Tax News & Views Ownership Disclosure Fruitcake Roundup

By Joe Kristan
December 27, 2023

Key Takeaways

  • Corporate Transparency Act owner disclosure rules take effect January 1.
  • Millions affected "have no idea."
  • NY enacts disclosure rules, but without proposed public database.
  • How "well intentioned" employee retention credit went haywire. 
  • Businesses urged to repay bad ERC refunds under forgiveness program.
  • 2024 IRS digitization could be "dream come true."
  • IRS falls short of 2023 scanning goals. 
  • Treasury drops "strict" hydrogen credit rules.
  • W-4s and take home pay.
  • Smart ways to make year-end charitable donations.
  • 2024 clean commercial vehicle safe harbors.
  • Big time college sports "one massive duck." 
  • National Fruitcake Day.

Companies Scramble to Get Ready As New Owner-Info Rules Draw Near - Michael Rapoport, Bloomberg ($):

Starting Jan. 1, companies are required to report their “beneficial ownership” to the Treasury Department—the identities and other information about the people who control the company. The aim is to stop money laundering and illicit financing by anonymous shell companies, and thus help stop the financing of terrorism, drug trafficking, and other global crime.

But as the start date nears, business groups say many of the estimated 32 million-plus companies required to disclose the information still have no idea, despite stepped-up outreach efforts by the government. And even though awareness is growing, many of those who are aware are nowhere near ready to comply, the groups and industry observers say.

Related: Updates to the Corporate Transparency Act for 2024 and Beyond.

BOI Reporting is Coming Soon - Thomas Gorczynski, Tom Talks Taxes. "It is important to note that the business's federal tax classification is irrelevant to determining if it is a reporting company. For example, a business activity conducted within a single-member LLC reported as a sole proprietorship on the owner’s tax return is a reporting company, even though the LLC is disregarded for federal tax purposes."

Public Database Stripped From New York’s LLC Transparency - Amy Hamilton, Tax Notes ($):

New York Gov. Kathy Hochul (D) has signed an amended version of the LLC Transparency Act that strikes those provisions that would have created the nation’s first public database of beneficial ownership information.

Based on the federal Corporate Transparency Act (CTA), the New York measure (A. 3484A/S. 995B) — signed December 23, with the State Legislature to approve the change through a chapter amendment — will require some limited liability companies formed or registered to do business in New York to identify their true owners to the secretary of state. The law takes effect 365 days after enactment.


How a ‘Well-Intentioned’ Tax Credit Became a Colossal Mess - Richard Rubin, Wall Street Journal ($):

Stephanie Murphy needed an idea. Fast.

It was early 2020, and the Democratic congresswoman saw the coronavirus pandemic posing a catastrophic economic threat to her Orlando, Fla.-area district. By mid-March, the Disney and Universal resorts closed. Murphy and her staff hunted for ways to help workers and businesses and prevent mass unemployment in the tourism industry. They latched onto a policy implemented in disaster zones after 2005’s Hurricane Katrina.

The result: The employee-retention tax credit, or ERC, a new nationwide incentive for businesses and nonprofits to keep workers on payrolls.

Legislate in haste, repent at leisure. And now the repentance is in full swing, with the program costing multiples of the $80 billion or so initially projected. It provides great background about how Congress pushed the IRS to shovel cash out as fast as possible, and how the IRS tried to oblige, much to the delight of fraudsters and promoters.

My favorite line is a lobbyist being quoted  as saying "I don't know if anyone could have predicted the marketers pushing, the celebeties pushing, all that other stuff." I think any group of tax pros might have predicted much of that over drinks, if that had been allowed at the time. 


IRS Urges Businesses To Come Clean With New ERC Voluntary Disclosure Program - Kelly Phillips Erb, Forbes. "The program will run through March 22, 2024. It’s the latest step in a campaign to stamp out bad actors and offer a fresh start to victims of aggressive ERC promotion schemes. To promote those ends, it offers substantial relief to eligible small businesses, while requiring them to provide information about the marketers and advisors who led them astray on the ERC."


A Look Ahead: Successful IRS Digitalization in 2024 Could Be ‘Dream Come True' - Jonathan Curry, Tax Notes ($):

Treasury has set ambitious goals for the IRS to meet ahead of the 2024 filing season, focusing on improving the taxpayer experience. Chief among those goals is the paperless processing initiative, a two-year effort announced in August to make it possible for the IRS to finally leave behind the sluggish, error-prone, paper-based processes that have made a farce of the agency’s archaic systems.


Ahead of the 2024 filing season, the IRS has a new set of goals driving it in its paperless processing initiative — and it’s already met one of them. Taxpayers are now able to electronically submit all correspondence and nontax forms, which the IRS says would, by itself, mean that 94 percent of taxpayers won’t have to send mail to the agency. The initiative also set targets of handling 20 more tax forms by e-file and making 20 of the most frequently used nontax forms available in digital, mobile-friendly formats.

IRS Will Fall Short of Return-Scanning Goal, TIGTA Says - Alexander Rifaat, Tax Notes ($):

The IRS won’t achieve its goal of scanning millions of taxpayers’ returns by the end of 2023, according to the Treasury Inspector General for Tax Administration.

In a report released December 26, TIGTA said the IRS had scanned approximately 35,000 returns by June and that, even counting returns filed after the end of the filing season, it won’t make the ambitious goal set by Treasury Secretary Janet Yellen of automating the scanning of millions of individual returns in 2023.


