Tax Update Blog

Tax News & Views IRS Hiring Literacy and Numeracy Roundup

August 29, 2022 | Blog
By Joe Kristan, CPA

Tax Professionals See Little to Fear in IRS Hiring Blitz - Nathan Richman, Tax Notes ($):

Any increased IRS enforcement efforts stemming from its $80 billion funding infusion will likely take years to materialize, in part because the agency is likely to struggle to hire the 87,000 new employees it hopes to bring on, according to two tax advisers.

...

On an August 25 webcast sponsored by the Idaho Society of CPAs, Edward K. Zollars of Thomas, Zollars & Lynch Ltd. also said the IRS will have a hard time finding enough people to hire. He asked, “Have you tried to hire anybody with any accounting or tax skills recently? Where are we going to find these people to fill all those roles?”

 

North Dakota Governor Calls for Flat Income Tax - Emily Hollingsworth, Tax Notes ($):

North Dakota Gov. Doug Burgum (R) has announced a tax relief plan that would switch the state to a flat individual income tax rate.

In an August 24 releaseBurgum and several state officials said the Relief for All plan would lower the personal income tax rate to a flat 1.5 percent. The proposal is intended to save taxpayers an estimated $250 million a year and eliminate the tax altogether for more than 388,000 people.

The current top rate in North Dakota is 2.9%. The proposal would take effect for 2023. 

 

AICPA: Draft Crypto Question on Form 1040 Needs an Upgrade - Mary Kathrine Browne, Tax Notes ($):

The IRS released a draft version of the form July 27, which changed the wording of its question concerning cryptocurrency to read: “At any time during 2022, did you (a) receive (as a reward, award, or compensation); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” 

The AICPA recommended that the question on the form be modified for simplicity and clarity to the following: “At any time during 2022, did you have a taxable event involving virtual currency?”

Accountants Urge IRS To Fix Tax Return Crypto Definition - Theresa Schliep, Law360 Tax Authority. "The definition provided in instructions for the U.S. individual income tax return departs from the definition used in other guidance from the IRS, such as Rev. Rul. 2019-24. the American Institute of Certified Public Accountants said in its letter. Streamlining the definition is important for taxpayers looking to correctly answer a question on the Form 1040 concerning possession of virtual currencies, according to the letter."

 

Forgiven Student Debt Could Be Taxed in Some States - Emily Hollingsworth, Tax Notes. "A provision in the American Rescue Plan Act excludes canceled debt from a taxpayer’s gross income if the loan is forgiven between December 31, 2020, and January 1, 2026, regardless of the reason the debt was discharged, which the White House said will apply to Biden's plan."

Next, the Supreme Court Decides How to Punish US Expats - Andreas Kluth, Bloomberg via The Washington Post:

Americans abroad suffer a long list of indignities in trying to comply with US laws. Most of them don’t owe the IRS any actual tax (because they usually pay at higher rates to their host countries, and subtract those amounts from their American liabilities). But they must still fill out incomprehensible forms demanding information that’s often unavailable or ambiguous — at great cost of time, worry and money. 

Some expats, for example, find themselves owning plain-vanilla mutual funds registered in their host country — employers sometimes put such investments into occupational retirement schemes by default. To the IRS, these are PFICs, or “passive foreign investment companies” — a synonym for toxic. The resulting paperwork is considered the most complex in the entire American tax code, and the taxation tantamount to confiscation. 

Related: Eide Bailly Global Mobility Services.

What is Form W-8BEN, and why is it so important? "The form is used to certify that a person’s country of residence for tax purposes is not the United States. It is important for Non-Resident Aliens as they might be subject to a 30% tax withholding on their U.S. sourced income. It allows foreign persons to claim a reduced withholding tax rate because they’re residents of a foreign country with which the U.S. has an income tax treaty."

 

US' Shunning Of Top-Up Tax Could Unwind Global Deal - Dylan Moroses, Law360 Tax Authority:

Key policy differences make it unlikely the U.S. alternative minimum tax will be considered a qualifying top-up tax, which makes up the difference between a company's low effective tax rate and the 15% corporate minimum tax under the OECD's Pillar Two definitions.

Under the U.S. minimum tax calculations, a number of general business tax credits and foreign tax credits aren't considered a reduction in tax payments for businesses facing the tax. However, the model rules for Pillar Two categorize tax credits as a reduction in tax payments, thus increasing the risk for a top-up tax.

Pleading GILTI - Alex Parker, Things of Caesar ($). "Amid all of this doom and gloom, one might forget that the U.S. does actually have a global minimum tax–the 10.5% tax on global intangible low-taxed income, enacted by the 2017 Tax Cuts and Jobs Act. Indeed, most of the changes Biden proposed were alterations to GILTI that left the fundamental concept intact."

