September 7, 2022
TIGTA Offers Dismal Assessment of COVID Tax Relief Administration - Jonathan Curry, Tax Notes ($):
A pair of new reports from the Treasury Inspector General for Tax Administration examining different aspects of the IRS’s efforts to implement emergency COVID-19 relief tax provisions came to similarly bleak conclusions.
The reports, both released September 6, suggest that the IRS’s slowness in developing procedures for processing COVID-19 relief tax credits claimed on amended business returns held up much-needed pandemic relief, while its laxity in examining claims for net operating loss carryback claims resulted in excessive tax refunds being issued.
From the TIGTA report "Delays Continue to Result in Businesses Not Receiving Pandemic Relief Benefits:"
Continued processing delays have prevented businesses from receiving pandemic relief benefits. The IRS did not begin processing claims for qualified Sick and Family Leave Credits and the Employee Retention Credit for 12 months and claims for Social Security Tax Deferral for 16 months after the pandemic relief legislation was enacted. This was due to a lack of updated programming and procedural guidance. A lack of training, erroneously suspended claims, and a lack of prioritization of claims contributed to additional delays processing claims.
In other words, your ERC refund isn't the only one that is taking forever.
Idaho To Move To Flat Income Tax System - Michael Nunes, Law360 Tax Authority ($):
Republican Gov. Brad Little signed H.B. 1 shortly after the measure passed the House of Representatives by a vote of 55-15 and the Senate by 34-1 during a special session. The bill, which Little proposed, will create a new 5.8% flat tax for individual taxpayers and corporations.
In November, Idaho will hold a ballot initiative on the Quality Education Act, which would create a new tax bracket for individual incomes $250,000 and over with a marginal tax rate of 10.925% and would raise the corporate rate to 8%. If approved by voters, the ballot measure would be canceled out by H.B. 1, which takes effect Jan. 3, said Senate Minority Leader Michelle Stennett, D-Ketchum.
Idaho Governor Signs Tax Reform Bill - Emily Hollingsworth, Tax Notes ($):
Under H.B. 1, the state's individual income tax brackets will be replaced with a flat 5.8 percent tax rate on income over $2,500 for single filers and over $5,000 for joint filers and the corporate tax rate will be reduced from 6 percent to 5.8 percent, effective January 3, 2023...
According to an analysis of the bill by the Associated Taxpayers of Idaho, C corporations and joint filers will benefit most from the tax changes. For example, a C corporation with $15 million in taxable income could save $30,000. A married couple with $110,000 in income could receive a $600 rebate and $123 in ongoing income tax savings, while low-income married couples with only $8,000 in taxable income wouldn’t pay income taxes and would receive a rebate of $600 and could also receive tax credits such as the child tax credit and the grocery tax credit. Moderately low-income married couples with $75,000 in taxable income could receive a $600 rebate and $115 in ongoing income tax savings, while a married couple earning $50,000 would receive the same rebate and $66 in ongoing savings.
Sept. 15 is the deadline for third quarter estimated tax payments - IRS. "Taxpayers not subject to withholding, such as those who are self-employed, investors or retirees, may need to make quarterly estimated tax payments. Taxpayers with other income not subject to withholding, including interest, dividends, capital gains, alimony, cryptocurrency and rental income, also normally make estimated tax payments."
Setting up the fall - Bernie Becker, Politico. "Long story short: The chances for a year-end tax deal depend in large part on how much interest congressional leaders have in tying up loose ends before 2023."
Tax Pros: Don’t Sleep on Your Superfund Tax Responsibilities - Mary Katherine Browne, Tax Notes ($):
October 31 is the deadline for taxpayers to report their Superfund excise tax liabilities for the first time in 26 years, and tax professionals are urging taxpayers to stay on top of their liabilities by keeping contemporaneous files and keeping an eye on the list of taxable substances.
Notice 2022-15, 2022-18 IRB 1043, has provided taxpayers with a transitional grace period in which those owing Superfund chemical taxes won’t be subject to section 6656 penalties for failing to deposit. However, that period lasts for only the last two quarters of fiscal 2022 and the first quarter of fiscal 2023.
Related: Superfund Chemical Excise Tax Reinstated.
