Tax News & Views Hot Dog! Ownership Reporting! Roundup

July 19, 2023

Small Businesses Aren't Ready for FinCEN Reporting, Critics Say - Amanda Athanasiou, Tax Notes ($):

“Few small businesses are aware of their requirements that begin in less than six months,” said Kevin Kuhlman of the National Federation of Independent Business during the hearing July 18. The House Subcommittee on National Security, Illicit Finance, and International Financial Institutions heard testimony on the consequences of FinCEN’s beneficial ownership rulemaking.

Kuhlman was referring to the January 1, 2024, effective date of beneficial ownership reporting rules promulgated under the Corporate Transparency Act (CTA). Companies formed on or after that date will have 30 days from their registration to report beneficial ownership information (BOI) under the regime, while reporting requirements for companies formed before that date commence January 1, 2025.

These rules will require many entities, particularly inactive ones or ones with low revenues, to report their ownership to FinCEN, the Treasury's Financial Crimes Enforcement Network. Severe fines can apply to reporting failures. explains the basic requirements:

Statistics indicate that about 30,000,000 small businesses in the U.S. will be required to file initial reports in 2024. This new law does not apply to larger companies, defined as those with over 20 full-time workers and revenues in excess of $5,000,000. Additionally, some smaller companies are excluded if they do business in a regulated industry that already shares similar ownership information with regulators.

This will place a burden on smaller businesses. It is expected that attorneys, who are generally involved in setting up businesses and effecting ownership transfers, will be the primary professionals involved in CTA compliance.


What to expect at the whistleblower hearing today - Punchbowl News:

Two IRS whistleblowers who claim the Justice Department improperly interfered in the investigation into Hunter Biden will testify in front of the House Oversight Committee on Wednesday. It’s a big moment for House Republicans who have touted the testimony of longtime IRS employee Gary Shapley as evidence of political bias within the Biden administration.

But Republicans are facing a massive quandary ahead of the anticipated hearing this afternoon: U.S. Attorney for Delaware David Weiss — who ran the Hunter Biden probe — has repeatedly disputed the whistleblowers’ major claims.


GOP to put IRS Hunter Biden whistleblowers at center stage - Emily Brooks and Rebecca Beitsch, The Hill. "IRS investigator Gary Shapley and an unnamed IRS special agent told the House Ways and Means Committee in May that they were displeased with the investigation into Hunter Biden’s tax matters, accusing prosecutors of slow-walking the investigation and allowing the statute of limitations to run out. Hunter Biden in June reached a deal to plead guilty to tax crimes for 2017 and 2018."

Senate Republicans Write to IRS, TIGTA on Alleged Agent Conduct - Cady Stanton, Tax Notes ($):

Senate Finance Committee ranking member Mike Crapo, R-Idaho, and the 12 other committee Republicans sent July 18 letters to IRS Commissioner Daniel Werfel and Inspector General J. Russell George with the requests. The lawmakers asked Werfel to share information about three separate reports of IRS agent conduct and urged George to open an investigation into one of the allegations.

The reports include claims of a March 9 unannounced visit to the home of journalist Matt Taibbi; an April 25 unannounced visit to the home of a taxpayer in Marion, Ohio, by an IRS agent using the alias “Bill Haus” who said he wished to speak on one matter before seeking information on another; and the June 14 seizure of boxes of Bureau of Alcohol, Tobacco, Firearms and Explosives Forms 4473 — a background check form containing information on gun purchasers — by armed IRS agents from a gun shop in Great Falls, Montana.


IRS Probe of 100 Wealthy Americans Gets Boost From Puerto Rico - Jim Wyss and David Voreacos, Bloomberg ($):

Manuel Cidre, Puerto Rico’s Secretary of Economic Development and Commerce, said his office has been working with the Internal Revenue Service since 2021 to identify people who may be abusing the island’s lucrative tax breaks. The IRS says that it has identified about 100 people who failed to meet the rules, and it expects “many of these cases to proceed to criminal investigation.”


More than 5,000 hedge fund managers, cryptocurrency traders and other Americans have moved to the US territory over the last decade to enroll in a program that lets them avoid paying federal income tax and no taxes at all on dividend, interest and capital gains income. But to qualify, they must spend at least 183 days a year in Puerto Rico, and income from the mainland is still subject to federal taxes.


How tech companies got access to our tax data - Tate Ryan-Mosley, MIT Technology Review:

In November 2022, the Markup published an investigation into tax prep companies including TaxAct, TaxSlayer, and H&R block. It found that the sites were sending data to Meta through Meta Pixel, a commonly used piece of computer code often embedded in websites to track users. The story prompted a congressional probe into the data practices of tax companies, and that report, published Wednesday, showed that things were much worse than even the Markup’s bombshell reporting suggested. 

The tech companies had access to very sensitive data—like millions of peoples’ incomes, the size of their tax refunds, and even their enrollment status in government programs—dating back as early as 2011. 


Powerball jackpot hits $750 million. If you win, here’s the tax bill - Kate Dore, CNBC:

Before winners see a penny of the multimillion-dollar jackpot, there’s a mandatory 24% federal withholding that goes to the IRS. The withholding applies to winnings of more than $5,000.

If you choose the $378.8 million cash option, the 24% withholding automatically reduces your cut by about $90.9 million. However, many taxpayers wrongly assume they’re off the hook after that 24%, Chichester said.

“That 24% comes off the top, but you’re still responsible for the other 13% at some point,” he said.

Your home state will also want a cut.


Disaster Relief: What the IRS giveth, the IRS taketh away. Or so it seems for disaster relief taxpayers until you get to page 4 of the collection notice. - Erin Collins, NTA Blog. "As the IRS continues to mail notices with incorrect dates to these taxpayers in the disaster relief areas, it will continue to cause confusion, and I suspect it will increase calls to the IRS and to taxpayers’ return preparers."

