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Tax News & Views Runs out the Clock Roundup

July 20, 2023

Tax Court Must Leave Opening for Late Suits Over IRS Bills - Aysha Bagchi, Bloomberg:

The US Tax Court must consider equitable reasons for allowing late lawsuits challenging IRS tax bills to go forward, a federal appeals court ruled Wednesday.

The decision of the US Court of Appeals for the Third Circuit only binds the Tax Court in cases appealable to that court, which covers Pennsylvania, New Jersey, and Delaware. Nonetheless, it was a sharp rebuke of the Tax Court’s unanimous decision in a separate case in November, Hallmark Research Collective v. Commissioner .

While this is good news for late filers, it's better to meet the deadline and not have to convince somebody you have an excuse.

Third Circuit in Culp Reverses Tax Court: Deadline To File Petition In Deficiency Cases Is Not Jurisdictional And Is Subject To Equitable Tolling - Leslie Book, Procedurally Taxing. "This continues the fallout from the Supreme Court’s Boechler decision and is a major step in bringing deadlines in tax cases in line with mainstream jurisprudence."

 

Hunter Biden Tax Probe Hampered by Justice Department, IRS Employees Say - Isaac Yu, Wall Street Journal:

On the Hill Wednesday, Ziegler and Supervisory Special Agent Gary Shapley detailed what they viewed as irregularities, including delayed warrants and instructions to investigators to avoid certain topics. Republicans on the committee used the testimony to paint a picture of what committee chairman James Comer (R., Ky.) called a “two-tier justice system” that gave preferential treatment to members of the Biden family.

...

Committee Democrats, led by ranking member Jamie Raskin (D., Md.), expressed skepticism of the testimony and noted that some of the described delays occurred in 2019 and 2020, before Biden was elected as president. The investigation was put on pause in the run-up to the 2020 election, they noted, based on guidelines put in place by former President Donald Trump’s attorney general, William Barr.

 

‘SALT’ shakes up House GOP tax package discussions - Laura Weiss, Roll Call ($):

Their push to force relief from the $10,000 "SALT" cap is shaping up as a major challenge to Republican leadership and underscores the political weight the issue carries in some of the country’s tightest swing districts.

There have been New York, New Jersey and California Republicans who've rebelled against the GOP-created SALT cap from its 2017 inception, but they secured needed leverage in a narrowly divided House this year to force their party to confront the issue.

Related: Capitol Hill Recap: Are taxes on the legislative agenda?

 

Microcaptive Proposed Regs Draw Fire on Multiple Fronts - Chandra Wallace, Tax Notes ($):

“This is a real insurance product to us,” David M. Findlay of Lake City Bank testified. Microcaptives allow community banks to obtain coverage that isn’t available or affordable in the commercial market — an “extra layer of protection” that bank regulators appreciate, he said.

“This proposed regulation would take away a critical tool in risk management and insurance protection that we and hundreds or thousands of other banks use in the country today,” said Findlay, whose bank serves rural counties in Indiana.

Related: Recent Developments in Micro-Captive Insurance—A Reportable Transaction

 

Extension filers: IRS.gov should be first step for summertime tax help; agency encourages those with extensions to file soon - IRS. "Every year millions of taxpayers postpone filing their tax returns by requesting an extension. While taxes may not be the first thing to come to mind in the summertime, it is an ideal time to start tax planning. IRS.gov is the fastest and most convenient way to get tax-related information and help. The online tools are available any time, so taxpayers can use them at their convenience."

Feds Face Sanctions For Delaying Tax Settlement - Henrik Nilsson, Law360 Tax Authority ($). "U.S. District Judge Mary Kay Vyskocil gave the government until Aug. 19 to reach a deal with Walter Schik to settle allegations that he failed to inform the Internal Revenue Service of two foreign bank accounts in 2007. The judge said that if the settlement has not been approved by the deadline, she may dismiss the case for failure to prosecute."

Louisiana Governor's Veto of Franchise Tax Phaseout Prevails - Matthew Pertz, TaxNotes ($). "Sen. R.L. Bret Allain II (R), who sponsored the bills, said during a July 18 veto override session that although he would love to see the tax eliminated, he was unable to rally enough support to put to a vote the governor's veto of S.B. 1 and companion bill, S.B. 6."

 

IRS Working to Deploy AI Algorithms and Models - Lauren Loricchio, Tax Notes ($):

Speaking July 19 during a webinar hosted by the Tax Executives InstituteKaschit Pandya, IRS deputy chief information officer, said that right now, AI feels like what the cloud felt like 10 years ago.

...

