Tax News & Views Spicy Tax Bill Roundup

House Panel Advances Tax Deal With R&D, Child Credits - Asha Glover and David van den Berg, Law360 Tax Authority ($):

The committee approved the Tax Relief for American Families and Workers Act of 2024, or H.R. 7024, by a vote of 40-3. The bill would allow taxpayers to immediately expense domestic research and experimentation costs paid or incurred in 2022 through 2025 rather than requiring them to be deducted over multiple years, as under current law.

The bill would also restore 100% bonus depreciation under Internal Revenue Code Section 168(k) and loosen the cap on deductible interest expenses under Section 163(j). 

Tax Deal Heads to House Floor, But Still Room to Negotiate - Cady Stanton and Doug Sword, Tax Notes ($):

National Taxpayer Advocate Erin Collins said she had concerns that the bill’s provision to cut off ERC claims after January 31 would push bad actors to quickly file while businesses with valid claims may be caught flat-footed. The deadline for ERC claims covering 2021 is April 15, 2025.

“I do believe there’s still legitimate taxpayers who are unaware and have not come in,” Collins said. “And so, that’s the challenge here is there are bad apples, but the good people indirectly are getting harmed. They’re getting harmed because of the delays, and they’re getting harmed if [Congress cuts] off the date . . . and they think they have another year. That’s going to be a challenge.”

What’s Next for the Tax Bill? Three Questions After Panel Markup - Samantha Handler, Bloomberg ($):

Some lawmakers have said the bill will need to pass under suspension of the rules, a procedure that prohibits amendments and requires a two-thirds supermajority. If House leadership were to bring up the legislation under regular order, there would be more opportunities for Democrats seeking more on the child tax credit or Republicans seeking a hike to the SALT cap to get their priorities in the bill.

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The bill needs at least 60 votes in the Senate to pass, so [House Ways & Means Ranking Democrat Richard] Neal said Friday he expects more changes will come to get enough of the Senate GOP on board. That also opens another opportunity for Democrats to keep pushing for more on the child tax credit, Neal said. The Senate Finance Committee also could hold a markup of the legislation, as some Republicans have asked for.

While the House is in recess the week of Jan. 22, the Senate will be in session.

Tax Bill Advances from House Committee, But Fate Unclear - Jay Heflin, Eide Bailly:

The benefits in the bill are expected to cost $77.3 billion. To offset this cost, the bill proposes to modify rules associated with the Employee Retention Tax Credit (ERTC).

The legislation proposes to accelerate the ERTC filing deadline to January 31, 2024, and penalizes ERTC promoters, according to the Joint Committee on Taxation...

According to conversations with insiders, the Senate is in wait-and-see-mode for how it will handle the tax bill. The options vary, from doing nothing with the bill, allowing committee hearings on it, or placing it on the floor without vetting it.

More coverage:

What’s in the New Tax Deal? - Alan Rappeport and Kayla Guo, New York Times.

Tax bill agreed to by House, Senate committees, but faces uncertain future in full Congress - Kay Bell, Don't Mess With Taxes.

House panel advances tax deal with resounding bipartisan vote - Tobias Burns, The Hill.

Strong bipartisan showing in first test of tax deal’s support - Caitlin Reilly, Roll Call. 

House Ways & Means Committee Advances Proposed Compromise Extenders Bill - Ed Zollars, Current Federal Tax Developments.

One Tax Deal Advances In House As Republicans Introduce New Tax Proposal - Kelly Phillips Erb, Forbes ($).

If you are curious how passing a bill affecting the past year during filing season will work out:

Tax Deal Puts a Damper on Filing Season Optimism - Jonathan Curry, Tax Notes ($):

The $79 billion tax package working its way through Congress threatens to set the IRS back just as it was turning the corner on its filing season woes, according to the head of the IRS's Taxpayer Advocate Service.

The 2024 filing season is set to begin January 29, but the tax deal — which House taxwriters advanced out of committee January 19 — has no chance of being enacted before the tax returns start flooding in. Thus, the IRS will likely have to make adjustments during the filing season to implement the law, National Taxpayer Advocate Erin Collins said January 20 at the American Bar Association Section of Taxation meeting.

Expanded Child Tax Credit Portends Refund Delays, Other IRS Woes - Erin Slowey, Bloomberg:

An increased child tax credit that is inching closer to passage in Congress could take the IRS weeks to implement, delaying refunds and leading to a spike in phone calls in the middle of filing season, National Taxpayer Advocate Erin Collins said.

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Collins said she is pushing for Congress to write into the law that the IRS will fix the credit after returns are filed and taxpayers don’t have to file amended returns—one area where the IRS is still struggling with a backlog, according to the NTA report to Congress earlier this month.

IRS Struggles to Sort Legitimate From Bogus Tax-Credit Claims - Richard Rubin, Wall Street Journal:

The Internal Revenue Service says it is inundated with bogus claims for the pandemic-era employee-retention tax credit. The IRS also says it has valid claims from employers that need the money. 

The problem: They are all in the same pile.

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The IRS appears several months away from digging out of the problem, its latest difficulty in administering the credit known as the ERC, which Congress created to encourage employers to keep workers attached to their jobs during the pandemic.

