Tax News & Views ERC and Humor Crime Roundup

By Joe Kristan
October 31, 2023

Key Takeaways

  • Hundreds of ERC fraud cases, $37B fraud identified... so far. 
  • Why employers may be shy about withdrawing ERC claims.
  • What the new House Speaker may mean for Tax Policy.
  • Tax Policy - looking ahead to the next few elections.
  • Easement fraud: tax enforcement lessons.
  • Wash Sales and year-end planning. 
  • Tax lessons from your pay stub.
  • Sales tax trick or treats.
  • Depreciation pitfalls.
  • Taxes and migration.
  • Tax Hell index.
  • Harsh realities for "basketball wife" reality show figure.
  • Beggars Night.

IRS Has Hundreds of Criminal ERC Cases Open - Nathan Richman, Tax Notes ($):

Some of CI’s ERC cases include seizure investigations, with many of the cases being relatively small at $1 million or less, Lee said October 26 at the UCLA Tax Controversy Institute, where he previewed some statistics that will be reported in CI’s 2023 annual report.

The data include $37 billion in fraud identified, 1.71 petabytes of digital data seized, and $271 million in seizures.

That leaves only $36.729 billion of the "identified" fraud to be recouped. 

It's still early in the ERC fraud hangover process, but it's worth putting that $37 billion in perspective:

  • $37 billion is just about half of what Congress originally thought the entire employee retention credit program would cost.
  • The program has now paid out around $230 billion, according to the Wall Street Journal
  • The fiscal year 2023 budget for the Department of Energy is $48.2 billion.
  • The fiscal year 2023 budget for the Department of Justice is $37.7 billion.
  • The fiscal year 2023 budget for the Department of Agriculture is $28.5 billion.
  • The fiscal year 2023 budget for the Department of the Interior is $17.5 billion.

The $230 billion paid out so far in ERC claims is about three times the aid to Ukraine since the latest Russian invasion. 

Related: IRS Puts Temporary Hold On New ERC Claims.'

Employers Might Not Rush To Withdraw Worker Credit Claims - David van den Berg, Law360 Tax Authority ($):

However, even employers that fell victim to scammers may not immediately question the advice they received. Furthermore, the requirements of the program may limit its utility for some employers.

Derek Adams, a former U.S. Department of Justice attorney now at the Potomac Law Group who represents clients under IRS audit regarding the employee retention credit, said most employers are under the impression that if a third party holding themselves out as an expert helped them with their claim it must be correct. Taxpayers generally think their claims for the credit are valid until a trusted auditor, accountant or lawyer tells them there's a problem, he said. Adams said because of that, he isn't expecting the program to spur widespread withdrawal requests.


The IRS said when announcing details on the program that it would treat withdrawn claims as though they hadn't been filed and no penalties or interest would be imposed in such cases. However, it said withdrawn claims wouldn't stop possible criminal investigations or prosecutions of businesses for willfully filing, conspiring to file or helping file fraudulent claims for the credit.

I suspect the IRS will have it's hands full with the obviously bad actors, and will leave the merely deluded alone for the most part.


IRS Bolsters Plan to Target High-Wealth Taxpayers, Official Says - Erin Slowey, Bloomberg. "The agency formed the Global High Wealth unit in 2009 as part of the Large Business and International Division to take a 'holistic approach' to high-wealth taxpayers. The 2022 tax-and-climate law gave the IRS tens of billions of dollars to crack down on taxpayers who have been dodging taxes, including those from large partnerships and corporations and high-wealth individuals."


The Tax Angle: New Speaker, IRS Budget, SALT - Stephen Cooper, Law36 Tax Authority ($). "Many House Republicans view the SALT deduction as a tax break for wealthier Americans living in coastal states such as New York, New Jersey and California that subsidizes state and local taxes that pay for unnecessary government spending. House Ways and Means Committee Chair Jason Smith, R-Mo., has promised New York Republicans on his committee that he would address the SALT deduction as part of tax legislation that passed his committee this summer."

What Will Tax Policy Be After the 2024, 2026, and 2028 Elections? - Martin Sullivan, Tax Notes ($):

Given that background, we make the simple — but not so terribly unrealistic — assumption that major tax legislation will be enacted only if one party controls both the House and Senate and the president is of the same party. If there is a divided government, there will be no major changes in the law. In today’s circumstances, that would mean no extension of the TCJA provisions scheduled to expire at the end of 2025. And it would mean that the United States would take no legislative action to align itself with the OECD’s guidelines for a pillar 2 minimum tax. 


As outlined above, a Democratic sweep in 2024 would lead us to expect several proposals similar to those embedded in the Biden administration’s green book explanation of its budget plans to become law, including a global minimum tax, raising the tax rate of corporate stock buybacks, expanding the net investment income tax, expanding the child tax credit and making it fully refundable, and expanding the earned income tax credit. To the extent there is any extension of TCJA individual tax relief, it would be limited to low- and moderate-income households.


