Werfel Sworn In as IRS Commissioner - Alexander Rifaat, Tax Notes ($):
Daniel Werfel has been sworn in as the 50th commissioner of the IRS, taking the reins during arguably one of the most consequential periods in the agency’s history.
At his Senate Finance Committee confirmation hearing, Werfel promised that the agency will make a spending plan for the new funds pubicly available and will release a report on potential racial bias in the tax code within 60 days of his confirmation. The Senate confirmed Werfel as commissioner March 9 in a 54-42 vote.
"After taking the oath of office a short time ago, I feel incredibly grateful and humbled to have the chance to lead such an amazing group of dedicated public servants at a pivotal moment in IRS history," Werfel told IRS employees. "This role culminates a lifetime of commitment to public service for me."
As commissioner, Werfel returns to the federal government, where he first began work at the Office of Management and Budget (OMB) in the late 1990s. He spent more than 15 years in the federal government, eventually serving as Controller of OMB. He came over to the IRS to temporarily serve as Acting Commissioner in 2013. Next, Werfel served as a leader of Boston Consulting Group's (BCG) Public Sector practice, first covering North America and then as a global leader.
Full 9th Circ. Sides With IRS In Partnership's $35.5M Loss Row - Theresa Schliep, Law360 Tax Authority ($):
The IRS timely disallowed a partnership's $35.5 million loss as the partnership's failure to strictly comply with filing rules meant the agency's readjustment deadline didn't pass, the full Ninth Circuit ruled Friday, overruling a three-judge panel.
But the Ninth Circuit majority ruled Friday that the Tax Court was correct in finding that the IRS' 2010 tax adjustment was timely because of Seaview's failure to comply with Treasury Regulation Section 1.6031(a)-1(e)(1). Under that regulation, Seaview was required to send its returns to a service center in Utah, rather than providing copies of those returns to an IRS agent and attorney, the majority said.
Partnership returns - and S corporation returns - are due tomorrow for calendar year filers. An automatic six-month extension is available, but you have to either e-file the extension or mail it.
Whether you file or extend, this case shows how important it is to do it properly. Some thoughts:
- E-file if possible. You get fast confirmation, and you don't have to worry about it getting lost in the mail.
- If you must paper file, send it to the right address. If you use the U.S. Mail, spring for certified mail, return receipt requested. Get the postmark receipt, keep the original somewhere safe, and scan it where it will be backed up, so you can document that you filed on time.
- If you get to the post office too late tomorrow, you can use an authorized private delivery service. Be sure you use one of the "authorized" delivery options - for example, UPS Next Day Air works, but UPS Ground does not. Be sure to use the proper street address, as the delivery services can't use post office box addresses. Safe your shipping documents so you can prove you filed on time.
S Corp and Partnership Due Date Reminder - Chris Corban, I Tax School. "Not filing a return or extension on time can have costly consequences. The late filing penalty for both S corps and partnerships is $220 per shareholder/partner for each month the return is late for up to 12 months. For S corps, when tax is due the late filing penalty also includes an additional 5% of unpaid tax penalty for each month the return is late (up to a maximum of 25% of the unpaid tax)."
Tax Court Blocks Estate’s Deduction for Failed CRAT - Chandra Wallace, Tax Notes ($):
The IRS properly denied a charitable deduction for an estate’s transfer of assets to a trust that didn’t qualify as a charitable remainder annuity trust (CRAT) because it didn’t provide for sum-certain annuity payments, the Tax Court ruled.
In a March 13 memorandum opinion in Estate of Block v. Commissioner, Tax Court Judge Elizabeth A. Copeland found that the trust at issue “squarely violates the paramount rule for” CRATs — that “the amount going annually to the noncharitable beneficiaries is certain and unmanipulable.”
As a result, the estate couldn’t deduct the value of assets transferred to the trust under section 2055(a), the court ruled.
The trustees tried to fix the deficiencies in the document, but Tax Court Judge Copeland ruled that the efforts were too little, too late, resulting in a $140,000 tax deficiency.
Related: Eide Bailly Wealth Transition Services.
Treasury Waives Income Exclusion Requirements for Six Countries - Erin Slowey, Bloomberg ($):
Treasury updated its list of countries where the income exclusion requirements are waived for US citizens or residents living abroad for 2022.
Revenue Procedure 2023-19 waived the requirements for individuals living in Ethiopia, Iraq, Ukraine, Belarus, China, and Mali because of “war, civil unrest, or similar adverse conditions precluded the normal conduct of business.”
Related: Eide Bailly Global Mobility Services
Not on the same page, globally - Bernie Becker, Politico:
The repeated back-and-forth between Yellen and GOP tax writers also revealed that, in many ways, the two sides appear to be talking past each other on the global tax deal.
While Republicans stressed that the agreement wasn’t going anywhere on their watch, Yellen suggested that, to her knowledge, at least one of the big impediments to implementation had been swept away.
Michigan Tax Relief Bill Signed Into Law - Emily Hollingsworth, Tax Notes ($). "A bill that modifies Michigan’s retirement deduction limit and increases the state’s earned income tax credit recently became law, but a provision that would have provided $180 tax rebates was essentially scrapped."
9th Circ. Vacates Class Cert. In LuLaRoe Sales Tax Suit - Craig Clough, Law360 Tax Authority ($). "The Ninth Circuit on Monday vacated class certification for more than 10,000 Alaskan consumers accusing clothing retailer LuLaRoe of charging sales tax on their purchases in tax-free jurisdictions, ruling the district court did not properly consider that some customers received discounts to offset the sales tax."
