Tax News & Views Happy Tax Season Roundup

2024 tax filing season starts as IRS begins accepting tax returns today; taxpayer help expands this year with more in-person hours, better service, improved tools – IRS:

The Internal Revenue Service successfully opened the 2024 tax season today by accepting and processing federal individual tax returns as the agency continues focusing on expanding options to help taxpayers.

The IRS expects more than 146 million individual tax returns for 2023 to be filed this filing season, which has a deadline of April 15, 2024.

With the start of the 2024 filing season, the IRS will be extending hours of service in nearly 250 Taxpayer Assistance Centers (TACs) across the country, providing additional help to people. The IRS will also be working to continue improvements on its phone service as well as expanding online tools. The Where’s My Refund? tool on IRS.gov will add more details for taxpayers checking on the status of their tax refund.

What the 2023-24 Tax Brackets and Income-Tax Rates Mean for Your Money – Ashlea Ebeling, Wall Street Journal ($):

The tax code has seven income-tax brackets for individuals that range from 10% to 37%. The 10% rate takes effect at the first dollar of taxable income, after benefits such as the standard deduction are applied, and each tax rate applies to income in that bracket. The current rates and brackets were set by the 2017 tax overhaul and expire at the end of 2025. If Congress doesn’t make changes, the top rate will return to 39.6% in 2026.

Key 2024 filing season dates:

• January 12: IRS Free File opens.
• January 16: Due date for 2023 fourth quarter estimated tax payments.
• January 29: Filing season start date for individual tax returns.
• April 15: Due date to file 2023 tax return or to request an extension for most of the nation.
• April 17: Due date for Maine and Massachusetts.
• October 15: Due date for extension filers.

2024 tax refunds could be larger than last year due to new IRS brackets. Here's what to expect – Aimee Picchi, CBS News:

Many Americans got a shock last year when the expiration of pandemic-era federal benefits resulted in their receiving a smaller tax refund check. That unwelcome surprise raises the question of what taxpayers can expect this year.

The good news: People could see bigger refunds this year, with some potentially receiving 10% more than a year earlier, according to Mark Steber, chief tax information officer at Jackson Hewitt.

Inflation adjustments to tax rules is the culprit behind larger refunds.

Ironically, inflation could ultimately benefit taxpayers this year, tax experts say. That's because the IRS adjusted many of its provisions in 2023 for inflation, pushing the standard deduction to a more generous level and raising its tax brackets by 7.1% — a historically large adjustment.

A silver lining from high mortgage interest rates: Bigger deductions on this year’s taxes – Rob Wile and Brian Cheung, NBC News:

Home mortgage rates have soared during the economic recovery from the pandemic, but the swelling ranks of homeowners facing steep interest payments this year may find some relief based on how they file their tax returns.

Thanks to the mortgage interest deduction, filers who choose to itemize their tax returns rather than take the standard deduction can deduct the entirety of their home interest payments in addition to taking other write-offs.

“Entirety”? There are limitations. The latest limitation came from the Tax Cuts and Jobs Act (TCJA) enacted in 2017.

The home mortgage interest deduction under the TCJA - Sonja E. Pippin, Ph.D., CPA, Journal of Accountancy:

The TCJA reduced the acquisition indebtedness ceiling to $750,000 ($375,000 for married couples filing separately) and eliminated any interest deduction for home equity indebtedness (Sec. 163(h)(3)(F)(i), as amended by Section 11043(a) of the TCJA).

Still, bigger interest payments do equal bigger deductions - up to a point.

There is another side to inflation adjustments:

BOI reporting and unauthorized disclosure penalties increased – Martha Waggoner, The Tax Adviser:

Inflation adjustments have significantly increased the civil monetary penalties for violating the beneficial ownership information (BOI) reporting rules and for the unauthorized disclosure or use of BOI. The rules requiring the reporting of BOI just went into effect this month.

The penalties are included for the first time in the annual final rule issued by the Financial Crimes Enforcement Network (FinCEN) that provides the list of inflation adjustments of civil monetary penalties within FinCEN's jurisdiction. The increases, which were posted in the Federal Register, are required under the Federal Civil Penalties Inflation Adjustment Act of 1990, P.L. 101-410, as amended.

