March 16, 2023
Tax Time Guide: IRS provides easy access to tax refund status with Where’s My Refund? tool; no need to call - IRS:
To use Where's My Refund?, taxpayers must enter their Social Security number or Individual Taxpayer Identification number, filing status and the exact whole dollar amount of their expected refund from the original tax return for the year they're checking.
The IRS updates the tool once a day, usually overnight, so there's no need to check more often. This prevents individuals from having to contact the IRS for updates unless the tool requests them to call.
Where's My Refund? displays progress through three phases:
- Return Received.
- Refund Approved.
- Refund Sent.
Taxpayers will get personalized refund information based on the status of their tax return. The tool will provide an actual refund date once the IRS processes the return and approves the refund.
National Taxpayer Advocate Urges Congress to Maintain IRS Appropriations But Re-Direct Some Funds Toward Taxpayer Service and Information Technology Modernization - Erin Collins, NTA Blog:
Large U.S. banks spend between $10 billion and $14 billion a year on technology, often more than half on new technology systems.
Yet in fiscal year (FY) 2022, Congress appropriated just $275 million for the IRS’s Business Systems Modernization (BSM) account. That’s less than five percent of what the largest banks are spending on new technology each year, and the IRS serves far more people and entities than any bank.
Erin Collins is the National Taxpayer Advocate. Her job is to serve as the taxpayer voice in the IRS. She has thoughts on future IRS funding:
The IRS has had a mixed record with IT projects in the past. Congress has sometimes responded by reducing its funding. I understand the frustration, but that’s not the right answer for taxpayers or tax administration. The reality is that whether in the public sector or the private sector, some IT projects fail. Other IT projects experience delays and cost overruns. That comes with the territory.
However, when a financial institution (or any business) is trying to upgrade a critical system to meet customer needs and the project doesn’t succeed, the board of directors isn’t likely to respond by slashing or zeroing out the company’s IT budget. Rather, it may retool the project, bring in consultants to provide closer oversight, or even change project leadership, but it will continue to dedicate funds to build essential systems that meet its business and customer needs and keep up with the competition. Congress should apply a similar approach to IRS IT projects.
That only requires firm Congressional purpose and a sustained Congressional attention span. So maybe not a sure thing.
U.S. Supreme Court Decides on Leniency for Non-Willful FBAR Violations - Jordan Zuck and Jared Johnson, Eide Bailly. "In Alexandru Bittner, Practitioner, v. United States, the U.S. Supreme Court ruled that the Bank Secrecy Act’s (BSA) $10,000 maximum penalty for the non-willful failure to report foreign bank accounts applies per form and not per account."
IRS Issues Applicable Federal Rates (AFR) for April 2023 - Bailey Finney, Eide Bailly. "The Section 382 long-term tax-exempt rate used to compute the loss carryforward limits for corporation ownership changes during April 2023 is 3.04%"
Treasury Solar Energy Tax Guidance Draws Cheers, Criticisms - Naomi Jagoda, Bloomberg ($):
Under the Inflation Reduction Act, solar and wind projects can get a tax-credit increase of 10 percentage points if they are located in low-income communities or tribal land, or a 20 percentage point increase if they provide most of their financial benefits to lower-income households.
Under the guidance, projects that have already been placed in service won’t be eligible to apply, which some major solar industry groups and tax professionals say may delay some projects and rule other projects out of eligibility for the credit enhancement. Additionally, some stakeholders have raised concerns about the criteria that will be used to select applications, and are seeking additional information about how the application process will work.
But some entities focused on clean energy in underserved communities are supportive of the criteria, saying it will be helpful to communities that haven’t benefited from solar projects in the past.
Related: Energy Efficiency Incentives and the Inflation Reduction Act.
Former Sen. Breaux leads new push against Biden tax plan - Laura Weiss, Roll Call. "The organization, Saving America's Family Enterprises Inc., is bringing in former Louisiana Sen. John Breaux, a centrist Democrat who served on the Finance Committee, to serve as a senior adviser and spokesperson and is running ads in 10 states and Washington, D.C."
UK Swaps ‘Super Deduction’ With Full Expensing Capital Allowance - Danish Mehboob, Bloomberg. "The full expensing measure lets businesses write off the cost of plant and machinery assets against taxable income for three years, from April 1 to March 31, 2026. The capital allowance regime includes a 100% allowance for main rate assets such as warehousing equipment and a 50% allowance for special rate assets such as solar panels."
The US, by contrast, is phasing out full expensing through "bonus depreciation." This year, the amount of asset costs eligible for bonus depreciation falls from 100% to 80%, with further reductions in coming years.
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.
Bill would eliminate Iowa individual income tax - O. Kay Henderson, Radio Iowa:
A Senate committee has approved a bill that would gradually eliminate the state income tax — if state tax revenues continue to grow. Senator Dan Dawson, a Republican from Council Bluffs, is chairman of the Senate Ways and Means Committee.
