Tax News & Views Blows the Nerd Whistle Roundup

By Joe Kristan, CPA
August 23, 2023

Whistleblower Receives $11.9 Million Award From IRS - Mary Kathrine Browne, Tax Notes ($):

The IRS agreed to pay a whistleblower a 22 percent award for providing the government with information that helped recover back taxes and penalties from a Fortune 500 company.


Since 2006, the IRS Whistleblower Office has recovered over $6.6 billion from whistleblower submissions and awarded whistleblowers with $1.1 billion, according to its most recent annual report. The program has struggled in recent years with a downward trend of issued awards starting in fiscal 2019.

Tipster Gets $12M For Tax Dirt On Fortune 500 Co., Attys Say - Anna Scott Farrell, Law360 Tax Authority ($). "The tipster is 'a knowledgeable, informed insider' with a 'detailed awareness of the relevant tax laws,' the lawyers said. The whistleblower provided the IRS with original information about specific instances in which the company failed to pay tax that led to the recovery of the company's liability, which included penalties and interest, they said. The information involved open tax years, according to the lawyers."

IRS Whistleblower Gets $11.9 Million in Fortune 500 Tax Recovery - Samantha Handler, Bloomberg ($). "The IRS initially decided to pay the whistleblower an award totaling 15% of the amount collected but boosted the award to 22% after attorneys provided more information on how the person made 'significant contributions,' Stephen M. Kohn of the Tax Whistleblower Attorney Group, who also represented the whistleblower, said in the release."


Endgame for Tax Legislation Extra Murky as Budget Impasses Loom - Doug Sword, Tax Notes ($):

As for taxes, everybody on Capitol Hill has known what the building blocks of the next tax extenders package would probably look like for at least the last year.

But it’s the when, how, and whether to pay for it that are the big unknowns. 


For those who aren’t tired of the repetition, the basic elements are some level of expansion of the child tax credit and a retroactive renewal of full research and development expensing. Sweeteners for Republicans that are less bipartisanly popular might include rollbacks of two other business tax breaks — bonus depreciation and net interest expensing — eroded by the Tax Cuts and Jobs Act.

The article outlines procedural hurdles that stand in the way of movement, including the attempt by the House to pass 12 separate budget bills instead of a big "omnibus" bill that a tax package could ride in on. The narrow partisan split in each house of a divided Congress, and the demands of militant members of each party, make things extra murky. 


Tax Court Orders IRS To Investigate Penalty Doc Backdating - Anna Scott Farrell, Law360 Tax Authority ($):

U.S. Tax Court judge ordered the IRS on Tuesday to find out when its employees, including from the Office of Chief Counsel, became aware that a penalty document in a $38 million easement case had been backdated.


Agency lawyers defended themselves, saying in a filing June 23 that they didn't act in bad faith and had effectively told the court five days after they found out the backdating by saying in a court filing that the IRS lacked sufficient information about the true date of the penalty document. The lawyers admitted, however, that they "should have been clearer."


ERC Claims Put Taxpayer Advocate Reps in Tough Spots = Jonathan Curry, Tax Notes ($). "The IRS is being flooded with amended returns claiming the ERC, thanks to sometimes overhyped promotion of the COVID-19 pandemic relief program. As a result, many claims coming into the IRS, and by extension, local taxpayer advocate offices, are ineligible. But some taxpayers are intent on pressing on anyway, and TAS employees can’t stop them from doing so, Gilbert J. Martinez, a senior program analyst with TAS, said August 22 at a conference sponsored by the Texas Society of CPAs."


The Moves Wealthy Families Are Making to Skirt Estate Taxes - Ashlea Ebeling, Wall Street Journal:

The Trump tax cuts of 2017 temporarily doubled the base amount individuals could give away without paying estate taxes to $10 million. These cuts are due to expire in 2026, pushing wealthy Americans to move fast. 


For American families with a net worth over $10 million, there is an urgency to consider a range of moves before the tax cuts expire, financial advisers said. The options range from straightforward gifts to heirs to setting up a complicated trust to protect wealth over generations. Otherwise, the only surefire way to avoid higher taxes is to die before the tax cuts expire.

Related: Estate and Gift Tax Planning Considerations for Estates between $6 - $12 Million.


The FATCA Data Haystack Remains Just That - Amanda Athanasiou, Tax Notes ($):

“If you wonder [why the] 'IRS has all this FATCA information they’ve not been able to use,' we’re waiting for the funding,” then-IRS Commissioner Charles Rettig said during a 2022 policy discussion hosted by Tax Analysts. FATCA’s implementing legislation did not provide implementation funding. But practitioners say FATCA data is not going unused.

“They do use it for purposes of audits and soft letters and denying voluntary disclosures,” Bryan Skarlatos of Kostelanetz LLP said. “When you go into a civil audit or a criminal investigation that could involve unreported foreign assets, you have to take into account the reality that there’s a very good chance the IRS has the info on the foreign account.”

While it's not clear what use IRS makes of the FATCA data, it is clear that FATCA complicates the financial lives of Americans overseas - the vast majority of whom are just trying to commit personal finance, not tax crimes. 

Related: Eide Bailly Global Mobility Services.


