Tax News & Views Tax Season Arriving Roundup

What You Need to Know About Your 2023 Personal Income Taxes – Jeff Stimpson, Investopedia:

KEY TAKEAWAYS

The deadline for filing your 2023 tax return is April 15, 2024.

The standard deduction for married filing jointly taxpayers is $27,700 for the 2023 tax year. It's $13,850 for single filers and those who are married but file separate returns.

There are still seven marginal tax rates with higher income bracket limits in 2023 to account for inflation.

Estates of people who died during 2023 have a basic exemption amount of $12.92 million, up from $12.06 million in the previous year.

Need help?

Strategic tax planning can create fewer headaches and generate more savings – Eide Bailly:

Your individual and business net incomes are directly impacted by how you manage and plan for tax savings. Understanding how your revenue, costs, and asset investments can impact your tax liability is important to maximizing your after-tax return. As your business grows across state or international borders, tax reporting issues demand more of your attention.

Taking advantage of specialized knowledge and experience to help answer your tax questions can mean the difference between merely finding an answer and finding the solution that works best for you. 

Speaking of your hard earned money going to the Federal government::

Two parties, two wildly different spending solutions, both implausible – George Will, Washington Post (Opinion): This piece is about the Federal government raising revenue.

Republicans propose cutting taxes and regulations enough to ignite economic growth so rapid and constant that a gusher of revenue will restore fiscal health. This approach is marginally less implausible than the Democrats’ proposal, because one can at least postulate a sufficient growth rate — say, 5 percent, forever…

The Democrats’ proposal is even less realistic: “Tax the rich” until they pay their “fair share.” The Republican approach ignores political and economic probabilities. The Democratic approach ignores arithmetic.

Here is why taxing the rich isn’t a good plan:

The Limits of Taxing the Rich – Brian Riedl, Manhattan Institute:

Budget deficits have risen to nearly 6% of GDP and are projected to rise to 10% of GDP over three decades. If Congress continues to enact additional tax cuts and spending expansions, these deficits will grow even larger. To close these baseline deficits and finance additional expansions, most progressives reject most spending cuts as well as middle-class tax increases. Instead, just “tax the rich” has become an easy and popular answer. However, while there is surely room to raise some revenue from corporations and wealthy families, the plausible revenue estimates from these proposals fall far short of closing these budget gaps.

In other words, the rich ain’t rich enough for the Federal government to tax its way out of its financial hole.

However, the Federal government could tax more, just differently:

Addressing the Long-Term Fiscal Imbalance with a Value-Added Tax – Alan Viard, American Enterprise Institute (congressional testimony). “The United States faces a large long-term fiscal imbalance that will burden future generations and that threatens long-term economic growth. A value-added tax (VAT) is an essential component of a well-designed response to this challenge.”

For the past few decades there has been talk of creating a U.S. VAT with little action.

Capitol Hill Recap: Can You Hear Me Now? – Jay Heflin, Eide Bailly:

The House Ways and Means Subcommittee held a hearing on prosperity. It was chiefly focused on renewing tax provisions in the 2017 tax reform bill that will expire in 2025… Another focus of the hearing was creating of a new tax system, like a Value Added Tax or a consumption tax. 

The quest to add another tax element to the Federal government has been around for years, if not decades. The everlasting argument is that the current tax system is confusing, downright unworkable, and will not raise the revenue needed to run the country.

That being said, for the past twenty years (or so) the political environment has not been right for Congress to create another tax system.

The political environment still isn’t right. In fact, it's gotten wronger. 

So-called “sin taxes” are also an option:

WHO calls on countries to increase taxes on alcohol and sugary sweetened beverages – WHO. “The World Health Organization (WHO) is releasing today new data that show a low global rate of taxes being applied to unhealthy products such as alcohol and sugary sweetened beverages (SSBs). The findings highlight that the majority of countries are not using taxes to incentivize healthier behaviours. To help support countries WHO is also releasing a technical manual on alcohol tax policy and administration.”

If you think Congress is going to help you on the tax front this year, think again:

Congress gets good at being bad - Jake Sherman, Andrew Desiderio and John Bresnahan, Punchbowl News ($):

There’s one week left until the House and Senate are scheduled to recess for the year, and the list of legislative items left undone, half done or in limbo is unusually long — and incredibly consequential…

There are huge issues at stake: Ukraine, Israel, Taiwan, border security, government funding, FISA, FAA. It’s just that party leaders and the White House can’t seem to agree on anything, so little gets done.

Notice that passing a year-end tax bill does not even make the list for legislative priorities that will likely go undone this year.

This week’s Recap:

Will congressional leaders hear these calls and pass a year-end tax bill? Senate Republican Whip John Thune (R-SD) suggested this week that leadership has yet to hear them.

In an interview with Punchbowl News, Thune was asked about the prospects for passing a year-end tax package. The Senator kind of shook his head and shrugged his shoulders before offering a grim outlook for advancing such a bill.

“There is some talk around it. House, the Ways and Means Committee is looking at it and there are discussions in the Senate,” Thune said.

Lawmakers Talk Out Tax Package Parameters - Naomi Jagoda, Bloomberg ($):

Lawmakers say discussions are ongoing about the framework of a potential bipartisan tax package pairing a trio of business tax breaks with an expanded child tax credit, though details on a final pact remain elusive.

With the most likely vehicles that lawmakers could attach any package to slipping into next year—the current funding extensions that begin to expire in-mid January—the two-year extenders saga still has a ways to go before it reaches any conclusion.

That being said, never say never. Congress has a knack for surprising folks by passing legislation when it is least expected. And some lawmakers are giving it the ole’ college try to pass a tax bill before heading home.

