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Tax News & Views Tick Tock Roundup

Jay Heflin
March 29, 2024

Key Takeaways

  • Tax bill not a priority in the Senate.
  • What “purgatory” means on Capitol Hill.
  • The Dirty Dozen.
  • Crackdown on Covid fraud.
  • Tax refunds go for debt.
  • Warning: Preparer Shenanigans.
  • Tax Court tosses rule.
  • China v. IRA.
  • Do-It-Yourself tax extensions.

Tax Bill Prospects Run Into Packed Senate Calendar – Doug Sword and Cady Stanton, Tax Notes ($):

Senate action on the tax package is queued behind an expected impeachment trial of the Homeland Security secretary, a supplemental spending bill including funding for Ukraine, and other legislation, according to Senate Democratic leadership. 

It means the Senate will have little time to address the tax package in April. The Senate has set a short work session from April 8-19 after a two-week break. Senators scheduled another legislative break April 19-29.

Capitol Hill Recap: Tax Bill, Dead or Alive? – Jay Heflin, Eide Bailly:

If Senators do not vote on the tax bill immediately after returning from recess, then the legislation will likely enter what is called “purgatory” on Capitol Hill. This means that the bill is not dead. It is also not alive. It’s in between. 

When bills enter purgatory, they still capture the attention of the press and lawmakers. But as time goes on that interest begins to wane. As interest declines, it can be hard to whip support for voting on the bill. As a former reporter who dealt with bills in purgatory, at some point lawmakers stop answering questions about them. This scenario makes it difficult to discern if the bill is actually dead, or merely waiting for action.

 

Agency Updates

Email, Texting Tax Scams Lead IRS’s Annual Dirty Dozen List – Bloomberg ($):

The IRS has launched its annual Dirty Dozen tax scams list with a warning of schemes that involve phishing and smishing, the agency said Thursday. 

These scams are fake communications that pose as legitimate tax organizations to access personal information. Phishing scams arrive in the form of emails while smishing scams come via a text or SMS message.

IRS kicks off annual Dirty Dozen with warning about phishing and smishing scams – IRS:

Phishing: An email sent by fraudsters claiming to come from the IRS. The email lures the victims into the scam with a variety of ruses such as enticing victims with a phony tax refund or threatening them with false legal or criminal charges for tax fraud. 

Smishing: A text or smartphone SMS message where scammers often use alarming language such as, "Your account has now been put on hold," or "Unusual Activity Report," with a bogus "Solutions" link to restore the recipient's account. Unexpected tax refunds are another potential lure for scam artists.

The IRS has more about the dirty dozen here.

 

IRS: Pandemic fraud investigations bear fruit – Bernie Becker, Politico Pro ($):

The IRS criminal investigation division has rooted out billions of dollars in pandemic-related fraud, the agency announced Thursday, in marking the fourth anniversary of a key coronavirus relief package. 

In all, the tax collector says its law enforcement arm has opened up more than 1,600 tax and money laundering cases that could add up to almost $9 billion in Covid-related fraud.

IRS Criminal Investigation releases updated COVID fraud statistics on 4th anniversary of CARES Act; nearly $9 billion investigated – IRS:

As of Feb. 29, 795 people have been indicted for their alleged COVID-related crimes and 373 individuals have been sentenced to an average of 34 months in federal prison. During the last four years, CI has obtained a 98.5% conviction rate in prosecuted COVID fraud cases. 

“The work by IRS Criminal Investigation provides a vital role in protecting against fraud and serves a key part in the agency’s wider efforts to ensure fairness in the nation’s tax system,” said IRS Commissioner Danny Werfel. “Protecting taxpayers against fraud in pandemic-era programs is just one example of the important role that CI plays in the law enforcement community. A healthy budget for the IRS helps us get the job done, and the work of CI provides a critical safety net to protect the nation against fraud.”

 

Final Regs Tighten Rules for Non-Comprehensive Health Insurance – Chandra Wallace, Tax Notes ($). “Treasury issued final regulations that update the definition of short-term, limited-duration insurance (STLDI) and require prominent notices contrasting it from comprehensive health coverage, but reserved guidance on the tax treatment of some fixed indemnity payments.”

 

Tax Season News

Where Are This Year’s Tax Refunds Going? Right Into a Debt Hole – Katherine Hamilton, Wall Street Journal ($):

Americans are failing to pay their credit-card debt and auto loans at the highest rate in more than a decade. Tax refunds will be a lifeline for many of them. 

Households were holding a record $17.5 trillion in debt last year, including record sums tied to their credit cards and vehicles, according to the Federal Reserve. The rate of people failing to make their payments typically peaks ahead of each tax season and has been trending higher over the past few years.  

Those with rising debt balances say they are going to use their tax-refund checks to pay down their loans.

 

DOJ Highlights Efforts Against Fraudulent Return Preparers – Tax Notes ($). “The Justice Department today urged taxpayers to choose their return preparers wisely as the April 15 federal tax filing deadline approaches. Unscrupulous preparers who include errors or false information on a tax return could leave a taxpayer open to liability for unpaid taxes, penalties and interest.”