Most Americans feel they pay too much in taxes, AP-NORC poll finds – Cora Lewis and Linley Sanders, Associated Press.

A majority of taxpayers feel they pay too much in taxes, with many saying that they receive a poor value in return, according to a new poll from the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research.

Two-thirds of U.S. taxpayers say they spend “too much” on federal income taxes, as tax season begins. About 7 in 10 say the same about local property taxes, while roughly 6 in 10 feel that way about state sales tax. Generally speaking, Republicans are more likely than Democrats to view taxes as unfair, to say they are paying too much in taxes, and to see taxes as a poor value.

Houston, we have a PR problem:

The poll found that few U.S. adults have a high level of confidence that the institutions that ultimately use their tax dollars — whether the federal government or local school districts — spend those taxes in the best interest of “people like them.” But people tend to trust governing bodies closer to home with their tax dollars slightly more: 16% are extremely or very confident in their local school district, compared to 6% for the federal government.

Fact Checker: Biden keeps saying billionaires pay 8 percent in taxes. Not really. – Glenn Kessler, Washington Post:

There are some “facts” that Biden likes to recite in almost every speech. In the past year, in more than 30 appearances, the president has referred to billionaires paying about 8 percent in federal income taxes. He said it in his last State of the Union address, and odds are he will say it again when he addresses Congress in March.

The line is a key part of his argument to impose a minimum 25 percent tax on all taxpayers with wealth greater than $100 million. That would raise about $360 billion over 10 years, the administration estimates.

But if you check Treasury Department calculations for what the richest Americans already pay in taxes, you would see that the top 1 percent pay in excess of 20 percent in income taxes and more than 30 percent in all federal taxes... 

White House document:

What Is the Average Federal Individual Income Tax Rate on the Wealthiest Americans? – The White House:

In our primary analysis, we estimate an average Federal individual income tax rate of 8.2 percent for the period 2010-2018... The President’s proposals mitigate two key contributors to the low estimated rate: preferential tax rates on capital gains and dividend income, and wealthy families’ ability to avoid paying income tax on capital gains through a provision known as stepped-up basis.

Digital asset question added to more forms for 2023 tax returns – Martha Waggoner, The Tax Adviser:

The IRS has added a question about income from digital assets to four forms covering partnerships, corporations, S corporations, and estates and trusts for 2023 tax returns...

The question appears at the top of Forms 1040, U.S. Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return. For tax year 2023 returns, it was added to Forms 1041, U.S. Income Tax Return for Estates and Trusts; 1065, U.S. Return of Partnership Income; 1120, U.S. Corporation Income Tax Return; and 1120-S, U.S. Income Tax Return for an S Corporation.

All taxpayers must answer the question. If they answer "yes," then they must report all income related to digital asset transactions, including any that were sold, exchanged, or transferred as a capital asset in 2023 or digital assets that were given as a gift. 

How to Get the Biggest Tax Break for Buying an EV – Ashlea Ebeling, Wall Street Journal ($):

The toughest roads to navigate in an electric vehicle may be the forking paths of the tax code.

EV buyers can get up to $7,500 in tax savings right at the dealership, under changes to the law that went into effect Jan. 1. By contrast those who drove an EV off the lot last year have to claim the tax credit on their 2023 tax return, which is due April 15 for most taxpayers. 

Whether you are eligible for this credit—and how much—depends on a range of factors including the vehicle’s price, where it was manufactured, the date of purchase and your income. Don’t assume you’ll get it for buying any new or old EV.

Tax refunds could be even larger if Congress can get its act together and pass tax legislation that was recently approved by the House tax-writers. 

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

The House Ways and Means Committee on January 19th approved tax legislation, but its fate moving forward is unclear.  

