Tax News & Views Budgets and Bear Hugs Roundup

Biden Threatens Veto Over IRS Budget Cuts, Clawbacks - Doug Sword, Tax Notes ($):

The veto threat published November 6 came hours before the House Rules Committee was scheduled to decide whether to allow votes on half a dozen IRS-related amendments to the spending bill. Those provisions include barring the agency from buying or storing weapons and ammunition, using artificial intelligence in tax enforcement, or adding to its employee count. Another amendment would reduce IRS Commissioner Daniel Werfel’s annual salary to $1.

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The veto threat noted that the clawback of IRA funds is not restricted to the FSGG bill and that IRS clawbacks in other House GOP-advanced spending bills brought the total to $67 billion. That would represent all of the new enforcement and operations support funds set aside in the IRA for the proposed modernization and strengthening of the agency.

IRS Funding Likely Safe With Dems Opposed To Further Cuts - Asha Glover and David van den Berg, Law360 Tax Authority ($):

House Republicans passed legislation to rescind $14.3 billion in IRS funding to pay for an aid package for Israel, but resistance in the Democratic-led Senate and public support for the agency's recent changes will likely insulate the agency from the latest attempt to cut its funding.

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The Senate's overwhelming rejection of an appropriations bill amendment offered by Sen. Rand Paul, R-Ky.,that would claw back $25 billion in IRS enforcement fundingindicates that there is significantly less appetite in the chamber to further rescind IRS funding, said Joe Hughes, a federal policy analyst at the Institute on Taxation and Economic Policy, a tax research organization.

IRS Official Spotlights Move to Audit More Wealthy Taxpayers - Michael Rapoport, Bloomberg ($):

Making sure that wealthy taxpayers are properly reporting and paying their taxes remains “a big focus” of the IRS, a senior IRS official reemphasized Monday.

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The IRS recently contacted about 1,600 wealthy taxpayers who collectively owe hundreds of millions of dollars. Demonstrating the agency has become more active in this area “has been very meaningful,” said Douglas O’Donnell, the IRS’s deputy commissioner for services and enforcement.

Related: IRS Collection Issues.

Thinking of Buying an Electric Car? The Tax Credits and Benefits to Know - Perry Ormont Blumberg, Wall Street Journal:

The maximum federal credit, if the vehicle meets all the requirements, is $7,500. There are limitations for the EV as well: The maximum cost of the car is set at $55,000 for sedans and $80,000 for trucks and SUVs. 

Starting in January, EV buyers can get up to $7,500 off the purchase right at the dealership instead of claiming it on their tax returns at the end of the year.

2023 Tax Reporting for Sale of Partnership Interest - Adam Sweet, Eide Bailly:

Traditionally, a partnership files IRS Form 8308 to report a partnership interest sale with an ordinary income component. The IRS released an updated Form 8308 for the 2023 tax year materially different from prior versions.

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Importantly, partnerships are required to furnish a copy of Form 8308 to each transferor and transferee partner by January 31 of the year following the year of the exchange. For example, if a partnership interest sale occurred in 2023 involving ordinary income recharacterization, Form 8308 must be furnished by January 31, 2024.

This January 31 due date puts pressure on affected partners to provide the necessary information to a partnership in a timely fashion (for instance, notifying the partnership of a sales transaction and providing the names and addresses of the transferor and transferee). Penalties can apply for a failure to timely furnish correct Forms 8308.

The IRS plan to let taxpayers digitally submit documents is ahead of schedule, Janet Yellen says - Fatima Hussein, AP via The Hill:

Under the initiative, most people will be able to submit everything but their tax returns digitally in 2024. As the IRS pilots its new electronic free file tax return system starting in 2024, the agency will be able to process everything, including tax returns, digitally by 2025.

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The processing change is expected to cut back on the $40 million per year that the agency spends storing more than 1 billion historical documents. The federal tax administrator receives more than 200 million paper tax returns, forms and pieces of mail and non-tax forms annually, according to the IRS.

IRS Releases Legal Memo Focused On ERC And Workplace Safety Guidelines - Kelly Phillips Erb, Forbes. "While noting that it was facts and circumstances dependent, the IRS suggested that the OSHA recommendations—like wearing a mask and gloves while performing their duties—would not likely impact an employer's ability to operate their business. The employer would still have to substantiate that the modifications resulted in a partial or complete shutdown."

IRS extends digital signature, certain email options - Kay Bell, Don't Mess With Taxes.  "'The agency extended indefinitely the option to use electronic or digital signatures on tax documents. The IRS says digital/e-signatures will be acceptable "until more robust technical solutions are deployed.'"

Social Security Announces 3.2 Percent Cost of Living Adjustment for 2024 - Parker Tax Pro Library. "The Social Security Administration announced that social security and supplemental security income (SSI) benefits for approximately 71 million Americans will increase 3.2 percent in 2024. The amount of earnings subject to social security tax will be $168,600 in 2024."

