Tax News & Views Penalty Waiver Extra Innings Roundup

September 2, 2022

Enjoy your Labor Day weekend - The roundup returns on Tuesday. 


IRS Urged to Extend Deadline for Late-Filing Penalty Relief - Lauren Loricchio, Tax Notes ($).

“The business cycle of the tax profession is filled with upcoming deadlines (September 15 deadline for pass-throughs, September 30 for trusts, and October 15 for individuals and corporations), and inserting a September 30 deadline into this mix creates an insurmountable burden for most practitioners and taxpayers,” [AICPA Tax Executive Committee Chair Jan] Lewis wrote.

Lewis also said that “given the complex facts often associated with international information reporting and that many affected taxpayers live abroad, the September 30 deadline is unrealistic and will fail to prompt a critical mass of impacted taxpayers to avail themselves of the benefits of the Notice.”

The IRS waits two years to waive pandemic penalties, and then subjects the waiver to a deadline in the middle of the extension rush for 2021. Amazing.


IRS Provides Relief for Certain 2019 and 2020 Tax Return Penalties - Parker Tax Por Library. "Notice 2022-36 provides that the IRS will not impose the penalties listed below with respect to the specified tax returns for tax years 2019 and 2020 that are filed on or before September 30, 2022. The penalties listed with respect to the four returns listed below for the 2019 and 2020 tax years will be automatically abated, refunded, or credited, as appropriate without any need for taxpayers to request this relief."

Automatic abatement of late filing penalties under Notice 2022-36 - Olivier Wagner, 1040Abroad. "Significant omissions from notice 2022-36 are the FBAR and form 8938."


Idaho Lawmakers Pass Gov.'s Tax Cut Proposal - Michael Nunes, Law360 Tax Authority ($):

H.B. 1, proposed by Republican Gov. Brad Little, passed the House of Representatives by a vote of 55 to 15 and the Senate by 34 to 1 during a special session. The bill, which would create a new 5.8% flat tax for individual taxpayers and corporations, now goes to the governor.

Under the bill, the first $2,500 of income for single filers and $5,000 of income for joint filers would be free from tax, adjusted for inflation.

The bill is scheduled to take effect on January 3, 2023. Why the odd date? Well...

Idaho to Consider Flat Income Tax in Special Session - Katherine Loughead, Tax Policy Blog. "While the proposed structural reforms are economically beneficial in their own right, the bill’s effective date—January 3, 2023—would ensure these reforms supersede and reverse the effects of a tax increase ballot measure that, if adopted, would take effect on New Year’s Day. Proposition 1, an economically harmful and highly flawed ballot measure set to appear on the statewide ballot in November, would raise the top marginal individual income tax rate to 10.925 percent."


Why California wants to give residents $1,000 not to have a car - Shannon Osaka, Washington Post:

The bill offers the tax credit to single-filers earning up to $40,000 and joint-filers making up to $60,000 who live without personal cars. And, because the tax credit is refundable, Golden State residents can claim the full amount even if they don’t have $1,000 in tax liability.


The new tax credit aims to make a small dent in California’s famous road congestion and to provide low-income households with extra funding to make use of public transportation.

In New California, all cars will be owned by the boyfriend or girlfriend.


Beneficial Ownership Rules Pending OMB Review - Matthew Guerry, Law360 Tax Authority ($). "The rules as proposed by the U.S. Department of the Treasury's financial crimes unit in December would require corporations and similar legal entities to report identifying information such as the full legal names, dates of birth and addresses of all of their beneficial owners. An individual is considered to be a beneficial owner under the rules if they have "substantial control" over the company or own or control at least 25% of it."

Win an Income-Tax Trifecta With Charitable Donations - Laura Saunders, Wall Street Journal. "Death is a certainty, but some taxes actually aren’t when you make charitable bequests using individual retirement account assets."

Related: Eide Bailly Wealth Transition Services


4 tax moves to make this September - Kay Bell, Don't Mess With Taxes. "2. Make your third 1040-ES payment. Many who've already filed their annual tax return still have other taxes to take care of this month. Yes, I'm talking about estimated taxes, which must be made for income that's not subject to payroll withholding. The third estimated tax payment for the 2022 tax year is due on Thursday, Sept. 15. You can make estimated tax payments electronically or, if you're old-school, use the third Form 1040-ES voucher and snail mail it. Your mailed payment is considered on time as long as the envelope bears a Sept. 15, 2022, U.S. Postal Service postmark. My earlier estimated taxes primer post has the scoop on this extra tax process, payment options, and the payment timetables."

