Key Takeaways
- Missing todays deadline can be expensive.
- Why extensions are good.
- How to file safely.
- Tariff update.
- Father of the year candidate.
- Green things.
It's a Deadline Day. Today is the due date for calendar-year partnership and S corporation returns - which means most of them. These returns should be filed or extended by midnight tonight.
Why is an extension always a good idea? If a return is extended and a mistake is found in the next six months, a taxpayer can file a "superseding return" rather than an amended return. The superseding return is treated as an updated original filing, with fewer processing obstacles than an amended return.
This is especially important for "BBA partnerships," which include most partnerships. If a superseding return is unavailable, BBA partnerships can only correct mistakes via the cumbersome "Administrative Adjustment Request" process, which requires special filings in subsequent returns of partners.
How should you file? If you can file electronically, that's how you should file, whether you are filing your return or are just extending. The IRS still struggles to process paper returns. Despite some silly things you may have read, e-filing is more secure than trusting a return to the vagaries of the postal service.
If you must file on paper, document your filing. Certified Mail, Return Receipt Requested, is the standard. Yes, it costs $8.16, but it can more than pay for itself if the IRS asserts a late filing penalty. If you really are a last-minute filer and you get to the post office after it closes, you can use an authorized private delivery service. Be sure you use the right delivery option; for example, UPS Next Day Air qualifies, but UPS Ground does not. Save your shipping documents.
What are the late filing penalties?
The IRS will assess a penalty of $245 per K-1 for late filing; the penalty is repeated for each additional month a return is late. That means a return with 10 K-1s filed one day late incurs a $2,450 penalty, while one filed three months late incurs a $7,350 penalty.
A Break for Scam Victims
Tax Pros Welcome IRS Scam Theft Loss Clarity - Nathan Richman, Tax Notes ($):
This analysis tracks a position recently propounded by attorneys considering the possibility of tax deductions for victims of “pig butchering,” a new form of investment scam. The memo considers five varieties of scams, including pig butchering, and the IRS took the position that three of the five would qualify for theft loss deductions in 2024.
The memo says taxpayers victimized by investment related scams qualify for a loss deduction, but victims of romance scams or "kidnapping scams" - where a grandparent is convinced that a grandchild is being held hostage - are not.
Related: Eide Bailly IRS Dispute Resolutions and Collections Services
DOGE and IRS
IRS to Pause Technology Modernization Work - Benjamin Valdez, Tax Notes ($):
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Former National Taxpayer Advocate Nina Olson said that putting modernization on pause will only exacerbate the agency’s timeline for making major upgrades.
“Doing a strategic pause is exactly why the whole IRS modernization effort has taken over 30 years — new people come in and stop what is underway and start over,” said Olson, now with the Center for Taxpayer Rights. “That’s one of the reasons why Congress gave the commissioner a five-year term — so at least there would be some continuity of vision and leadership.”
Cuts to IRS Enforcement Arm Make Tech Modernization More Urgent - Erin Schilling, Bloomberg ($):
“AI can help the IRS detect work better, but you still need people to do the work, unless we’re all going to somehow get comfortable with AI doing audits,” said Tom Cullinan, a tax attorney at Chamberlain, Hrdlicka, White, Williams & Aughtry and former counselor to the IRS commissioner.
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Plus, a fully staffed IRS is still important to tackle tax scams proliferating through promoters on social media, Cullinan said. When he was at the IRS between 2018 and 2022, he said there were cases that were relatively easy to take on but the agency wasn’t able to pick up because they didn’t have enough people.
‘‘Delete’ is one of their favorite terms’: Inside DOGE’s IRS takeover ahead of tax season - Rene Marsh and Marshall Cohen, CNN:
“They just randomly drop by people’s offices, demanding access to systems; they’re bullying us and there’s no discipline in what they are doing, which really worries me,” said one IRS employee.
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In response to CNN’s reporting, the White House press secretary said in a statement, “This story is based on anonymous sources and the fraudsters always scream the loudest. The vast majority of Americans support President Trump rooting out waste, fraud, and abuse.”
