Tax News & Views Shutdown Avoided Roundup

Shutdown avoided, but this is still a historically unproductive Congress – Harry Enten, CNN:

With just hours to spare, the House, defying its most conservative Republican members, passed a short-term funding measure with the support of a majority of Democrats and Republicans. The Senate quickly moved to pass it, and President Joe Biden signed the bill into law.

Funding was to run out on September 30th but now the Federal government is funded through November 17th.

By agreeing to this spending deal, the government did something it has rarely done this year: enact a bill or resolution. There had been 14 bills and resolutions that have become law since the start of this Congress in January, prior to this stopgap measure to keep the government open. If that strikes you as a small number, it should.

Since 1973, an average of about 70 bills or resolutions have been enacted through roughly this point (i.e., September 25) in a Congress in which the House and presidency are controlled by different parties.

IRS Avoids New Headache With Shutdown Averted - Naomi Jagoda, Bloomberg ($):

The biggest implication in the tax world from the last-minute congressional votes Saturday to avoid a federal shutdown is that about two-thirds of IRS employees will no longer be furloughed and taxpayers will be able to get assistance at least until Nov. 17.

Taxpayer assistance centers will remain open and phone calls will be answered—a particular relief given the Oct. 16 deadline to file tax returns for the millions who received an extension. The agency’s shutdown plan had it processing only error-free e-filed refunds.

With the shutdown in our review mirror and the IRS not hamstrung, some people hope that Congress will pass a tax bill by year-end that provides tax relief to businesses. However, the current funding agreement makes passing a tax bill less likely.

Why? Because lawmakers will be fighting over appropriation bills that the House and Senate are not expected to agree on.  Then, as November 17th creeps closer, they will shift focus and fight over a spending bill that extends funding beyond November 17th.

The best chance for passing a tax bill this year is if lawmakers use the next funding bill to extend spending into next year. If they approve another short-term funding bill, spending fights will dominate discussions on Capitol Hill for the remainder of the year – and possibly into next year.

Also, Congress does not have a good track record for passing spending bills:

Why Congress So Rarely Passes Government Funding Bills on Time - Tanya Lukyanova, Bloomberg ($):

Since 1977, when the current system for government budgeting went into effect, the US Congress has passed all of its spending bills by the fiscal year deadline only four times. During that period, the government has shut down due to the lack of funding — either fully or partially — at least 20 times.

There is also another issue that will take focus away from passing tax legislation:

Gaetz plans move to oust McCarthy, says GOP needs new leader – John Bennett, Roll Call:

Rep. Matt Gaetz said Sunday he intends to push a motion this week to oust Rep. Kevin McCarthy from the speakership amid a feud over government spending after the California Republican passed a stopgap spending measure with mostly Democratic votes.

“I do intend to file a motion to vacate against Speaker McCarthy this week. I think we need to rip off the Band-Aid. I think we need to move on with new leadership that can be trustworthy,” the Florida Republican told CNN. “By week’s end he will either not be speaker or will he will be Speaker serving at the pleasure of House Democrats.”

Speaker McCarthy's fate is definitely a "stay tuned" situation. House Democrats could save him, but it is not clear if they will. 

IRS Reminds Taxpayers That Extended Filing Deadline Is Approaching – Tax Notes ($):

The IRS has reminded (IR-2023-183) taxpayers who requested extensions to file their 2022 tax returns that they must file by October 16 to avoid a possible late filing penalty.

Disaster-area taxpayers in most of California and parts of Alabama and Georgia also have until October 16 to file various federal individual and business tax returns and make tax payments. Taxpayers with an IRS address of record in other areas covered by government disaster declarations and those returning from a combat zone may have additional time to file as well.

IRS Contractor Is Charged in Leak of Trump Tax Returns, Thousands of Wealthy Americans’ Records – Richard Rubin and Aruna Viswanatha, Wall Street Journal ($):

Federal prosecutors charged an Internal Revenue Service contractor with stealing the tax returns of former President Donald Trump and thousands of other wealthy Americans and leaking them to news organizations, apparently solving a two-year puzzle over a security breach that prompted outrage from lawmakers and administration officials.

Charles Littlejohn, 38, of Washington, D.C., was charged Friday with one count of unauthorized disclosure of tax information, and he faces up to five years in prison, according to a Justice Department news release.

