Tax News & Views EB Pro takes Center Stage Roundup

April 10, 2023

Spotlight on International Tax Services Partner Shannon Smith - Rebecca Baker, Bloomberg ($):

Our Spotlight series highlights the careers and lives of tax professionals around the world. This week’s Spotlight is on Shannon Smith, who is partner in charge of international tax services at Eide Bailly in Boulder, Colo.

Smith previously was a senior manager in international tax for EY before joining Eide Bailly 10 years ago. She is co-chair of Eide Bailly’s diversity, equity, and inclusion council and serves on the board of directors for the Young Americans Center for Financial Education.


IRS sees workforce hitting 105,000 by 2025 – Benjamin Guggenheim, Politico:

The IRS aims to employ 105,187 workers by 2025, swelling the agency ranks by nearly 50 percent within three years to workforce levels not seen for a quarter-century, according to projections by the IRS obtained by POLITICO.

The numbers give a fuller picture of the agency's hiring aims than those provided in a strategic plan released by the IRS on Thursday.

The expansion — based on several assumptions, including estimated future appropriations for the agency — is part of an effort by newly appointed Commissioner Danny Werfel and the Treasury Department to transform tax enforcement and administration with a new $80 billion windfall provided last August by Democrats’ Inflation Reduction Act.

If "future appropriations for the agency" is essential for hitting the employment target, that could be a problem.

Case in point: 

IRS $80 Billion Roadmap Tees Up Congressional Funding Fight - Chris Cioffi, Bloomberg ($):

The IRS plan for spending its $80 billion contains a warning: The windfall won’t be nearly as effective if Congress doesn’t also provide the agency with adequate annual funding.

It will ‘need an ongoing investment on top of the allocated IRA funding’ to deliver the needed transformation, the agency said in its plan, released Thursday. That supplemental money isn’t a substitute for annual appropriations, the IRS said, and some of its improved services will start being impacted if lawmakers don’t maintain funding levels adjusted for inflation.

This message is aimed straight at congressional Republicans who have been hellbent on starving the IRS of funds for over two decades. Former House Speaker Tom DeLay (R-Texas) routinely used to say that he wanted to block IRS funding so that the agency would shrink and become small enough that he could drown it in a bathtub.

If Appropriations are curbed, relying solely on the $80 billion will likely not be enough when it comes to hiring:

Four Hurdles for IRS to Implementing its $80 Billion Plan - Naomi Jagoda and Lauren Vella, Bloomberg ($):


The plan calls for hiring in a number of areas, including for audits of high-income individuals and large businesses, providing guidance to taxpayers, and strengthening the agency’s data expertise.

A section on employee recruitment and retention proposes to revamp the hiring process, including creating student pipelines, as well as mentorship and coaching programs for employees.

But tax professionals expressed skepticism the IRS will be able to hire all the employees they need, and those best fit for the agency.

Maybe hiring is unnecessary if the IRS invests in nifty computers?

Tax Loopholes Abound, but AI could Shut Them Down – Jill Rosen, Johns Hopkins University:

To eliminate tax loopholes that cost the federal government billions of dollars every year, tech and law experts are working together to create artificial intelligence that can find loopholes better than a legion of blue-chip tax accountants.

Regarding the headline, the emphasis seems to be on 'could.'

Though the task is daunting—a recent test with the tax code 'completely baffled' ChatGPT—leaders of the Johns Hopkins University-based effort not only believe it's doable, they worry a corporate-funded effort will beat them to the punch and use their own AI to find even more tax loopholes.


IRS Zeroes in on Crypto, Digital Assets in Enforcement Plan - Lauren Vella, Bloomberg ($). “The agency will use some of the $80 billion in funding provided by the new tax-and-climate law to thoroughly examine issues surrounding digital asset transactions, listed transactions, and certain international issues—resources the IRS said it didn’t previously have for this purpose.”


Even Casually Betting on Sports: Filing Your Federal Taxes Explained - Leah McBride Mensching, Bloomberg ($):

This tax filing season is on track to be the biggest yet for sports betting. Next year is on track to be even bigger… For those individuals who placed bets, keeping records of winnings, losses, and filing forms, as well as betting legally, should make filing taxes easier than washing nacho cheese out of your Patrick Mahomes jersey.


IRS Issues Revised Form 3115 for Changes in Accounting Methods - Michael Rapoport, Bloomberg ($). “The new Form 3115, revised as of December 2022, replaces the previous 2018 version of the form, the IRS said in an announcement Friday.”


Disaster Relief - Samantha Handler, Bloomberg ($):

With tax day approaching, lawmakers are hoping Congress can address an issue relating to tax deductions for taxpayers recovering from Hurricane Ian.

