Tax News & Views Keep it Simple Roundup

IRS renews cybersecurity push for tax pros - Michael Cohn, AccountingToday:

"The Security Summit plays a key role in protecting federal and state tax filings from identity thieves. Their work continues to strengthen our systems against fraudulent tax returns," said IRS Commissioner Danny Werfel in a statement. "Tax professionals also form a critical part of our defenses. The sensitive financial and tax information they hold is a tempting target. It's critical that those handling sensitive tax information, especially smaller practices, stay current and keep their systems safe."

Wyden, Crapo Want Crypto Industry Views on Tax Uncertainties - Doug Sword, Tax Notes ($). "The top Democrat and Republican on the Senate Finance Committee are asking the digital asset industry to weigh in on a host of tax uncertainties identified in a newly published Joint Committee on Taxation report."

Senate panel looks into changing tax treatment of crypto - Micahel Cohn, AccountingToday:

The effort comes as Sen. Kirsten Gillibrand, D-New York, Cynthia Lummis, R-Wyoming, are expected to reintroduce the Responsible Financial Innovation Act, as soon as Wednesday, according to Fortune. The bill was originally introduced over a year ago and aimed to overhaul regulation of the cryptocurrency and stablecoin industry (see story). It was supported by the crypto industry and would have moved some of the key oversight functions from the Securities and Exchange Commission to the Commodity Futures Trading Commission, sparking opposition from the SEC.

Top Senate Tax Writers Seek Input On Digital Asset Taxation - Kate Lucero, Law360($):

The top Democrat and Republican on the Senate Finance Committee sought policy input Tuesday on the taxation of digital assets such as cryptocurrency and nonfungible tokens, asking stakeholders, finance leaders and other experts to weigh in.

The rapid uptake of digital assets has raised novel regulatory issues and tax filing challenges, including the proper property classification of the assets under the Internal Revenue Code, Finance Committee Chair Ron Wyden, D-Ore., and ranking member Mike Crapo, R-Idaho, said in an open letter.

The U.S. Tax Code Is Too Complex for Direct eFile to Work - Tax Foundation, Taylor Cazy. "The Internal Revenue Service (IRS) recently released a study on the feasibility of a government-run direct file program for taxpayers ahead of the agency’s planned start of a Direct eFile pilot program in the upcoming 2024 tax filing season. While a prefilled tax return may sound like it would make filing season less stressful, the current U.S. tax code is too complicated for it to work. Lawmakers should focus first on simplifying the tax code and strengthening existing taxpayer service before implementing a direct file program."

IRS Penalty Regs Risk Eroding Safeguards, Attys Say - Anna Scott Farrell, Law360($):

The law underlying the proposed regulations, which requires that an Internal Revenue Service supervisor approve tax penalties before they're issued, was intended to stop overzealous IRS agents from threatening taxpayers with penalties in order to gain an advantage in liability negotiations, the ABA's Section of Taxation said in a letter dated Friday.

But the proposed regulations could soften those protections, allowing the IRS to satisfy the supervisory approval requirements of Internal Revenue Code Section 6751(b)(1) at later points in the penalty assessment process, after an agent may have already notified a taxpayer of penalties, said the ABA and other groups, including the National Taxpayers Union and the Tax Section of the State Bar of Texas.

IRS Seeking Feedback to Improve Notices, Official Says - Lauren Loricchio, TaxNotes($):

The IRS wants to improve notices to taxpayers as part of efforts to transform itself with funding from the Inflation Reduction Act (IRA, P.L. 117-169).

According to Josh Beck of the Taxpayer Advocate Service, agency notices are often unclear and information is often difficult to find or sometimes omitted. Math error notices, refund fraud notices, and combination letters are some of the more problematic ones, he said during a July 11 webinar hosted by the Center for Taxpayer Rights.

Tax Court Bars Bad Debt Deductions for Related-Entity Transfers - Chandra Wallace, Tax Notes($):

In a July 11 memorandum opinion in Allen v. Commissioner, Judge Tamara W. Ashford said that businesses owned by petitioner William G. Allen weren’t entitled to claim bad debt deductions in the 2009 tax year because the intercompany advances weren’t real loans.

The facts “indicate that there was no real expectation of payment,” Ashford found. “This is evidenced by the complete lack of interest payments and inconsistent repayment of the principal.”