Tax News & Views On Your Mark, Get Set Roundup

February 27, 2023

Hill Watch Agenda - Chris Cioffi, Bloomberg ($):

Lawmakers have kicked off work on high-profile legislation and investigations following a slow start to the 118th Congress, with clashes over government spending set to escalate in the months ahead...

On the tax front there could be action on these proposals:

  • Republicans focused on R&D tax break, e-commerce tax reporting
  • Democrats supporting expanded child, low-income housing tax credits
  • Lawmakers also eyeing changes to cap on state and local tax deductions

TCJA extension is also in the picture:

Buchanan Bullish - Chris Cioffi, Bloomberg ($):

Rep. Vern Buchanan (R-Fla.) is optimistic that legislation making permanent provisions of the 2017 tax law can be done this Congress, and with Democratic support.

Although a package of tax extenders and child tax provisions didn’t make it into an end-of-year omnibus package last Congress, Buchanan said he’s bullish that this time could be different.

‘I’ve got good working relationships with Democratic members,’ he said. ‘I’m going to be looking for things that we can get to yes on where it makes sense.’

But before dealing with taxes that companies and individuals have - for months - been calling on Congress to fix, the tax-writing House Ways and Means Committee on Tuesday will advance legislation aimed at tackling unemployment fraud:

Markup of Views and Estimates Letter to the Committee on the Budget, Oversight Plan for the 118th Congress, and H.R. 1163 – House Ways and Means Committee:

Markup of:

Research Capitalization Increases Tax Payments While Cutting ETRs – Martin Sullivan, Tax Notes ($):

The ticking research capitalization time bomb that Congress set in 2017 has exploded. Recently published company reports to the SEC indicate that some taxpayers made additional cash tax payments of more than a billion dollars in 2022 as a result of required capitalization. Because this is just a mandated timing change in tax payments, there is no direct impact of it on reported effective tax payments. There can be, however, significant indirect effects that reduce the company effective tax rate by increasing the deduction for foreign-derived intangible income.


In the Senate, a new IRS commissioner could be confirmed soon:

Werfel Answers Senators’ Written Questions - Chris Cioffi, Bloomberg ($). The questions to Werfel are basically partisan in nature. Republicans asked if funding the IRS will create unnecessary audits. Democrats basically asked the same question, but used the phrase “tax cheats,” signaling that the audits are necessary.

The document is here.

Despite the partisan questions, Werfel is expected to be confirmed:

The panel could soon schedule a vote on whether to send Werfel’s nomination to the full Senate. Wyden has vowed to move quickly on confirmation. At least two Republicans on the committee, Sens. Thom Tillis (R-N.C.) and Todd Young (R-Ind.), have indicated they would likely support Werfel.


Republican war on 'woke' policies creeps into U.S. debt-ceiling debate – Jason Lange and David Morgan, Reuters:

U.S. House Republicans are eyeing $150 billion in spending cuts that reflect a hardline drive to target education, healthcare and housing - particularly efforts to address racial inequities that conservatives deride as ‘woke’ - as they push forward in talks on the federal debt ceiling.

If House Republicans insist on spending cuts, you can bet that Senate Democrats will insist on tax increases. The argument over how to lift the debt ceiling is expected to last into July.


Eide Bailly making news:

Before you file, we have tax tips for you – Lisa Cownie and Kelsey Barchenger, KEYC News Now:

Brock Thaemitz from Eide Bailly has helpful tax tips for your 2022 filing.

Some changes are in store, including the amount of tax credits filers may receive back. Tax payers can expect to see smaller child tax credits, the higher credits were not expanded to the current filing year.

Dependent care credits will also be less this year, it has gone back to the previous tax rule, therefor this refund will also be less dur to this credit not being expanded.


What You Need to Know for the 2023 Tax Season – Tara Siegel Bernard and Ron Lieber, New York Times:

Doing taxes in 2023 feels a lot like it did before the pandemic. Still, there are some meaningful changes to keep in mind.


They Went Viral and Made Money. Now They Owe Taxes – Lora Kelley, New York Times ($):

Fortunes can ebb and flow substantially on social media platforms, with content creators reaping riches from viral videos one month — and making little the next. Influencers may also receive lavish gifts, one-off checks and direct tips from loyal viewers.

In the eyes of the Internal Revenue Service, they owe taxes on all of it. For some creators, especially those filing freelance taxes for the first time, tax season can feel a bit daunting.