Republican Taxwriters Push for Expired TCJA Tax Provision Work – Cady Stanton, Tax Notes ($). “The window may be closing on tax package opportunities for the year, but House Ways and Means Republicans are still trying to push their leadership to act on a legislative fix for expired business tax provisions... The door has nearly closed on an end-of-year tax package, with no clear vehicles to attach tax legislation to by the end of December." 

BTW, 2025 is expected to be a huge year for tax legislation:

Beyond the expired provisions, the taxwriters also told [Speaker] Johnson they look forward “to fully making the Tax Cuts and Jobs Act permanent for families and small businesses in 2025.”

Ever wonder how much revenue is raised by certain tax measures? Merry Christmas:

Estimates Of Federal Tax Expenditures For Fiscal Years 2023-2027 – Joint Committee on Taxation. “The Joint Committee staff has made its estimates based on the provisions in Federal tax law enacted through August 31, 2023. “

Landmark Pension Access Corrections Introduced as 2024 Nears - Austin Ramsey, Bloomberg ($):

New, bipartisan draft legislation in Congress would correct a landmark workplace retirement access bill signed into law late last year to ensure catch-up contributions continue in 2024 without a hitch and balance contribution limits.

Several key retirement plan jurisdiction committees in the House and Senate issued identical discussion drafts Wednesday that would amend many key SECURE 2.0 Act (Pub. L. No. 117-328) provisions before they take effect next year.

IRS Timing Examined by Ninth Circuit in Offer-in-Compromise Case - Jeffery Leon, Bloomberg ($). “A US appeals court, hearing arguments Thursday over whether a taxpayer’s offer to reduce a $50 million tax liability had properly been denied by the IRS, found itself focused on the agency’s timing of the denial and who had authority to make the decision.”

Appeals Court Urged to Affirm Ruling Limiting IRS Penalty Power - John Woolley, Bloomberg ($):

The IRS lacks authority to assess a penalty for failing to report ownership interest in foreign corporations because the tax code doesn’t permit it, a taxpayer told an appeals court Thursday.

The failure-to-report penalty under IRC Section 6038 may only be recovered through a civil action, not through the IRS’s assessment authority, because Congress never specified the mode of recovery or enforcement, the taxpayer’s brief said. The IRS appealed to the US Court of Appeals for the D.C. Circuit after losing in US Tax Court, where it argued in favor of its authority to assess.

Background:

Alon Farhy was required under IRC Section 6038(a) to report his ownership interest in two foreign corporations, but willfully failed to file the relevant Forms 5471 for each between 2003 and 2010, his brief said. In 2018, the IRS assessed $60,000 in penalties imposed by Section 6038(b)(1) and (2) against Farhy for each year at issue, and sought the next year to collect the penalties administratively with a proposed levy on his property. 

Best. Headline. Ever:

Your Next Fortune Cookie Might Contain Tax Advice From the IRS – Erin Slowey, Bloomberg ($). “The IRS is finding new ways to reach taxpayers beyond the typical means of communication—including through fortune cookies. ‘Now when people go into a Chinese restaurant, and they open up their fortune cookie, they not only can get a fortune, but they get some tax advice as well,’ Derek Ganter, director of stakeholder liaison at the Internal Revenue Service, said Thursday.

(I can't help but wonder if this idea was the brainchild of the much-disputed, often-maligned $80 billion that is being paid to the tax agency in chunks.)

Hunter Biden faces new criminal charges from special counsel investigating him on taxes – Susan Ferrechio, Washington Times:

Hunter Biden was indicted Thursday on nine counts of failing to pay taxes and filing false tax returns as part of an ongoing investigation by special counsel David Weiss.

The president’s son, 53, failed to pay hundreds of thousands of dollars in taxes, according to a criminal indictment filed in the U.S. District Court for the Central District of California, and knowingly concealed income on his tax returns.

Taxable Estates Bottomed Out in 2019, ITEP Finds – Jonathan Curry, Tax Notes ($). “Just eight out of every 10,000 taxpayers were subject to the estate tax in 2019, the most recent year for which the IRS has released data. That’s a historic low — with the exception of 2010, when it was briefly repealed — for a tax regime that has become steadily more irrelevant over the past two decades, according to a December 7 report from the Institute on Taxation and Economic Policy.”

The report is here. 

US Trade Tensions With Canada Spark Defense Of DSTs – Natalie Olivo, Law360 Tax Authority ($):

The U.S. government's threats of retaliatory trade measures in response to Canada's proposed digital services tax have drawn criticism from specialists, who say certain DSTs aren't inherently discriminatory and are a relatively feasible way for countries to tax revenue generated online.

A bipartisan group of U.S. lawmakers is claiming that Canada's measure discriminates against U.S. companies, but that's not the case, according to Wei Cui, a professor at University of British Columbia's Peter A. Allard School of Law. Unlike other digital measures, such as those in France and the U.K., Canada's levy has a broad scope that could apply to domestic businesses, he said.

From the “First World Problems” file:

What Tax-Loss Harvesting Is and How It Can Boost Returns – Wayne Duggan, U.S. News and World Report:

Losing money on stocks, bonds or other investments is never fun, but savvy investors can at least enjoy a silver lining to their bad investments when tax season rolls around.

Tax-loss harvesting is a technique that involves using capital losses to offset capital gains or even ordinary income to reduce your overall tax bill. Traders can incorporate tax-loss harvesting into their investing strategy before the end of a calendar year by selling underperforming stocks and locking in losses. However, investors should first understand how tax-loss harvesting works and what some of the pitfalls can be if you're not careful.

Happy National Crossword Solvers Day! Interesting tidbit: “Solving crossword puzzles is a favorite pastime for people across the globe. In fact, it is so popular, people who solve or write crossword puzzles have their own name—cruciverbalists,” according to National Day Calendar.