Key Takeaways
- “There’s no strategy here except to, I don’t know, weaken the IRS and replace it with apps.”
- Appeals office and Taxpayer Advocate targeted for cuts.
- Rehired IRS employees placed on paid leave.
- Tariff "Liberation Day" slated to massively increase import taxes.
- National Poultry Day.
IRS Retreats From Some Audits as Agency Slashes Workforce - Richard Rubin and Ashlea Ebeling, Wall Street Journal:
One big concern: Hollowing out the IRS could erode a valuable asset—high voluntary tax compliance by households and businesses. People pay partly because of social norms against lawbreaking and partly because they fear getting caught. Now, Americans pay about 85% of what they owe, with direct IRS collections adding 2%, levels that research suggests are above many European countries.
IRS Job Cuts to Bring Delays in Legal Work, Curbs to Easy Filing - Michael Rapoport, Bloomberg ($):
The reductions are planned by May 15, and include earlier layoffs of probationary employees and people who accepted the government’s deferred-resignation offer to leave. A court order has since required the IRS to reinstate the probationary employees, but they have been placed on administrative leave.
Treasury Department to cut IRS taxpayer advocate staff - Tobias Burns, The Hill:
“These adjustments to right-size the NTA will in no way negatively impact that mission nor service to taxpayers in any meaningful way,” a Treasury Department spokesperson said in a statement.
That confidence is not shared universally. Eide Bailly Tax Controversy Partner Elyse Katz says such cuts will be "Devastating... They are already stretched. Taxpayers are going to be left with no options or resources to get their problems solved and will be at the mercy of the IRS to eventually get things accomplished. With both the IRS and TAS being slashed, problems will go up and resolutions will go down."
Treasury, IRS Still Finalizing Next Staff Reductions, Krause Says - Benjamin Valdez, Tax Notes ($):
“You may have seen information in the press about reductions in force (RIF). I want to confirm that we have not received Treasury’s RIF and Reorganization plan yet,” Krause said in a March 18 memo to all employees, which was viewed by Tax Notes. “We continue to engage with Treasury regarding potential reduction levels, other workforce shaping tools and important considerations regarding timelines.”
IRS Updates Court on Steps to Reinstate Fired Employees - Kristen Parillo, Tax Notes ($, my emphasis):
...
Upon reinstatement, Treasury will place each affected employee in an administrative leave status, the declaration said.
According to a memo sent by the IRS Human Capital Office to agency managers on March 17, all reinstated IRS employees will be paid while on leave and will receive back pay from the date of their termination. The memo, viewed by Tax Notes, said that employees will also have their federal benefits, including health and life insurance, restored to the election before termination.
In the name of efficiency.
Oh, and Tariffs.
Trump aides prep new tariffs on imports worth trillions for ‘Liberation Day’ - Jeff Stein and David Lynch, Washington Post:
Trump’s reciprocal plan could return the average U.S. tariff to its early 1930s level of around 20 percent, said Edward Gresser, a former trade official who is now the vice president and director of trade and global markets for the Progressive Policy Institute. Gresser said Trump’s actions would be unprecedented, and many experts have argued the president does not have the authority to impose such sweeping tariffs without congressional approval.
Trump doubles down on reciprocal tariffs: ‘April 2 is a liberating day’ - Lauren Irwin, The Hill:
Despite concern over the economy and financial markets in the U.S. and abroad, Trump maintained that more tariff hikes were coming.
He was asked if there was any inclination to ease up on tariffs amid anxiety in the markets, to which he replied “no.”
Bessent reveals how Trump will decide reciprocal tariffs - Sylvan Lane, The Hill:
If a country doesn’t change those policies, he continued, “then we will put up the tariff wall to protect our economy, protect our workers, and protect our industries.”
China has a defense against Trump’s trade war: A great wall of pork - Christian Shepherd, Washington Post. "Targeting American farm products is a key part of Beijing’s response. It put 10 to 15 percent tariffs on $21 billion of American products, including pork, chicken, soybeans and other farming goods predominantly produced in rural areas of the United States that voted Republican in the last election, including Iowa, North Carolina and Missouri. China was the third-largest importer of American pork last year, after Mexico and Japan."
