Tax News & Views Carrots and Tariff Sticks Roundup

Reminder to those who owe: Payment plan options are available - IRS (emphasis added):

The Internal Revenue Service today reminds taxpayers that they don’t need to wait until April 15 to file their 2024 federal return, and if they owe and are unable to pay the balance in full, there are payment plans available to help them pay their tax obligation.

Tax returns for 2024 are due on April 15, 2025, with exceptions for taxpayers in a disaster area, combat zone or living and working abroad. April 15 is also the deadline for making tax payments to avoid late charges such as interest and the late payment penalty.

The IRS urges those who cannot pay their full balance to file and pay as much as they can on or before April 15. Filing on time avoids the late filing penalty, which is usually 5% per month on the unpaid balance.

For this purpose, a return filed after April 15 under a timely-filed extenison is filed "on time."

Why Cutting Corners on Your Taxes This Year Is a Bad Idea - Laura Saunders, Wall Street Journal:

If you’re thinking about cheating a little—or a lot—on your taxes due April 15, think again.

It’s easy to see why Americans may be tempted to cut corners. Since President Trump took office and Elon Musk’s Department of Government Efficiency began its work, the Internal Revenue Service has shed thousands of workers, including key executives, and reduced tax enforcement. More disruptions are likely on the way.

...

The bottom line is that the IRS has plenty of ways to find tax misdeeds and penalize Americans who commit them. So here’s the best reason to play it straight this year: You want to sleep at night.

Tariffs: L-Day +2

Trump tariff price hikes could start with clothing, cars and coffee - Abha Bhattarai and Shira Ovide, Washington Post:

“These tariffs are going to raise prices for American people in a way that directly affects their everyday lives,” said Kimberly Clausing, a professor at UCLA Law and a former Treasury Department economist. “For consumers, this will be the biggest tax increase they’ve faced in 50 years, in the form of price increases.”

...

The steepest price increases could begin with Americans’ morning coffee, almost all of which comes from overseas. At Graffeo, a San Francisco coffee roastery founded in 1935, daily deliveries of green coffee beans arrive from Colombia, Costa Rica and Papua New Guinea — all of which will soon face 10 percent tariffs.

Market Upheaval From Trump’s Tariffs Could Be Just the Beginning - James Mackintoch, Wall Street Journal:

Markets were gripped by the recession trade after President Trump’s tariffs on Wednesday threatened a global trade war. Treasury yields, stock futures and the dollar all plunged.

...

The carnage in the markets might be just the beginning: If the biggest U.S. tax rise since at least the 1950s causes the economy to shrink, stocks and Treasury yields still have a long way to go down.

Tariff Reaction

Trump’s Reciprocal Tariff Calculations Are Nonsense, Will Punish Mutually Beneficial Trade - Alan Cole, Tax Policy Blog:

However, despite the characterization of the tariffs as “reciprocal,” and despite the accompanying graphics referring to foreign “tariffs charged to the USA including currency manipulation and trade barriers,” the White House did not actually measure tariffs, currency manipulation, or trade barrier policies employed by other countries. Instead, it drew its estimates from something else entirely: bilateral trade deficits in goods.

Specifically, the White House documents appear to allege the “tariffs charged to the USA” are the greater of two different quantities: (a) 10 percent, and (b) the 2024 US trade deficit in goods with a given country, divided by the total quantity of US imports from that country.

...

The method for calculating other countries’ so-called “tariffs” for reciprocal purposes is nonsense.

Trump’s Trade War Escalates as China Retaliates With 34% Tariffs - Keith Bradsher and David Pierson, New York Times. "China bought $147.8 billion worth of American semiconductors, fossil fuels, agricultural goods and other products last year. It sold $426.9 billion worth of smartphones, furniture, toys and many other products to the United States."

America’s astonishing act of self-harm - Financial Times. "If it endures, Donald Trump’s decision on April 2 2025 to enact sweeping “reciprocal” tariffs on US trade partners will go down as one of the greatest acts of self-harm in American economic history. They will wreak untold damage on households, businesses and financial markets across the world, upending a global economic order that America benefited from and helped to create."

UK Gov't Preparing List Of US Goods For Tariffs - Josh White, Law360 Tax Authority ($). "The Department for Business and Trade announced a consultation inviting businesses to give feedback on the indicative list of U.S. imports and the possible fallout of tariffs. At the same time, the government published a 417-page list of U.S. imports it could target."

Tariff Politics and Pushback

Republicans play powerless as Trump tariff fears sweep across the globe - Katherine Tully-McManus, Meredith Lee Hill, and Jordain Carney, Politico.

Meanwhile, Republicans on Capitol Hill — who could use their own votes to stop the new tariffs cold — made clear they had no intention of acting anytime soon.

...

On the one hand, it was the latest example of how timid Republican lawmakers have grown in checking or challenging Trump, who has remade the GOP in his own image over the course of a decade. On the other, some hints of possible future pushback emerged — four GOP senators voted with Democrats Wednesday to overturn an earlier, smaller tranche of tariffs, and a veteran Republican senator proposed curtailing presidential powers to levy tariffs.

