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Tax News & Views Going Big Roundup

Jay Heflin
May 3, 2024
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Key Takeaways

  • Look-out rich and corps.
  • EV and GSTT reg updates.
  • ERC comeback?
  • Tax talk on the Hill.
  • Court updates.
  • Oh Canada!
  • Headed for the Big House.
  • Boo! (or not)

IRS To Boost Audit Rates By 50% On Wealthy, Werfel Says – Asha Glover, Law360 Tax Authority ($):

The Internal Revenue Service plans to nearly triple audit rates on corporations with assets over $250 million and increase audit rates by more than 50% on wealthy taxpayers with more than $10 million in total positive income by 2026, Commissioner Daniel Werfel said Thursday.

The agency additionally plans to increase audit rates nearly tenfold on large complex partnerships with assets over $10 million, according to the agency's update and update supplement to the strategic operating plan the agency released in April 2023, detailing how it would spend the funding boost from the 2022 climate law. The update refines last year's plan and identifies objectives, including upcoming efforts to increase audits on key groups, Werfel told reporters ahead of the release.

The article also notes that audit rates for taxpayers earning under $400,000 will hold steady.

IRS Plans to Triple Audit Rates on Large Corporations – Benjamin Valdez, Tax Notes ($):

The IRS also said it will increase audit rates on large, complex partnerships to 1 percent, up from 0.1 percent.

Regarding agents with guns:

One way the IRS plans to accomplish its goals is with more employees. By fiscal 2029, the agency hopes to reach 102,500 full-time equivalent employees — up from 82,990 in fiscal 2023. 

And the modest rise in employees from fiscal 2022, when the agency had 79,070 employees, should dispel any claims that the IRS would use new funding to add 87,000 new armed agents, Werfel said. 

This report should lay to rest any lingering myth about a supersized IRS,” Werfel said to reporters. “As I’ve believed all along, we were never going to add 87,000 additional employees, let alone 87,000 armed agents.”

The latest results:

IRS aims to more than double its audit rate for wealthiest taxpayers in strategic plan update – Kate Dore, CNBC. “In fiscal 2023, the IRS closed nearly 583,000 tax return audits, resulting in $31.9 billion in recommended additional tax, according to the latest Databook.”

BTW: Enforcement is not the first objective (it's third):

IRS updates modernization plans – Michael Cohn, Accounting Today:

The latest Strategic Operating Plan updates the initial SOP released last April and focuses on five key objectives: 

Objective 1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible.
Objective 2. Quickly resolve taxpayer issues when they arise.
Objective 3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
Objective 4. Deliver cutting-edge technology, data and analytics to operate more effectively.
Objective 5. Attract, retain and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers.

The updated Strategic Operating Plan is here.

 

SECURE 2.0 Act changes affect how businesses complete Forms W-2 – IRS:

The Internal Revenue Service reminds businesses that starting in tax year 2023 changes under the SECURE 2.0 Act may affect the amounts they need to report on their Forms W-2. 

The SECURE 2.0 Act allows for additional features in various employer retirement plans to encourage use of these plans.

 

IRS Might Reopen ERC Voluntary Disclosure Program in Future - Emmanuel Elone, Bloomberg ($). “The Internal Revenue Service might reopen its employee retention credit voluntary disclosure program in the future, an agency official said May 2… The IRS is in the process of reviewing applications to the program and might reopen the program in a “reduced capacity,” said John McInelly, an IRS official. If the program reopens, it would not be as lenient as its predecessor, although he did not provide any further details.”

 

Reg Updates

U.S. Department of the Treasury Releases Final Rules to Lower Consumer Costs, Continue U.S. Manufacturing Boom in Batteries and Clean Vehicles, Strengthen Energy SecurityTreasury Department:

 Today the U.S. Department of the Treasury and Internal Revenue Service (IRS) released final rules on the clean vehicle provisions of the Inflation Reduction Act (IRA) that are lowering costs for consumers, spurring a boom in U.S. manufacturing, and strengthening energy security by building resilient supply chains with allies and partners.

The final rule is here.

 

Relief Provisions Respecting Timely Allocation of GST Exemption and Certain GST Elections – Treasury Department:

This document contains final regulations that provide guidance describing the circumstances and procedures under which an extension of time will be granted to make certain allocations and elections related to the generation-skipping transfer (GST) tax. The statutory provision underlying these rules was enacted as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The guidance affects individuals (or their estates) who failed to make a timely allocation of GST exemption, a timely election out of the GST automatic allocation rules, or certain other timely GST elections.

 

On The Hill

Crapo Considering TCJA Working Groups – Doug Sword, Tax Notes ($):

The Senate Finance Committee’s ranking member says he is looking into duplicating a House initiative to prepare taxwriters for 2025 tax negotiations.

House Ways and Means Committee Chair Jason Smith, R-Mo., announced April 24 that committee Republicans are creating 10 “tax teams” to study expiring provisions in the Tax Cuts and Jobs Act. That idea appeals to Finance Committee ranking member Mike Crapo, R-Idaho, although he calls the teams “working groups.”

These Teams/Groups are expected to be comprised of Republican lawmakers, i.e., no Democrats. And the fight over TCJA is expected to occur AFTER the 2024 elections. If Democrats are in control of either chamber in 2025 the findings from these Teams/Groups will basically be meaningless.

GOP Panel’s Tax Teams Set Busy Summer Agenda in Run-Up to 2025 - Samantha Handler and Chris Cioffi, Bloomberg ($):

Ways and Means Chair Jason Smith (R-Mo.) said his committee’s tax teams will be busy this summer, and has said he hopes the teams will stake out a new path than working groups formed in the years leading up to 2017. Working groups fix things, he said. Tax teams plan ahead. 

“They’ll definitely have listening sessions, and they’ll work with members and stakeholders,” he said. “They’ve got a lot of work ahead of them.”

 

Court Side

Gold Dealer Avoids Pretrial Fraud Determination – Erin McManus, Tax Notes ($):

The Tax Court declined to impose additions to tax in the IRS’s examination of a gold industry business with poor recordkeeping and unfiled returns. 

Judge Courtney D. Jones denied April 30 the IRS’s motion to find the taxpayer liable for fraudulent failure to file or, in the alternative, accuracy-related penalties in Goldmark Manufacturing Inc. v. Commissioner. The judge also denied the C corporation’s motion to compel production of documents the IRS didn’t have.

 

Texas Tax Preparers Cop To $3.7M Tax Fraud Scheme – Anna Scott Farrell, Law360 Tax Authority ($):

The owner of a Texas tax preparation company and her two sisters who worked as employees all pled guilty Thursday to preparing nearly $3.7 million worth of false returns riddled with fraudulent credits, according to the U.S. Department of Justice. 

[The defendant], owner of Campos Tax Service in the Rio Grande Valley, and her sisters…pled guilty to conspiracy to help their clients file fraudulent returns, causing what the DOJ said was a nearly $3.7 million total tax loss.

 

Heirs Ready $15 Million Fight With IRS Over Grantor Trust Status – Andrew Velarde, Tax Notes ($):

An estate’s heirs are braced to fight a $15 million jeopardy assessment from the IRS allegedly stemming from a mistake in classifying a foreign trust as a grantor trust and a closed statute of limitations. 

Gunter A. Geiger’s son (Grant) and widow (Margie) filed separate district court complaints on May 1 in the U.S. district courts for the Southern District of Florida and Eastern District of Pennsylvania in Geiger v. United States. The complaints ask the district courts to determine that a $15 million jeopardy assessment made against them, including approximately $9 million in penalties, is unreasonable and should be abated.

 

International Zone

Canada Budget Seeks To Establish Corp. Min. Tax Standards – Jack McLoone, Law360 Tax Authority ($):

Budget proposals submitted to Canada's Parliament by the finance minister would implement the Organization for Economic Cooperation and Development's global corporate minimum tax standards as part of the country's overarching budget plans.

Canada's global minimum tax act was included in a package of proposals introduced in Parliament on Tuesday by Finance Minister Chrystia Freeland that would implement changes announced in Canada's 2024 budget. The bill would introduce the 15% minimum tax on multinational corporations making on average more than €750 million ($804.2 million) annually, in line with the OECD's Pillar Two standards to fight tax base erosion and profit shifting. The government is prioritizing this bill for "expeditious passage" in Parliament, according to a Department of Finance news release also issued Tuesday.

 

From the “Big House Blues” file

Feds Want Prison For Ex-Public Defender For Tax Fraud – Anna Scott Farrell, Law360 Tax Authority ($):

A former chief public defender in Minneapolis who in seeking leniency said he resigned in disgrace amid accusations that he failed to pay taxes for years on his private law firm should nonetheless spend eight months in prison after pleading guilty, prosecutors told a Minnesota federal court.

[The defendant], who admitted in December that he failed to pay over $213,000 in employee withholdings before becoming chief public defender of Hennepin County, wasn't sufficiently punished by losing the job he called the "pinnacle" of his career, federal prosecutors said in a brief Wednesday.

 

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About the Author(s)

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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.