DOGE Worker Violated Security Protocol, Treasury Official Says - Kathleen Murphy and Alexander Rifaat, Tax Notes ($):
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Elez resigned in February but has since been reinstated and moved to the Social Security Administration.
No Shutdown
The Government Lights Remain On For Now Edition - Kelly Phillips Erb, Forbes:
Paul was reportedly demoted because he refused to cooperate with Elon Musk's Department of Government Efficiency, as DOGE representatives allegedly sought to share taxpayer information with other federal agencies.
Senate Passes Stopgap Stripping $20B From IRS, Avoiding Shutdown - Cady Stanton, Tax Notes ($). "The Senate voted 54 to 46 to pass the GOP continuing resolution extending government funding through the end of fiscal 2025 — largely at fiscal 2024 levels — ahead of a midnight March 14 government funding deadline. The legislation extends a freeze on $20.2 billion in enforcement funding for the IRS from the Inflation Reduction Act through the end of the fiscal year, September 30, rescinding the money from the agency."
West Virginia Storm Deadline Extension
West Virginia storm victims qualify for tax relief; various deadlines postponed to Nov. 3 - IRS:
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The tax relief postpones various tax filing and payment deadlines that occurred from Feb. 15, 2025, through Nov. 3, 2025 (postponement period). As a result, affected individuals and businesses will have until Nov. 3, 2025, to file returns and pay any taxes that were originally due during this period.
Tariff Update
Supermarket Produce Aisle - Patrick Thomas, Wall Street Journal. "American consumers expect to see fresh produce in stores year-round, and for avocados, broccoli, peppers and mangos, that means buying from Mexico and South American countries. At this time of year, about 60% to 70% of what East Coast produce distributor John Vena sells is imported, much of it from Mexico and Canada."
Trade War Retaliation Will Hit Trump Voters Hardest - Lazaro Gamio and Ana Swanson, New York Times. "The jobs that could be hit by retaliation are especially concentrated in pockets of the upper Midwest, South and Southeast, including many rural parts of the country that are responsible for producing agricultural goods. It also includes areas that produce coal, oil, car parts and other manufactured products."
Blogs and Bits
Using tax-favored retirement funds after a disaster - Kay Bell, Don't Mess With Taxes. "While that’s not the planned or ideal use of a nest egg, it is often the necessary financial move following a disaster. And to help those who must tap tax-advantaged accounts, federal lawmakers changed the rules to make such account distributions easier and less costly."
Courts Order 6,700 IRS Employees to Be Rehired But They Can Still Be Properly Fired by May 15 - Ronald Marini, The Tax Times. "Agencies planning to conduct large-scale layoffs can still proceed in accordance with the laws that govern such processes, he said, meaning that the reprieve for workers may only be temporary. The Office of Personnel Management had set a deadline of Thursday for agencies to submit reduction in force plans."
The Case for Repealing the Corporate SALT Deduction - Adam Michel, Liberty Taxed. "The corporate income tax is a highly imperfect revenue source and should ultimately be repealed entirely. However, while it exists, policymakers should work to reduce its economic and political distortions. Eliminating the SALT deduction as part of a broader tax reform can meet those goals."
Bad Medicine
Illinois Doctor Pleads Guilty to Evading Approximately $1.6M in Taxes - US Department of Justice (Defendant name omitted, emphasis added):
According to court documents and statements made in court, Defendant was a medical doctor who resided in Lake Forest. From approximately 2011 to 2017, Defendant evaded payment of approximately $1.6 million he owed to the IRS. Among other steps, Defendant transferred ownership, in name only, of two rental properties from himself to his children without their knowledge, even though he continued to receive income from these properties. He also transferred approximately $600,000 from bank accounts he controlled in the United States to accounts in India. To fraudulently reduce the money he owed the IRS, Defendant submitted documents to the IRS that omitted an investment account in the United States, bank and investment accounts in India, and ownership of the rental properties.
Thanks, Dad.
What day is it?
It's St. Patrick's Day, meaning it's National Corned Beef and Cabbage Day!
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