Tax News & Views Deadline Pierogis Roundup

IRS reminds taxpayers of Oct. 15 tax-filing extension deadline; combat zones, disaster areas, Israel have more time - IRS:

The Internal Revenue Service today encouraged taxpayers to file their 2023 tax year federal income tax return on or before the upcoming Tuesday, Oct. 15, 2024, deadline to avoid possible late filing penalties.

Convenient electronic filing options, including IRS Free File, are still available. MilTax is a free online service that members of the military and qualifying veterans can use to file their federal income tax returns and up to three state income tax returns.

Disaster-area taxpayers and military members and their families may have extra time to file. Those with an IRS address of record in areas covered by Federal Emergency Management Agency (FEMA) disaster declarations and those returning from a combat zone may qualify for additional time to file.

Deadlines vary depending upon the disaster and locality. Details on all recent disaster relief are on the Around the nation page on IRS.gov.

Remember, it's not enough to put your e-file authorizations in the mailbox, addressed to the preparer's office, by the deadline. Your tax preparer has to have your e-filing authorizations in hand by October 15 to e-file your extended returns on time.

Tribal Government Businesses Tax-Exempt under New Regulations

IRS Proposes Tax Exemption for Native American Tribal Businesses - Caitlin Mullaney, Tax Notes ($):

New proposed rules would exempt businesses wholly owned by Native American tribes from federal income taxation.

“Over the past 30 years tribal nations have requested this guidance because tax certainty is critical to tribal economic development and the creation of opportunity. . . . The proposed guidance we’re releasing today answers the request and is a recognition of both tribal sovereignty and that tribal economies are unique,” Treasury Deputy Secretary Wally Adeyemo said during an October 7 call with reporters.

Tribal Businesses Will Not Be Subject to Federal Taxes, Rules Say - Erin Slowey, Bloomberg ($):

The tax status of tribally chartered corporations, which are for-profit businesses owned by the tribe, has been up in the air for more than three decades. The proposed rules (REG-113628-21, RIN 1545-BQ13) will also expand tribal access to millions of dollars in clean energy tax credits.

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The 2022 tax-and-climate law amplified the requests for guidance on the tax status as tribal governments became eligible for energy tax credits under the law.

The tax-exempt nature of tribes previously blocked them from taking tax credits but a new provision in the law allows many tax-exempt organizations and government entities to receive a refundable payment in lieu of a tax credit, also called direct pay.

Foreign Account Reporting Deadlines Extended for Disaster Areas

FinCEN Extends FBAR Filing Deadlines For Victims Of Recent Natural Disasters - Kelly Phillips Erb, Forbes ($):

The Financial Crimes Enforcement Network (FinCEN) has issued notices extending the filing date of Reports of Foreign Bank and Financial Account (FBARs) for victims of recent natural disasters, including Hurricane Helene, Hurricane Debby, Hurricane Beryl, and Tropical Storm Francine.

Victims of these recent natural disasters are granted an FBAR filing extension for the 2023 calendar year. FinCEN is offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance and by the IRS as eligible for tax filing relief as a result of the specific natural disasters.

Electric Vehicle Credits Misdirected?

Are Today’s Tax Credits the Best Way to Get Americans to Buy E.V.s? - Lydia DePillis, New York Times:

Totaling these costs and then subtracting fiscal benefits through gas taxes and electricity bills, electric vehicles impose $16,003 in net harms, the authors said, while gas vehicles impose $19,239. But the range is wide, with the largest electric vehicles far outpacing many internal combustion cars. Take a large electric pickup truck like the Rivian, and the compact hybrid Toyota Prius, which is excluded from the tax credits.

“The harms imposed by the Rivian are three times the harms imposed by the Prius, in terms of air pollution and death from accidents,” said Hunt Allcott, a co-author and professor of global environmental policy at Stanford University. “But we are subsidizing the Rivian and not the Prius.”

Supreme Court turns down tax cases.

Supreme Court Won’t Hear Whistleblower, Research Tax Credit Cases - Patrice Gay, Tax Notes ($):

The Supreme Court on October 7 denied review to a whistleblower seeking review of the Tax Court’s dismissal of his challenge to an award determination and to a couple challenging the denial of research tax credits they claimed from their S corporation.

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The Court also denied review to Leonard and Barbara Grigsby, who sought review of a Fifth Circuit decision that upheld the disallowance of their claimed research tax credits. The Fifth Circuit affirmed a district court decision that granted the government summary judgment in its suit to recover an erroneous refund from the couple that was based on an improper $1.3 million research tax credit claimed by their construction S corporation. The court found that the representative projects considered by the court yielded no viable business components and were funded by other parties.

Taxes on the Campaign Trail

Congressional estimators find sharply lower revenue take from Harris tax plans - David Lerman, Roll Call. "Nearly half of that difference stems from a more conservative estimate of the revenue that can be gained by raising the corporate income tax rate from 21 percent to 28 percent. That proposal would increase revenue by $881 billion over the coming decade, or $469 billion less than the White House estimates, the JCT and CBO said."

