directing the agency to immediately implement paper-scanning technology to address backlog concerns, according to the IRS chief.
“You’ll see us move in a direction that’s expansive in that regard,” Rettig said when asked what his assessment of Collins’s advice was. However, he continued, “it may not be these technologies.”
Commissioner Rettig testified yesterday at a hearing of the Senate Appropriations Financial Services and General Government Subcommittee.
Rettig Says IRS Plans To Eliminate Backlog This Year - Asha Glover, Law360 Tax Authority ($):
Lawmakers during the hearing voiced concerns that the amount of hiring the IRS is doing would impede the agency's ability to eliminate the backlog by the end of the year. Ranking member Cindy Hyde-Smith, R-Miss., said that in some cases, it could take up to 37 weeks to properly train incoming employees.
However, Rettig said the employees the agency is currently hiring are expected to be onboarded and trained sometime in June. Many of the employees hired are already employees who are just being refreshed, he said, adding that the onboarding process for new employees is considered in his plan to eliminate the backlog by the end of 2022. Some new hires will only need a few days to train, he said.
To be sure, the training needed to circle numbers with a red pen and operate rubber stamps may not take 37 weeks.
Roe v. Wade debate likely stalls Tax Agenda on Capitol Hill - Jay Heflin, Eide Bailly:
Democratic congressional leaders have been trying for months to pass their Build Back Better plan that would increase taxes on businesses and wealthy taxpayers. Recently, their plan was to pass a scaled-back version of the bill (that would likely include all the tax increases in the original legislation) before Memorial Day.
Last night’s leak from the Supreme Court has likely delayed this plan as Democrats will now focus on codifying the Roe v. Wade decision before the high court undoes it, which could occur within the next few months.
Momentum builds in Senate for major cannabis bill - Aris Folley and Karl Evers-Hillstrom, The Hill:
Senators on both sides of the aisle are throwing support behind a proposal to tuck key marijuana banking legislation into a larger package aimed at boosting U.S. competitiveness, increasing the odds that a significant cannabis bill gets through the upper chamber this year.
[Washington Senator Patty] Murray says she is “fighting every which way” to get the cannabis legislation included in the final bill. She noted that federal law currently forces weed dispensaries to use cash, making them prime targets for robberies.
As Jay Heflin notes above, the prospects for legislation advancing this session may have been dimmed by other developments yesterday.
Minnesota Provides Tax Relief for Small Businesses, Frontline Workers - Tax Notes. "Minnesota S.F. 2677, signed into law as Chapter 50, authorizes $500 million in direct payments to frontline workers, including those who work in healthcare, retail, public transit, ground and air transportation services, manufacturing, courts and corrections, and vocational rehabilitation; individuals must apply through the state Department of Labor and Industry over the 45-day application period to qualify for a payment."
College Savings Could Be Diverted to IRA Under Senate Bill - Caitlin Mullaney, Tax Notes. "The Helping Parents Save for College Act of 2022 (S. 4103) would expand the section 25B savers credit to cover education savings account contributions and would allow rollovers from education accounts to Roth IRAs."
For National Small Business Week, plan now to take advantage of tax benefits for 2022; enhanced deduction for business meals, home office deduction and more - IRS. "Alternatively, instead of filling out the 44-line Form 8829, business owners can choose the simplified method, based on a 6-line worksheet found in the instructions to Schedule C, the tax form for sole proprietors. This method has a prescribed rate of $5 a square foot for business use of the home. The maximum deduction is $1,500, based on business use of at least 300 square feet."
2022 Tax Season: The Tax Season From Hell (Part 2) - Russ Fox, Taxable Talk:
Change the Tax Filing Deadline to May or June 15th. I hated writing this, but the reality is that Tax Season is far too compressed and tax returns have gotten more complicated with more busy work. It’s just impossible for most tax professionals to set a mid-March deadline and get all the returns filed. (Indeed, as I’ll mention in Part 4 we plan on changing our deadline for receiving paperwork.) Many of our clients didn’t receive their brokerage 1099s until late March. Many of our clients still haven’t received their K-1s.
That's fine as far as it goes, but even then it compresses a year's worth of tax compliance into March - June. Letting the deadline go out to October would ease staffing problems and stress for preparers and IRS employees while bringing down costs for taxpayers.
