Tax News & Views Wrong Notice Mutiny Roundup

IRS Sends Taxpayers Bills With Wrong Due Dates - Ashlea Ebeling, Wall Street Journal:

The Internal Revenue Service mailed out millions of letters demanding payment for amounts owed this month—many with the wrong due date. Now it has issued an apology.

Corporate AMT Can Be Omitted From Estimated Tax Payments for Now - Chandra Wallace, Tax Notes ($):

The IRS and Treasury will provide corporate taxpayers with relief from additions to tax for estimated tax underpayments attributable to the application of the new corporate alternative minimum tax.

The relief applies to tax years beginning before January 1, 2024, and comes just in time for calendar-year taxpayers, whose next estimated tax payments are due June 15.

From the IRS press release: 

The Inflation Reduction Act created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning after Dec. 31, 2022. CAMT generally applies to large corporations with average annual adjusted financial statement income exceeding $1 billion.

Considering the challenges associated with determining the amount of a corporation's CAMT liability and whether a corporation is an applicable corporation subject to the CAMT, the IRS will waive the penalty for a corporation's failure to pay estimated income tax with respect to its CAMT for a taxable year that begins after Dec. 31, 2022, and before Jan. 1, 2024.

The relief is implicit admission that the tax on financial statement income is so carelessly drafted and poorly conceived that large corporations with large in-house tax staffs can't reasonably be expected to know whether it applies or how to compute it.

Mid-June estimated tax payment deadline in sight for many taxpayers - IRS:

The Internal Revenue Service today reminded taxpayers of the 2023 second quarter estimated tax deadline. Those who pay estimated taxes should consider the June 15 deadline to stay current with their taxes.

Estimated tax is the method used to pay tax on income that isn't subject to withholding. Payments are normally made by self-employed individuals, retirees, investors, businesses, corporations and others that do not have taxes withheld.

Many taxpayers who have taxes withheld should pay estimated taxes as well. For example, many taxpayers who receive wages also have K-1 income or rental or investment income. 

An electronic payment is the fastest, easiest and most secure way for individuals to make an estimated tax payment. Taxpayers can securely log into their IRS Online Account or use IRS Direct Pay to submit a payment from their checking or savings account. Taxpayers can also pay using a debit card, credit card or digital wallet. Taxpayers should note that the payment processor, not the IRS, charges a fee for debit and credit card payments. Both Direct Pay and the pay by debit card, credit card or digital wallet options are available online at IRS.gov/payments and through the IRS2Go app.

Taxpayers can also use the Electronic Federal Tax Payment System (EFTPS) to make an estimated tax payment. Payment by check or money order made payable to the "United States Treasury" is also an option. Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes.

Electronic payment makes sure that your payment gets to the IRS on time and isn't lost in the bottom of a neglected IRS mail bin somewhere.

Coming House GOP Tax Bill Unlikely to Be Offset - Doug Sword and Cady Stanton, Tax Notes ($):

The bill is widely expected to propose restoring a trio of popular business tax breaks that were reduced under the Tax Cuts and Jobs Act. Costs will be driven by how the bill is structured, but a proposal to extend expanded bonus depreciation and eliminate its phaseout — the most expensive of the business tax breaks — would cost $325 billion on its own, according to the Congressional Budget Office.

...

Meanwhile, in the Senate, where only bipartisan measures can advance, senators from both parties met June 7 for a roundtable discussion at which they relived last year’s impasse over the fairness of pairing a full restoration of research and development expensing with a CTC expansion. Senators at least agreed on the importance of quickly rolling back the R&D amortization requirement, which went into effect in 2022.

Related: our coverage of the roundtable.

House Tax-Writing Committee Approves Several Tax-Related Bills - Jay Heflin, Eide Bailly. "None of the bills make changes to statutory tax rates. Many of them are narrowly focused on issues in the Internal Revenue Code that don’t appear on a 1040 form."

IRS to Clarify Monetization of Energy Credits for Mixed Partnerships - Lauren Vella, Bloomberg:

The new law is unique because it allows tax-exempt entities—which normally do not have tax bills to use credits—to invest in clean energy and take advantage of these incentives through the direct pay process. The direct pay provision would function as a refundable payment. For-profit entities are allowed to sell credits through a process called transferability.

During a Practising Law Institute conference session on partnership taxation in San Francisco, Lauren Collins, a tax and renewables partner at Vinson & Elkins, said practitioners are unsure what to do when a partnership contains both a tax-exempt entity partner and non-tax-exempt entity partner, and it is looking to take advantage of these energy credits.

Related: Energy Efficiency Incentives.

House Bill Takes Swing at PGA’s Tax-Exempt Status - Caitlin Mullaney, Tax Notes ($). "The No Corporate Tax Exemption for Professional Sports Act, introduced June 7 by Rep. John Garamendi, D-Calif., would amend section 501(c)(6) to include a special prohibition on providing tax-exempt status to pro sports organizations."

Somewhat related: How to Protect your Tax-Exempt Status. 

Time running out to repay COVID retirement distributions, recover paid taxes - Kay Bell, Don't Mess With Taxes. 

The CARES Act allowed retirement savers to withdraw up to $100,000 in 2020 from their 401(k) plans and individual retirement accounts to help them cover financial shortfalls due to the pandemic.

...

