Tax News & Views Comes Knocking Roundup

July 25, 2023

IRS says agents will no longer knock on taxpayers’ doors unannounced - Julie Zauzmer Weil, Washington Post:

Since at least the 1950s, revenue agents have knocked on tens of thousands of taxpayers’ doors each year, according to agency staff. The new policy will reduce these visits to no more than a few hundred per year, and only under unusual circumstances. 

Instead of making house calls to taxpayers who have ignored overdue tax notices in the mail, the agency will send letters that instruct taxpayers to schedule a visit with a revenue officer, it explained.

IRS Halts Surprise Visits Citing Agents’ Safety, ‘Common Sense’ - Jonathan Curry, Tax Notes ($). "'This decision is a step in the right direction for obvious reasons,' Maggie Ochoa of Eide Bailly LLP, who worked as an IRS revenue officer from 2019 to 2021, told Tax Notes."


IRS ends unannounced revenue officer visits to taxpayers; major change to end confusion, enhance safety as part of larger agency transformation efforts - IRS:

IRS Commissioner Danny Werfel announced the change as part of a larger effort to transform IRS operations following passage of the Inflation Reduction Act last year and the creation of the new IRS Strategic Operating Plan in April.


Werfel also noted that there have been increased security concerns in recent years on multiple fronts. The growth in scam artists bombarding taxpayers has increased confusion about home visits by IRS revenue officers. Sometimes scam artists appear at the door posing as IRS agents, creating confusion for not just the taxpayers living there but local law-enforcement.

For IRS revenue officers, these unannounced visits to homes and businesses presented risks. Revenue officers routinely faced hazards and uncertainty making unannounced visits to attempt to resolve delinquent tax matters.

What will it take to get the IRS to make a house call? 
 These rare instances include service of summonses and subpoenas; and also sensitive enforcement activities involving seizure of assets, especially those at risk of being placed beyond the reach of the government. To put this in perspective, these types of situations typically number less than a few hundred each year – a small fraction compared to the tens of thousands of unannounced visits that typically occurred annually under the old policy.
Also, IRS Criminal Investigations will also continue home visits. So IRS visits will cause anxiety to fewer taxpayers, but those who are visited will have good reason to be anxious.
The IRS also released a new "RO visit fact sheet" addressing questions including "What is a revenue officer," "how revenue officers work," and the difference between revenue officers and IRS criminal investigators. 


IRS Ups Ante in Recapture of Excess COVID-19 Tax Credits - Caitlin Mullaney, Tax Notes ($):

The IRS added that the assessment and collection procedures don’t replace the existing recapture methods and aren’t exclusive. Rather, they are simply an alternative method available to the IRS for recovering erroneous refunds of tax credits sent to employers under pandemic response legislation, including the Families First Coronavirus Response Act; the Coronavirus Aid, Relief, and Economic Security Act; and the American Rescue Plan Act of 2021.

One item in the regs has an interesting twist from companies using professional employer organizations (PEOs) to handle their payrolls and payroll taxes:

The regs note that in situations when third-party payers claim tax credits on behalf of their common law employer clients, who remain subject to employment laws relating to compensation, the common law employer clients may also be assessed for an erroneous refund of credits.

Related: What to Know About the Employee Retention Credit.


Tax, Budget Bill Slide Into ’24 Could Spur Record Retroactivity - Doug Sword, Tax Notes ($):

“There’s a lot of talk about taxes, but nothing’s going to gel until you get close to Christmas,” said Senate Finance Committee member Chuck Grassley, R-Iowa. “The Democrats are not going to move anything that doesn’t have child tax credit in it.”

That should make for a nerve-racking fall and winter for tax watchers. Research and development amortization and tightened net interest expensing went into effect 18 months ago, and the coming talks may be the last chance to roll them back. A major tax extenders package has never included a retroactive period of more than 23 months.

A restoration of the research expense deduction to 2022 seems unlikely even in a best-case scenario. Prudent taxpayers shouldn't count on it at all, and enjoy the surprise if it somehow happens. 


