Tax News & Views Fails To End The Shutdown Roundup

Tomorrow! Tune in for an ACA 30 Minute Roundtable featuring Eide Bailly Affordable Care Act specialists Tonya Rule and Breanna Nagel. "Whether you’re struggling with filing obligations, new and changing regulations, or incorrect completion of forms, there are many ways companies can leave themselves at risk for large penalties." October 14, 1:00 P.M. Central. Register here.

More IRS Layoffs as Trump Follows Through on Shutdown Firings - Cady Stanton, Tax Notes ($):

The Trump administration distributed reduction-in-force notices to IRS employees October 10, following through on a threat from the Office of Management and Budget to lay off federal employees during the government shutdown.

An email sent to IRS employees obtained by Tax Notes confirmed that RIF notices were sent to affected employees October 10 and specifically mentioned the government shutdown.

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A legal filing from the Trump administration in American Federation of Government Employees v. Office of Management and Budget estimated that about 1,446 Treasury employees received RIF notices “related to the lapse in appropriations.” In that case, the plaintiffs are seeking a temporary restraining order to stop the implementation of RIFs during the shutdown.

Trump Fires 1,300 IRS Workers as Shutdown Layoffs Begin - Chris Cioffi, Erin Slowey, and Erin Schilling, Bloomberg ($):

The Trump administration has begun firing about 1,300 workers at the IRS as it tries to leverage mass layoffs in the standoff over government funding in Congress.

A source familiar with the matter said the employees will be fired across all divisions and include both those furloughed and still working during the shutdown. The agency when selecting who to layoff identified many people who do back office work like scheduling, training, and communications, the source said. A second source earlier confirmed the layoffs began Friday.

Unions Ask for Immediate Court Block on Shutdown Layoffs - Ian Kullgren, Bloomberg ($). "The request, added to a lawsuit filed last week against the federal government, asks a California district court to swiftly stop the layoffs occurring at several federal agencies. The American Federation of Government Employees also urged the judge to move up a hearing scheduled for next week, citing the urgent nature of the cuts."

IRS Furloughs Demand Tax Pros’ Close Documentation and Patience - Doug O'Donnell, Bloomberg Tax Insights and Commentary:

The IRS will continue to process payments. Paper returns may not be processed, and accounts may not be adjusted, but taxpayer filing and paying deadlines aren’t extended—making it necessary to meet deadlines.

Continue making timely payments and maintain records of them should questions arise later. This is especially the case to avoid penalties and interest, and helps anyone on an installment agreement remain in compliance with it.

For those with an Oct. 15 filing deadline, filing electronically is best to make sure your return has been accepted.

Chaos & Delays: What the IRS Shutdown Means for Taxpayers in Fall 2025 - Ronald Marini, The Tax Times. "From October 8th onward, the IRS has moved to an emergency footing, leaving over 34,000 staff at home with only the barest skeleton crew to handle critical functions tied to tax season and new legislative priorities."

Congress Shutdown Maneuvers

The Government Shutdown Is Finally Starting to Bite - Siobhan Hughes, Theo Francis and Katy Stech Ferek, Wall Street Journal:

Party leaders showed no change in their stances. “They’ve made the decision to take a ‘my way or the highway’ approach,” House Minority Leader Hakeem Jeffries (D., N.Y.) said of Republicans, speaking on “Fox News Sunday.” House Speaker Mike Johnson (R., La.) countered on the same show that it was Democrats who were being unreasonable. “It’s real pain for real people, and they seem not to care,” he said.

Expiring ACA Tax Credit Makes Strange Bedfellows - Katie Lobosco, Tax Notes ($):

Rep. Marjorie Taylor Greene, R-Ga., a staunch conservative and ally of President Trump, is siding with Democrats in pushing for the extension of an expiring Affordable Care Act tax credit.

Greene’s comments fostered cautious optimism on Capitol Hill that a bipartisan deal could be reached to address the issue before the end of the year, even as the Senate left Washington until October 14 amid an impasse over reopening the government.

The enhanced premium tax credit, which is set to end after December 31, has become a major sticking point in the government funding fight. Democrats are demanding the issue be addressed in exchange for their votes to reopen the government, which has been shut down since October 1.