CRFB chart of projected deficits


Easement $1.3B Tax Fraud Case Signals Big Enforcement Lessons - Starling Marshal and Carina Federico, Bloomberg. "In the syndicated conservation easement case, professionals such as lawyers, accountants, and appraisers were accused of wrongdoing and being part of the scheme. Their alleged participation emphasizes the need for taxpayers considering investment to obtain independent advice from a professional who has nothing to gain from participation in the structure."

What Is the Wash-Sale Rule? - Anna-Louise Jackson, Buy Side from WSJ. "The wash-sale rule requires that investors who want to claim a capital loss from selling an investment refrain from buying that same asset, or a 'substantially identical' one, within a 30-day period."  

What’s on your pay stub? - Michelle Singletary, Washington Post. "Tip: Don’t have too much of your wages withheld just so you can get a tax refund. Unless your tax situation changed during the year — maybe you had a baby or bought a home — you’re just letting Uncle Sam hold your money interest-free. Some people love a large refund, using it as a forced savings plan. But this strategy could be costing you money if, for example, those funds could otherwise be used to pay down credit card debt or invest."

Added Halloween scare: sales tax on treats - Kay Bell, Don't Mess With Taxes. "Of course, since taxes are part of the process, things can get stickier than that chocolate bar left in a hot car. Not all food products are taxed the same."


Are You Really Sure Your Electronic Form 1040 Was Filed? - Peter Reilly, Forbes. "The CPA had not followed through on the electronic filing. He claimed that Dr. Lee's return was too complicated for his software to handle, which frankly strikes me as kind of preposterous. I am not including his name in this piece, although you will find it if you follow the link to the opinion. As it happens it is a pretty common name and there are several CPAs who bear it. It's not as bad as having the same name as somebody who confessed to murdering his mother like I do, but it's bad enough."

IRS Extends Replacement Period under Section 1033 for Certain Livestock Sales - Parker Tax Pro Library. "The IRS is extending the time that farmers and ranchers in 49 states, the District of Columbia, Micronesia, the Marshall Islands, Puerto Rico, and the U.S. Virgin Islands have under Code Sec. 1033(e) to replace livestock sold on account of weather-related conditions."

Decoding depreciation: common pitfalls and how to fix them - National Association of Tax Professionals. "Missed depreciation is a lot more prevalent than some of us think."


The Fight for 15 (Percent) - Alex Parker, Things of Caesar. "Many critics claim the OECD's 15% global minimum tax rate is too low. Here's how they got to that figure, and what it means for the overall project."

The Short Form: Do People Really Move Because of Taxes? - Noah Peterson, Tax Policy Blog. "One clue: most studies have found that state and local taxes affect migration, and the effect seems to have become stronger over the years—probably because technology has made it easier for people and businesses to move."

Taxes aren't everything. They are certainly a thing. 


The 2023 Tax Hell Index - Dan Mitchell, International Liberty. "The world’s three worst tax hells are Belarus, Venezuela, and Argentina (they also held the top three spots in last years Index)."


Former reality show cast member and St. Louis DJ sentenced for multiple frauds - IRS (Defendant name omitted, emphasis added):

U.S. District Judge Henry E. Autrey on Tuesday sentenced a former "Basketball Wives" reality show cast member and St. Louis, Missouri area radio personality to four years in prison for committing $564,000 worth of frauds, including tax fraud, bank fraud, insurance fraud and three separate pandemic fraud schemes.

Defendant pleaded guilty in May to 15 felonies: five counts of misuse of a Social Security number, four counts of bank fraud, three counts of making false statements to the IRS and three counts of wire fraud.

In her plea agreement, Defendant admitted under-reporting her income on tax returns for 2017-2019 and falsely claiming a niece and nephew as dependents, thereby avoiding $29,366 in tax.

She fraudulently used Social Security numbers not assigned to her to open accounts with credit card companies and banks. When she failed to pay on the accounts, victim companies lost $28,537.

Defendant also used those Social Security numbers to open bank accounts and commit bank fraud. She deposited thousands of dollars' worth of checks taken from other peoples' accounts without their knowledge and then withdrew the money, causing another $23,850 in losses.

Defendant admitted submitting nine applications for Economic Injury Disaster Loans, intended to help struggling business during the pandemic. The applications contained false information about business income and payroll, as well as her criminal history. She used the $144,400 that resulted from two of the applications to fund her personal lifestyle, her plea agreement says.

After her indictment, Defendant on Jan. 3, 2022, applied for the California COVID-19 Rent Relief program, falsely claiming that she was a state resident with a total annual household income of $50,000 and that she couldn't pay her rent due to a "Reduction in hours of work" due to the pandemic, her plea agreement says. She received $27,801. She had stopped paying rent in July of 2021 and she failed to disclose that her $3,803 rent was more than reimbursed by a $4,000 payment from the network that produces "Basketball Wives LA." Her work hours and pay were not reduced by the pandemic.

Worse than any shot clock violation. 


Why do witches wear name tags? It's National Candy Corn Day! It's also Beggar's Night in the Des Moines area, a strange local custom where children go out the night before Halloween, instead of the real night, and where they are expected to come up with a joke before they get their treat. So get your jokes ready now!

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