Key Takeaways
- TIGTA says IRS has plans to phase out 2 of 104 creaky legacy IT systems.
- Deadlines for Minnesota storm counties postponed to February 3.
- Tip tax exemption becomes bipartisan crusade.
- Child tax credit on the campaign trail.
- IRS struggling to issue deceased taxpayer refunds.
- First 'Survivor' still battling his 2000 tax bill.
- IRS secret shopper browses at Great Falls gun store.
- National Filet Mignon Day.
Programming Note: I will be hosting a free Eide Bailly webinar next Tuesday, August 20, on Tax Planning Tips: Key Business & Individual Considerations. Register here.
IRS Found Lacking Agencywide Plan to Retire Legacy Systems - Benjamin Valdez, Tax Notes:
The IRS identified 107 of its 334 legacy systems as possible candidates for retirement, but only two of those systems had been attached to specific decommissioning plans as of December 2023, the Treasury Inspector General for Tax Administration said in a report released August 12.
It's generally believed that obsolete information technology is bad for taxpayers and tax administration. The increased funding for the agency under the Inflation Reduction Act was touted as funding IRS technology upgrades.
Some extended Minnesota 2023 returns are now due February 3, 2025
IRS provides relief to Minnesota victims of severe storms, flooding; various deadlines postponed to Feb. 3, 2025 - IRS (emphasis added):
These taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments.
The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA).
This means that individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties qualify for tax relief.
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The tax relief postpones various tax filing and payment deadlines that occurred from June 16, 2024, through Feb. 3, 2025 (postponement period). As a result, affected individuals and businesses will have until Feb. 3, 2025, to file returns and pay any taxes that were originally due during this period.
This means, for example, that the Feb. 3, 2025, deadline will now apply to:
-Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the storms occurred.
-Quarterly estimated income tax payments normally due on June 17 and Sept. 16, 2024, and Jan. 15, 2025.
-Quarterly payroll and excise tax returns normally due on July 31 and Oct. 31, 2024, and Jan. 31, 2025.
In addition, penalties for failing to make payroll and excise tax deposits due on or after June 16, 2024, and before July 1, 2024, will be abated, as long as the deposits were made by July 1, 2024.
2024 Presidential Campaign Reaches Tipping Point
Harris Calls for No Taxes on Tips, Borrowing a Trump Idea - Siobhan Hughes, Wall Street Journal:
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“It is my promise to everyone here: When I am president, we will continue our fight for working families of America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers,” Harris said. The idea could prove popular in the swing state of Nevada, which is populated by casino and other service-industry workers who rely on tips.
Harris Held Talks With Union Before Making Tip Pledge - Alexander Rifaat, Tax Notes ($):
The union endorsed Harris on August 9. A day later, in Nevada, she pledged to pursue such a “no tax on tips” policy.
Biden would sign a bill eliminating a tax on tips, White House says - Brett Samuels, The Hill. "President Biden would 'absolutely' sign legislation to eliminate taxes on tipped wages if it made it to his desk, the White House said Monday, embracing a policy first proposed by former President Trump and echoed by Vice President Harris."
Why Trump's and Harris' proposals to end federal taxes on tips would be difficult to enact - Dee-Ann Durbin, AP via Washington Post. "It would be complicated, not to mention enormously costly to the federal government, to enact. It would encourage many higher-paid workers to restructure their compensation to classify some of it as 'tips' and thereby avoid taxes. And, in the end, it likely wouldn’t help millions of low-income workers."
Kamala Harris’s Tax Policy Evolution - Nana Ama Sarfo, Forbes. "None of the tax legislation that Harris sponsored became law, but her imprint is clear in the Biden administration’s wide-sweeping Inflation Reduction Act, especially its climate justice provisions."
On the trail: Cutting taxes on tips, and expanding child credits - Bernie Becker, The Hill. "And like Trump’s idea for eliminating income taxes on Social Security benefits, an income tax-only exemption wouldn’t give much assistance at all to people at the bottom of the income ladder."
Vance Backs $5,000 Child Tax Break in Bid to Steady Campaign - Alicia Diaz, Bloomberg via MSN. "Republican vice presidential candidate JD Vance floated more than doubling the federal child tax credit to $5,000, seeking to reframe a “pro-family” stance that has come under attack from Democrats."
Dems Blast Vance Over Child Tax Credit Proposal - Alexander Rifaat, Tax Notes ($). "Congressional Democrats pointed out Vance skipped a recent vote on a tax package that included an expansion of the child tax credit. Senate Republicans quashed the $79 billion tax package, which the House overwhelmingly passed six months earlier."
