June 28, 2022
Finally, a deal on tax rebates - Emily Hoeven, CalMatters. "The centerpiece is a $17 billion inflation relief package that includes direct payments of as much as $1,050 to an estimated 23 million Californians, including individual filers making as much as $250,000 and joint filers making as much as $500,000, CalMatters’ Alexei Koseff reports."
Idaho Extends Period for Claiming Credit for Overpaid Taxes - Emily Hollingsworth, Tax Notes ($):
Idaho taxpayers now have a period of 10 years within which to claim a credit for overpaid taxes.
H. 715, sponsored by the House Revenue and Taxation Committee, extends the statute of limitations for filing a claim for a credit for overpaid income tax, penalties, or interest. It allows taxpayers to do so within 10 years — rather than three years — from the later of the date the return was filed or the return’s due date. The bill, signed by Gov. Brad Little (R) earlier this year, took effect retroactively to January 1.
Ohio Gives Residents Tax Cuts On Sales Of Businesses - Paul Williams, Law360 Tax Authority ($):
H.B. 515 specifies two instances where the sale of ownership interest is considered business income and is therefore eligible for a deduction and subject to a preferential tax rate of 3%, as opposed to a graduated personal income tax rate up to 3.99%. The preferential tax treatment will apply if a sale is treated as a sale of assets for federal income tax purposes or if a seller materially participated in the business's activities during the taxable year when the sale occurred or during any of the five preceding tax years, according to the bill's fiscal note.
Qualifying taxpayers will be able to deduct the first $250,000 from their sale of equity or ownership interest, or the first $125,000 for spouses filing separately. The remaining equity or interest will incur the state's flat tax rate of 3% on business income.
Iowa is the only other state I am aware of with a similar exclusion. The Iowa exclusion will expire for most business sales made after 2022.
Democrats race to revive economic package as inflation spikes - Tony Romm, Washington Post ($):
Manchin has remained steadfast in his belief that the U.S. government should spend less, and raise more, than others in his party prefer. Increasingly, Democrats believe they will end up with a package far smaller in scope than they first envisioned — one focused on lowering prescription drug prices and combating climate change, with spending financed through changes to tax laws that also cut the deficit.
But many of the key details are still unresolved, generating fresh discomfort among lawmakers. In a sign of the lingering schisms, a broadly supported attempt to lower the price of health insurance by extending subsidies under the Affordable Care Act remains at risk of falling out of the package entirely. The loss of those tax credits could result in premium increases for millions of Americans next year.
Any tax hikes need the blessing of Arizona Senator Sinema, which was a problem in getting the plan through last year.
Ex-Official Offers Insight on Voluntary Disclosure Timeliness - Andrew Velarde, Tax Notes ($):
Shortly after the closure of the offshore voluntary disclosure practice, in November 2018, the IRS announced new voluntary disclosure guidelines designed to bring noncompliant taxpayers facing potential criminal exposure into compliance. The voluntary disclosure practice requires taxpayer cooperation with the IRS; the submission of all required returns for the disclosure period; and payment of taxes, interest, and penalties, requires a taxpayer to be truthful, timely, and complete with the disclosure.
The story is about Daniel Price, who had been with the IRS Office of Chief Counsel (Small Business/Self-Employed) and remarks he gave to the New York University School of Professional Studies. One item he addressed is disclosure of cryptocurrency transactions:
Price also said that the government is looking for disclosures related to mixers and tumblers, which can be used to disrupt a blockchain record. Mixers or tumblers would be a red flag for potential illegal-source income, he said, arguing that they could be viewed as the digital version of money laundering, designed to disguise transactions.
Related: Offshore Voluntary Disclosure.
Information Reporting on Digital Assets Steps Into the Spotlight - Marie Sapirie, Tax Notes:
The looming prospect of compliance with the reporting requirements in section 6050I has been a problem for the digital asset industry since the passage of the Infrastructure Investment and Jobs Act (P.L. 117-58) last November...
The revised version of section 6050I requires taxpayers engaged in a trade or business to file an information return when they receive $10,000 or more in digital assets in one transaction or two or more related transactions in the course of that trade or business. The information required is the name, address, and tax identification number of the person from whom the assets were received; the amount of the assets; and the date and nature of the transaction. The provision was originally designed for cash transactions.
Efforts to delay or repeal the requirement continue.
Senate committee searches for Wayfair remedy for small biz - Roger Russell, Accounting Today:
Since the Supreme Court decision in Wayfair vs. South Dakota four years ago, the sales tax arena has been filled with complexity and confusion. States acted quickly to take advantage of the opportunity afforded by the removal of physical presence test as a prerequisite for them to impose sales tax nexus.