Proposed Regulations Seek to Clarify Estate Inclusion and Clawback for Certain Lifetime Gifts - Melissa White, Eide Bailly:
The proposed regulations provide that "gifts" of property includible in the donor’s gross estate after 2026 would be subject to estate tax based on the values, estate tax rates, and exemptions applicable as of the date of death. The estate tax rules bring gifts back into the taxable estate under some limited and specified circumstances.
4 tax moves to make in May - Kay Bell, Don't Mess With Taxes. "May 16 is Tax Day for Colorado wildfire victims, as well folks who were in the paths of the tornado outbreak through Arkansas, Kentucky, Illinois, and Tennessee. Click on those states' names for more in my earlier posts on the special tax relief for these affected major disaster area filers."
Lesson From The Tax Court: Distinguishing Employees From Independent Contractors - Bryan Camp, TaxProf Blog. "I like how the IRS creates three broad buckets o’ factors in Publication 15-A: (1) Behavioral Control; (2) Financial Control; and (3) Type of Relationship. I think the factors going to control are generally the most important ones with that third bucket being more of a set of miscellaneous tie-breakers."
HDHP and HSA Inflation Adjusted Numbers Released for 2023 - Ed Zollars, Current Federal Tax Developments. "In order for an individual to make a contribution to a health savings account, he/she must have coverage under a qualifying high deductible health plan (HDHP) and no disqualifying coverage."
What To Do When Succession to the Next Generation Isn’t an Option - Chad Flanigan and Amber Ferrie, Eide Bailly. "One of the first steps we encourage family-owned businesses to take is a business valuation. Having an independent appraisal of your company’s worth can help you with succession and wealth planning. Specifically, business valuations are helpful for companies planning two to three years out for exit so they have time to set up gifting and estate options. It’s also helpful in identifying key value drivers, risks and opportunities."
Adjusting for Climate Change: Clean Energy Tax Proposals - David Stewart, Marie Sapirie, Nicole Elliot, and Beth Viola, Tax Notes Opinions. "At this point, in terms of timing, we're hoping that the Senate will try to get some sort of agreement in place on whatever reconstituted Build Back Better legislation, at least in terms of a framework that could potentially be done, ideally by Memorial Day. From a political perspective, the Democrats really need to try to get a package done and passed, and signed by the president before they go on the August recess. But the reality is they have until the end of September in order to use the reconciliation instructions that they have to try to pass this legislation."
In States’ Culture Wars, Tax Policy—And Taxpayers—Should Be Off Limits - Renu Zaretsky, TaxVox. "When state politicians use tax policy as a weapon in their culture wars, the victims are often local taxpayers."
State Sales Tax Breadth and Reliance, Fiscal Year 2021 - Jared Walczak, Tax Policy Blog. "Sales tax bases range from 19.32 percent of personal income in Massachusetts to 93.89 percent in Hawaii; the Massachusetts base is extremely narrow, while the Hawaii base features significant tax pyramiding."
There's always the personal injury practice. An attorney who "practiced primarily in the areas of personal injury and criminal law" may have practiced the second specialty too enthusiastically, based an a Justice Department press release (defendant name omitted):
In 2011, soon after Defendant entered into a payment plan with the IRS, he began using a bank account in the name of a third party to hold hundreds of thousands of dollars in an attempt to protect the funds from IRS scrutiny. By June 2012, Defendant made sufficient tax payments so that the IRS removed a lien against Defendant for the 2008 tax year. Shortly thereafter, Defendant transferred more than $248,000 from the third-party account to his personal money market account. Defendant subsequently filed false tax returns for 2011, 2012 and 2013, failing to pay taxes on approximately $950,000 in income in those years, and also failed to pay significant taxes owed for the 2014 and 2015 tax years.
The evidence at trial revealed that Defendant spent lavishly on cars and watercraft and, between 2012 and 2016, spent approximately $1.5 million constructing a new home.
Judge Bolden found Defendant guilty of three counts of making and subscribing a false tax return, and four counts of failure to pay income tax. At sentencing, which is not scheduled, Defendant faces a maximum term of imprisonment of 13 years.
Maybe the next career move could be a tax practice.
May the Fourth is for the birds. In addition to the Star Wars holiday, today is also National Bird Day. Fill your feeder!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.