History Provides A Lesson On Who Would Likely Pay For Trump’s Social Security Plan - Eugene Steuerle, Tax Policy Center. "Tomorrow’s taxpayers, mainly today’s non-elderly, will cough up the money. That’s not a promise; it’s just history. "

Trump’s Tariffs Can’t Pay For His Many Promises - Howard Gleckman, Forbes:

Could tariffs replace the income tax? Not even close. They’d replace only about 8 percent of the $34 trillion in federal individual income tax revenue the Congressional Budget Office expects the Treasury to collect over the next decade. They’d even fall short of paying the $4 trillion cost of extending the 2017 Tax Cuts and Jobs Act.

Blogs and Bits

Another reason to e-file: Theft of snail-mailed tax refund checks is increasing - Kay Bell, Don't Mess With Taxes. "So, if you’re still a paper tax transaction holdout, both for filing and getting your refund, consider going electronic next filing season."

Need for More Red Flags and Enforcement to Pursue Tax Cheaters - Annette Nellen, 21st Century Taxation. "But why wasn't this person's return flagged by the IRS as needing an audit? Why is an employee with wages well beyond the median U.S. income (about $64,000 for the years involved), allowed a very large medical expenses exceeding 7.5% of his AGI when it is extremely likely he has good health insurance from his employer who pays his high salary? This should be a 'red flag' to trigger an examination - high paid employee with medical expense deduction."

TIGTA - IRS Could Collect Over a Billion Dollars in Taxes From Unreported Wagering Income - Ronald Marini, The Tax Times. "TIGTA reviewed all Forms W-2G issued to individual taxpayers during Tax Years (TY) 2018 through 2020 (as of March 2023) and found 148,908 individuals who were issued Forms W-2G with a total amount of more than $15,000 per individual in gambling winnings and did not file a tax return."

Excellent Article on IRS CI Special Agent and Cryptocurrency - Jack Townsend, Federal Tax Crimes. "The Cyber Sleuth installment deals with Jarod Koopman, an IRS 'Cyber Sleuth.' Koopman is an example of IRS employees and government employees generally who bring dedication and unique skill to the mission of the IRS, an agency that Congress chronically underfunds seemingly to hamper the IRS’s ability to do the tasks Congress assigned it to do."

Tax crime in the yoga studio

Leader of Yoga to the People pleads guilty to tax evasion - IRS (defendant name omitted, emphasis added):

Damian Williams, the United States Attorney for the Southern District of New York, announced that Defendant pled guilty today to a conspiracy to commit tax evasion from 2012 through 2020. Defendant was the longtime leader of a prominent nationwide yoga business, Yoga to the People (YTTP), from which he received more than $3.5 million in income between 2012 and 2020, yet he did not file individual (or business) tax returns or pay any income taxes for at least eight consecutive years. Defendant pled guilty before U.S. District Judge John P. Cronan, to whom his case is assigned.

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Defendant was YTTP’s founder, principal owner, and functional chief executive officer, as he directed and made decisions for the YTTP enterprise. From approximately 2012 through 2020, Defendant received more than $3.5 million in owed taxes to the IRS exceeding $1 million, but never filed a personal tax return with the IRS or paid any income taxes.

During the charged period, Defendant repeatedly represented his annual income to be six figures to income and third parties not associated with the Government (e.g., a bank, a car financing company, and a real estate entity). In one such instance, Defendant submitted a fabricated tax return to a third party, which a co-defendant prepared for Defendant at Defendant’s request. During the charged period, Defendant enjoyed an extravagant lifestyle, which included frequent foreign travel; expensive hotels, meals, and clothing; NFL season tickets; and country club payments.

Defendant and his co-conspirators used various methods to evade taxes, including, among others:

-Accepting yoga students’ payments in cash (e.g., which was collected in tissue boxes) and paying yoga teachers in cash and “off the books;”

-Generally forbidding YTTP teachers from counting incoming cash that yoga students paid and requiring yoga studio managers to transport cash proceeds to Defendant’s apartment on St. Marks Place in Manhattan, where those proceeds were “stacked” and counted during so-called “stacking parties;”

-Failing to maintain a corporate headquarters or keep corporate books and records;

-Using nominees to disguise Defendant and his co-conspirators’ connection to various entities which, in fact, were part of the YTTP enterprise and from which Defendant and his co-conspirators received income;

-Using YTTP business accounts to pay Defendant’s (and his co-conspirators’) personal expenses; and

-Maximizing unreported income, as Defendant manipulated subordinates into providing free labor (e.g., teaching unpaid classes, stacking cash, cleaning yoga studios, depositing cash into bank accounts, etc.).

If the IRS summary is accurate, the yoga populist paid his workers in cash "off the books," making every disgruntled employee a potential informant. Then he was a jerk to them. It's not a stretch to see how this could turn out badly.

What day is it?

It's National Pierogi Day! Or you could celebrate National Fluffernutter Day, in a fit of misguided nostalgia.

Tax News & Views Deadline Pierogis Roundup

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Joe B. Kristan, CPA