Pandya said it is difficult to get access to meaningful data at the IRS right now, but that the agency’s enterprise data platform program is meant to make it easier.

“The idea is to take all of our data from within the IRS, place it in an enterprise data warehouse, and then build the analytics layer on top of it so that everyone has access to the data that they need in order to carry out an action or research something,” Pandya said. “I believe the data warehouse is what will probably provide the most benefit for the taxpayers and our business users.”

 

Why IRS direct tax return filing is a bad idea - Kay Bell, Don't Mess With Taxes. "What happens if (when) the IRS program makes a mistake?"

Taxpayers Are Liable For Taxes On $1.2 Million—Even If Their Daughter Stole It - Kelly Phillips Erb, Forbes. "In the tax world, we often say that rules matter. A Florida couple found this out in a most unfortunate way after a judge ruled that they were liable for taxes on $1.2 million in retirement income, much of which was fraudulently taken from them—by their own daughter."

Passthrough Losses Disallowed Due to Taxpayers' Lack of Outside Basis in Partnerships - Parker Tax Pro Library. "The court rejected the taxpayer's argument that he bore the economic risk of loss with respect to the lower tier partnership's liability because the notes secured a loan to the partnership after finding that the notes were not pledged as collateral and further, the taxpayer was not at risk with respect to the lower tier partnership's movie making activity."

IRS Uses Reduction Act Funding To Reopen Taxpayer Assistance Centers - Amber Gray-Fenner, Forbes. "Three new TACs were opened—two in Puerto Rico and one in Mississippi—and thirty-two previously shuttered TACs have been reopened since August 2022. In June, the IRS held its first Community Assistance Visit in Paris, Texas, and more visits are currently planned for seven additional states: Michigan, Nebraska, Idaho, Alaska, Hawaii, Oregon, and New Mexico. The Community Assistance Visits are designed to operate as temporary TACs 'to give taxpayers from underserved areas an opportunity to meet face-to-face with IRS assistors.'"

 

'No Labels' Fiscal Policy Reads More Like No Details - Howard Gleckman, TaxVox. "Unfortunately, the No Labels agenda reads exactly like what it is: A carefully crafted plan aimed at attracting moderate voters who don’t read too carefully. It is a gauzy wish list for the center-right and center-left that tries too hard to not offend. Hence, no explicit acknowledgment that Social Security reform will require benefit cuts and tax increases or that broader fiscal policy will too."

Weeding the Garden of International Tax - Daniel Bunn, Tax Policy Blog. "When it comes to compliance, both the taxpayer and the tax collector must be considered. A recent study for the European Parliament found that tax compliance costs run between 1 and 2 percent of business revenue; for a business making a 10 percent profit margin (many businesses would be very happy with such a margin), that suggests a compliance tax on profits of 10 to 20 percent. Relative to revenue collected, the compliance costs average 30 percent among the 27 European Union countries and the United Kingdom."

 

Pop star Shakira is to face a second tax probe from Spain - AP via The Hill. "The first case that is set to go to trial hinges on where Shakira lived during 2012-14. Prosecutors in Barcelona have alleged the Grammy winner spent more than half of that period in Spain and should have paid taxes in the country, even though her official residence was in the Bahamas."

Charlotte business owner and disaster relief loan “consultant” is indicted for $1.2 million COVID-19 fraud scheme - IRS (defendant name omitted):

According to allegations in the indictment, from March 31, 2020, to August 1, 2020, Defendant. submitted fraudulent PPP loan and EIDL applications to the U.S. Small Business Administration (SBA) and SBA-approved lenders, seeking to obtain relief funds for his businesses, Borrow My Ride, Balanced Society Corporation, The Regins Corporation, and GGGAB, Inc. To obtain the relief funds, the indictment alleges that Defendant. falsified information in loan applications and supporting documentation, and provided false financial information, fake employment data, and fraudulent tax returns for his businesses. As a result of the scheme, the indictment alleges that Defendant. received more than $570,000 in fraudulently obtained relief funds.

The indictment further alleges that Defendant. also executed the scheme by submitting false and fraudulent applications for PPP and EIDL funds on behalf of customers, causing more than $660,00 in relief funds to be disbursed to his customers. Defendant. allegedly promoted the fraudulent scheme through personal referrals and in social media posts where he advertised that he was a PPP loan/EIDL consultant. Over the course of the scheme, Defendant. allegedly received improper loan preparer fees for his services totaling more than $150,000, and, to avoid detection, he allegedly required customers to pay the loan preparation fees in cash, via cashier's checks, or wire transfers.

Fast-forward a couple of years and you will see similar stories involving people promoting employee retention credits.

 

Check. It's International Chess Day!

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