New Treasury Reporting Rules May Be A Shock To Many Cos. - Sarah Jarvis, Law360 Tax Authority. "FinCEN has noted that beneficial ownership information refers to identifying information about the individuals who directly or indirectly control a company. Reporting companies have to report the name, date of birth and residential address of each of their beneficial owners and provide identification such as a passport or driver's license."

Related: Corporate Transparency Act Mandates Stricter Federal Disclosures Alerts.

New client, BOI scams proliferating as tax season 2024 begins - Kay Bell, Don't Mess With Taxes. 

 A new business reporting law as part of the Corporate Transparency Act took effect on Jan. 1. This beneficial ownership information, or BOI, reporting requirement was created to help U.S. officials stop bad actors from hiding ill-gotten gains through shell companies or other opaque ownership structures.

The BOI requirement also is now the newest scam vehicle.

What the IRS Knows About Your Online Sales This Year - Laura Saunders, Wall Street Journal: "The IRS announced in November that the threshold for online platforms to report potentially taxable income on Form 1099-K for 2023 is once again $20,000 of gross income and 200 transactions. Say someone bought six tickets to a concert for $250 each last year and resold four of them for $1,000 each through a reselling platform. The platform doesn’t need to report the seller’s $4,000 of income to the IRS."

Understanding Iowa's New Tax Rules for Retired Farmers - Kristine Tidgren, Ag Docket. "Beginning in 2023, certain “retirement income” for those who are disabled or 55 years of age or older is excluded from Iowa taxable income. Iowa Code § 422.7(19). The law also exempts retirement income received by surviving spouses. Prior law exempted retirement income only in an amount up to $6,000 for singles, and $12,000 for those who are married filing jointly."

Programming note for Iowa readers: I will be co-presenter with Iowa Department of Revenue personnel on a webinar Wednesday discussing the Iowa Pass-Through Entity Tax. Register here.

Prepare for Another CBO Shocker - Martin Sullivan, Tax Notes ($):

Using the preview of its new economic projections released in December 2023, we estimate that the CBO will project interest cost on the federal debt to be about 3.3 percent of GDP in 2025. That’s about $950 billion. As recently as 2021, actual interest cost as a percentage of GDP was 1.6 percent. That was about $350 billion. (CBO, “CBO’s Current View of the Economy From 2023 to 2025” (Dec. 15, 2023).)

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And if our speculation about future interest costs is correct, our level of already skyrocketing deficit pain will ascend even higher.

Will that be a catalyst for meaningful fiscal restraint by the federal government? Tax increases? Cuts to Medicare and Social Security? Perhaps as a preliminary step we could form a bipartisan commission — like that headed in 2010 by Alan Simpson and Erskine Bowles — to propose deficit reduction plans. Unfortunately, despite the clearly more dire financial condition of the federal government since 2010, our increasingly partisan leaders are showing less willingness than ever to seek the kind of compromise that would be necessary for long-term deficit reduction.

Congress Should Fix the Nanny Tax - Adam Michel, Liberty Taxed:

If a family pays a household worker—nanny, maid, gardener—$2,700 or more in 2024, they are considered “employers,” and the individual providing the service is an “employee.” That threshold is easily surpassed by hiring a babysitter for four weeks a year at the DC minimum wage of $17 per hour.

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These rules are ostensibly in place to protect the household employees. Instead, their cost and complexity push many parents and workers into the grey economy—often unknowingly opening them up to legal liabilities and tax penalties. The rules also incentivize the use of less flexible third‐party service providers and institutional childcare that raises costs for families and lowers pay for providers.

Trump Vows To “Always Protect Social Security” But What Does He Mean? - Howard Gleckman, Tax Policy Center:

As you think about Trump’s words, remember the status quo. Social Security’s trustees currently predict the program’s retirement trust fund will be insolvent beginning in 2033. The actual date will depend on demographics and the state of the economy. But the bottom line has been clear for many years: Barring congressional action, Social Security will be unable to pay retirees their full promised benefits within a decade.

If Congress does not enact a massive tax increase or borrow trillions of dollars more, benefits would have to be reduced across-the-board by about 23 percent. Think of it this way: Social Security’s average monthly benefit this year is $1,907. A 23 percent reduction would cut that benefit by $438 to just $1,469.

Stiff Sentences In Conservation Easement Criminal Case - Reactions - Peter Reilly, Forbes. "The big news last week for those who follow the controversy around syndicated conservation easements (SCE) is the extremely harsh sentences handed down by Judge Timothy Batten to CPA Jack Fisher and lawyer James Sinnott. Fisher got 25 years and Sinnott 23 years. There is also restitution to be paid: $455,855,755 from Fisher and $443,760,035 from Sinnott. Most of the coverage so far has been based on this DOJ press release. This piece will take a somewhat deeper dive giving you some background and reactions."

I am one of the reactors.

Sioux Falls man charged with preparation of false tax returns and wire fraud - IRS (Defendant name omitted:

The Indictment alleges that Defendant is the owner of ACU Tax Services. Between Feb. 2, 2018, and April 2, 2019, Defendant prepared false U.S. Individual Income Tax Returns and submitted them to the IRS for several taxpayers. Those returns were false in that the returns represented that the taxpayers were entitled to claim deductions when, in fact, they were not. Defendant submitted those tax returns electronically and caused fraudulently-inflated refunds, which unjustly enriched Defendant.</p

I know tax forms can be intimidating, but read them. If something doesn't look right, ask questions. This preparer's clients now have a South Dakota-sized IRS headache.

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