March 7, 2023
Biden to unveil plan averting Medicare funding crisis, challenging GOP - Jeff Stein, Washington Post:
The White House’s proposal would raise the net investment income tax, created by the Affordable Care Act, from 3.8 percent to 5 percent for all Americans earning more than $400,000 per year, in line with Biden’s pledge not to raise taxes for anyone under that threshold. The tax applies to capital gains and investment income. The plan also would expand this tax by applying it to more kinds of income from pass-through firms — businesses in which the owners pay taxes on their personal income taxes. Currently, these kinds of business owners do not pay this tax.
This isn't entirely correct. The current net investment income tax applies to "passive" business income from pass-throughs, but not to non-passive income. Passive status is determined under the passive loss rules. These rules generally treat income as "passive" if the owner spends too little time in business operations. Special rules apply to rental real estate income and retirees.
Biden’s Budget to Lay Out Plan to Extend Key Medicare Trust Fund by 25 Years - Andrew Restuccia and Richard Rubin, Wall Street Journal:
Top earners—individuals making more than $200,000 and married couples making over $250,000—pay an additional 0.9% on money above those thresholds for a total of 3.8%. In addition, a parallel 3.8% tax applies to net investment income for that same top group.
That doesn’t, however, create a uniform 3.8% tax on income. Active business income—like the profits of a closely held manufacturer—isn’t subject to the payroll tax or to the investment-income tax.
Biden Budget Will Propose Tax Increase to Boost Medicare - Jim Tankersley and Margot Sanger-Katz, New York Times. "Mr. Biden’s plans are unlikely to become law. They are almost certain to be rejected by the Republicans who won control of the House last fall, and who roundly oppose tax increases."
It's White House budget week - Bernie Becker, Politico. "But as The Wall Street Journal noted over the weekend, it won’t be the most surprising thing if the Biden administration picks some tax increases for the budget from its greatest hits bin, given that so many of them got blocked by the Democratic-led Senate last year."
The final bills Utah lawmakers passed - Erin Alberty, Kim Bojórquez, Axios Salt Lake City. "A $400 million tax cut package approved by the Legislature includes lowering the state income tax rate from 4.85% to 4.65%."
W.Va. Lawmakers Pass Income Tax Cuts, Small-Biz Credit - Jaqueline McCool, Law360 Tax Authority ($).
H.B. 2526 passed the House by an 89-4 vote Saturday and was sent to Justice, who said in a news release that he would sign the bill. Among other tax changes, the bill would reduce the state's personal income tax rates but would not cut them as much as a previous plan pitched by Justice and passed by the House.
The new proposal, passed by the Senate late last month, would impose a 2.36% tax on income up to $10,000, a 3.15% tax on income over $10,000 and up to $25,000, a 3.54% tax on income over $25,000 and up to $40,000, a 4.72% tax on income over $40,000 and up to $60,000, and a 5.12% tax on income over $60,000.
IRS Wants Specific Cryptocurrency Data in Voluntary Disclosures - Nathan Richman, Tax Notes ($):
Taxpayers should keep and use data on their virtual currency transactions when making voluntary disclosures to avoid potential criminal tax enforcement from the IRS, according to an official.
Tax representatives should keep the cryptocurrency data for a voluntary disclosure case in an electronic format, preferably either a CSV file or an Excel spreadsheet for each transaction, Schenck said. The audits during voluntary disclosures closely resemble normal audits, and thus include information document requests and tax return preparer interviews, she noted.
Related: Eide Bailly Penalty Help.
Challenges to Remote Work Tax Rules Likely Gaining Steam - Benjamin Valdez, Tax Notes ($):
The proliferation of remote work arrangements is upending many conventions, and experts say it’s set to generate increased opposition to one of the more controversial tax policies of the era: convenience of the employer rules.
New York’s convenience rule is the most well known, but several states apply some version of a rule that taxes the income of employees of an in-state business when they work from home at an out-of-state location for purposes of convenience. With more workers telecommuting part or most of the time, the new work model is increasingly grating against these policies, and critics are hoping it will eventually lead to the undoing or curtailment of convenience rules.
Related: Telecommuting Workers in Refuge States Complicate State Taxes.
Senate Republicans advance bill to eventually eliminate Iowa's income tax. Here's the plan - Stephen Gruber-Miller, Des Moines Register:
Senate Study Bill 1126 would lower Iowa's income tax rate to 3.55% in 2026, 2.95% in 2027 and 2.5% in 2028.
Beginning in 2030, the bill would transform Iowa's taxpayer relief fund into an "individual income tax elimination fund" and use the money in the fund to eventually lower the individual income tax rate further until it is eliminated entirely.