I.R.S. Contractor Charged With Leaking Tax Returns – Glenn Thrush and Alan Rappeport, New York Times ($):

Prosecutors said that Mr. Littlejohn, 38, stole tax information “dating back more than 15 years,” the indictment said. He retrieved the returns between 2018 and 2020, when he was working for a company contracted by the I.R.S. He then provided the tax information to the news organizations, the indictment said.

“Both news organizations published numerous articles describing the tax information they obtained from the defendant,” the indictment added.

The news organizations that received the information were the New York Times and ProPublica, according to the article.

Make no mistake, these leaks were jaw-dropping to insiders:

UPDATED: IRS consultant charged in massive leak of taxpayer data – Brian Faler, Politico:

The announcement comes more than two years after ProPublica said it had obtained a massive trove of information about the taxes and incomes of wealthy people, many of them well known, going back some 15 years. It published a series of stories showing many of them paid little or nothing in taxes.

The leak astonished many IRS veterans, not just because of its sheer scale, but because tax filings are subject to elaborate safeguards and unauthorized disclosures are rare.

New IRS Pass-Through Unit Is No Quick Fix to Partnership Worries - Caleb Harshberger, Bloomberg ($):

The IRS’s new unit to tackle concerns around pass-through entities could take years to fully stand up, and will face down a complex and opaque slice of the tax code that many say needs reforming.

The agency announced the unit in September and said it will kick off next year as a part of the IRS’s Large Business & International Division with a mandate to pursue companies such as S Corps and partnerships that the agency says are being used to avoid taxes by “passing through” their income to partners.

It won’t be easy: Whole teams will have to be hired and trained in the intricacies of pass-through laws and how to audit partnerships and other entities.

IRS Expands Online Portal for Tax Pros Assisting Clients - Erin Slowey, Bloomberg ($):

Tax professionals will be able to access new services for their clients after the IRS announced Friday that it expanded its digital self-service portal.

Democrats’ Inflation Reduction Act set aside tens of billions of dollars to help the IRS modernize and catch up on needed upgrades after decades of underfunding. Part of that effort, as outlined in the IRS plan to use the funds, is revamping the agency’s technology.

The updates to the Tax Pro Account portal will allow tax professionals to view client information and manage their active client authorizations on file with the Centralized Authorization File, or CAF, database, according to the release.

The release is here.

IRS Has Rolled Out Identity Proofing for FOIA Requests – Lauren Loricchio, Tax Notes ($):

The IRS has quietly rolled out identity proofing for Freedom of Information Act requests submitted through its online portal, a development that some transparency advocates find concerning.

The agency’s FOIA public access portal now says it is using a “sign on system that requires identity verification.” According to the site, users with accounts set up before June 26, 2023, will have to register or sign in through ID.me, a third-party contractor that provides verification services for the IRS and other government agencies.

Tax-and-Climate Law Guidance Dominates IRS, Treasury Annual Plan - Erin Slowey, Bloomberg ($):

The Treasury Department and IRS in the coming year will focus on guidance for the Inflation Reduction Act and cryptocurrency rules, the agencies said in an annual list of regulatory priorities.

The Priority Guidance Plan details 237 projects that the agencies plan to prioritize from July 1,2023 through June 30, 2024. The plan doesn’t give a specific timeline on when the regulations will be released and many projects that were on last year’s plan were repeated.

The Priority Guidance is here.

FinCEN Issues More Compliance Help on Ownership-Disclosure Rules - Michael Rapoport, Bloomberg ($):

A Treasury Department unit issued more material Friday to help companies comply with pending new requirements to disclose more about who owns them.

Treasury’s Financial Crimes Enforcement Network, or FinCEN, added to a frequently asked questions list on its website about the new “beneficial ownership” disclosure requirements, which take effect Jan. 1. FinCEN had expanded its FAQ list and issued other compliance help earlier this month.

From the “Deep Discount” file:

IRS Slashes PTIN Fees by Two-Thirds – Mary Katherine Browne, Tax Notes ($):

The IRS has updated its regulations concerning the user fees for the application and renewal of preparer tax identification numbers, reducing the fee amount in response to litigation.

Issued September 29, interim final regulations (T.D. 9980) and proposed rulemaking (REG-106203-23) reduce the cost of PTIN application and renewal from $30.75 to $11.

You could spend the amount saved on a lunch - but only for one person given inflation. I recently bought lunch and was stunned that it cost over $24.00. When I received the bill I informed the waiter that I was only paying for a single lunch. The waiter gave me a funny look and asked for my method of payment. 

It’s National Name Your Car Day. Mine is Steve, but pronounced like it is in the music video by Flight of the Conchords.