IRS E-Filing Rules Give Small Businesses More Prep Time - Naomi Jagoda, Bloomberg ($):

Final IRS rules on electronic filing requirements include a later applicability date that should be helpful to small businesses, tax and payroll industry professionals said.

The rules, released Feb. 21 by the Treasury Department and IRS, require businesses that have to file at least 10 information returns in a year to file those forms electronically, effective for returns that have to be filed in 2024 and later. The current threshold of 250 information returns will remain in effect until then.


IRS tech is so ‘archaic’ the agency struggles to find people to work it - Perspective by Joe Davidson, Washington Post:

The Internal Revenue Service, which funds nearly everything the federal government does, uses information technology that is creaking with old age. Some of its computer systems are so antiquated, a federal watchdog complains, that it’s difficult to find people who know how to work them.

In one example, a Government Accountability Office report released this month notes the tax agency’s use of an ‘obsolete programming language’ called COBOL, which could lead to ‘difficulty finding employees with such knowledge,’ adding that this ‘shortage of expert personnel available to maintain a critical system creates significant risk to an agency’s mission.’

I’ve been told that the IRS uses older employees to teach younger employees about COBOL because it’s not being taught elsewhere.


Pa. Sourcing Ruling Injects Uncertainty Into Future Tax Fights – Paul Williams, Law360 Tax Authority ($). “The Pennsylvania Supreme Court's decision upholding the state Department of Revenue's interpretation of a service sourcing statute opened the door to giving the agency more leeway in applying laws and may invite further pushback from the attorney general's office in litigation.”


Youngkin’s Tax Plans ‘Still Alive’ and Waiting for Budget Deal - Angélica Serrano-Román, Bloomberg ($). “As Virginia’s legislative session draws to a close on Saturday, it’s increasingly likely that any deal on new tax cuts proposed by Gov. Glenn Youngkin (R) will have to wait until lawmakers return in nearly two months.”


Distillers Toast New Plan to End Kentucky’s Bourbon Barrel Tax - Michael Bologna, Bloomberg ($). “Kentucky is poised to kill off the state’s unique bourbon barrel tax, but school districts and localities aren’t happy with the plan introduced in the Legislature this week. Some lawmakers in California are pushing the governor to regulate cryptocurrency businesses, and Indiana lawmakers sent a bill to the governor with a workaround to the $10,000 state and local tax deduction limit.”


U.S. Eyes Trade Deals With Allies to Ease Clash Over Electric Car Subsidies – Alan Rappeport, New York Times:

The Biden administration hopes to reach limited free trade agreements with countries in Europe and Asia that would not require congressional approval as it looks to ease allies’ concerns about legislation that President Biden signed into law last year, Treasury Secretary Janet L. Yellen said on Friday.

The law, known as the Inflation Reduction Act, has rankled trans-Atlantic ties in recent months, fueling frustration in Europe and in Japan that the administration’s policies are protectionist actions that will lead to a global subsidy war.

Further down the article:

The tension has centered on $50 billion in tax credits that the law created to entice Americans to buy electric vehicles assembled in North America. For electric vehicles to be eligible for the full tax credit, a portion of the minerals that are used to make the batteries that power them must come from nations that have free trade agreements with the United States.


From the "Not Worried Yet" file:

Most Adults Aren’t Worried About Income Tax Liability for Online Payments. Gen Zers Are the Exception - Amanda Jacobson Snyder, Morning Consult:

Though the Internal Revenue Service has pushed back plans to require payment providers such as Venmo and PayPal to send tax forms to Americans who received more than $600 from business transactions through the platforms, a new Morning Consult survey finds that 2 in 3 U.S. adults are not concerned about the tax collection changes. Roughly half of Gen Zers, however, are concerned about the new tax implications.

I doubt that this issue is front-of-mind for most people, until they get a letter from the IRS about it. Luckily that won't happen this year:

New rules issued by the IRS for the 2022 tax year would have lowered that threshold to $600 and eliminated the transaction total requirements, but following pushback from the tax industry on the grounds that tax pros weren’t ready to implement the new rules and the risk of users receiving 1099s for personal payments on the platforms, the IRS agreed to hold off on implementation for another year. 


Happy National Retro Day!

Mullet? Check! Parachute pants? Of course! Aviator shades? Yes! COBOL running my computer? You bet!

Systems are go to return to the 1980s!

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