 

Secret Service returns $286 million in stolen pandemic loans to SBA - Kay Bell, Don't Mess With Taxes. "The investigation was initiated by the Secret Service's Orlando, Florida, field office. Those agents found alleged conspirators used more than 15,000 Green Dot debit cards to illegally conceal and move the government money. Green Dot online bank, the issuer of the cards, worked with federal agents to uncover the cards."

Trust Terms Block Ability of Estate to Claim Either Charitable or Marital Deduction on Portion of Charitable Remainder Trust - Ed Zollars, Current Federal Tax Developments. "Including an option in a purported charitable remainder trust for the trustee to choose between making distributions of the annual unitrust payment to the surviving spouse or a charity ended up with the decedent’s estate not being able to claim either a charitable contribution or marital deduction by the estate for these amounts, the IRS ruled in a Chief Counsel Advice."

IRS Cancels Millions Of Penalties And Will Issue Refunds To Taxpayers Who Already Paid Them - Robert Wood, Forbes. "The relief is automatic, and most of $1.2 billion in refunds will be delivered to eligible taxpayers by next month. This means that eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund. As a result, nearly 1.6 million taxpayers who already paid the penalty are receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September."

 

Back to School, Back to Savings: 529 Plans as a Strategy - Susan Allen, Bloomberg. "Section 529 plans are education savings plans that can be used toward higher education expenses for the account beneficiary. Account owners get tax benefits, flexibility, and control."

Taxation of Forgiven Student Loans and Some Observations - Annette Nellen, 21st Century Taxation. "I have seen a few articles and news reports that some states might tax this income, making it sound like a dreadful result. Certainly, tax-free is better than tax, but the borrower is still in a better position than paying that principal and interest on their own. For example, if someone with a state income tax rate of 5% has $10,000 of student loan cancellation income and is in a state that taxes that $10,000, they are out of pocket $500.  That's much better than out of pocket $10,000 of principal and the interest on it."

Why Student Debt Forgiveness Won’t Include Higher Tax Bills - John Buhl, Tax Policy Center. "President Biden announced plans to forgive $10,000 in student debt for all borrowers with below $125,000 in annual income ($250,000 for couples), while Pell Grant recipients will be eligible for $20,000 in forgiveness. For many, the change will be even more generous because last year’s American Rescue Plan Act (ARPA) makes the loan forgiveness tax free. But that feature could add more than $30 billion to the government’s cost."

Student Loan Forgiveness: Should You File or Wait? - Russ Fox Taxable Talk. "As to when there will be guidance: soon.  I would expect it within ten days, but this is just an educated guess on my part.  I actually expect it sooner than ten days, but you never know about Washington."

 

IRS Is Raising More with Less, But New Funding Misses the Mark - Scott Hodge, Tax Policy Blog. "Unfortunately, the Inflation Reduction Act has focused more of the $80 billion to enforcement and hiring more auditors rather than programs that make it easier for taxpayers to comply with the code and the IRS to administer it. If, for example, the IRS made use of commercial scanning technology to input paper returns into the system, they could redeploy thousands of people to actually helping taxpayers. In other words, put the 'service' back into the IRS."

 

5th Circ. Affirms Fraud Convictions Of Texas Atty, Client - Jack Rodgers, Law360 Tax Authority.

A three-judge panel ruled Wednesday that the IRS did not need to show it had issued a demand letter in order for the government to pursue charges against John Green, a Texas attorney who previously held a seat in the Idaho Legislature, and his client, Thomas Seglas, for failing to pay some $1.1 million in taxes.

Both defendants had been sentenced to prison terms. How did they get there? From the Fifth Circuit Opinion:

In April 2006, Selgas and Green — his lawyer — orchestrated an effort, along with MyMail partner Bob Derby, to amend MyMail's tax forms “based on the current laws of a constitutional $.” According to Selgas and Green, “Federal Reserve Notes are valueless pieces of paper” and “lawful money” is instead measured by the “constitutional value” of a dollar, which is 371 ¼ grains of silver. The practical effect of employing this theory was to significantly underreport the amount of income that MyMail and the Selgases actually received.

Sure, right.

MyMail's CPA refused to amend the tax returns in line with Selgas and Green's so-called “constitutional dollar” or “lawful dollar” theory because the CPA thought it was “not a sustainable position before the IRS.” Selgas and Green found another accountant to amend the forms. MyMail's amended tax form reported gross receipts for MyMail of $729,846 instead of $6.8 million; a distribution of $117,079 to Michelle Selgas instead of $1.091 million; and a distribution of $8,798 to Selgas instead of $82,000.

I bet that first CPA sleeps better now than the one who amended the returns. 

 

It adds up. It's Literacy & Numeracy Week! Offer not available to elected officials. 


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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.