Today's vote was 40-3 and support for passage was bipartisan. The bill proposes to do the following:

• Full expensing of domestic (not foreign) research and development costs for tax years 2022 thru 2025
• Up Bonus Depreciation to 100% for property placed in service in 2022 thru 2025
• Expand the 163(j)-interest deduction (from EBIT to EBITDA) for certain transactions from 2022 thru 2025
• Increase the maximum amount a taxpayer may expense under Section 179
• Increase the threshold for 1099 (NEC and MISC.) reporting, from $600 to $1,000
• Increase the State housing credit ceiling for calendar years 2023, 2024, and 2025
• Prevent double taxation regarding certain transactions between the U.S. and Taiwan
• Extend the rules for treatment of certain disaster-related personal casualty losses
• Disaster relief for East Palestine
• Increase the Child Tax Credit

Bipartisan Tax Break Bill Faces Rocky Road To Passage – Asha Glover, Law360 Tax Authority ($):

A bipartisan tax bill that quickly cleared the House's tax panel faces a tumultuous path forward in the full chamber, where Speaker Mike Johnson, R-La., needs to either have robust bipartisan support to pass the bill or risk opening it up to changes…

With House lawmakers set to return the week of Jan. 29, the floor vote's timing is up to Johnson, who has essentially three choices on how to proceed — the first option being to do nothing, which is unlikely, according to Ray Beeman, principal and leader of EY's Washington Council. Beeman, a former staffer for the Ways and Means Committee and the Joint Committee on Taxation, told Law360 that Johnson's second option would be to bring up the bill under a suspension of the rules, which would require the approval of two-thirds of House lawmakers and would block the bill from being amended.

The third option would be to follow regular order, which would open the bill up to amendments by the House's 435 lawmakers, Beeman said, adding that there would then be a question of how many amendments lawmakers would actually bring to a vote on the floor. He said that if Johnson proceeded under regular order, he would have to face the prospect that the billcould be voted down.

Capitol Hill Recap: Will Words Translate Into Action on Tax Bill Vote – Jay Heflin, Eide Bailly:

The lawmakers’ concerns about the bill include, but are not limited to:

• The Child Tax Credit is too big.
• The Child Tax Credit is too small.
• Why isn’t SALT-cap relief included in the bill?
• The business tax breaks are larger than the family tax breaks.
• The bill’s cost needs to be fully offset.
• The cost offset in the bill is dicey.

Complaints about the bill come as the House could vote on the measure [this] week. House Republican leaders, who control the chamber, put folks on notice earlier this week that a vote on the legislation could – repeat: could – occur the week of January 29th.

Politico Playbook – Rachael Bade, Eugene Daniels and Ryan Lizza, Politico:

Will Johnson put the bipartisan tax bill on the floor? Action this week is still up in the air, according to a senior Republican aide, with conservatives — such as former Freedom Caucus chair SCOTT PERRY (R-Pa.) — raising concerns about the bill’s child tax credit expansion, while Northeast moderates keep pressing for a costly restoration of the state and local tax deduction, aka SALT.

GOP leaders face conservative, moderate pushback on bipartisan tax deal – Emily Brooks, The Hill. “Pushback to the tax bill from hard-line conservatives and Northeastern moderates — two factions that have long complicated the slim GOP majority’s ability to move legislation — means Johnson and GOP leadership have to make a choice between pushing through a bipartisan win for business or minimizing intraparty turmoil.”

Possible fallout from the tax bill being written by two lawmakers instead of the tax committees:

Quiet rebellion threatens House GOP chair over surprise tax deal – Juliegrace Brufke, Axios:

The House GOP's top tax writer doesn't just face blowback over the surprise deal he unveiled this month: Now the background chatter suggests Rep. Jason Smith (R-Mo.) could lose his gavel.

Why it matters: Senior Republican sources said Rep. Vern Buchanan (R-Fla.) — who narrowly lost a heated three-way race for the position in 2023 — has been urged to challenge House Ways and Means chairman for the top job.

Removing a sitting chairman before the end of their three-term limit would be unusual.

The last sitting chair to be demoted before their time was in 2005.

As a tax reporter on Capitol Hill, I covered the 2005 outing. I will not report the name of the member who was ousted from the chair, but the reason he was pulled was because he didn't always live in reality. It had nothing to do with legislation or process, which arguably are the chairperson's prerogative. 

