Tax News & Views Spinach and Senate Roundup

Joe Kristan
March 26, 2024
Bing Copilot DALL-E 3 image of a celebration of spinach

Key Takeaways

  • Senate taxwriter rips bill to fix R&D deductions.
  • May 17 is last day to claim 2020 refunds.
  • Wisconsin looks to renew reciprocity with Minnesota.
  • China takes EV credits to WTO.
  • Taxing Iowa saunas.
  • I was told there would be no math.
  • National Spinach Day.

Looking dicey for bipartisan tax bill - Bernie Becker, Politico ($):

In fact, Sen John Cornyn of Texas, a longtime GOP tax writer, gave even more reason to doubt the tax bill’s chances late last week, when he blasted the measure negotiated by Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith in a floor speech.

Cornyn talked about the tax bill, which would expand the Child Tax Credit and restore key tax breaks for business, for nine paragraphs, and spoke exactly eight words worth of praise for the legislation. “There are some portions that are very promising,” he said.



It tolls for thee - if you haven't filed for 2020.

Time running out to claim $1 billion in refunds for tax year 2020, taxpayers face May 17 deadline - IRS:

The Internal Revenue Service announced today that almost 940,000 people across the nation have unclaimed refunds for tax year 2020 but face a May 17 deadline to submit their tax returns.

The IRS estimates more than $1 billion in refunds remain unclaimed because people haven’t filed their 2020 tax returns yet. The average median refund is $932 for 2020, and the state-by-state table below shows how many people are potentially eligible for these refunds in each state along with the median average refund by state.

Sometimes even three years is too late. Withheld taxes have to be claimed within two years.

IRS Updates Electronic Partnership Form Amid Programming Error - Erin Schilling, Bloomberg ($):

The agency is working on a programming error in Form 1065 that it estimates will be fixed by June 16, according to an update on its website.

The programming error is blocking partnerships that e-file from using Code ZZ on Line 20 of Form 1065’s Schedule K-1. Code ZZ is used for other income, gain, or loss not included in other sections of the form. The IRS recommends partnerships extend their returns until it can be fixed.

Since calendar year partnership returns were due on March 15, that extension is an excellent idea, if you did that on time.


From Wisconsin to China

Wisconsin Governor Approves Tax Reciprocity Study, Bullion Exemption - Paul Jones, Tax Notes ($):

Wisconsin’s governor has approved bills to explore resurrecting a tax reciprocity agreement with Minnesota, exempt bullion from sales tax, and close what critics called a loophole allowing home equity theft by localities.

S.B. 374, signed by Gov. Tony Evers (D) March 21, directs the Department of Revenue to pursue a study with the Minnesota DOR regarding how recreating a reciprocal income tax agreement would affect both states. The study’s focus would include the number of cross-border workers and the potential amount of tax revenues that would be forgone by each state if they create a new reciprocal income tax agreement. The study is intended to facilitate negotiation of a new agreement.


China to challenge Biden’s electric vehicle plans at the WTO - Associated Press:

Starting this year, U.S. car buyers are not eligible for tax credits of $3,750 to $7,500 if critical minerals or other battery components were made by Chinese, Russian, North Korean or Iranian companies. The credits are part of U.S. President Joe Biden’s signature climate legislation, named the 2022 Inflation Reduction Act.

The Chinese Commerce Ministry said in a statement posted online that the U.S. formulated discriminatory subsidy policies for new energy vehicles in the name of responding to climate change. It said the U.S. move excluded Chinese products, distorted fair competition and disrupted the global supply chain for new energy vehicles.


Blogs and bits

IRS ERC compliance efforts tops $1 billion - Kay Bell, Don't Mess With Taxes. "The IRS hasn't set a specific date to resume processing filings with ERC claims, but it anticipates it will be sometime in the late spring. And when it does resume, the IRS says it will 'review the ERC inventory with strong, new measures of scrutiny in place.'"