How To Avoid State Tax On Student Debt Forgiveness - Peter Reilly, Forbes. "How exactly you will claim the insolvency exception on a state return when you are not claiming it on a federal return remains to be seen."

President announces student loan forgiveness: eligibility details, application, and tax implications - Wolters Kluwer Tax & Accounting. "Although the federal tax code generally treats forgiven debt as taxable income, the American Rescue Plan signed by President Biden in 2021 includes a measure that exempts canceled student debt from taxation through 2025. The result is that the recent student loan forgiveness announcement by the White House will not result in the forgiveness being subject to federal income tax."

Can the IRS Approve a Penalty Too Soon? - Keith Fogg, Procedurally Taxing. "In Sparta Pink Property, LLC v Commissioner, T.C. Memo 2022-88, the Tax Court examines an unusual argument that the IRS approved the penalty too soon thereby rendering the approval ineffective.  The issue arises in the context of a conservation easement case."

Men Headed to Prison After Targeting Senior Citizens In $20 Million Scam - Rebekah Barton, TaxBuzz." The conspirators used material misrepresentations to sell illiquid, highly speculative investments that were then used as vehicles for fraud."


Cutting Through the Misinformation About The IRS’s Plan To Spend $80 Billion - Howard Gleckman and Janet Holtzblatt, TaxVox. "Still unanswered: Will the new hires do the same work as the people they are replacing, or will the IRS create new positions more suitable for the 21st century? The answer has implications for the type of agency the IRS will be in the future."

Taking Stock of the Book Min Tax - Alex Parker, Things of Caesar ($):

We’ll have to see when the numbers come in, but it’s probably not wrong to call the CAMT a stock options tax, that does a few other things.


The real difference has to do with how the value of those stock options is calculated. When the stock option is granted, the company must estimate its future book value. But the company will be eligible for a deduction based on the actual value of the stock when it is claimed–and as these companies often see their stock prices skyrocket, that value can be much higher than the initial estimate.


It's always the '80s somewhereNathan Richman of Tax Notes reports: "The district court in 2021 ordered the IRS to refund Donald E. and Frances P. Baxter after they paid a 2002 tax assessment for their 1984 and 1985 taxes. The assessment stemmed from an IRS investigation that began in 1987 of the AMCOR partnerships, including three the Baxters participated in. The IRS had sought statute of limitation extensions from the partnerships’ tax matters partners." 

The district court found itself reversed by an appeals court in a case involving the "TEFRA" audit rules and an old tax shelter. The sheer length of the litigation here helps explain why Congress changed the rules governing partnership audits in 2015. The new "BBA rules" allow the IRS to assess partnerships directly for tax resulting from exam adjustments. These rules have been effective since 2018.


Ex-CFO Of Irish Pub Chain Charged With Tax Fraud - Eric Heisig, Law360 Tax Authority ($) (defendant name omitted):

Defendant, 56, ex-CFO of Cleveland-based CDG Acquisition LLC, faces two counts of wire fraud. CDG owned 15 restaurants under the Claddagh Irish Pubs name, and Defendant directed a company accountant to pay certain states less sales tax than owed between 2010 and 2018, according to the indictment.

The locations that Defendant caused to underpay the taxes spanned Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania and Wisconsin, according to the indictment. All eight states lost out on sales tax revenue as a result, the indictment alleged.

How was this allegedly done? From the Department of Justice Press Release:

The indictment states that based on the defendant’s instruction, the accountant would edit the company's sales and sales tax figures, file false tax returns and pay states the amount instructed by the defendant.

It is alleged that one common way to underpay sales tax was for the company to report and pay sales tax for four weeks during a five-week period, leading CDG to collect a week’s worth of sales taxes that were omitted from state sales tax filings.

If that's what happened, it didn't work very well in the end.


Play ball! Today is Spalding Baseball Day. "When we talk about baseball, Albert Goodwill Spalding is a person that we cannot ignore. His contributions to the game are beyond words and worthy of being celebrated. He played baseball throughout his youth and played his first competitive game with the Rockford Pioneers. It was a youth team when he joined in 1865. After seeing his impressive 26–2 victory over the Mercantiles, Rockford Forest Citys approached him. Spalding was only 15 years old at that time. He played for Rockford Forest City for five years."

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