Tax News & Views Fake Charity and Real Joe Roundup

IRS warns of scammers using fake charities to exploit taxpayers - IRS:

Fake charity promoters may use emails to solicit donations or alter or "spoof" their caller ID to make it look like a real charity is calling on the phone. They often target seniors and groups with limited English proficiency.

Here are some tips to protect against fake charity scams:

• Don't give in to pressure. Scammers often use a tactic focused on an urgent need to pressure people into making an immediate payment. Legitimate charities are happy to get a donation at any time; so, people should feel no rush. Donors are encouraged to take time to do their own research.

• Verify first. Scammers frequently use names that sound like well-known charities to confuse people. Potential donors should ask the fundraiser for the charity's exact name, website and mailing address so they can independently confirm it.

• Be wary about how a donation is requested. Taxpayers should never work with charities that ask for donations by giving numbers from a gift card or by wiring money. That's a scam. It's safest to pay by credit card or check — and only after verifying the charity is real.

• Don't give more than needed. Scammers are on the hunt for both money and personal information. Taxpayers should treat personal information like cash and not hand it out to just anyone. They should never give out Social Security numbers, credit card numbers or PIN numbers, and they should give bank or credit card numbers only after they've confirmed the charity is real.

Washington state's capital gains tax upheld - Melissa Santos, Axios.

Why it matters: The 7% capital gains tax, which Washington's Legislature approved in 2021, is projected to raise about $500 million per year for public education and child care programs.

The tax applies to profits from selling capital assets, such as stocks and bonds, if those profits exceed $250,000 per person (or per married couple) in a year.

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What's next: The capital gains tax took effect in January 2022, and the first payments are due next month.

Washington Capital Gains Tax Survives State Court Scrutiny - Perry Cooper and Laura Mahoney, Bloomberg ($). "A Friday ruling upholding Washington’s new state capital gains tax already has its challengers eyeing the US Supreme Court."

More Tax News & Views coverage: Washington State Supreme Court Upholds State Capital Gain Tax (Updated)

New York storm victims qualify for tax relief; April 18 deadline, other dates extended to May 15 - IRS:

 The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as a result of storms that occurred between Dec. 23 and Dec. 28, 2022. This means that individuals and households that reside or have a business in Erie, Genesee, Niagara, St. Lawrence and Suffolk counties qualify for tax relief. Other areas added later to the disaster area will also qualify for the same relief. The current list of eligible localities is always available on the Tax Relief in Disaster Situations page.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Dec. 23, 2022. As a result, affected individuals and businesses will have until May 15, 2023, to file returns and pay any taxes that were originally due during this period.

This includes 2022 individual income tax returns due on April 18, as well as various 2022 business returns normally due on March 15 and April 18. Among other things, this means that eligible taxpayers will have until May 15 to make 2022 contributions to their IRAs and health savings accounts.

Certain New York Storm Victims Get an Extra Month to File with the IRS - Russ Fox, Taxable Talk. "As of today, this relief is solely for federal (IRS) taxes. While I do expect the New York Department of Taxation and Finance to conform to this, they have yet to announce that they are conforming."

Limit Stock Buyback Tax's Rules, Groups Tell IRS - Kat Lucero, Law360 Tax Authority ($):

A set of rules designed to prevent U.S. companies with foreign affiliates from circumventing the new excise tax on stock repurchases should be narrowly defined as to not disrupt routine intercompany transactions, stakeholders and attorneys told the Internal Revenue Service.

The 1% tax, which took effect in January, applies to stocks repurchased by publicly traded corporations — including companies with foreign headquarters. To prevent such foreign companies from using U.S. affiliates to avoid the levy, IRS interim guidance said repurchases also include U.S. firms using "funds by any means" to buy back stocks on behalf of their foreign parent company. But the scope of these provisions — collectively known as the "funding" rules — are too broad and inconsistent with congressional intent, according to stakeholders and attorneys in their recommendations to the IRS made public this week.

The Foreign Reach of the Share Buyback Excise Tax - Lee Sheppard, Tax Notes ($). "If Congress wanted to reach foreign parents not doing business in the United States, it would have said so, and its own analysts would have said it lacked jurisdiction. Indeed, Congress rejected a version of the buyback excise tax that would have reached foreign corporations."

Ky. Approves Sales Tax Changes, SALT Cap Workaround - Michael Nunes, Law360 Tax Authority ($). "Democratic Gov. Andy Beshear signed H.B. 360, which allows pass-through entities to elect to be taxed at the entity level for income tax purposes and gives stakeholders a tax credit for 100% of taxes paid. The law also makes changes to the state's sales tax statute, which was expanded last year to include more services."

Related: IRS Blesses Entity-level Tax Deduction used as SALT Cap Workaround

Green Book Proposal Could Pave Way For More IRS Penalties - David van den Berg, Law360 Tax Authority ($). "Changes in the 2024 fiscal year Green Book, including the elimination of some supervisory approval requirements and an expansion of IRS officials' authority, are likely to increase the number and amount of penalties asserted as well as disputes over penalties, practitioners told Law360. The Green Book details the tax proposals in President Joe Biden's budget."

Related: Eide Bailly Penalty Help.

New Electric-Vehicle and Home-Energy Tax Incentives - Ashlea Ebeling, Wall Street Journal:

People buying EVs need to charge them, too. The August law revived a tax credit for residential charging systems retroactive to Jan. 1, 2022. It is $1,000 or 30% of the costs of buying or installing a residential EV charging system, whichever is less.