Congress Update
Tax Bill's 'Magic Math' Approaches Inflection Point in Congress - Zach Cohen, Bloomberg ($):
...
The Joint Committee on Taxation since the advent of the modern congressional budgeting process in the mid-1970s has scored any statutory changes against current law rather than against assumptions of their continuation, the panel’s chief of staff, Thomas Barthold, told Senate Democrats in a letter this month.
The only exception he named was the treatment of excise taxes to a trust fund, which his team assumes continue even if they are set to expire absent congressional action.
International Terminal
EU To Push On With OECD Tax Plan, Official Says - Josh White, Law360 Tax Authority ($):
European Commissioner Wopke Hoekstra, who oversees tax and climate policy, said at the EU Tax Symposium that the OECD's two-pillar reforms are still important. That package includes the 15% minimum corporate tax rate under Pillar Two and new taxing rights under Pillar One.
European Commission Plays Down Wealth Tax Prospects - Saim Saeed, Bloomberg ($):
Hoekstra added that even when there is “an idea that appeals to your heart, you still wait and look at it when it’s on paper,” and “think about the exact merits.”
Kenya Businesses Decry Unpredictable Tax Code That Led to Riots - Bella Genga, Bloomberg. "Kenyan business leaders say the nation’s taxation regime is unpredictable and inconsistent, adding a layer of risk for firms operating in the East African nation that saw dozens of protesters killed in anti-tax marches last year."
Blogs and Bits
Some survivors wait more than a year to get deceased taxpayers' final refunds - Kay Bell, Don't Mess With Taxes. "Overall, TIGTA’s analysis found that in the more than 440,000 final filings it reviewed, survivors were owed a total of $1.3 billion in refunds. It also discovered that they have been waiting on average more than a year for the money."
IRS Properly Certified Seriously Delinquent Tax Debt to State Department, Leading to Potential Loss of Passport - Ed Zollars, Current Federal Tax Developments. "The court noted that if the Commissioner certifies that a taxpayer has a "seriously delinquent tax debt," I.R.C. § 7345(a) mandates that the certification be transmitted to the Secretary of State for action regarding the taxpayer’s passport. The Commissioner is also responsible for notifying the taxpayer of this certification under I.R.C. § 7345(d)."
Financial Services Firm Can't Exclude 9/11 State Grant Proceeds from Income - Parker Tax Pro Library. "The Tax Court held that New York state grant proceeds received by a financial services corporation as a result of the September 11, 2001, terrorist attacks on the World Trade Center were not excludible from income."
IRS Surprises Taxpayers With New Ruling On Theft Losses After TCJA - Matthew Roberts, Forbes. "Scammer A contacted Taxpayer 5 by text and phone, claiming to have kidnapped Taxpayer 5’s grandchild. When Taxpayer 5 asked to speak to his grandchild, Scammer A used artificial intelligence to clone the grandchild’s voice, convincing Taxpayer 5 of the kidnapping. Upon Scammer A’s instructions, Taxpayer 5 transferred funds to an overseas account. The funds included Taxpayer 5’s IRA and non-IRA accounts. Taxpayer 5 later determined that it was a scam."
Misplaced Trust
Former operations manager sentenced to five years in federal prison for stealing over $2.5 million from employer, covering up the scheme with tax fraud - IRS (defendant name omitted, emphasis added):
According to court documents, Defendant was employed as an Operations Manager for a property management business located in Evansville, Indiana. Between May 2017 and June 2022, Defendant ran a five-year wire fraud scheme, stealing approximately $1,803,466.38 from her employer via unauthorized checks and Automated Clearing House (“ACH”) transfers.
During this five-year period, Defendant executed 99 unauthorized ACH transfers, totaling $503,151.59 and wrote 279 unauthorized checks to herself, totaling $1,300,314.79. The funds were transferred from her employer’s bank accounts to her personal bank accounts.
In an effort to conceal the unauthorized checks, Defendant entered false information in the business accounting software, representing that the checks were written to her employer instead of herself. These false entries made it appear as if the business’s funds were being moved from one account to another for a legitimate business purpose.
With the theft continuing for five years, we can assume accounting controls were not what they should have been. It's possible that the business thought such controls were too expensive. It turned out otherwise.
What day is it?
It's National Poultry Day!
