Key Takeaways
- Math error bill signed.
- Taxpayer Advocate explains key provisions.
- Tax Court, tax penalty bills clear house; Senate prospects "murky."
- IRS wrestles with pornography bar in tip deduction.
- Costco joins tariff lawsuits.
- Giving Tuesday tips and suggestions.
Free Employee Benefit CPE Webinar Today! The Eide Bailly Employee Benefit team will sponsor a free webinar on Common Errors and Their Corrections in Employee Benefit Plans at noon Central time December 2. Eligibility errors, contribution errors, document failures and much more are on the menu. Free, 1 hour of CPE available. Register here.
IRS Math Error Bill Becomes Law - Alexander Rifaat, Tax Notes ($):
The Internal Revenue Service Math and Taxpayer Help Act (H.R. 998) compels the IRS to provide to taxpayers a description of any errors in plain English, including the specific type of error and the area on the return where it was made; an itemized computation of adjustments required to correct the error; a phone number for the automated transcript service; and a deadline for requesting an abatement of any tax assessed as a result of the error.
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Under the legislation, which passed the House in March and the Senate in October, the IRS will also launch a pilot program to send error notices by mail and submit a report to Congress that will include, among other things, the number of errors and abatements, with dollar amounts.
A Win for Taxpayers: Internal Revenue Service Math and Taxpayer Help Act - Erin Collins, NTA Blog:
It is important for taxpayers to understand they only have 60 days to request abatement of the IRS’s adjustment. If they fail to act within that 60-day window, the assessment becomes final, and they generally lose their right to challenge the IRS’s position in Tax Court. Usually, once a tax has been assessed, the taxpayer’s only remedy if they disagree with the IRS is to pay the tax, submit a claim for refund, and, if necessary, file a refund suit in either the U.S. district court or the U.S. Court of Federal Claims.
Unfortunately, math error notices often leave taxpayers confused or unaware of their rights. Notices can be vague, failing to explain what the IRS changed or why. In some cases, notices have even omitted the critical 60-day abatement information altogether, leaving taxpayers uncertain about what action to take.
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The Internal Revenue Service Math and Taxpayer Help Act strengthens taxpayer rights and reaffirms a core principle of tax administration: that every taxpayer deserves clear, accurate, and timely communication from their government. With the President’s signature, this bipartisan reform has now become law – ensuring fairer, more transparent IRS communications for millions of taxpayers.
Erin Collins is the National Taxpayer Advocate, an independent taxpayer ombudsman within the IRS.
Related: Eide Bailly IRS Dispute Resolution and Collections Services.
Tax Court, Tax Penalty Bills Clear House
House Passes Bills on Tax Court Procedure and IRS Penalties - Katie Lobosco, Tax Notes ($):
Both the Tax Court Improvement Act (H.R. 5349) and the Fair and Accountable IRS Reviews Act (H.R. 5346) have garnered bipartisan support. They unanimously advanced out of the Ways and Means Committee earlier this year.
House Votes To Expand Tax Court's Subpoena Power - Asha Glover, Law360 Tax Authority ($):
The bill also would allow special trial judges to hear any proceeding within the Tax Court's jurisdiction if the parties consent, according to the JCT. The court's special trial judges are currently limited to providing recommendations in specific cases, as assigned by the chief judge, unless otherwise ordered, the report said.
Under the bill, trial judges would be granted the power to order punishment for contempt of court. However, trial judges would not be able to issue punishments that exceed the maximum fine or prison term for a Class C misdemeanor, according to the JCT.
IRS Fines’ Supervisory Review Blessed by Bipartisan House Vote - Zach Cohen, Bloomberg ($):
The vote passes Rep. Glenn Grothman’s (R-Wis.) H.R. 5346, which specifies fines can only be levied if they have the sign-off of the immediate supervisor of the IRS employee making that determination.
The IRS issued regulations last year that Grothman argued improperly broadened which officials could approve fines and decreased accountability.
The article says the bill's prospects in the Senate are "murky."
Congress and ACA Credits on Day 2 of 12 December Session Days
Trump mum as time runs short for Obamacare deal - Andrew Desiderio, Laura Weiss and Ally Mutnick, Punchbowl News:
Absent a major shift, senators are set to vote on a Democratic proposal to extend the enhanced Obamacare subsidies for a number of years, and potentially a “side-by-side” but yet-undefined GOP alternative. Neither of these proposals will get 60 votes.
Some Senators in both parties agree that the only path to an extension of some sort relies on heavy involvement from President Donald Trump, who was set to propose a pared-back short-term subsidy extension last week before pulling the plug.
Tax Credit or HSA: What Will Bring Down ACA Healthcare Costs? - Katie Lobosco, Tax Notes:
Democrats and some moderate Republicans want to temporarily extend and reform the enhanced premium tax, which was created during the COVID-19 pandemic. But many other Republicans have no interest in restoring a part of the ACA and are suggesting to instead send money directly to Americans to help pay for their healthcare.