IRS Gives Tax Relief, Extensions To Vermont Flood Victims - Robert Wood, Forbes. "Flooding victims anywhere in Vermont now have until Nov. 15, 2023, to file various individual and business tax returns and make tax payments."

17 states are holding tax holidays this year, with four in July - Kay Bell, Don't Mess With Taxes. "There are four this month in Alabama, Florida, Mississippi, and Tennessee. A baker's dozen are scheduled for early or mid-August."


Tax Court Leaning Harder On The Little Guys In Hobby Loss Cases - Peter Reilly, Forbes. "Two Tax Court decisions last month emphasize the wisdom of keeping separate accounts for your losing side gig."

Help individuals and small businesses by promoting tax literacy - Annette Nellen, 21st Century Taxation. "Any federal funding of financial literacy activities should be sure to include an introduction of federal tax obligations of a new business. STEM activities funded by the government, and similar ventures that reach high school and college students, should also be encouraged or required to offer tax education because many of these students will become self-employed entrepreneurs."


Eleven PLRs Filings Triggered By Failure to Attach Simple Election to Return - Ed Zollars, Current Federal Tax Developments. "Although bonus depreciation may appear advantageous for most taxpayers, there are scenarios where it may be in their best interest to opt out of claiming it. Under IRC §168(k), taxpayers have the option to elect to forego the utilization of bonus depreciation on a class-by-class basis."

Though it's hard to see why the tax law requires taxpayers to attach a statement with magic words to a return, instead of just claiming the reduced amount of depreciation. 


A Path Forward for the OECD? - Alex Parker, Things of Caesar. "The global minimum tax works by having a single, universal measurement of income as well as taxation. It’s based on financial accounting data, which isn’t supposed to be used for tax purposes but was close enough to a global taxable income standard, with some tweaks. The tax kicks in when corporate income, under this measurement, is taxed below 15%."

Liability for Unpaid Estate Taxes - Keith Fogg, Procedurally Taxing. "If the estate taxes are unpaid, trustees, transferees, or beneficiaries become liable for the unpaid estate taxes through IRC §6324(a)(2).  Here, the estate failed to keep up with the installment payments causing the IRS to terminate the §6166 election and issue a notice of final determination under 26 U.S.C. §7479.  This triggered the immediate need for the estate to pay the entire liability.  As you might expect, with an estate of this size, the beneficiaries did not all get along with each other or with the trustee of the living trust... The case points out the care that must be taken in distributing estate assets where an estate tax liability exists."


“Monetizing” Clean Energy Tax Credits Creates a Sham Market for Bad Policy - Scott Hodge, Tax Policy Blog:

The Inflation Reduction Act (IRA) and Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act are both case studies. Both laws offer a litany of tax credits that are only useful for taxpayers with large enough tax liabilities to credit against. Tax credits are not very useful for start-ups, because start-ups are not profitable. The tax code does allow start-ups to carry an unused tax credit on their books as an asset until the firm is profitable enough to use it, but that could take years. And a tax credit in the future is not much of an incentive today.

Similarly, tax credits offer no incentive to the tens of thousands of entities that pay no income taxes, including charities, nonprofit hospitals, universities, local governments, and quasi-public entities such as the Tennessee Valley Authority and rural electric utilities.

The IRA and CHIPS Act offer two questionable workarounds: allowing taxpayers to transfer or sell their tax credits to other taxpayers and allowing for direct payments to untaxed entities in lieu of credits.

The IRA’s Green Energy Subsidies May Cost More Than Expected. Is That Good Or Bad? - Howard Gleckman, TaxVox. "Are the IRA’s green energy subsidies, like many government programs, clumsy, inefficient, and costly? Yes. Are they an important step forward in the battle against climate change? Yes again."


The Real Winners of the 2023 World Series of Poker - Russ Fox, Taxable Talk. "The Internal Revenue Service did not end up with taxes that exceeded the first place winnings; the agency will have to be content with finishing in second place (based on pre-tax prizes) with a haul of just $8,753,797. Still, you can’t say that the IRS didn’t do poorly because the house always wins."


San Diego couple charged with stealing stimulus payments during pandemic and purchasing luxury Mercedes-Benz and jewelry - IRS (defendant names omitted):

The indictment alleges that between April 2020 and at least September 2020, Mrs. Defendant approached homeless and low-income individuals throughout Southern California for the purpose of soliciting and collecting their personal identifying information ("PII"). Mrs. Defendant then allegedly used that information—along with the PII of detainees at two local detention facilities—to submit applications for Economic Impact Payments (EIP) from the IRS, which are commonly referred to as "stimulus payments."


The indictment states that Mrs. Defendant used various EDD debit cards to purchase thousands of dollars of jewelry, nearly $9,000 in furniture that she shipped to her Spring Valley residence, and to cover part of a $60,000 down payment for a Mercedes-Benz G-Class 550 SUV that she purchased in the name "Alexa Defendant." In addition to the conspiracy count, the indictment charges Mrs. Defendant with money laundering based on her purchase of the luxury vehicle, which the IRS has seized.

The homeless and low-income people (allegedly) victimized had problems enough before their identities were (allegedly) stolen. 

I do wonder at the term "luxury Mercedes-Benz" in the IRS headline. It implies that there maybe is a stripped-down Mercedes model out there, competing with Chevy and Ford.


Dog! Today is National Hot Dog Day. When I was in elementary school, we had a Hot Dog Day once a month, where we left our GI Joe lunchboxes at home and had a delicious wiener at lunch. We were not shamed for having them with ketchup. 


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