IRS Nominee Werfel Headed for Senate Floor Vote - Alex Clearfield, Bloomberg ($). "Senate Majority Leader Chuck Schumer (D-N.Y.) teed up a procedural vote on IRS commissioner nominee Danny Werfel for as soon as Wednesday, which in turn would set up final confirmation later this week."
New W-2 scams are popping up this tax filing season - Kay Bell, Don't Mess With Taxes:
Con artists, in many cases via social media, are encouraging people to use tax software to manually fill out a new Form W-2, Wage and Tax Statement, replacing the individual's actual earnings with false income information.
They then are told they can use the fake W-2 amounts to get bigger refunds, some reaching five figures, than what they legitimately are due.
Just because it's on TikTok, Twitter, or Facebook doesn't make it true.
California (Franchise Tax Board) Conforms to Extension to October 16th - Russ Fox, Taxable Talk. "The Franchise Tax Board announced late yesterday that California is officially conforming to the IRS extension until October 16th for all tax returns due from January 10th through October 15. Almost all of California is covered by the extension; only Imperial, Kern, Lassen, Modoc, Plumas, Shasta, and Sierra counties are not covered."
Lawsuit Over Kobe Bryant Crash Settles, IRS Taxes It - Robert Wood, Forbes. "The suit asked for $75M for emotional distress from the photos, but there was apparently no argument that the photos made the plaintiffs physically sick or caused them post traumatic stress disorder. That makes the verdict taxable, but is that after legal fees are subtracted, or before?"
Residential Energy Credit Observations & Cautions - Annette Nellen, 21st Century Taxation. "Also, there are both ill-informed and unscrupulous sellers and installers who might mislead taxpayers as to how much credit they will get. Some will encourage those with equity in their home to borrow to pay for the energy efficient items and perhaps a lot more that doesn't generate a credit and might not even be needed. Be cautious and encourage your clients and older family members to be cautious."
Beyoncé’s World Tour And Millennial 401(k)s Is A Teachable Moment - Peter Reilly, Forbes. The tax issues involved in tapping your retirement plan for front-row seats.
IRS Lengthens Refund Lookback Period for Returns with Covid-Postponed Due Dates - Parker Tax Pro Library. "According to the notice, the IRS will disregard the periods from April 15, 2020 to July 15, 2020, and from April 15, 2021 to May 17, 2021, in determining the beginning of the lookback period to align the lookback periods with the postponed return filing due dates. Notice 2023-21."
Related: IRS relaxes refund deadlines for COVID years
North Dakota’s Path to a Flat Individual Income Tax - Timothy Vermeer, Tax Policy Blog. "Last week, the North Dakota House of Representatives advanced three income tax reform bills: HB 1118, HB 1158, and HB 1425. Each bill would reduce the top marginal rate from 2.9 percent, and two would significantly flatten the current five-bracket system."
What Paul Krugman Gets Wrong About Social Security - Eugene Steurle, TaxVox. "Over 40 percent of those with the lowest lifetime earnings never make it to age 62 or end up retiring on disability insurance, whose benefits are not affected by the retirement age. Refusing to raise the retirement age at all helps lower-income workers disproportionately only if you believe they benefit from some sort of trickle-down economics."
Representative of Chicago area red-light camera company sentenced to five years in federal prison - IRS (Defendant name omitted):
In July 2022, Defendant, of Palos Heights, pleaded guilty to one count of corruptly offering something of value to influence and reward a public official (Count Five), and one count of filing a false tax return (Count Eight). Earlier this week, U.S. District Judge Ronald A. Guzman sentenced Defendant to 64 months' imprisonment on the bribery charge, and 34 months on the false tax return charge, which sentences are to run concurrently.
According to his plea agreement, Defendant offered and agreed to give things of value, namely money, with the intent to influence State Senator A, an agent of the State of Illinois. As Chairman of the Senate Transportation Committee, State Senator A was in a position to assist Company A by opposing legislation adverse to the interests of the red-light-camera industry and obtaining Illinois Department of Transportation ("IDOT") approvals for Company A's red-light cameras. Defendant also admitted other acts of bribery in the plea agreement, including acts that involved abusing his position as Chief of Staff for Public Official A, a Cook County Commissioner, in efforts to benefit individuals who paid money to Defendant and his associates. In total, Defendant participated in corrupt activities that involved offering and obtaining bribes totaling approximately $148,000.
In addition, in 2016, Defendant caused an accountant to file his tax return with the Internal Revenue Service, knowing that this tax return contained false information. The false return caused losses to the IRS of at least $14,732 and losses to the Illinois Department of Revenue of at least $1,268. Defendant also acknowledged that his tax returns for tax years 2012 through 2015 and 2017 through 2018 underreported his income, and thereby caused additional losses to (1) the IRS of at least $58,430; and (2) the Illinois Department of Revenue of at least $6,512.
You can run red lights without ever getting in your car, tax-wise.
Time for second breakfast. It's National Cereal Day!
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