But lawmakers may have run out of time to make any major reforms for the 2026 coverage year. ACA enrollees must decide what coverage they want for next year by December 15 to avoid a lapse in insurance in January.
Tax on Naughty Tips
For ‘No Tax on Tips,’ the I.R.S. Gets Intimate - Andrew Duehren, New York Times:
Maybe we should back up.
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On the list of nearly 70 eligible occupations, detailed in a proposed regulation in September, were “digital content creators,” “entertainers and performers” and “dancers,” categories that, at first blush, seemed as if they could be a boon for America’s sex workers. But the Trump administration also added that tips for prostitution or “pornographic activity” would not be entitled to the new tax break.
Imagine being the IRS agent being asked to audit this. The addition to the IRS Audit Manual for this should be something.
The article quotes a Substack tax writer and friend of Tax News & Views:
Politico's Bernie Becker looks at how the deduction could play in the mid-term elections next year:
Kevin Hassett, the director of the National Economic Council, quickly pivoted to those items when asked on CBS’s “Face the Nation” about rising grocery prices and voters’ increasing pessimism about the economy.
“The bottom line is that we’ve got the big, beautiful bill cutting taxes on overtime, taxes for tips and so on. And all that money is going to start to be in people’s pockets,” Hassett said.
Some people, anyway.
Costco's Tariff Special
Costco Joins Companies Suing Trump Administration Over Tariffs - Sarah Nassauer and Gavin Bade, Wall Street Journal:
In a filing with the U.S. Court of International Trade on Friday, Costco said the lawsuit is necessary to make sure it is eligible for refunds if the Supreme Court rejects the administration’s reasons for tariffs collected under the International Emergency Economic Powers Act. Costco executives declined to comment.
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If the court does strike down the tariffs Trump initiated in April, it isn’t clear how or whether previously paid duties would be refunded. The onus would be on the justices to decide and they gave little indication how they might unwind the president’s signature economic policy. Though unlikely, it is theoretically possible that Congress could move to retroactively authorize the tariffs Trump imposed.
Blogs and Bits/What day is it?
It's Giving Tuesday, "a global generosity movement unleashing the power of radical generosity." Today we double up our daily holiday and blog roundup with items related to this post-Thanksgiving day of charity.
Coming changes to charitable tax deductions and giving strategies on Giving Tuesday 2025 - Kay Bell, Don't Mess With Taxes. "The OBBBA created a new above-the-line charitable deduction of up to $1,000 for individual taxpayers who claim the standard deduction. It goes up to $2,000 for married jointly filing couples who don’t itemize."
Navigating Tax Rules During The Season Of Giving - Robert Wood, Forbes. "Donations to recognized charities are different, but even if you give to a charity, you can’t deduct the value of your time or services. That’s true even if you usually bill by the hour and donate many hours of otherwise billable time."
Giving Tuesday 2025: Movember and Bridge to Enter Advanced Math - Mary Pat Campbell, Stump-Meep. "Yes, Movember focuses on prostate cancer, testicular cancer, and men’s mental health issues specifically, and not all causes of mortality for men."
Help some of the poorest people in Rwanda - Timothy Lee, Understanding AI. "This year the group is aiming to raise at least $1 million to help people in rural Rwanda."
Make sure your gifts count at tax time. Some keys:
- Any gift of $250 or more requires a contemporaneous written receipt to be deductible. If you wait until the IRS exam to get it, it's too late. No receipt, no deduction.
- Non-cash gifts over $500 have to be reported on Form 8283. If they exceed $5,000, a qualified appraisal is required for property gifts other than publicly-traded securities. Cryptocurrency is not a publicly-traded security. No appraisal, no deduction. Again, if you wait until the IRS audits you to get your appraisal, you lose.
- Be sure it's a gift to a qualified charity. Gifts to or for the benefit of individuals don't count on your 1040.
- Two changes in the tax rules take effect January 1 that might make a gift this year more valuable. First, there will be a 1/2% of adjusted gross income floor on charitable gifts - meaning no itemized deduction for such gifts if they don't exceed that amount. Second, the tax benefit of gifts and some other itemized deductions for top bracket taxpayers will be limited by a new formula next year that reduces the deductions by 2/37. For taxpayers in the 37% top bracket this year and next, charitable gifts will be worth more this year.
If you are stumped for a gift, I humbly offer a few suggestions.
The Tax Foundation does invaluable work in analyzing federal, state, and international tax policy.
The Institute for Justice steps up for taxpayers who would otherwise have to fight city hall, or the county, or the IRS without legal help.
Finally, consider Staben House, run by my baby sister under the auspices of Waukegan Township, Illinois. "Waukegan Township Staben House provides transitional housing and community enrichment services to homeless women with children. We strive to develop goals with families, assist them in establishing and sustaining permanent housing, increasing skills, income and achieving greater self-determination."
While the township provides some funding, Staben House relies on donations for much of its work.
Make a habit of sustained success.