Minn. May Delay NOL Deduction Cut, Tax Dept. Says - Sanjay Talwani, Law360 Tax Authority ($): "The Minnesota Department of Revenue said in a notice that the Legislature had notified the state revenue commissioner that lawmakers may delay the reduction in the NOL deduction limit from 80% to 70% of a corporation's taxable income so it applies to tax years starting after Dec. 31, 2023. Under legislation passed in May, the drop in the deduction limit applies to tax years starting after 2022."


Treasury Announces Further Foreign Tax Credit Relief - Dylan Moroses and Matthew Guerry, Law360 Tax Authority ($):

The U.S. Treasury Department issued a notice Friday announcing temporary relief this year for certain foreign taxes paid but emphasized that the relief will not be available for foreign digital services taxes paid.


The proposed rules also provide a safe harbor under a separate section of the final rules that says foreign taxes aren't income taxes in the U.S. sense if they don't permit the recovery of significant costs and expenses. Under this safe harbor, a disallowance of certain items of significant cost or expense doesn't prevent a foreign tax from satisfying the cost-recovery requirement if no more than 25% of the item is disallowed. 

Related: Eide Bailly International Business Services.


Senate Committee Presses Leon Black on Epstein Tax Advice - Matthew Goldstein, New York Times:

A Senate committee is investigating whether $158 million that the billionaire investor Leon Black paid the disgraced financier Jeffrey Epstein for tax and estate planning services should have been classified as a gift, as part of a broader inquiry into tax-avoidance schemes by ultrawealthy individuals, according to a letter sent by the committee to Mr. Black.


Mr. Black’s lawyers did provide some information about several grantor retained annuity trusts, or GRATs, that were set up in 2006 to enable him to pass on shares in Apollo to his children in a tax-advantaged manner — while letting him continue to earn income from the investment.... Beginning in 2014, Mr. Epstein supposedly helped restructure the trusts to avoid a $1 billion gift and estate tax hit to Mr. Black and his family, according to the Dechert report.

While I have no inside information on Mr. Black's tax planning, I am reasonably confident that he could have gotten a perfectly good estate plan for 1% of what he paid Mr. Epstein.


Mega Millions jackpot hits $820 million: How much the winner will actually get - Iman Palm and Addy Bink, The Hill. "Should you win the Mega Millions jackpot, you’ll choose between a lump sum cash payment (currently estimated at $422 million), or the annuity option, which is one immediate payment followed by 29 annual payments that grow by 5% each time. The same goes for Powerball."

And don't get a referral for your estate planning work from Leon Black. 


The real-life story of the Barbie movie's tax & IRS references - Kay Bell, Don't Mess With Taxes. "But what really caught my attention were the tax remarks by the character portraying Barbie's creator.,, Handler is played by Rhea Perlman (yes, Carla from television's Cheers). In the Greta Gerwig–directed film, Perlman as Handler repeatedly (reportedly, since as I noted I've not yet seen the movie) mentions the Internal Revenue Service and tax evasion."

Let Mattel You about Barbie’s Taxes - Zoe Callaway and Kyle Hulehan, Tax Policy Blog. "Barbie has had over 200 careers, including flight attendant, nurse, engineer, and astronaut, just to name a few, but Barbie’s most challenging role in LA might just be a part she never auditioned for: taxpayer."


IRS Memorandum Makes Clear the Agency's Rejection of Many Extended Supply Chain Justifications for the ERC - Ed Zollars, Current Federal Tax Developments. " The memorandum emphasizes the necessity of documenting the specific government orders that the employer relied upon, demonstrating how these orders created challenges for the supplier. Moreover, it highlights the employer's inability to procure critical and necessary supplies due to these issues and how such circumstances resulted in a qualifying suspension of the employer's own business."