Any withdrawn money was still taxable at ordinary income tax rates. However, the 10 percent tax penalty usually assessed on early withdrawals from tax-deferred retirement accounts — it typically applies to money taken out by someone younger than 59½ — was waived.

And the CARES Act also provided a way for those needing the money to recover those taxes later. All they had to do was repay the distribution amount, in part or full, within three years.

House Proposal Would Restore Expanded And Improved Monthly Child Tax Credits - Kelly Phillips Erb, Forbes. "There does appear to be bipartisan support for making changes to the child tax credit, but the devil is in the details. Various proposals have been floated by Sens. Marco Rubio (R-FL) and Mitt Romney (R-UT), but those have yet to move forward."

IRS still has a sizable backlog of returns despite improvements, taxpayer advocate says - Kate Dore, CNBC. "While Collins believes the IRS has the technical capability to implement direct filing, she worries about the timing. 'IRS still is not out of the hole that they have dug,' she told CNBC."

Above Or Below The Line? Eleventh Circuit Drops Anchor On Taxpayer’s Hobby Loss Argument - Leslie Book, Procedurally Taxing. "The taxpayers had a few hundred thousand dollars in revenue from the yachting activity. As the expenses from the activity were less than 2% of their AGI they were unable to benefit from Section 183. In effect, those expenses were treated like any other expense not connected to a trade or business, that is, they were not deductible."

FATCA Reporting of Compensatory Foreign Stock Option on Form 8938 - Virginia La Torre Jeker, US Tax Talk. "When it comes to foreign information return reporting, the grant of options to an employee on foreign stock can get confusing.  Is an option granted to an employee with respect to foreign stock reportable on Form 8938 as a 'Specified Foreign Financial Asset'?  What if the employee has no plans to exercise the option?"

Buckle Up. 2025 Promises To Be An Historic Year In Tax And Budget Policy - Howard Gleckman, TaxVox. "Now that Congress has passed the Fiscal Responsibility Act (FRA) of 2023, it isn’t too soon to start thinking about the mess lawmakers have created for themselves in 2025. The law grants a short-term reprieve from Congress’s self-made debt limit crisis. But it also sets up what promises to be an extraordinary round of fiscal policy battles in 2025. Not only will lawmakers have to refight the debt limit battle, but they’ll have to do so with the fate of trillions of dollars of tax increases at stake."

It’s Time for a Bipartisan Commission on Taxes and Spending (Again) - Robert Goulder, Tax Notes Opinions:

For the sake of cutting to the chase, I suggest we forgo another well-intended commission on the national debt and revive the findings of previous commissions. They’re not so stale that they’ve lost relevance.

...

The plans are guaranteed political enemies in perpetuity because both threaten the sacred tenets of our tax-and-spend system. Progressives detest that they’d cut entitlement programs; conservatives loathe that they’d raise income taxes.

Why Congress Is More to Blame than IRS for $26 Billion in Refundable Tax Credit Overpayments - Scott Hodge, Tax Policy Blog. "The IRS has been set up for failure. Like a police officer who arrives at the scene after an alleged crime has been committed, the IRS is in a no-win situation because of the inherent design of tax credits."

Full Expensing is a Key Piece of the Republican Economic Package - Adam Michel, Liberty Taxed. "Forcing taxpayers to carry investment deductions into future years—as many as 39 years for many buildings—means that the write-off’s value is eroded by inflation and time. I estimate that the loss of full expensing and five‐year amortization of research expenses will deny businesses as much as 28 percent of the real value of their investment deductions."

Overseas Americans Are Ordinary People, Not FATCAts - Laura Snyder, Tax Notes ($). "Given, on the one hand, the difficulties the IRS has in contending with the FATCA reporting it receives, and, on the other hand, the lesson of the IRS working paper — that most of the FATCA reporting submitted to the IRS concerns accounts that do not have tax revenue effects — maintaining the application of FATCA for those accounts is difficult to justify. FATCA imposes considerable compliance burdens on both the relevant taxpayers and the IRS, with — as the IRS working paper evinces — no effect on revenue."

Related: Eide Bailly Global Mobility Services. 

Utah fraudster sentenced to 24 months after stealing thousands of dollars in PPP loan money - IRS (Defendant name omitted; my emphasis):

According to court documents, in May 2020, in the District of Utah and elsewhere, Defendant, of Cottonwood Heights, illegally made false representations to Mountain America Credit Union to obtain approximately $266,000 in PPP funds for his small business, Peak Debt Consumption LLC. Mountain America Credit Union is a bank where deposits were then insured by the Federal Deposit Insurance Corporation (FDIC) in connection with PPP loan applications. Defendant falsely stated and caused to be falsely stated that Peak Debt Consumption LLC had 12 employees and had a monthly payroll of $100,000. In Defendant's plea agreement, he further admitted that he committed money laundering by sending an online wire transfer for $225,000 of fraudulently obtained PPP loan money from his small business Mountain America Credit Union account to his personal TD Ameritrade account. Defendant was ordered by the court to pay $465,995 in restitution and will have 36 months of supervised release following his 24 months prison sentence.

You really can get in trouble for claiming Covid benefits you don't qualify for - even if the nice person calling about Employee Retention Credits says otherwise.

If you are feeling mutinous today, you're in luck. It's Bounty Day!