As of Jan. 1, 2023, the EV charger credit is limited to certain census tracts. Claim it on Form 8911, Alternative Fuel Vehicle Refueling Property Credit.

Global Tax Deal Moves Ahead Sparking New Republican Resistance - Samantha Handler and Chris Cioffi, Bloomberg ($). "The two-part tax deal would reallocate a slice of the profits of the largest multinationals from countries where they’re currently taxed, to jurisdictions where the companies make sales. Countries are aiming to finish work on this part—known as Pillar One—by mid-year."

March Madness includes busted brackets and taxable winnings - Kay Bell, Don't Mess With Taxes. "Those who bet on the pre-tournament favorites are nursing their wagering wounds. But if you're among those who like long-shots, congratulations! The Internal Revenue Service also is happy for you. Your winnings are taxable income."

Tax Pros and Their Clients Can Be Targets of ‘Vishing’ Scams - John Wilson, Bloomberg. "You’re no doubt familiar with email phishing, the unsolicited messages offering loans, antivirus software, and pharmaceuticals that lead to credential-skimming websites and spyware-laden attachments. Vishing is the phone-based version, where someone calls out of the blue and asks you to divulge sensitive information they can use for financial gain."

Third Circuit Finds Horse Farm with History of Losses Wasn't Operated for Profit - Parker Tax Pro Library. "The court noted that Bluestone paid for many of Mitchel and Brianna's personal expenses and said that piling theses costs onto Bluestone was inconsistent with claims that the company operated with a profit motive."

Meet The IRS Special Agent Earning His Stripes As An NFL Referee - Kelly Phillips Erb, Forbes. "Sundays, during the NFL season, you can spot Eugene Hall as side judge 103, making critical calls about whether a catch is out of bounds, if there was pass interference, or any other downfield penalties. During the rest of the week, Hall is looking for very different kinds of infractions—as an IRS Criminal Investigation Special Agent tracking down tax cheats and scams that are way out of bounds."

Biden’s Budget Would Raise Taxes On High-Income Households, Cut Them For Many Others - Howard Gleckman, TaxVox. "Overall, Biden’s tax provisions would reduce after-tax incomes for nearly two-thirds of households. But for those making less than $410,000, nearly all of that decline would be due to their share of the corporate tax hikes."

The Budgetary Trilemma - Greg Mankiw. "A wise economist of the center left recently suggested to me that the Biden administration faces a trilemma: They would like to (1) increase spending on programs they consider important, (2) not raise taxes on those making less than $400,000 a year, and (3) put fiscal policy on a sustainable path. But the stark reality is that they can have only 2 out of the 3."

This Is the Worst Time for a Bonus Depreciation Phaseout - Martin Sullivan, Tax Notes ($). "The phaseout of bonus depreciation means marginal ETRs on investment are no longer zero, which, of course, reduces the incentive to invest. But what makes matters worse is inflation. The rate of inflation was around 2 percent when the TCJA was passed, but it’s now about 6 percent. As in the 1970s and early 1980s, inflation again reduces the incentive to invest by reducing the present value of depreciation deductions."

The Long Road to Tax Transparency - Alex Parker, Things of Caesar. "Does ESG include responsible tax-paying? It’s not one of the more prominent issues, to be sure. But the DOL rule does mention compliance with tax law, among others, as a factor that could be considered."

Côte d’Ivoire claim of the day - Tyler Cowen, Marginal Revolution.

While both its sales and corporate tax regimes may be considerably lower than those of other countries globally, at 60%, Côte d’Ivoire’s income tax rates are markedly higher compared to developed countries.

Only Finland (56.95%), Japan (55.97%), Denmark (55.90%), and Austria (55%), closely follow Côte d’Ivoire to round up the top five countries with the highest income tax, in a study that surveyed over 150 countries.

On a non-tax note, Tyler's post today on AI is worth your time.

Landscaping business owner pleads guilty to tax evasion after not filing and paying taxes for nine years - IRS (defendant name omitted):

During the years under investigation, Defendant received checks from customers (income) totaling $2,537,771.86 from 2011 through 2019. Defendant did not deposit all of these checks into his bank accounts, and he received cash back from the bank totaling $878,983.48 when he negotiated the checks.

As part of his plea, Defendant admitted he intentionally attempted to evade and defeat his income tax responsibilities by taking the following actions, amount others: conducting business transactions in cash, paying employees without reporting said payments to the IRS, cashing customer checks at his financial institution, and asking customers to write multiple checks in amounts of less than $10,000 to avoid bank reporting requirements.

In total, Defendant did not pay federal income taxes of $507,554.00 to the IRS, and also admitted that he failed to file income taxes with the state of Arkansas. Defendant agreed to pay restitution, including penalties and interest, to both the U.S. Treasury and Arkansas Department of Finance and Administration.

Mistakes were made. When you insist on using cash, every customer and employee becomes a potential informant. By fiddling with the $10,000 deposit rule, you trigger requirements for banks to report you to the IRS. By not filing - the taxpayer didn't file for 2011 through 2019 - you never start the statute of limitations. In the long run, it's easier to just pay the taxes.

Why am I working today? It's National Joe Day. If you aren't a Joe, celebrate with a nice hot cup of Joe.