Some members from Florida’s delegation urged President Joe Biden to support Sen. Rick Scott’s (R-Fla.) bill that would provide disaster-loss tax relief for those impacted by Hurricanes Ian, Nicole, and Fiona. Scott is working with Senate colleagues to make the bill a top priority when Congress returns April 17, said Scott spokesperson Clare Lattanze.

Lawmakers return on April 17, tax season ends on April 18. Not much time to pass legislation through both chambers and have it signed into law. 


Defenders of Tax Sale Practices Speak Out to Supreme Court - Perry Cooper, Bloomberg ($):

State and county governments, groups representing government officials, and two tax professors threw their weight behind a Minnesota county whose tax sale practices are at the heart of a US Supreme Court case.

Geraldine Tyler challenged Minnesota’s law allowing local governments to keep surplus proceeds when a homeowner’s property is sold to settle tax debts. Hennepin County kept the full $40,000 foreclosure sale price to satisfy Tyler’s $2,300 in delinquent taxes and $12,700 of accumulated interest and penalties.


IRS May Only Use ‘Deposit’ as Payment if Penalties Were Assessed - Aysha Bagchi, Bloomberg ($):

In its opinion, the three-judge panel of the US Court of Appeals for the Third Circuit tossed out a 2021 US Tax Court ruling in favor of the Internal Revenue Service. The Tax Court concluded the IRS was permitted to apply the money from Faisal Ahmed to the penalties even though he had meant for the money to be used as a cash bond deposit that would freeze interest accrual while he continued to dispute the penalties.


Proposed Regs Issued on Supervisory Approval of Penalties – Tax Notes ($). “The IRS has issued proposed regulations (REG-121709-19) on the section 6751(b) requirements for supervisory approval of some penalties to address uncertainty that has arisen because of recent court decisions.”

The document is here.


New Mexico Governor Vetoes Broad Tax Cuts, Keeps $500 Rebates - Laura Mahoney, Bloomberg ($). “New Mexico Gov. Michelle Luján Grisham signed provisions of a sweeping tax bill to give $500 tax rebates to all filers and expand the state’s film and TV tax credit but used her line-item veto authority Friday to reject broad changes to personal and business taxes.”


Missouri Tax Package Would Set State Up for Success – Janelle Fritts, Tax Foundation:

Missouri has worked to improve its tax competitiveness significantly in recent years, but state lawmakers have always regarded tax reforms as ongoing, particularly in light of the growing tax competition across the country. House Bill 816, which recently passed the House and crossed over to the Senate, would build on past tax reforms and give Missouri one of the most competitive state tax codes in the country according to the State Business Tax Climate Index, a measure of the competitiveness of state tax structures.


Foreign Taxpayers Cautiously Optimistic About IRS’s Payment Plan – Jonathan Curry, Tax Notes ($). “Buried in the IRS’s new strategic operating plan is a project that would make paying taxes just a little bit easier for overseas taxpayers, but it’s still not clear how — or when — the agency will meet its pledge.”


From the “Best Laid Plans” file:

The Problem With the IRS Pledge Not to Audit More Earners Under $400,000 – Josh Zumbrun, Wall Street Journal ($):

The audit rate has newfound relevance because of the IRS’s new $80 billion in funding. Treasury Secretary Janet Yellen had directed that ‘any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.’

While the plan will ease the worries of law-abiding taxpayers, it could also provide a road map for tax cheats.

An unscrupulous person who earned $500,000 might decide it is better to hide $100,000 instead of just a few thousand dollars, because they would then have the reported income of an ordinary person that the IRS has pledged not to pursue too hard.

Taxpayers who engage is these sorts of shenanigans can also take comfort that the IRS plans to go nowhere near the current audit rate for incomes under $400,000.  

The new IRS commissioner, Danny Werfel, confirmed by the Senate last month, repeated that pledge this week. He told reporters the IRS had no plans to increase ‘the most current audit rate we have for households making less than $400,000…We will not come close to hitting or exceeding any historic average rate.’

Also, how does the IRS know a taxpayer's income level without auditing them?

IRS releases plan to spend $80 billion windfall — with critical details missing – Benjamin Guggenheim, Politico Pro ($):

‘That’s a real challenge — first to determine who is safe from the pledge without actually doing an audit to determine if their true (actual) income is below $400,000 and then second, to determine the appropriate ‘historical’ audit rate to apply to taxpayers with income below $400,000,’ said Janet Holtzblatt of the left-leaning Tax Policy Center…


Happy National Encourage a Young Writer Day!

Here’s how to celebrate it, according to National Day Calendar:

Give a journal. A journal provides a place for daily writing. From short poems to inspired essays, this is a place young writers can feel free to stretch their wings unjudged.

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