Germany To Go Forward With Minimum Tax On Its Own - Matt Thompson, Law360 Tax Authority ($):
The 15% U.S. tax enacted last month on financial statement income of companies with over $1 billion in profits is not the international minimum tax.
Offers to accelerate or increase student loan relief are scams - Kay Bell, Don't Mess With Taxes. "Crooks rely on our natural tendency to want help as quickly as possible. Scammers encourage their targets to act fast, saying they may miss qualifying for loan forgiveness or other assistance if they don't immediately sign up. Like before hanging up the phone or closing your email. Don't fall for it."
As Congress Passes on SALT, States Turn to Pass-Through Entities - Mike Shaikh, David Pope, and David Simon-Fajardo, Bloomberg. "Though the validity of these workarounds originally was questioned by some commentators, the IRS blessed them by releasing Notice 2020-75, which says that pass-through entities can claim entity-level deductions for state income taxes when PTETs are used to shift the tax burden from individuals to entities. Several states enacted PTETs prior to this notice, but since its publication, most states have adopted these laws."
Court Nixes IRS Attempt to Change Loan Payment into Sec. 707(c) Guaranteed Payment - Parker Tax Pro Library. "The Tax Court rejected the IRS's argument that the finance company and partnership were a joint venture and, as a result, the finance company had a 'single equity interest' in its dealings with the partnership that transformed the partnership's loan payments to the finance company into guaranteed payments made to a partner pursuant to Code Sec. 707(c)."
Taxes and the UK’s new Prime Minister - Daniel Bunn, Tax Policy Blog:
The previous Chancellor of the Exchequer, Rishi Sunak, had proposed increasing the UK corporate tax rate from 19 percent to 25 percent starting in April 2023. Additionally, he pushed through an increase to National Insurance Contributions (NICs), a tax that raises roughly 20 percent of all UK tax revenue. The 1.25 percentage point increase in NICs applies to employers, employees, and investment income.
In her campaign, Liz Truss promised to cancel the corporate tax hike and reverse the NICs hike. Canceling the corporate tax hike would reduce revenues by £17 billion each year and reversing the NICs hike would reduce revenues by £13 billion. Together, these represent 3.7 percent of total revenues collected during the 2021-22 fiscal year.
The Educator Expense Deduction: It May Be Time To Trade This Token Benefit - Renu Zaretsky, TaxVox. "Given the growing national teacher shortage and increasingly tough working conditions, policymakers need to trade in that token for something better. It’s too small, it’s inefficient, and teachers deserve more."
Post-Wayfair: Burden or Favor - Jéanne Rauch-Zender, Tax Notes. "To describe the post-Wayfair landscape as 'chaotic' would be an understatement. State revenue departments have treated the Wayfair decision as a license to treat most facets of e-commerce as a sufficient basis to justify extending their tax jurisdiction beyond their states’ geographic borders. The result has been an ever-expanding assortment of new tax obligations imposed on businesses whose only contact with a state is communicating with its residents via the internet."
Timelines in Tax History: Moralistic Tax Policy in the 1930s - Joseph Thorndike, Tax Notes. "In 1935 tax reform rose to the top of the New Deal agenda, when Roosevelt urged Congress to raise taxes on the rich, slowing the concentration of wealth and economic power. In making the case, he unleashed moralistic rhetoric on fairness and fiscal citizenship that reshaped American taxation for decades to come."
Not surprisingly, the fraud proceeds didn't appear on the defendant's 1040.
From 2014 to 2021, Defendant deceived more than 100 victims by lying to them that he would be investing their funds in short-term construction loans that would pay large return rates that ranged from 15% to 30% for a period of up to 90 days. As part of the scheme, Defendant showed actual and prospective victim-investors fabricated bank statements that purported to show the investments' growth.
In fact, Defendant never invested the victims' money and instead used it for his own personal expenses, including credit card payments, a trip to Las Vegas, and two automobiles – a Jeep and an Alfa Romeo.
Defendant targeted members of the Hispanic community, many of whom were of limited means, for his fraudulent scheme. One victim invested her life savings of $20,000 in Defendant's scheme.
Squash, squished. Today is National Acorn Squash Day - a day of mourning for your author, whose squash garden was obliterated by an August hailstorm.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.