Tax News & Views Could Write a Book About ERC Holdups Roundup

Joe Kristan, CPA
September 6, 2023

IRS Slows Refund Payments for Pandemic-Era Tax Break - Richard Rubin and Ruth Simon, Wall Street Journal:

The Internal Revenue Service has slowed the payment of tax refunds to employers under a pandemic-era program, as the agency struggles to combat what it says are fraudulent and overstated claims for the employee-retention tax credit. 


The announcement marks the government’s biggest step to rein in the cottage industry of employee-retention tax-credit advisers that has emerged in the past few years. The IRS is likely facing years of disputes and litigation because it is expected to try to claw back some refunds it has issued.

The article notes that $220 billion of ERC was probably paid through July of this year. "That is roughly triple the original congressional estimates." 


CP 283-C penalty notices mistakenly sent out on timely filed Forms 8955-SSA - IRS:

Plan sponsors that filed timely and complete Forms 8955-SSA do not need to respond to penalty notices dated before September 1, 2023.

As a result of a programming issue in the IRS system that receives Forms 8955-SSA, the IRS sent out CP 283-C penalty notices to plan sponsors who timely filed complete 2022 Forms 8955-SSA. The notices indicate a late or incomplete filing of Form 8955-SSA.

Plan sponsors that timely filed a complete return do not need to respond to penalty notices dated prior to September 1, 2023. The IRS has resolved the programming issue and is updating its records to reflect the timely and complete filings.


IRS Faced Setbacks With Hiring Revenue Agents, Watchdog Finds - Lauren Loricchio, Tax Notes ($):

Revenue agents in the IRS’s Small Business/Self-Employed and Large Business and International divisions “play an important role in examining high-income taxpayers,” but the IRS has struggled to hire those employees, according to the report.

By the end of March 2023, SB/SE and LB&I had hired 19 and 15 revenue agents, respectively, although they had set targets for hiring 1,788 and 2,045 agents in fiscal 2023.

Well, March is only halfway through the fiscal year, so they have plenty of time to catch up. 

The report mentions that the IRS is look to train this 44-person army of agents through a new "IRS University":

IRS University (IRSU) is not ready to fully function as the IRS intended

...We asked the IRS what the origins of the “university” model were and whether other Federal agencies had experience with it. The IRS explained that the IRSU concept stemmed from the IRS's research, which included interviews of learning professionals from different Government and private entities, and consideration of case studies. Based on the research and data analyzed, the IRS's Comprehensive Training Strategy team developed the concept for a centralized learning model, which was supported by both the IRS Human Capital Officer and the IRS Commissioner. IRS management stated that their goal is for the IRSU to build on and unify existing training and development “communities” and organize training curricula around structured yet flexible career paths.

Based on this, it seems the Army of Agents armed with AK-15s won't be ready for action for awhile. 

IRS Must Alter Training to Target Rich Taxpayers, Watchdog Says - Erin Slowey, Bloomberg ($). "TIGTA made six recommendations to revise how the IRS plans to target individual high-income earners over $400,000 who may be delinquent on taxes and use abusive tax schemes."

One of the recommendations: "Ensure that revenue agent new hires, responsible for income tax examinations, receive Form 1040 individual tax return training." One would hope so.

Link: The IRS Needs to Leverage the Most Effective Training for Revenue Agents Examining High-Income Taxpayers (TIGTA).


Ariz. Pauses Plan For $84M In Refunds From Voided Tax - Sanjay Talwani, Law360 Tax Authority ($). "The Arizona Department of Revenue said it cannot process court-ordered refund claims worth about $84 million related to an invalidated Pinal County transportation tax because a final decision on the funds' distribution is needed from the Pinal Regional Transportation Authority."


GOP Concerns About Tax-Exempt Groups May Prompt Probes, Guidance - Samantha Handler, Bloomberg ($):

Ways and Means Chair Jason Smith (R-Mo.) and the committee’s oversight subcommittee Chair David Schweikert (R-Ariz.) requested information from the public in August on rules regarding 501(c)(3) and 501(c)(4) entities, citing reports about alleged foreign funds flowing through the organizations to influence US elections. Comments are due Sept. 8.


Some tax professionals and other observers hope that the increased interest in 501(c)(4) groups could lead to elimination of an appropriations provision that’s blocked the IRS from issuing guidance. Either way, more hearings and letters on the issue are expected, but likely to be partisan as the GOP focuses solely on Democratic groups, said Chris Armstrong, a partner at Holland & Knight and a former Republican staffer on the House Ways and Means and Senate Finance committees.

Updated Guidance on EO Political Activity Needed, Attorneys Say - Fred Stokeld, Tax Notes ($):

“Definitive guidance regarding the amount of political campaign intervention and other nonexempt activities a section 501(c)(4) organization may engage in is necessary for these organizations to be able to operate in compliance with the law,” the attorneys wrote. “If the IRS is going to change the standards that it applies, that change should occur in public guidance, not in the offices and conference rooms of 1100 Constitution Avenue.”

Related: How to Protect your Tax-Exempt Status.


Nebraska DOR Issues Guidance on Passthrough Entity Tax Election - Emily Hollingsworth, Tax Notes ($). "'An eligible partnership or S corporation may now file an election with the Nebraska Department of Revenue to be subject to Nebraska income tax for tax years beginning on and after January 1, 2018,' the DOR said in a September 1 information update, with links to forms a passthrough must use to elect to pay tax at the entity level for tax years 2018 through 2022 and for tax years after 2022. Links are also provided for schedules to be used for determining a partner's share of the entity tax and a shareholder's share of the tax."