O Canada! What Might Its Digital Services Tax Mean For Us? - Renu Zaretsky, TaxVox. "Canada plans to impose a 3 percent digital services tax (DST) on Jan. 1. Americans might not notice the DST as we scroll through apps or click 'buy' online, but we would notice the trade war it might prompt."

Gasoline Excise Tax Outdated - What will come from recent House hearing on this? - Annette Nellen, 21xt Century Taxation. "A road usage fee could be charged, such as a vehicle miles traveled tax (VMT), that has been heavily studied in Oregon and California (and likely elsewhere as well). It is not difficult to track how many miles someone drives and there are ways it can be paid monthly or at least annually when the owner registers their car with their state (with the state sending the tax to the federal government)."

Tax Court Exposes Financial Engineering Of Conservation Easements - Peter Reilly, Forbes. quoting Tax Court Judge Gustafson: "A developer intending to build a facility would never have contemplated buying the Mill Road Tract for $6.7 million but would instead have bought one of the many other tracts available at much lower prices. As a prospective developer would do, we view the price of a comparable undeveloped lot in Henry County as the proper “substitute” by which to value to the Mill Road Tract. Mr. Kinney's valuation of $900,000 was based on such comparables, and we adopt his valuation."

The difference between the $900,000 charitable deduction allowed and the $6.7 million claimed sums up what the IRS doesn't like about syndicated conservation easements. 

Jeff Bezos Plans Miami Move for Family, Work…and It Might Help Tax-Wise, Too - Thomas Gryta and Laura Saunders, Wall Street Journal. "Bezos could lighten his state tax burden by moving to Florida. Washington state’s constitution has long been understood to bar an income tax, but in 2021 legislators added a 7% excise tax on net long-term capital gains above an exemption of $250,000."

Priming the debate over taxes and interstate migration - Bernie Becker, Politico. "Washington might be a pretty liberal state, but it historically has had a fairly regressive tax system — an income tax, for instance, was long viewed to have been banned under the state constitution. But what Washington does have is a new capital gains tax and a push from some Democrats for a wealth tax, neither of which are happening down in the Sunshine State."

Jeff Bezos’s Move Undercuts Proposed Washington State Wealth Tax - Jared Walczak, Tax Policy Blog.

Bezos sold about $15.7 billion worth of Amazon stock between 2020 and 2021, according to news reports. If we assume that Bezos—who, other than the symbolic purchase of one share last year, has not purchased any shares of Amazon in decades—had held onto these shares since the IPO, he saved nearly $1.1 billion in taxes by selling those shares before the new state capital gains tax went into effect. Whether or not it was a motivating factor, relocating to Florida ensures that future sales won’t be subject to Washington’s new capital gains tax, either.

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The state’s economists projected that the wealth tax would raise about $3.2 billion a year once implemented. This estimate included assumptions that some share of high-net-worth households would move to avoid the tax, but a Bezos move is going to be particularly hard for the state to stomach. Based on his current net worth, which is mostly in publicly reported ownership of Amazon shares, Bezos would have been on the hook for about $1.44 billion a year under the proposed wealth tax—a full 45 percent of the projected total.

Taxes aren't everything, but sometimes they are enough. 

Federal Jury Convicts Dual Resident Doctor of Tax Evasion - US Department of Justice (Defendant name omitted):

United States Attorney Ronald C. Gathe, Jr., announced the conviction of Defendant, age 49, of Baton Rouge, Louisiana, and Clive, Iowa, with tax evasion. Defendant was indicted by a federal grand jury on September 8, 2022.

After a seven-day trial before U.S. District Judge Brian A. Jackson, the jury unanimously convicted Defendant of one count of tax evasion. Defendant, a physician, owned and operated an urgent care clinic known as Stat Care Clinics, L.L.C. d/b/a Central Stat Care. As the evidence at trial demonstrated, for tax years 2007 through 2017, Defendant owed significant taxes totaling approximately $1.6 million, excluding interest and penalties. The IRS notified Defendant that she owed taxes multiple times and through various means.

Defendant undertook various steps to evade the payment of her outstanding tax liability, including preparing and filing with the IRS a false form underreporting income and inaccurately detailing her assets. Defendant also accumulated and concealed cash in a safe instead of depositing it in the bank. Finally, Defendant purchased millions of dollars of real estate and personal property in the names of nominees, including, but not limited to, a personal residence, a boat, an airplane, and thousands of acres of farmland and hunting land. The property purchased in the names of nominees totaled over $6.7 million.

Sometimes it's better to just pay the taxes. 

Vote. Then seek solace. It's Election Day in many places today. Fortunately, it's also National Hug a Bear Day.