Meanwhile in Congress
Backers Seek to Peel Off Housing Tax Credit for Separate Vote - Samantha Handler, Bloomberg ($):
The bill is one of the first substantial efforts by a Democrat to move tax legislation this year outside of the $78 billion bipartisan tax package negotiated by Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.).
No hurry?
Are You Still Waiting on a Refund From a Deceased Taxpayer’s Return? - Erin Collins, NTA Blog.
IRS Form 1310 is filed to claim a refund on behalf of a deceased taxpayer. When a taxpayer dies, the taxpayer’s personal representative or surviving spouse must file a final income tax form (Form 1040 or 1040-SR) for the year of death (in addition to any returns not filed in preceding years). If a refund is claimed on a final income tax return or an amended return for that final tax year, the personal representative or surviving spouse must attach a Form 1310, unless an exception applies. Attaching Form 1310 notifies the IRS that the taxpayer has died and directs the IRS to send the refund to the beneficiary.
Blogs and Bits
Hurricane Debby victims in Florida, Georgia, and North and South Carolina get tax relief - Kay Bell, Don't Mess With Taxes:
Affected taxpayers in all four states, however, have the same ultimate new tax deadline. It’s Feb. 3, 2025. This means that all affected individuals and businesses in the four states will have until then to file tax returns and pay any taxes that were originally due during their disaster created postponement periods.
Is the "Family Management Company" Strategy Legitimate? - Thomas Gorczynski, Tom Talks Taxes. "Assuming the only employee of the family management company is the owner’s child, this arrangement has no non-tax objective; it only exists to attempt to exempt the child’s wages from employment taxes."
Dissipation of Decedent's Assets by Son Justified Jeopardy Assessment - Parker Tax Pro Library. "A district court granted summary judgment to the IRS after concluding that it was appropriate for the IRS to initiate a jeopardy assessment against a deceased taxpayer's son who was overseeing his father's estate. The court found that the fact that the son and his mother were using the estate's assets for personal purposes was reason enough for a jeopardy assessment."
IRS Releases Final Digital Asset Regs & New Draft of Form 1099-DA - Ronald Marini, The Tax Times. "Now in IR-2024-178 dated June 28, 2024 The U.S. Department of the Treasury and the Internal Revenue Service issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law."
IRS releases updated draft of Form 1099-DA for digital assets - Martha Waggoner, The Tax Advisor. "Generally, brokers will send these forms to both taxpayers and the IRS in early 2026, the IRS said in the release."
Breaking News From Survivor Season 1
'Survivor' Winner Is True Owner In Property Dispute, US Says - Anna Scott Farrell, Law360 Tax Authority ($):
While Hatch and his sister, Kristin Hatch, have argued that she is the owner and therefore the property can't be sold to satisfy the tax debts, the government said she is her brother's nominee. She didn't pay her brother for the property, and, after he transferred his interest to her, "he continued to enjoy or exercise control over" it, the government said.
The man won a million dollars on national TV in 2000 and left it off his tax return. Somehow, it seems, he hasn't paid the taxes even now.
Related: Eide Bailly IRS Dispute Resolution and Collections Services
IRS Secret Shopper Strikes Again
Owner of Great Falls firearms business charged with filing false income tax returns - IRS (Defendant name omitted, emphasis added):
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Defendant, through a real estate agent, listed the business for sale for $1,750,000. An IRS undercover agent, posing as a potential buyer, inquired about the list price by calling the real estate agent in February 2023. The real estate agent told the undercover that, “[N]ot everything flows to the tax returns.” In a later conversation, the real estate agent told the undercover that they would not identify in writing any “off the books” income but the actual amount of income was “substantial.”
As further alleged, the undercover toured [the business] with Defendant in May 2023. During the tour, Defendant stated that he skimmed approximately $450,000 in cash and repeatedly stated he did not report 20 percent of the gross receipts to the IRS. Based on his own claims and on records obtained through a search warrant, Defendant underreported approximately 20 percent, or about $1,486,404, of his income for tax years 2018 through 2022, resulting in him owing the IRS approximately $492,254.
I like to remind business owners that even if the IRS never has audited you, it's important to file timely and accurate returns if you ever want to sell your business. The buyer doesn't want to buy your tax problems and will normally hire a tax pro to check your tax filings. When the "buyer" is really from the IRS, that goes double.
What Day is it?
It's National Filet Mignon Day! Tip your server.
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