Tax News & Views Revealing Reading Roundup

September 6, 2022

IRS Says It Exposed Some Confidential Taxpayer Data on Website - Richard Rubin, Wall Street Journal:

The data are from Form 990-T, which is often required for people with individual retirement accounts who earn certain types of business income within those retirement plans. That typically includes people whose IRAs are invested in master limited partnerships, real estate or other assets that generate income, not those whose IRAs are solely invested in securities.

The disclosures included names, contact information and financial information about income within those IRAs. It didn’t include Social Security numbers, full individual income information or other data that could affect a taxpayer’s credit, the Treasury Department determined, according to a letter that the administration is sending to key members of Congress on Friday.

Taxpayers sometimes buy publicly-traded partnerships in IRAs in the belief that they putting them there will avoid cluttering up their 1040s, as the K-1s add time and expense to 1040 preparation. Unfortunately, buying them in an IRA can require the IRA to file its own tax return, the 990-T, to pay tax the Unrelated Business Income Tax. The UBIT is basically the corporate income tax applied to income of non-profit entities. 

Related: Final Regulations Issued for Unrelated Business Income Activities

IRS exposed about 120K people's information online - Michael Cohn, Accounting Today:

The Internal Revenue Service mistakenly posted information from approximately 120,000 individuals on its website before discovering the error on Aug. 26 and taking it down.


"The IRS recently discovered that some machine-readable (XML) Form 990-T data made available for bulk download section on the Tax Exempt Organization Search (TEOS) should not have been made public," the IRS said in a statement Friday. "This section is primarily used by those with the ability to use machine-readable data; other more widely used sections of TEOS are unaffected."


IRS Inadvertently Disclosed Taxpayer Data From Exempt Org Forms - Fred Stokeld, Tax Notes ($):

Pointing to questions surrounding how nonprofit news organization ProPublica obtained the private tax documents of thousands of the highest-net-worth individuals in the country, NTUF said it has long been calling on Congress to tighten privacy protections at the IRS. “Clearly the IRS has come off a Disastrous Filing Season and maybe the 87,000 new personnel would be better used for customer service and data protection than enforcement," the group said, referring to the additional hiring the IRS is expected to do thanks to the $80 billion funding infusion it will be getting under the Inflation Reduction Act (P.L. 117-169).

"NTUF" is the National Taxpayers Union Foundation. 


Midterm Elections to Decide Fate of Biden’s Tax Agenda - Richard Rubin, Wall Street Journal:

The Biden plan’s fate rests on this fall’s midterm elections. A Republican victory in either the House or Senate would likely create a stalemate on major tax policy, with the GOP’s anti-tax-increase stance clashing with Mr. Biden’s proposals. Likewise, given Mr. Biden’s veto power, Republicans would struggle to cut taxes, claw back increased Internal Revenue Service funding or reverse the handful of corporate tax increases that Congress just passed, analysts say.


Democrats have also been unable to implement the U.S. piece of the 15% global minimum tax deal that Treasury Secretary Janet Yellen negotiated. The other section of that deal—giving more taxing power to countries with large consumer markets—would require congressional approval, and Republicans are unlikely to support such a move.

Reimagining Treasury’s Agenda After Budget Reconciliation - Mindy Herzfeld, Tax Notes ($). "There are several reasons to believe Treasury might be aggressive in its efforts to advance the administration’s progressive goals through regulatory or other means (the Obama administration’s hard-line rules to prevent U.S. companies from inverting overseas is one example of that approach). Statements by senior Treasury officials on adopting multilateral tax treaties by simple majority vote show the administration is open to the creative expansion of administrative power in furtherance of its agenda."


Congress Eyes IRS Budget, Extenders Ahead Of Midterms - Stephen Cooper, Law360 Tax Authority:

Congress returns to Washington on Tuesday facing a busy tax agenda that includes work on passing a budget for funding the IRS and solidifying plans for a year-end bill to renew a group of expiring tax provisions for businesses and individuals.

The short list of measures awaiting congressional action this fall includes the 12 annual appropriations bills that make up the fiscal 2023 federal budget, which must be passed by Congress and signed into law by the president by the end of September. Congress could delay the budget agreement, which includes annual funding for the Internal Revenue Service and the U.S. Department of the Treasury, and instead send several continuing resolutions to the White House until passage of an omnibus budget in December.