House leadership leaving tax floor vote in limbo - Jake Sherman and Laura Weiss, Punchbowl News ($):

The House Republican leadership has not yet decided whether to put the bipartisan, bicameral tax deal on the floor this week, according to multiple sources familiar with the matter…

The blue-state GOP members want Johnson to bring the bill to the floor under a rule to allow them to amend the bill. But the leadership has been hesitant to agree.

Adding SALT could sink the package, given opposition to the deductions on the right and divisions in the Senate. Plus, a rule process could run into trouble with hardline conservatives, who might seek their own changes or block it over their broader fight about government funding tactics.

The latest leadership thinking is the bill could come to the floor by Tuesday at the earliest, Wednesday at the latest or get punted.

If the bill gets "punted" it would be logical to assume that tax activity for the year is over until 2025. 

On the other hand, if Congress passes this bill and its enacted, then say goodbye to a smooth tax filing season:

Lawmakers’ Largesse Threatens Vibes for a Smooth Filing Season – Jonathan Curry, Tax Notes ($):

Tax professionals who had been looking forward to the first uneventful filing season in years aren’t so sure a smooth tax season is still in the cards — and it’s all thanks to Congress.

“I’ve seen a lot of bad tax seasons and some OK ones,” April Walker of the American Institute of CPAs told Tax Notes. “But the worst ones are when things happen in January or February that affect that current tax season,” she said.

Unfortunately for Walker and the rest of the tax profession, that’s precisely what Congress is contemplating doing.

Senate Panel Schedules Vote On IRS Chief Counsel Nominee – Jared Serre, Law360 Tax Authority ($):

The Senate Finance Committee will vote next week on President Joe Biden's pick for chief counsel of the Internal Revenue Service, the committee announced.

The committee will meet to discuss Marjorie A. Rollinson's nomination at 10 a.m. Eastern on Wednesday in the Dirksen Senate Office Building, according to an announcementmade Thursday.

Treasury Confirms Shake-Up of Tax Team – Alexander Rifaat, Tax Notes ($):

The Biden administration continued the reshuffle of its tax policy personnel with the appointment of Aviva Aron-Dine as acting Treasury deputy assistant secretary for tax policy.

A Treasury official speaking on background to Tax Notes January 26 said Aron-Dine, who works in the White House as a deputy director at the National Economic Council (NEC), is scheduled to begin her new role in late February.

Aron-Dine will succeed Lily Batchelder, who will return to New York University School of Law after serving as assistant secretary for tax policy since September 2021.

Don't Overlook These New RMD Rules for 2024 – Rachel Hartman, U.S. News and World Report:

Retirement account owners must take required minimum distributions from traditional IRAs and 401(k)s after a certain age. The SECURE 2.0 Act, signed into law in December 2022, brought changes to the RMD rules in 2023. For 2024, you’ll want to know what age your RMDs will start, along with the consequences for missing a withdrawal. You should also be familiar with the guidelines related to charitable giving and Roth 401(k) RMDs.

• For RMD rules in 2024, consider the following:
• RMDs begin at age 73.
• RMDs could impact Medicare costs.
• RMDs might affect taxes.
• Missing a withdrawal may result in penalties.
• The qualified charitable distributions limit increased in 2023.
• There are no RMDs for Roth 401(k)s in 2024.

US Expatriations Rise In 4th Quarter, IRS Says – Jared Serre, Law360 Tax Authority ($):

The number of people who expatriated from the U.S. jumped nearly 45% during the fourth quarter of 2023 compared with the previous quarter, the Internal Revenue Service said in a notice published Friday.

The number of people who lost or renounced their U.S. citizenship rose to 1,145 in October, November and December, from 791 during the third quarter, the IRS said.

From the “Greased Lightning” file:

How to get your tax refund faster in 2024 – Michelle Singletary, Washington Post:

The three keys to a faster refund: No errors, e-filing and direct deposit.

Simple errors can delay the processing of your return and, as a result, your refund. That includes incomplete forms or a math error, which may require a manual review. If your return is flagged for possible identity theft or fraud, that, of course, will slow down your refund.

If you file electronically and authorize direct deposit, your refund should appear in your bank account within 21 calendar days. It can take four weeks for mailed returns.

Happy National Bubble Wrap Day! Who can resist popping those air squares? I can’t!