The Unaffordable Healthcare Subsidies That Led to a Government Shutdown - William McBride, Tax Policy Blog:

The fiscal fight that resulted in the current federal government shutdown is, at its core, about the healthcare sector, spiraling healthcare costs, and federal subsidies. The main focus is the end-of-year expiration of enhancements to the Affordable Care Act premium tax credits (PTCs), which, if extended permanently, would cost about $350 billion over the next decade, according to the Congressional Budget Office (CBO).

However, PTCs are but one of many federal subsidies and tax preferences for health care, making this sector by far the most heavily government-subsidized sector in the economy. Healthcare spending has grown to almost one-third of the federal budget and, combined with tax preferences, now exceeds $2 trillion or 8 percent of GDP. These subsidies are forecasted to continue growing faster than the overall economy, making reforms that control costs imperative to achieve a sustainable fiscal trajectory.

Tariffic Weekend

In Retaliatory Move, Trump Threatens 100% Tariffs on Chinese Goods - Ana Swanson, New York Times:

President Trump on Friday said he would impose a 100 percent tariff on all products from China in response to curbs Beijing announced this week on rare-earth minerals, a rapid escalation of tensions between the world's largest economies.

On Truth Social, Mr. Trump wrote that the tariffs would take effect on Nov. 1 and be imposed “over and above” other tariffs on Chinese exports, which are already 30 percent and in some cases much higher. The United States would also put export controls on critical software, he said.

China vows to retaliate if Trump makes good on 100 percent tariff threat - Christian Shepherd and Lyric Li, Washington Post. "China has pledged to hit back if President Donald Trump carries out a threat to impose tariffs of 100 percent on all Chinese goods, as new data showed China’s exports to the United States dropped sharply last month."

Trump, Vance Open Door to China Deal as Trade Spat Drags On - Josh Wingrove and María Paula Mijares Torres, Bloomberg via Yahoo Finance. "President Donald Trump’s administration signaled openness Sunday to a deal with China to quell fresh trade tensions while also warning that recent export controls announced by Beijing were a major barrier to talks."

Blogs and Bits

Federal government shutdowns, then and now - Kay Bell on Substack. "Already, air travelers have faced flight delays; there are no telephone hotlines for taxpayers seeking Internal Revenue Service help as the Oct. 15 extended filing deadline nears; and folks looking to spend a break at a national park have been turned away."

2026 Inflation-Adjusted Amounts Released - Thomas Gorczynski, Tom Talks Taxes. "For tax year 2026, the standard deduction amounts will increase to $16,100 for single and MFS and $32,200 for MFJ."

FBAR Penalty Invalidated Under Seventh Amendment - Parker Tax Pro Library. "A district court granted a taxpayer's motion to dismiss an action by the government against a taxpayer to reduce to judgment penalties for failing to file a Foreign Bank and Financial Accounts Report (FBAR) after finding that the FBAR penalty assessment did not comply with the Seventh Amendment's guarantee of the right to a jury trial."

Related: Eide Bailly Penalty Help.

The Earned Income Tax Credit’s Hidden Tradeoffs - Veronique De Rugy, The Unseen and The Unsaid. "It may increase participation in the short run while reducing incentives to acquire skills in the long run. That’s a poor trade-off if what we really want is sustainable wage growth through higher productivity rather than larger subsidies."

Tax Obscura

Foreign Gifts: No Tax, But You Darn Well Better File the Form.

The Internal Revenue Code provides that you don't have to pay income tax on gifts or inheritances you receive. So that means gift recipients never have to worry about reporting them to the IRS, right?

If it were only that simple.

While there is no recipient reporting for gifts received from a U.S. person, gifts from across the border have a reporting requirement - and failure to report can be absurdly expensive.

You are required to file Form 3520 if you receive a gift or inheritance over $100,000 from a non-resident alien or a foreign estate. You are also required to file the form if you receive a gift exceeding the annual gift tax exclusion ($19,000 for 2025) from a foreign partnership or foreign corporation.

Failure to report these items can result in a penalty of up to 25% of the amount gifted - even though the amount isn't taxable in the first place.

The Form 3520 reporting is presumably to alert the IRS to the possibility that the gift or inheritance was actually something more sinister, such as disguised compensation or money being laundered. But even if you receive a perfectly innocent inheritance from Uncle Hans back in the old country, not filing Form 3520 can be costly.

What day is it?

It's International Day For Failure. It happens to all of us, so we might as well celebrate it, I guess.

Tax News & Views Fails To End The Shutdown Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA