July 26, 2022
Democrats’ Failures So Far on Tax Policy Spur Frustration in Party - Richard Rubin, Wall Street Journal ($).
The short-term sticking point is the narrow margin for the Democrats in the Senate, a 50-50 tie where the Democrats must get all of their members to agree. Sen. Kyrsten Sinema (D., Ariz.) opposed tax-rate increases, limiting her party’s ability to reverse the cuts from the 2017 law. Sen. Joe Manchin (D., W.Va.) put what seemed to be the final stake in the Democratic tax agenda this month by considering and then rejecting a plan that would have raised about $1 trillion over a decade.
Any singular focus on Mr. Manchin or Ms. Sinema obscures other intraparty divides that emerged over the past 18 months as Democrats struggled to simultaneously be the party of raising taxes on the rich and a party whose own base has shifted to include more high-income suburban voters.
An excellent treatment of the dynamics that have prevented one-party control of Congress and the White House from resulting in sweeping tax changes.
Leftovers pile up for year-end tax bill menu - Laura Weiss, Roll Call:
Another motivator for a year-end deal is restoring a bigger R&D incentive. Beginning this year, companies have to deduct their domestic R&D costs over five years instead of all upfront, a provision of Republicans’ 2017 tax law.
Companies have been lobbying for a reversal, which many top tax writers aim to deliver by year’s end. That push hit a snag in recent months, as some Democrats objected to moving forward with the tax break for businesses while benefits for lower- and middle-income families, like a larger child tax credit, remain lapsed.
Other items likely to arise in a year-end tax bill include child credits and energy provisions.
Senate Bill to Boost Chip Production, Advanced Technology Set to Move Ahead - John McKinnon, Wall Street Journal ($). "The bill combines about $52 billion in subsidy funding to boost semiconductor production in the U.S., along with about $24 billion in advanced manufacturing tax credits that would also support the industry."
Prospects Unclear After Manchin Sinks US Int'l Tax Changes - Dylan Moroses, Law360 Tax Authority:
With midterm elections looming in November, lawmakers are less inclined to work together, but the last months of the Congress, commonly referred to as a lame-duck session, have sometimes produced significant tax legislation that has passed with bipartisan support.
However, lawmakers have several expiring domestic tax provisions to consider in any year-end negotiations, casting doubt that there would be enough capacity for Congress to also consider U.S. international tax law changes.
Rettig faces questions over audits of Trump critics - Brian Faler, Politico. "As for the Finance meeting this week, don’t be surprised if Rettig tells that panel what he told Ways and Means: That there was nothing political about the audits of Comey and McCabe and that the odds of both of them being selected for a special research audit program are not as long as it might seem."
Big Hospitals Provide Skimpy Charity Care—Despite Billions in Tax Breaks - Anna Wilde Mathews, Tom McGinty and Melanie Evans, Wall Street Journal ($). "Nonprofit hospitals say the national charity-care figures don’t provide a full picture, because some states expanded their Medicaid programs under the Affordable Care Act, reducing the uninsured population and resulting in less need for free care."
Iowa's tax-free weekend is in August. Here's how to avoid paying sales tax on shoes, clothing - Hanah Rodriguez, Des Moines Register. "Clothing and shoes priced under $100 are sales tax-free."
New York Law Conforms State to Some Federal Filing Extensions - Emily Hollingsworth, Tax Notes ($). "The bill was prompted by the aftermath of Hurricane Ida in New York in November 2021. The IRS extended the filing deadline for tax returns that were due in October 2021 to January 3, 2022, for taxpayers affected by the storm, and New York did the same. The IRS then extended the deadline to February 15, but the state, citing the 90-day limit under current law, didn't extend its deadline, according to the justification for the bill. New Yorkers affected by the hurricane were required to file despite the IRS’s extension on federal returns, creating confusion and late tax payments, the justification said."
Oregon Tax Court Upholds Increased Value of Property Involved in Shooting - Christopher Jardine, Tax Notes ($). "An Oregon taxpayer is not entitled to a property tax reduction or exemption due to frequent target shooting on a neighboring property that resulted in the wounding of her son, the Oregon Tax Court has held."