Link: No. 21-36020.
Related: Identifying Your Sales Tax Risks
Top Tax-Related Takeaways From Biden’s Budget Proposal - Kelly Phillips Erb, Forbes. "But before you rush out and make plans based on the budget, you should understand that the President’s budget, like all others that came before it, is a proposal. It’s not law. It’s a signal to Congress that this is what the administration wants to happen—but Congress doesn’t always follow the wishes of the President. President Bush, for example, was never able to fully repealed the estate tax (it’s still around), President Obama did not “cut the deficit we inherited by half” by the end of his first term in office, and President Trump did not eliminate the Affordable Care Act."
Biden’s Tax Plan Stings Some Two-Career Couples - Alexis Leondis, Bloomberg via Washington Post. "If Biden’s proposal were to become law (and that’s a big if), many unmarried couples where each make low six-figure salaries might be better off (tax-wise) staying single to skirt the new 39.6% rate."
Tread lightly when taking tax advice from AI & social media - Kay Bell, Don't Mess With Taxes. "Get real, and thorough, tax help: At best, bad online tax advice, whether generated by human or artificial intelligence, can cost you some money and a follow-up from the IRS. At worst, it could be a scam that leads to loss of your tax refund and identity."
Oscars ‘Free’ Gifts Draw $46k Tax Bill From IRS + $16k From California - Robert Wood, Forbes. "The swag offering this year includes over 60 gifts, small and large, including a three-night stay at The Lifestyle in Canada worth $40,000. If you want to look your best, how about a $12,000 arm liposuction procedure from Dr. Thomas Su? Or a private hair restoration consultation with hair transplant surgeon Dr. Alan J. Bauman valued at $7,000? Then there is up to $10,000 worth of procedures from Dr. Konstantin Vasyukevich, including chemical peels, laser skin resurfacing and Botox."
Federal Employee Tax Compliance - Keith Fogg, Procedurally Taxing. "The Treasury Inspector General for Tax Administration (TIGTA) just published an interesting report on tax compliance by federal employees outside the IRS... One thing that struck me about the TIGTA report was the number of high-level employees at federal agencies who were non-compliant."
TIGTA Recommendation for Legislation Consideration to Make Failure to File a 2-Year Felony - Jack Townsend, Federal Tax Crimes. "As I understand the proposal, it would not change the current elements of the failure to file crime, which already requires willfulness. It would change only the maximum incarceration period to make the crime a two-year felony."
Cliff-Diving - Alex Parker, Things of Caesar. "The Organization for Economic Cooperation and Development’s most recent “technical guidance” on the 15% global minimum tax seemingly ended hopes that the body would grant some kind of special exemption for the U.S. and its similar but looser version, the 10.5% tax on global intangible low-taxed income."
Biden’s New Tax Proposals Are Complicated and Rife with Double Taxation - William McBride, Tax Policy Blog. "The Biden administration is now proposing to add dozens of new complicated provisions to the tax code, ostensibly explained by the 226-page “Green Book” that was just released. While many of the provisions are tax hikes aimed at high-income taxpayers and businesses, workers will pay the price. Reduced investment and innovation will lead to fewer jobs and lower wages."
A First Look At The Revenue Provisions Of Biden’s 2024 Budget - Howard Gleckman, TaxVox. "Indeed, the vast majority of the revenue proposals are familiar. They include tax rate increases on households making $400,000 or more and corporations, and big changes in taxation of multinational corporations. Other proposals would curb the use of carried interest by investment firms, limit very large retirement accounts, and ban so-called “wash-sales” by investors in cryptocurrency. "
President Biden's FY24 Greenbook - Observations on Some Items - Annette Nellen, 21st Century Taxation. "Observation: While individual tax increase proposals continue to be aimed at those with income above $400,000, the corporate tax increase proposal will indirectly affect all individuals. Eventually, all corporate tax is paid by some combination of shareholders, customers and employees."
Seven charged in sophisticated stolen identity tax refund fraud scheme that sought over 100 million dollars from the IRS - IRS (Defendant names omitted):
Defendant allegedly recruited and directed Other Defendants to provide addresses to him that could be used in the scheme. Defendant and others then allegedly registered with the IRS, posing as authorized agents of multiple taxpayers using stolen information relating to the taxpayers and their real tax preparers. The conspirators then allegedly directed the IRS to change the addresses on file for the taxpayers and to send their tax information, including account transcripts and wage records, to the addresses controlled by the conspirators. The conspirators then allegedly used this information to electronically file tax returns claiming fraudulent refunds and directed the refunds the IRS to split the refunds among several prepaid debit cards. Prior to issuing tax refunds to some taxpayers, the IRS allegedly sent verification letters to the addresses controlled by the defendants, and the defendants and others, pretending to be the taxpayers, instructed the IRS to release the refunds.
The indictment also charges that Defendants obtained the prepaid debit cards that were to be used to receive the fraudulent refunds and that once the refunds were deposited onto the prepaid debit cards, they laundered the funds by purchasing, among other things, money orders from local stores in amounts low enough to avoid reporting thresholds. Defendant and others also allegedly used the prepaid debit cards and money orders to purchase designer clothing, home renovation materials and used cars at auction. The indictment alleges that all defendants kept or received money orders purchased with the fraudulent refunds as their share of the illegal proceeds.
ID theft is still a thing. Follow good ID hygiene by protecting your personal information, especially your Social Security Number. Don't send tax documents by unsecured e-mail; use secure portals for electronic transmission of tax inforamtion.