California Lawmakers Pass Union Dues Tax Credit, Other Bills at End of Session - Paul Jones, Tax Notes ($):

A.B. 158, which Gov. Gavin Newsom (D) is expected to sign, would enact an element of the fiscal 2023 budget package that Newsom and the Democrat-controlled State Legislature approved this summer. It would allow members of qualifying labor unions to claim a refundable tax credit for some of the dues they pay, instead of the state’s existing deduction.

According to a legislative staff report on the bill, the credit would be implemented beginning in 2024, and it would be the greater of the dues a union member paid multiplied by an adjustment factor or a capped amount of a union member's dues, with the maximum dollar amount computed annually. 


EV tax credit may be out of reach for most consumers - David Jordan, Roll Call. "The tax credits may ultimately benefit few consumers in the short term while the industry pushes to increase domestic manufacturing. The Alliance for Automotive Innovation, an industry group whose members include Ford, General Motors, Toyota and other large automakers, unsuccessfully called for a change to the law’s tax credit provision prior to passage."

AICPA Maintains Focus on Schedules K-2, K-3 Compliance - Tax Notes. "The American Institute of CPAs has identified issues related to the implementation of partnership schedules K-2 and K-3 that it believes require immediate clarification to support taxpayer compliance, recommending broader exceptions, allowing for a consolidated Form 8082 disclosure filing, and simplifying foreign tax credit information reporting at the partnership level."

These are new forms for 2021 relating to international tax issues. 


Hedge Fund Protests IRS Position on Limited Partner Exception - Kristen Parillo, Tax Notes ($):

The two petitions — one covers tax year 2016 and the other tax year 2017 — address an issue that has vexed the tax community for decades. When Congress enacted the Self-Employment Contributions Act (SECA) in 1950, distributive shares of partnership income or loss allocated to partners, whether general or limited, were subject to self-employment tax.

But in 1977 Congress created a carveout for limited partners. Under section 1402(a)(13), limited partners are exempt from paying self-employment tax on their distributive shares of partnership income or loss. Guaranteed payments they receive for services they provide to the partnership are still subject to self-employment tax.


'Tax' typo in $2 taxi fare dispute leads to 2 nights in jail - Kay Bell, Don't Mess With Taxes. "Instead of tax evasion, for which a conviction could carry a six-figure fine and up to 2.5 years in jail, McCoubrey was charged with taxi fare evasion, a minor civil offense typically settled by paying a fine between $10 and $250."

Don't mess with cab drivers.

AICPA Issues Proposed Revisions to Statements on Standards for Tax Services - Ed Zollars, Current Federal Tax Developments. "The task force believed it was important to implement a standard which ensures members adopt reasonable safeguards to protect taxpayer data, both in electronic format and otherwise."
IRS Offers a Narrow Break to US Participants of Foreign Pensions - Christopher Callahan, Bloomberg. "For example, foreign pensions treated as grantor trusts—which is the most common reporting position—must be reported annually by the US plan participant via Forms 3520 and 3520-A. Failure to timely file these forms could result in penalties as low as $10,000 or as high as 5% of the pension value and 35% of the pension contribution or distribution amount."
Third Circuit Affirms That Executor Can Be Held Liable for Estate Tax Deficiency - Parker Tax Pro Library. "The Third Circuit affirmed the Tax Court and held that the IRS was entitled to collect an estate tax liability by means other than an offer of compromise in a situation where the estate tax due had been miscalculated and the error was not discovered until after much of the estate's assets had been distributed, although $640,000 was distributed shorting after the estate's executor receive the notice of deficiency."

Inflation and Europe’s Personal Income Taxes - Daniel Bunn, Tax Policy Blog. "Only 11 out of 27 European OECD countries automatically adjust income tax brackets for inflation every year. Germany adjusts its income tax brackets every two years in response to an inflation report, but it also has the flexibility to adjust rates more regularly (as it has done in recent years). For countries with flat taxes (e.g., Czech Republic, Estonia, and Hungary), this is less problematic: there are no higher brackets into which rates can creep."

What Should I Do if I Missed the FBAR Filing Deadline? - Matthew Roberts, Freeman Law. "Taxpayers who fail to file a timely and proper FBAR can be held liable for significant civil penalties.  However, there are options to regain compliance, provided the taxpayer meets certain eligibility requirements and acts before the IRS discovers the non-filing."

Related: Eide Bailly Offshore Voluntary Disclosure.


Well, which is it? Today is both Fight Procrastination Day and National Read a Book Day. I'll work on my to-do list when I'm done with this chapter. 

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