Tax Refund And Return Processing Times Shorten As IRS Works Through Backlog - Kelly Phillips Erb, Forbes. "As of July 8, 2023, the IRS had 1.29 million unprocessed amended individual tax returns—that's an uptick from earlier this year and represents additional returns that were received through the tax season. The agency is processing these returns in the order received, and the current timeframe can be more than 20 weeks. With that in mind, don't file the same return more than once—the pile will only grow larger."


IRS Provides 2023 Transition Relief for Required Minimum Distributions - Parker Tax Pro Library. "This relief applies with respect to any distribution made from a plan between January 1, 2023, and July 31, 2023, to a participant born in 1951 (or that participant's surviving spouse) that would have been an RMD but for the change in the required beginning date under Section 107 of the SECURE 2.0 Act."

No Authority For How To Compute Housing Investment Exit Taxes - Peter Reilly, Forbes. "On June 30, 2023 Judge Peter B. Krupp of the Suffolk County Superior Court in Massachusetts issued a decision that may have far reaching consequences for affordable housing throughout the country."

Why the IRS Sometimes Fails at Being “Taxpayer Friendly” on Low Income Issues - Caleb Smith, Procedurally Taxing. " I’ve argued that there are really two systems of tax administration, and that many of the issues the article raises may be true for the wealthy, but don’t hold up as cleanly for low-income taxpayers. Among those issues, (1) that the notice and comment procedure for low-income issues is not as likely to be 'gamed' as it is for the wealthy, and (2) that the government doesn’t have the same pressures to issue impermissibly taxpayer friendly guidance for low-income issues."


Stolen Money Taxable - Disallowed Theft Loss Rule Stings Scammed Couple - Roger McEowen, Agricultural Law and Taxation Blog. " Casualty and theft losses are deductible regardless of whether the property is used in the trade or business, held for the production of income or held for personal purposes although the rules differ slightly on how the loss is calculated.  But a rule change that took effector for tax years beginning after 2017 and before 2026 has changed the landscape for deducting casualty and theft losses."

Detroit Considers Shift From Property To Land Value Taxation - Aravind Boddupalli, Tax Vox. "Because typical property tax regimes apply equally to the parcel of land and any improvements on it, there is evidence the tax can discourage investment. This is because construction, repair, and maintenance all contribute to higher property values, and subsequently, higher property taxes. This may prompt some landowners to keep their land vacant or let buildings deteriorate."

Henry George, call your office. 


Omaha man sentenced for tax evasion and role in multimillion dollar embezzlement - IRS (defendant name omitted; my emphasis):

Acting United States Attorney Susan T. Lehr announced that Defendant, of Omaha, Nebraska, was sentenced today by United States District Court Judge Brian C. Buescher to 30 months' imprisonment for income tax evasion and 78 months' imprisonment for conspiracy to commit money laundering; these terms of incarceration were ordered to be run concurrently. There is no parole in the federal system. After his release from prison, Defendant will serve a two-year term of supervised release. As part of his sentence Defendant was ordered to pay $5,146,816.51 to victim property owners who were clients of Darland Properties, LLC and $1,954,505.10 in restitution to the Internal Revenue Service.

Defendant also admitted to forfeiture allegations and has forfeited his interest in a 2020 McLaren 600LT Spider, a lake home in Fremont, Nebraska, a home in Queen Creek, Arizona, two commercial properties in Nebraska, nearly $2.2 million in life insurance policy proceeds, approximately $ 74,743.00 in currency, and multiple items of jewelry and luxury watches.


Beginning in approximately 2015, his business partner used his position as the Vice President of Darland Properties to direct repair work to SSI... Partner and Defendant used SSI to fraudulently obtain monies from Darland Properties' clients by causing SSI to bill for work that was not performed, overbilling for work, and causing SSI's inflated invoices to be submitted to insurance companies to obtain insurance proceeds to which Darland Properties' clients were not entitled to... The proceeds were then used to acquire residential and commercial real estate, luxury vehicles, life insurance policies, jewelry, watches, credit card purchases, and loan payments.

But not, it seems, to pay income taxes. 


Just in time for state fair season. It's National Merry Go Round Day!

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