The five Democrats on the committee voted against the move. Senator Herman Quirmbach of Ames said getting rid of the state income tax will lead to cuts in state services. “The state income tax is half the state revenue,” Quirmbach said. “So how are we going to pay our bills?”
Link: SSB 1126.
Five Things You Need To Know About Cryptocurrency And Taxes - Kelly Phillips Erb, Forbes. "The IRS is getting serious about cryptocurrency—er, digital assets. This year, the question near the top of your Form 1040 asks, 'At any time during 2022, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?'"
Tax credit lesson: American Opportunity vs. Lifetime Learning - Kay Bell, Don't Mess With Taxes. "Either option will help you choose the best educational tax credit for your, or your student's, situation. But a little pre-filing homework can help you ace this tax break."
What payments are considered alimony? - National Association of Tax Professionals. "Here’s a handy chart to help you determine what income is considered alimony for pre-2019 agreements."
The Perfect Storm – US Tax, Community Property & the Mobile International Couple - Virginia La Torre Jeker, US Tax Talk. "The biggest lesson here is to avoid surprises by a careful examination of the facts. Tax professionals must be critically aware of the possible consequences of international legal regimes when working with their clients."
Related: Eide Bailly Global Mobility Services.
Oklahoma Lawmakers’ Tax Reform Plan Would Put State in Top 10 - Janelle Fritts, Tax Policy Blog. "House Bill 2695 would repeal the state’s franchise tax; House Bill 2285 would create a flat income tax of 4.5 percent, with revenue triggers for additional rate reductions in the future; and House Bill 1375 would repeal the state’s throwback rule and shift the state’s apportionment formula from three-factor to single sales factor."
Mistimed Charitable Donation Results in Capital Gains to Donors - Chandra Wallace, Tax Notes ($):
A couple that delayed finalizing a charitable donation of shares in a long-held family business pending a deal to sell that business wound up with taxable capital gains income and no charitable deduction, the Tax Court held.
In a March 15 memorandum opinion in Estate of Hoensheid v. Commissioner, the Tax Court found that the petitioners’ delay in transferring their donated shares in the family business, Commercial Steel Treating Corp. (CSTC), until two days before the business sale closed meant that they realized gain from the share sale.
From the opinion (emphasis added):
To avoid an anticipatory assignment of income on the contribution of appreciated shares of stock followed by a sale by the donee, a donor must bear at least some risk at the time of contribution that the sale will not close. On the record before us, viewed in the light of the realities and substance of the transaction, we are convinced that petitioners' delay in transferring the CSTC shares until two days before closing eliminated any such risk and made the sale a virtual certainty. Petitioners' right to income from the sale of CSTC shares was thus fixed as of the gift on July 13, 2015. We hold that petitioners recognized gain on the sale of the 1,380 appreciated shares of CSTC stock.
A double loss- not only do the taxpayers have to pay tax on the gain they gave away, they get no charitable deduction. A terrible result for the taxpayer.
Why did they lose all of the charitable deduction? A common mistake: an appraisal failure. The tax law requires a "qualified appraisal" of contributions other than publicly-traded securities in excess of $5,000. Additional requirements apply when the deduction claimed exceeds $500,000.
You can tell the taxpayer is in trouble when the opinion notes "... petitioners do not meaningfully dispute that their appraisal had at least some defects. As a consequence, petitioners do not argue that they strictly complied with the qualified appraisal requirement. Instead, they rely on the doctrine of substantial compliance and the statutory reasonable cause defense to excuse any defects."
Judge Nega found the compliance fell short:
This is not the rare case “where a taxpayer does all that is reasonably possible, but nonetheless fails to comply with the specific requirements of a provision.” Petitioners' failure to satisfy multiple substantive requirements of the regulations, paired with the appraisal's other more minor defects, precludes them from establishing substantial compliance.
The moral? If you are donating appreciated property, make sure you get the appraisal right. Make sure the appraiser is "qualified" by IRS standards. Make sure you get the appraisal on-time. File Form 8283 with all the needed information on a timely-filed return. And if you need to extend your 2022 return to get this right, do it.
Pennsylvania owners of landscape and excavation firm charged with conspiring to defraud the IRS and employment tax crimes - IRS (Defendant name omitted):
If you really want to get IRS attention, either fail to remit withheld taxes or stop filing. Better yet, do both.
According to the indictment, which was unsealed today, from approximately October 2013 through December 2021, Defendants owned and operated a landscaping and excavation business and attempted to defraud the IRS by (1) not reporting the income they received from the business, (2) using business funds to pay for personal expenditures, (3) not paying employment taxes, including the income tax withheld from employees' paychecks and Social Security and Medicare taxes and (4) changing business names and concealing business income to thwart IRS efforts to collect the unpaid employment taxes. It is also alleged that one Defendant did not file individual income tax returns for years 2019 through 2021.
It's not just the day after the pass-through deadline. It's National Panda Day!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.