Tax News & Views Social Media Sugar Cookie Roundup

Joe Kristan
July 9, 2024
Sugar cookie enthusiast

Key Takeaways

  • TikTok Tax Tips Trigger Taxpayer Trauma, says IRS.
  • Prevailing wage rules for IRA energy credits create compliance challenges.
  • Tip exclusion makes GOP platform.
  • IRS looking at non-profit hospital community benefits.
  • Inspector general notes slow IRS file retrieval.
  • Nebraska consumption tax fails to make November ballot.
  • International minimum tax compliance costs could "dwarf" tax generated.
  • IRS won't take pennies on the dollar if you have the whole dollar.
  • Sugar Cookie Day.

Misleading social media advice leads to false claims for Fuel Tax Credit, Sick and Family Leave Credit, household employment taxes; FAQs help address common questions, next steps for those receiving IRS letters - IRS. The Agency calls out bad social media tax advice:

The Internal Revenue Service issued alert IR-2024-139 about a series of scams and inaccurate social media advice. Social media schemes led to thousands of inflated refund claims during the past tax season. The IRS has increased its compliance efforts related to false and/or questionable credits.


The IRS warns taxpayers not to fall for these scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit, household employment taxes and overstated withholding. The IRS has seen thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims.

The IRS continues to urge taxpayers to avoid these scams as myths continue to persist that these are ways to obtain a huge refund. Many of these scams were highlighted during this spring’s annual Dirty Dozen series, including the Fuel Tax Credit scam, bad social media advice and “ghost preparers.”

The fact sheet explains how the IRS responds when it identifies a filing based on these claims. It discusses how the scams work, and what the law actually is.


Putting the Prevailing Wage Rules Into Action - Marie Sapirie, Tax Notes ($). The Inflation Reduction Act offers extra tax credits for taxpayers meeting "prevailing wage" requirements for their energy projects. The article discusses the challenges of meeting these requirements:

Apprentices must be tracked carefully during construction to ensure compliance with apprentice-to-journeyman ratios, participation requirements for qualified apprentices, and the labor hours requirement. The preamble to the final rules notes that “taxpayers may establish procedures to help ensure their compliance with the Apprenticeship Requirements,” including regular review of contactor and subcontractor apprentice-hiring practices and contractual provisions that require the hiring of apprentices...

The final rules have additional details that require careful tracking. For example, foremen who spend more than 20 percent of their time in a workweek doing the work of laborers and mechanics and are not otherwise exempt are included in the prevailing wage rules for the time they are performing those duties. But the hours that they spend performing those duties are excluded from labor hours for purposes of the labor hours requirement in the apprenticeship rules. The preamble also explains that training hours for apprentices count toward the labor hours requirement when they occur at the facility and if they involve the performance of construction, alteration, or repair work, but training hours at other locations do not.

The article also discusses software providers and consulting firms that help taxpayers comply with the strict compliance monitoring rules.

Related: How the Inflation Reduction Act is Boosting Energy Efficiency Incentives


Tax and Politics

Republican Platform Includes TCJA Extensions, Tax-Free Tips - Alexander Rifaat, Tax Notes ($): 

The Republican National Committee’s platform committee has signed off on a handful of tax proposals that former president and presumptive Republican presidential nominee Donald Trump has touted on the campaign trail.

The RNC on July 8 unveiled the 16-page draft platform, which will be voted on by the full committee at the Republican National Convention in Milwaukee the week of July 15. In addition to confirming Trump’s pledge to make the provisions of the Tax Cuts and Jobs Act permanent, the platform proposes eliminating taxes on tips for service industry professionals.


IRS News: Eye on Non-profit Hospitals; IRS Storage Woes

Nonprofit Hospitals’ Community Benefits Come Under IRS Scrutiny - Owen Racer, Bloomberg ($). "The agency raised questions last month when it announced it will audit 35 tax-exempt hospitals this fiscal year as part of a stepped-up focus on the sector. The IRS has not historically gone after tax-exempt hospitals for their compliance of community benefit requirements. But after a $60 billion infusion from the Democrats’ 2022 tax-and-climate law, plus congressional pressure to apply greater scrutiny toward tax-exempt hospitals, the IRS is taking a closer look that could potentially ripple across an industry exempt from tens of billions of dollars in federal taxes."


IRS Failed To Analyze Storage Costs, TIGTA Says - Anna Scott Farrell, Law360 Tax Authority ($): 

The National Archives, or NARA, raised its rates during the COVID-19 pandemic when federal records centers it used to store paper records were closed or operating at limited capacity, according to the report, which is dated July 3. The closures created a backlog of the storage and retrieval of records, with five of the top six requesters during 2022 saying it took two to eight months to receive documents, if they were received at all, TIGTA said.

The IRS also didn't monitor the performance of its contract during that time period, TIGTA said, and IRS officials said they were unaware of any delays in obtaining paper records. 

Taxpayers whose correspondence went unanswered as a result of the delays noticed.

Link: TIGTA report. This isn't the first time the IRS has had concerns about IRS storage facilities.