Biden Pushes Strict Climate-Subsidy Rules Despite Energy Producers’ Warnings - Amrith Ramkumar and Richard Rubin, Wall Street Journal. "The Biden administration on Friday proposed tough new rules for a valuable climate subsidy, siding with environmental groups despite warnings from some of the nation’s biggest energy companies that strict limits could stifle a critical industry."

Top Federal Tax Cases Of 2023 - David van den Berg, Law360 Tax Authority ($). "The U.S. Tax Court ruled in April that penalties assessed under Section 6038, which governs information reporting regarding some foreign corporations and partnerships, were not subject to deficiency procedures. The court found the IRS lacked the authority to assess hundreds of thousands of dollars in penalties against Alon Farhy, who failed to file Forms 5471 in each tax year from 2003 to 2010."

IRS is waiving $1B in penalties. Beware of tax debt relief companies. - Michelle Singletary, Washington Post. "With many pandemic issues behind it and staffing up thanks to the Inflation Reduction Act’s boost to the agency’s budget, the IRS announced it will resume mailing collection notices for the 2021 and 2022 tax years in January."

How to Use a W-4 to Boost Your Take-Home Pay - E Napoletano, Buy Side from WSJ. "While life events warrant W-4 updates, experts say there are also strategic reasons to revisit your form and tax withholdings."


6 tax-smart ways to make year-end charitable contributions - Kay Bell, Don't Mess With Taxes. "Give appreciated stock. If you're finally reassessing your portfolio with an eye on making some investment changes, you also might want to look into a charitable way to rebalance your holdings. Donating appreciated assets that you've had for a while can benefit you and your favorite charity."

Relief Granted from Certain Failure-to-Pay Penalties During Period IRS Suspended Sending Out Automated Reminder Notices - Ed Zollars, Current Federal Tax Developments. "The Notice further indicates that the agency will resume issuing the previously suspended automated reminder notices."


IRS Extends Safe Harbor for Incremental Cost of Commercial Clean Vehicles to 2024 - Parker Tax Pro Library. "For purposes of Code Sec. 38, Code Sec. 45W(a) allows a taxpayer a Section 45W credit for the purchase of each qualified commercial clean vehicle, as defined in Code Sec. 45W(c), placed in service by the taxpayer during the tax year. Under Code Sec. 45W(b)(1), the amount of the Section 45W credit for each qualified commercial clean vehicle is the lesser of (1) 30 percent of the taxpayer's basis in the vehicle in the case of a vehicle not powered by a gasoline or diesel internal combustion engine (15 percent in any other case), or (2) the incremental cost of the vehicle. Under Code Sec. 45W(b)(4), the maximum credit allowed is $7,500 in the case of a qualified commercial clean vehicle that has a gross vehicle weight rating of less than 14,000 pounds, and $40,000 for all other vehicles."

IRS Extends Tennessee Storm & Tornado Victim Taxes To June 17, 2024 - Robert Wood, Forbes. "The IRS has announced tax relief for individuals and businesses in parts of Tennessee affected by severe storms and tornadoes that began on Dec. 9. These taxpayers now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments. The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Davidson, Dickson, Montgomery and Sumner counties. Individuals and households that reside or have a business in these counties qualify for tax relief."


The Annual PT Tradition: An Update on the Center for Taxpayer Rights’ Activities — Part 1 - Nina Olson, Procedurally Taxing via Tax Notes. "It’s year-end, so it’s time for the annual Procedurally Taxing post in which I review all the activity of the Center for Taxpayer Rights (CTR) and ask for PT/Tax Notes readers’ support for our projects. Now, we aren’t just asking for donations, although they do help. Readers of this series are the most sophisticated practitioners in the field of tax, and you know that procedural justice for all taxpayers, regardless of income or status, is a key component of a trusted, effective, and efficient tax system. So our annual appeal this year is for volunteers, as well as donations."

170+ Tax Changes in 117th Congress - Too Many or Not Enough? - Annette Nellen, 21st Century Taxation. "How can anyone keep up with all of this? I spend a lot of time on tax updates - tracking them, making update presentations (and it is challenging in addition to tracking and reading the IRS guidance on all of these changes (not all of the changes have guidance)), but I can't explain all of these (and most tax practitioners don't need to know about all of them as they pertain to a wide range of taxpayers)."

Why Are Big-Time College Sports Revenues Exempt From Income Tax? - Howard Gleckman, TaxVox. "You know the old line, 'If it looks like a duck, quacks like a duck, and walks like a duck, it is a duck?' Well, big-time college sports is one massive duck."


Four Tampa Bay area tax preparers sentenced to prison - IRS (Defendant names omitted):

According to court documents, from January 2017 through April 2019, Defendants were income tax return preparers at a business in St. Petersburg. The defendants conspired to defraud the United States by preparing false income tax returns for numerous clients for the Internal Revenue Service (IRS) to issue tax refunds in amounts in excess of what the clients were entitled to receive. In doing so, the defendants documented on Schedule C forms they prepared that clients owned fictitious businesses, which maximized the clients' ability to claim the Earned Income Credit on their tax returns and thereby increase their tax refunds. The defendants also fraudulently reported that clients were entitled to claim credits for fuel taxes or educations expenses paid to make it appear that their clients were entitled to tax refunds.

The defendants collectively were ordered to pay $1,006,881 in restitution to the IRS and to never prepare tax returns for third parties again.

I suspect the IRS wants money back from the clients as well. 


Dig in. It's National Fruitcake Day!

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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.