Investment Income Can Be Tricky At Tax Time—Here’s What You Need To Know - Kelly Phillips Erb, Forbes. "Interest is reportable at the first dollar—though you typically won't receive a Form 1099-INT, 1099-INT, Forms 1099-OID, or substitute statement unless you receive $10 in taxable interest for the year. Reportable interest may include interest from your bank or brokerage account and interest from series EE, H, HH, and I savings bonds—exclusions may apply. For example, under the Education Savings Bond Program, you may be able to exclude from income all or part of the interest you receive on the redemption of qualified U.S. savings bonds during the year if you pay qualified higher education expenses during the same year (you do not qualify for the exclusion if your filing status is married filing separately)."

India Tax Agency Seizes Opposition Funds Ahead of World’s Biggest Election - Tripti Lahiri, Vibhuti Agarwal, and Krishna Pokharel, Wall Street Journal. "India’s main opposition party, the Indian National Congress, says its campaign for the world’s biggest election is in tatters after tax authorities froze its accounts and seized its funds, in what it said was an example of state agencies being turned against opponents of Prime Minister Narendra Modi."


Tax Policy Corner

Biden’s Homebuyer Tax Credit Has Potential But Can Be Improved - Howard Gleckman, TaxVox. "A tax credit for first-time homebuyers could be an important step towards restructuring the way the US subsidizes home ownership. But the version President Biden included in his 2025 budget misses an opportunity by being temporary and by retaining the current mortgage interest deduction (MID)."

Challenges of Tax Exemptions - Annette Nellen, 21st Century Taxation:

For a sales tax (a tax on personal consumption), the only items that should be exempted medical services provided by a medical professional and tuition for a university or professional/job training.

In the Iowa ruling, the question was whether booking services for saunas with "science-backed technology of infrared (IR) and red light therapy(RLT) to optimize health and wellness" is "commercial recreation."

In the ruling, the Iowa Dept. of Revenue had to review the Code that defines "recreation" and then Black's Law Dictionary on the definition of "pleasure"! Because there was pleasure and promotion of physical fitness involved, the DOR found the sauna service to be taxable. It also noted that even if not recreation, it would fall under the taxable services of Turkish baths and reducing salons.

In other words, broaden the base, lower the rate? Iowa may have other plans.


Tax Court Math Lesson

The bad at math defense. The Tax Court yesterday dealt with a novel defense by a business owner being held responsible for unpaid employment taxes. From Chief Special Trial Judge Carluzzo's opinion (my emphasis):

Petitioner, who has degrees in political science, speech, and theater, is fluent in several foreign languages. He has an interest in international affairs and also has a management degree in international relations...

At all times relevant here, petitioner was Company's chief executive officer (CEO) and sole shareholder. He had the authority to hire and fire employees of Company and exercise control over Company's bank accounts. In January 2014 petitioner transferred assets from Company to a newly organized business entity.

According to petitioner, his successes in management consulting and other professional endeavors are attributable to his interpersonal skills. He claims to suffer from a learning disability with respect to mathematics, but he is otherwise competent to conduct his personal and business affairs. Throughout his professional career he delegated many business and sometimes personal financial responsibilities to employees and accountants, including a certified public accountant....

I wish I had thought of that in junior high. Then again, it didn't work here:

Petitioner points to his difficulties comprehending mathematical concepts and notes that he hired others, including [his accountant], to take responsibility for Company's bookkeeping and tax matters. As petitioner views the matter, the failure to pay Company's employment taxes results from [the accountant's] embezzlement, not from anything petitioner did or failed to do. Relying heavily on these reasons, he argues that he should not be held liable as a “responsible person” for Company's employment taxes. The focus, however, is on his authority to control Company's obligations to pay its employment taxes, not on whether he personally took responsibility for that duty.  Considering his position with Company and taking into account his decisions to disburse Company funds to pay for items other than Company's employment tax liabilities, we find that petitioner was a person described in section 6672(a) for purposes of Company's outstanding employment tax liabilities.

Don't fall behind on employment taxes. The math just doesn't work.


What Day is it?

Be strong to the finish and celebrate National Spinach Day!


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About the Author(s)

Joe Kristan

Joe B. Kristan, CPA

After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.

Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.