State News: MD Digital Tax Survives, NE Consumption Tax Fails to Make Ballot

Federal Court Dismisses Challenge to Digital Ad Tax - Andrea Muse, Tax Notes ($):

Judge Lydia Kay Griggsby of the U.S. District Court for the District of Maryland concluded July 3 in Chamber of Commerce of the United States v. Lierman that the provision regulates both conduct and protected speech but has a plainly legitimate sweep, rejecting the associations' First Amendment facial challenge to the provision barring companies from directly passing the tax along to customers by means of separate fees, surcharges, or line items.

“We are disappointed with the decision, which recognized that Maryland is restricting the speech of businesses yet failed to hold the law unconstitutional,” Jennifer Dickey, deputy chief counsel and vice president of the U.S. Chamber of Commerce Litigation Center, said in an emailed statement. “The Constitution protects businesses’ right to speak to their customers about taxes that affect their prices.”

Digital taxes are under consideration in other states, including California and Nebraska.


Nebraska Consumption Tax Measures Fail to Clear Signature Hurdle - Emily Hollingsworth, Tax Notes ($):

Nebraska ballot petitions to eliminate the state's income, property, and sales taxes in favor of a broad consumption tax failed to get the number of signatures necessary to qualify for the November ballot.

Mark Bonkiewicz and Paul von Behren of the EPIC Option campaign told Tax Notes on July 8 that their two ballot petitions to implement the EPIC (elimination of property, income, and corporate taxes) Option consumption tax plan came up short in gathering the needed 123,000 signatures before the secretary of state's July 3 deadline.


Blogs and Bits

Oklahoma’s grocery sales tax ends in late August - Kay Bell, Don't Mess With Taxes. "Some Sooner State shoppers, however, will still pay. The new law doesn’t affect local sales tax on groceries. But it does prohibit cities and counties from increasing the tax until July 1, 2025."

Prioritizing Travel and a New Business Over Paying Tax Debt Dooms Tax Discharge - Parker Tax Pro Library. "The court held that because the debtor had the funds to pay the back taxes but instead spent her money on a bracelet business and travel expenses, she was guilty of willfully attempted to evade taxes and thus was not eligible for a discharge of her tax liability in bankruptcy."

California Raises Taxes Again By Restricting Net Operating Loss Use - Robert Wood, Forbes. "The new law suspends the net operating loss deduction for tax years beginning on or after Jan. 1, 2024, and before Jan. 1, 2027. The suspension applies to taxpayers with greater than $1 million in net income for the tax year."

Helping Some Taxpayers But With Much Complexity - SECURE Act 2.0 Sec. 115 Emergency Withdrawals - Annette Nellen, 21st Century Taxation. "Well, the idea sounds good. If someone has an emergency needing up to $1,000 of cash and the only source is a retirement plan, why not pull some funds out without the 10% penalty ("additional tax"). Now, the distribution will be taxed leaving less than $1,000 for the emergency. We might ask why only $1,000 which isn't enough to cover many emergencies. I think it is because the purpose of the account is for retirement."


Tax Policy Corner

The "Exponential" Pillar Two Compliance Avalanche - Alex Parker, Things of Caesar. "Certainly, some countries will see a boost in revenue. But that amount could be dwarfed by the money that companies will need to spend drawing up new systems to fill out informational reports for every participating jurisdiction they apply in. (Despite the OECD’s single return that’s supposed to streamline this.) Rather than a boon to countries, it’ll be a boon to tax practitioners with a huge deadweight loss to the global economy."

Those Making $450,000 And Up Would Get Nearly Half The Benefit Of Extending the TCJA - Howard Gleckman, TaxVox. "TPC estimated that extending the TCJA would lower taxes by an average of about $2,000 in 2026. But nearly half the benefit would go to the highest-income 5 percent of households, those making about $450,000 or more."



Tax Court: IRS Gets the Whole Dollar

Pennies on the dollar? Tax Notes reports ($) on a taxpayer who wanted to settle a tax debt at a bargain rate. The headline of the Erin McManus article gives a hint as to why it didn't work out: Self-Employed Taxpayer With $5M in Equity Denied Payment PlanThe taxpayer tripped over two hurdles in the race for a pennies-on-the-dollar settlement of old debts:

1. She failed to keep current on current tax payments, and

2. She failed to show that she couldn't use her real estate equity to make the payments.

From the Tax Court opinion:

The Form 433-A showed two real properties with $0 loan balances and total equity of $4,826,608 as well as two vehicles with total equity of $168,479 and $0 loan balances. The Form 433-A also showed total monthly income of $89,230.31 and total monthly expenses of $23,312 for a net difference of $65,978.31. As of August 10, 2022, petitioner had still not filed a tax return for tax year 2021.

Despite what you may have heard on the radio, the IRS doesn't routinely settle tax debts for less than the amount owed if it thinks you have the resources to pay the debts. These resources can include both your current income and your other net worth. 


What day is it?

It's National Sugar Cookie Day! "Originating back in the 1700’s in Nazareth, Pennsylvania, sugar cookies were initially referred to as Nazareth Cookies by German Protestant settlers and baked in the shape of a keystone, their state’s symbol."

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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.