But legislative and regulatory changes in the 45 states plus the District of Columbia that collect sales tax clouded the landscape, leading to the conclusion that online sales taxes are “a major source of headaches and costs for small businesses,” according to Ron Wyden, D-Oregon, chairman of the Senate Finance Committee. He noted that the Wayfair decision gave states “a green light to force small businesses into becoming tax collectors when they sell online — collecting taxes even for states where those businesses had no brick-and-mortar presence.”
Related: States Respond to SCOTUS Wayfair Decision.
The Dobbs fallout, tax edition - Bernie Becker, Politico. "So here’s the situation — it looks like employees won’t have to pay taxes on reimbursements they get for abortion-related travel, at least up to a certain point, as Bloomberg Law and other outlets previously have noted."
Understanding How R&D Capitalization Works - Eide Bailly. "In the last few years, legislation has made significant changes to the way things work. The Tax Cuts and Jobs Act of 2017 removed the ability of companies to expense their R&D costs starting in 2022."
Household employees mean more tax tasks for employers - Kay Bell, Don't Mess With Taxes. "A key factor in differentiating a household employee from repairmen, plumbers, and similar people who work on or in your home, is that this second group typically provide their services as independent contractors, not as your employees. You are just one of several customers for whom they work."
While IRS Announces Agency Has Met a Milestone in Processing Returns, the National Taxpayer Advocate Points Out the Situation is Worse Than a Year Ago - Ed Zollars, Current Federal Tax Developments. "While the IRS posted a news release announcing the agency had hit a key milestone in dealing with paper return filings that have been backlogged since the pandemic began, the National Taxpayer Advocate issued a report a day later showing the agency had lost ground over the past year in attempting to catch up on dealing with such returns."
When Is the Time to Consider New Withholding on the W-4? Always. - Jody Padar, Bloomberg. "Here’s how it works: The W-4 tells your employer how many deductions you are planning to take, and how much should be withheld from your income. Workers often put down zero because they are overwhelmed with paperwork on their first days on a new job and leave it unchanged until they move jobs. Other times, they maximize the deduction based on family members, which leads to a larger monthly paycheck but a cost down the road come tax time. Many taxpayers completely ignore how choosing the right withholding actually affects their take-home income."
S Corporation Dissolution – Part 1 - Roger McEowen, Agricultural Law and Taxation Blog. "While an S corporation might be an acceptable entity choice for professional service businesses such as law firms and accounting firms, it tends not to work as well as the operating entity for a farm or ranch. The S corporation can also present some tricky issues upon liquidation."
Good Article on the Abusive Syndication Easement -- Legislative and Judicial Initiatives - Jack Townsend, Federal Tax Crimes. "Finally, over the years, I have noted that many of the abusive tax shelters have built a legal superstructure that was aggressive and often did not hang together, but in the final analysis it was egregious overvaluation that was the Achilles heel."
Beginning Today, Some of Our Nation’s Most Vulnerable Taxpayers Will Automatically Have Their Accounts Excluded From Assignment to Private Collection Agencies - NTABlog (posted June 24): "Good news: Starting today, June 24, the IRS will systemically exclude from assignment to PCAs the accounts of taxpayers who are identified as currently receiving SSI. On Monday, June 27, the IRS will recall the accounts of any taxpayers currently receiving SSI that are now assigned to a PCA, and affected taxpayers will soon receive a letter informing them of this recall."
How should a virtual currency exclusion work? - Annette Nellen, 21st Century Taxation. "A frequent proposal for taxation of virtual currency is to add an exclusion similar to IRC section 988(e) for gain 'by reason of changes in exchange rates after such currency' for personal transactions. This is a simplification measure as not records need to be kept such as when one is traveling and using a foreign currency. It is likely infrequent that the conversion gain exceeds $200."
Three Reasons Why a Gas Tax Holiday is a Bad Idea - Greg Mankiw. "If it is true that refiners are near capacity, as reports suggest, then supply is relatively inelastic. That means the tax reduction would mainly benefit producers."
How Should the US Tax Petroleum Profits? - Thornton Matheson, TaxVox. "The US can tax a larger share of petroleum profits without discouraging production by increasing taxes on petroleum rents. And the way to do that is by eliminating existing tax breaks and imposing a permanent petroleum rent tax."
St. Paul Staffing Agency Owners Sentenced for Tax Evasion Scheme - US Department of Justice. "In addition to falsely reporting and underpaying payroll taxes, the defendants caused the business to file false annual corporate tax returns and use multiple bank accounts to hide the scheme. The defendants essentially split the profits from the tax fraud by keeping cash for themselves."
From here to there, it's National Logistics Day!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.