If you found gold coins, meteorites or cash stuffed in a piano, the tax man wants a piece - Greg Iacurci, CNBC."Its taxability is due to a basic premise of tax law: Income is taxable unless the Internal Revenue Code excludes it from taxation or allows for a tax deferral, said Troy Lewis, an associate professor of accounting and tax at Brigham Young University."


ID theft scams & hacks continue in the tax world (& beyond) - Kay Bell, Don't Mess With Taxes. "The IRS and its Security Summit partners said today that they continue to see a steady stream of attacks on tax offices. Just like this summer heat, the surge of summer tax schemes just won't let up."

Lawsuits Against Google And Meta Allege Websites Are Spying On Taxpayers - Kelly Phillips Erb, Forbes. "According to the complaint, Google Analytics' tracking pixel made the wiretapping possible. If you own a website, you're familiar with Google Analytics. At its most basic, it helps you measure traffic to the site. But it's more sophisticated than a simple counter—it can collect information about how users interact with the features on a website."


IRS Delays Hawaii Wildfire Victims Tax Filing & Payments To Feb. 15 - Robert Wood, Forbes. "The IRS has announced expansive tax relief for Hawaii wildfire victims in Maui and Hawaii counties. These taxpayers now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments."

IRS Provides Guidance on Electronic Filing Exemptions, Waivers, and Rejections - Parker Tax Pro Library. "In Notice 2023-60, the IRS advised that filers for whom the technology required to file electronically conflicts with their religious beliefs should notify the IRS that they qualify for a religious exemption in advance of filing returns and other documents by filing a Form 8508, Application for Waiver from Electronic Filing of Information Returns."


The Future Of Commercial Real Estate And Big City Budgets - Thomas Brosy, TaxVox. "Total property tax revenue accounts for 30 percent of local general revenue, but the pain from this transition will likely be concentrated in major cities with big commercial districts."

Why Italy’s Latest Windfall Profits Tax Is Still Bad Tax Policy - Cristina Enache, Tax Policy Blog. "Perhaps the most important argument in this case is that for the majority of banks, there is no 'windfall' to tax."

Trump vows massive new tariffs if elected, risking global economic war - Jeff Stein, Washington Post:

“I think we should have a ring around the collar” of the U.S. economy, Trump said in an interview with Kudlow on Fox Business on Thursday. “When companies come in and they dump their products in the United States, they should pay, automatically, let’s say a 10 percent tax … I do like the 10 percent for everybody.”


Economists of both parties said Trump’s tariff proposal is extremely dangerous.

I remember the "ring around the collar" TV ads. The ring was a bad thing.


Texas man who earned millions working overseas pleads guilty to tax evasion - IRS (Defendant name omitted):

According to court documents and statements made in court, from 2013 to 2018, Defendant worked in the United Arab Emirates (UAE) and Qatar, earning approximately $4,783,031 in income that he deposited into foreign bank accounts. From2013 through 2017, Defendant filed tax returns falsely reporting that his income was only approximately $100,000 each year, an amount near or below the Foreign Earned Income (FEI) exclusion, which allows a U.S. citizen who lives and works in a foreign country for the majority of a year to exclude a portion of their income earned outside the United States from their taxable income. Defendant did not file a return for 2018. As a result, Defendant caused a tax loss to the IRS of $1,169,348.

After Internal Revenue Service Criminal Investigation (CI) Special Agents interviewed Defendant, he used an internet application to alter his employment contract and payroll documents to make them appear as if Defendant's former employer was responsible for submitting his tax returns and paying the corresponding taxes due. Defendant then caused his attorneys to provide the fraudulent documents he had created to the Justice Department's Tax Division and the IRS. After investigators asked a witness about the internet application Defendant used to create the phony documents, Defendant attempted to delete the documents from his account.

This is likely a FATCA catch. Foreign account privacy isn't what it used to be.


9th Circ. Affirms $8.4M Penalty For Timeshare Tax Shelter - Kat Lucero, Law360 Tax Authority ($), shelter promoter name omitted):

A Montana lawyer who set up a nonprofit to facilitate the donation of unwanted timeshares is liable for more than $8.4 million in penalties for promoting an abusive tax shelter that overstated the value of the vacation properties, the Ninth Circuit affirmed Thursday.

[The attorney] used his nonprofit, Donate for a Cause, to get people to donate their shared ownership in a vacation home and falsely claim to them that they would get a charitable contribution tax deduction based on the full appraised amount of the timeshare, the three-judge panel said in the unanimous published opinion.

This is a notorious example of a too-good-to-be-true tax scheme. Participants would contribute unwanted time-shares to the non-profit and claimed a charitable deduction based on appraisals provided by the non-profit organizer. The non-profit would then sell the time shares on eBay for a small fraction of the appraised amount. From a Justice Department Press Release:

 For example, the complaint alleges that one customer transferred a timeshare to Donate for a Cause that had originally been purchased for $10,597.50.  Donate for a Cause used eBay’s charity platform to sell that timeshare to a third party for only $81, yet [the attorney] appraised that timeshare for $8,740, the complaint states.

$8.4 million will buy a lot of eBay timeshares.

Links: Ninth Circuit Opinion; District Court Opinion.


I hardly even have to look. It's Find Your Inner Nerd Day

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