The road ahead - Toby Eckert, Politico:

House GOP leaders had hoped to bring their tax cut package — passed by Ways and Means back in June — to the floor before the August recess. But they ran into a wall of opposition from a handful of members from high-tax states who want some relief from the $10,000 cap on sate and local tax deductions imposed by the GOP’s 2017 tax law.

Republican leaders will pick up where they left off, trying to find a way to resolve the impasse without causing a revolt by other factions in the GOP caucus.


Being the boss tax basics - Kay Bell, Don't Mess With Taxes. "The U.S. tax system is pay as you earn. That's taken care of for most taxpayers through paycheck withholding. But when you run your own business, you must make sure the associated income tax is paid in a timely manner. For self-employed people, that's generally done by making estimated tax payments."

An IRS Identity Protection Unit Saga: Part 2 - Russ Fox, Taxable Talk. "The 2020 return has not posted to the main IRS system for processing; the issue is that even though everything has been entered into the system by the IP unit, it’s stuck."


New York Now Has The Highest Cigarette Tax As Rates Stay Flat In Most States - Kelly Phillips Erb, Forbes. "As of September 1, New York State has the highest cigarette tax in the country. The cigarette tax has increased by $1.00 per pack of 20 cigarettes, from $4.35 to $5.35. That brings a pack of cigarettes to somewhere around $10 per pack in the state."

Lesson From The Tax Court: Cannot Use CDP To Contest Trust Fund Recovery Penalty - Bryan Camp, TaxProf Blog. "From the taxpayer’s perspective, dealing with payroll taxes is a real pain.  It’s all too easy to get the tax accounting and quarterly reporting misaligned with the IRS, and resolving those disputes takes time and energy."

The U.S. Expat’s Guide to Form 2555 and Foreign Earned Income - Olivier Wagner, 1040Abroad. "Form 2555, known as the Foreign Earned Income Exclusion form, is a critical U.S. tax form for American citizens or resident aliens residing in a foreign country. This form allows you to exclude a specific amount of your foreign earned income from federal income tax. For the calendar year 2023, the maximum exclusion is $120,000. By filing Form 2555, you can significantly reduce or even eliminate your U.S. tax liability on foreign income, making it an essential tool for U.S. expats."

Related: Eide Bailly Global Mobility Services


Trump’s Previous Tariffs Foreshadow the Economic Harm of Latest 10% Tariff Proposal - Scott Hodge, Tax Foundation. "Taken together, the two studies suggest that imposing a 10 percent across-the-board tariff on imported goods would not improve the competitiveness of domestic producers but would raise prices on consumers and complementary goods and be costly for every job saved or created."

A European Vacation And Tax Appreciation - Renu Zaretsky, TaxVox. "Amsterdam drivers pay a value-added tax (VAT) of 21 percent on their car purchases and a one-time tax dependent on the vehicle’s CO2 emissions. Annually, car owners pay a road tax based on the vehicle’s weight, type, and fuel need. Our ride-share driver, for example, reported paying $300 a year for his sedan. The Netherlands levies the highest fuel tax in the European Union: €0.82 per liter or $3.69 per gallon."


Taylor Swift’s principle of doing DD - Leonard Wagenaar, Leonard's Tax Posts. "As Matt Levine pointed out (, she didn’t actually ask questions on the right risks: the risks that ultimately became fatal to FTX. But if a DD report comes back with ten major issues that are all individually manageable, you should read the writing on the wall and conclude that it’s a pretty high risk partnership."


Co-owner of media brokerage firm pleads guilty to filing a false tax return - IRS (Defendant name removed; my emphasis.):

According to court documents and statements made in court, Defendant, now a resident of Cody, Wyoming, co-owned a media brokerage firm with her husband and hired an accounting firm to prepare business and personal tax returns for 2012 through 2014. Despite receiving the completed and accurate tax returns from the accounting firm, Defendant did not file them with the IRS. After the IRS contacted Defendant and requested that she file the unfiled returns, Defendant lied to the IRS, claiming that her accounting firm had timely filed the returns and that she would provide copies of those returns.

Defendant did not provide copies of the accurate returns that had in fact been prepared by her accounting firm. Instead, Defendant doctored the business returns, removing $10,000,000 in gross receipts earned by her brokerage firm, and altered the personal returns by removing over $9,500,000 in income that she and her husband had earned from 2012 through 2014. Defendant also falsely backdated her signature on each tax return to make it appear as if the returns had been timely signed and mailed these falsely doctored documents to the IRS, hoping to evade paying the full amount of taxes she owed.

In addition, Defendant failed to timely file business and individual returns for 2015, which she had also hired the accounting firm to prepare, nor did she pay the tax due and owing for the individual return.

In fairness, it's not easy to backdate a signature other than falsely.

The taxpayer might not have thought this through very well. She went through the time and expense of having returns - and then she sat on them. When you stop filing returns, the IRS computers notice that - so she pretty much invited the IRS to come around. And with the IRS already sniffing around, she gave them different returns leaving out millions of dollars of income. Lots can go wrong that way.

The taxpayer now faces up to three years in prison, plus paying the tax, plus likely civil fraud penalties of 75 percent of the tax, plus interest. 

The moral? When your preparer sends you your returns, and they have the right numbers, file them.


Sorry, did you say something, I was reading. It's National Read a Book Day!

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