Do IRS Employees Know the Postmark Rule? - Russ Fox, Taxable Talk:
We normally file business return extensions electronically. However, every year there are a few that must be paper-filed (mailed to the IRS). On March 11th we mailed an extension for an S-Corporation (call it Acme). The IRS had yet to process Acme’s S-Corporation election paperwork; when I attempted to e-file the extension, it failed. So we mailed it certified mail, return receipt to the IRS on March 11th; it was received at the IRS in Ogden, Utah on March 17th. This past week, Acme received a letter from the IRS stating we cannot accept your extension because it was filed after the deadline.
The owner of Acme was, of course, upset with me until he saw that I did file the extension timely; eventually the extension will end up being valid. But (a) I had to waste time on a conversation with the owner of Acme, (b) the IRS wasted time and money in sending out the notice, and (c) will waste additional time removing the penalty and noting the extension was timely filed.
IRS is a mess now, especially when paper is involved. Many IRS penalty notices are wrong even when the IRS is dysfunctioning at its normal level. IRS operations are subnormal, and likely will remain so for some time. Don't assume an IRS penalty is notice correct, and don't assume your preparer messed up. Eide Bailly's Tax Controversy Services team can help. So can using Certified Mail any time you have to mail a return to the IRS or state taxing authorities.
Breadwinner Should Have Known of Issues Leading to Understatement, Denied Innocent Spouse Relief - Ed Zollars, Current Federal Tax Developments. "The Tax Court denied an attempt by the breadwinner to obtain innocent spouse relief for tax liabilities in the case of Soler v. Commissioner. And the case also contains a warning for spouses who may prefer to not get involved in tax matters in the marriage when their spouse happens to be an accountant."
The different ways forgiven student debt is taxed - Kay Bell, Don't Mess With Taxes. " The tax code generally treats forgiven or canceled debt as taxable income. It's officially known in the tax world as cancellation of debt income or CODI, with emphasis (from me) on income. There are some exceptions, usually carved out by Congressional action. That's the case in some cancelled student loan debt."
ABLE accounts can help people with disabilities pay for disability-related expenses - IRS. "People with disabilities can use an Achieving a Better Life Experience or ABLE account to help pay qualified disability-related expenses. This tax-advantaged savings account doesn't affect their eligibility for government assistance programs."
How Tariffs and the Trade War Hurt U.S. Agriculture - Alex Durante, Tax Policy Blog. "In response to the U.S. imposition of tariffs by the Trump administration on Chinese imports, China responded with several waves of tariffs on U.S. exports to China, with tariff rates ranging from 2.5 percent to 25 percent. As China represents the U.S.’s largest agricultural export market, a large percentage of agricultural goods, including soybean and pork exports, faced tariffs. Other countries also retaliated against the U.S. for imposing Section 232 tariffs on steel and aluminum. Across all retaliatory tariffs, $30 billion in agricultural products were targeted, or about 22 percent of all retaliated goods."
Helpful Crypto Taxation Report From Kansas - Annette Nellen, 21st Century Taxation. "The Division's website also has a link to a 16-mimnute audio file that is about the best I have heard on the basics of cryptocurrency tech and tax. I recommend it if you feel you are missing the basics on these topics."
Tarzana accountant pleads guilty to fraud charge for helping client fraudulently obtain $1.2 million COVID related business loan - IRS (Defendant name omitted):
Specifically, Defendant prepared a false federal corporate income tax return, claiming that Agency 126 paid employees $5,383,401 in wages during the 2019 tax year. Defendant provided the false 2019 tax return to his client to submit to a bank to support the PPP loan sought by the client. To hide his involvement, Defendant marked the false tax return "self-prepared."
Defendant admitted that both he and his client knew that Agency 126 had no employees, paid no wages, and never filed tax returns with the IRS.
The client electronically submitted the false tax return that Defendant prepared to the Small Business Administration and the bank in support of Agency 126's fraudulent PPP loan application. On the false 2019 tax return submitted to the bank, the client removed the "self-prepared" designation and replaced it with Defendant as the preparer.
Relying, in part, on the false tax return, the bank and the SBA approved and funded Agency 126's PPP loan and wired $1,212,312 to a bank account that the client controlled. For his role in the scheme, Defendant was to receive a percentage of the loan proceeds when the bank forgave the loan.
Just a small part of the estimated $80 billion or so in PPP fraud.
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