Help you can trust:

Let us help you relieve your tax headache – Eide Bailly:

Federal, state, local, and international tax burdens and responsibilities consume time and cash flow. Whether you’re an individual, a business, a nonprofit, or handling a trust or estate, proper planning and guidance from a well-versed professional can make managing taxes less painful. 

Eide Bailly has the depth of tax resources to help you gain peace of mind. Plus, our professionals are supported by the National Tax Office, allowing clients to dig into specialized tax situations.

 

Court Side

Tax Court Tosses Treasury Rule on Conservation Easement Deed - John Woolley, Bloomberg ($):

The US Tax Court ruled Thursday that a Treasury regulation used by the IRS to block a $14.8 million conservation easement deduction based on the easement’s deed is invalid under the Administrative Procedure Act. 

Valley Park Ranch LLC, a partnership in Tulsa Oklahoma that conveyed a 45.76-acre conservation easement to Compatible Lands Foundation in 2016, asked the court to vacate the regulation after the IRS disallowed its claimed $14.8 million tax deduction. The government said the partnership hadn’t established that it satisfied all of its requirements for deducting a noncash charitable contribution because the easement isn’t “protected in perpetuity” under the terms of its deed.

 

2nd Circ. Urged To Uphold Dual Citizen's FBAR Penalties – Anna Scott Farrell, Law360 Tax Authority ($):

A New York federal court correctly upheld tax penalties against a dual French citizen for hiding millions of dollars in six foreign accounts, the U.S. government told the Second Circuit, urging it to reject the woman's claims that American authorities violated the Hague Convention in pursuing her.

U.S. Magistrate Judge Jennifer Willis didn't abuse her discretion when she ordered Carolyn Buff, who had been living in Belgium, to participate in a deposition in the case, which sought to collect civil tax penalties for 2006 through 2008, the government argued in a brief Wednesday.

 

Supreme Court Arguments Transcript Available in Estate Tax Case – Tax Notes ($). "The transcript is available of the March 27 Supreme Court oral arguments in Connelly v. United States, addressing whether life insurance proceeds received by a closely held corporation on the death of a shareholder are corporate assets for estate tax valuation purposes and aren’t offset by the corporation’s obligation to redeem the deceased shareholder’s stock."

 

How a ‘Gorgeous’ Dior Bag Cost a Widow $61,000 in Tax Court – Laura Saunders, Wall Street Journal ($). This article is about the dark side of filing a joint tax return.

A widow recently discovered just how much so. Her late husband had told her that he had “dealt with” their overdue income taxes—but he hadn’t. 

She ended up in Tax Court with the Internal Revenue Service. Now, she owes the IRS $61,000 of tax. With interest, her bill is about $93,000. Sydney Thomas owes this tax because when married couples sign a joint income-tax return, the law holds each spouse liable for everything on the return.

Long story short: She tried the innocent spouse claim, but it didn’t work. In part because she posted online that she purchased a very expensive purse even though she knew (or should have known) about her tax debt.

A cautionary tale from Eide Bailly’s own:

Recent Tax Court Case Shows Social Media’s Role in IRS Exams – Joe Kristan, Bloomberg ($):

The IRS has the internet and knows how to use it. So the next time you have a hot take and post it on a blog or social media, remember that a future IRS examiner may be reading it…

 

International Zone

China’s WTO case takes broad aim at U.S. clean energy subsidies – Doug Palmer and Kelsey Tamborrino, Politico Pro ($):

China is challenging an expansive list of U.S. subsidies for clean energy production as a violation of World Trade Organization rules, according to a document released Thursday. 

Earlier this week, China indicated it would take the first step in pursuing a formal WTO legal challenge by requesting consultations with the United States over new electric vehicle subsidies provided by the Inflation Reduction Act passed by Congress in 2022.

 

New Zealand Parliament Passes Global Minimum Tax – Jack McLoone, Law360 Tax Authority ($). "With the passage of the bill, New Zealand will establish a 15% minimum tax rate for large multinational corporations with an average annual revenue of more than €750 million ($809.8 million), in line with the OECD's Pillar Two standards to fight tax base erosion and profit shifting. The bill is expected to officially become before law April 1, Finance Minister Nicola Willis and Revenue Minister Simon Watts said in a joint news release Wednesday."

 

From the “Do Try This at Home” file

New Interactive Tool: Build Your Own Tax Extensions – Committee for a Responsible Federal Budget:

With large parts of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire after 2025, policymakers will soon face important choices about the future of the tax code. 

Try the new interactive Build Your Own Tax Extensions tool, which allows users to pick and design their own tax extension package. While a full extension could cost $3.4 trillion or more, this tool allows users to design a fair, pro-growth, and fiscally responsible alternative.

The tool is here.

 

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About the Author(s)

Jay Heflin Photo

Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.

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.