Republicans Raise Concerns About Trump’s Tariff Blitz - Lindsay Wise, Siobhan Hughes, and Richard Rubin, Wall Street Journal. "Sen. Chuck Grassley (R., Iowa), the only grain farmer in the Senate, joined with Sen. Maria Cantwell (D., Wash.) to introduce a bill Thursday that would allow Congress to remove tariffs put in place by any president."

Trump Sued Over US Tariffs by Conservative-Backed Legal Group - Ben Bain, Bloomberg via MSN:

The New Civil Liberties Alliance said Thursday the president illegally imposed an emergency tariff on Chinese goods. NCLA is representing a small retail stationery business named Simplified, which claims it will suffer “severe” harm from his “unconstitutional” tariffs on China.

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In the lawsuit, Simplified alleges that Trump improperly bypassed Congress by imposing tariffs under the International Emergency Economic Powers Act of 1977. The firm touts itself as a woman-owned business that sells premium calendar planners and other organizational tools.

Senate moving on tax, budget

Senate advances blueprint for Trump tax cuts, other top priorities - Al Weaver, The Hill. "The Senate on Thursday advanced its budget resolution, teeing up a weekend vote on a blueprint for President Trump’s tax agenda and other top priorities."

Senate Primed for Budget Vote; House Fight to Come Later - Cady Stanton and Katie Lobosco, Tax Notes ($):

While the updated resolution calls for extending provisions of the Tax Cuts and Jobs Act, it doesn’t include the cost of extension, and there isn’t a full tally of its other costs. The price tag, including the expected tax title, is about $5.8 trillion, according to an estimate from the Committee for a Responsible Federal Budget. The Senate’s measure counts neither the Joint Committee on Taxation’s estimate of $4.6 trillion to extend tax cuts another 10 years nor $871 billion in estimated interest costs.

Republican senators have largely coalesced behind the budget resolution, but more pushback is expected in the House, which adopted a very different version in February. A handful of House Republicans — including Rep. Andrew Ogles, R-Tenn. — have already criticized the Senate measure. Others have previously voiced concern about the use of a current-policy baseline to score a tax bill.

Republicans Debate Hiking Tax Rate to 40% for Millionaires - Nancy Cook and Saleha Mohsin, Bloomberg:

Republicans are weighing the creation of a new bracket for those earning $1 million or more to offset some of the costs of their tax bill, a stark departure from decades of GOP opposition to tax increases, according to people familiar with the matter.

Deliberations have included a new top rate that would be around 39% to 40%, according to people familiar with the matter, who have requested anonymity to discuss a matter that is still being negotiated.

Tax Administration News

DOGE Cuts Overlook Long-Standing Bids To Improve IRS - Kat Lucero, Law360 Tax Authority ($). "'The DOGE people seem to understand the cutting part, but what they don't seem to understand is the implementation part,' said Eric Green, founding partner of Connecticut-based Green & Sklarz LLC."

7,000 probationary workers will return to their jobs in next 10 days - Martha Waggoner, The Tax Adviser. "Under court orders, the IRS had previously reinstated the workers by placing them on administrative leave, according to an email the workers received in mid-March. A federal judge – one of two who issued rehire orders for probationary employees who worked at the IRS and other government agencies – said that decision did not meet the terms of his bench order and said the employees must go to work."

Blogs and Bits

Tax loss harvesting in the wake of tariff stock losses - Kay Bell, Don't Mess With Taxes. "The Internal Revenue Code wash sale rule says you cannot take tax advantage of a losing asset and then repurchase substantially the same stock within 30 days of the sale. This 30 days actually is 60 days, because it applies to 30 days before the sale and 30 days after the sale."

Tax Return Is Key Information Source For Divorce Attorney - Peter Reilly, Forbes. "When there are numerous accounts with complex flows, Crane will call in forensic accountants. They are also required to work on valuation of business interests. When each of the couple hire their own forensic accountant they can sometimes help reconcile the differences in value. Crane enjoys working with the forensic accountants. She finds that she always learning new things from them. "

'Reciprocal' Tariffs Disrupt Transfer Pricing - Chad Martin, Eide Bailly. "One immensely disruptive dimension of the new 'reciprocal tariff' regime announced is its implication for transfer pricing analyses relying on comparable profits method/transaction net margin method data sets."

Bozo Tax Tip #7: Honey, You Don’t Exist! - Russ Fox, Taxable Talk. "Last week, I finished the tax return of a long-time client (call him John Smith). We were on the phone reviewing his return and he mentioned his wife. He was filing his 2024 tax return as 'Single.' After I congratulated him, I asked when he got married. He replied, 'last August.' I sighed."

Hacked

Texas woman sentenced to 18 months in prison for conspiracy to defraud the IRS - IRS (Defendant name removed, emphasis added):

Defendant, of Mansfield, Texas, was sentenced on March 31, 2025, by United States District Judge G. Murray Snow to 18 months in prison, followed by three years of supervised release. Defendant previously pleaded guilty to Conspiracy to Defraud.

From approximately January 2020 through April 2022, Defendant’s co-conspirators hacked into an Arizona tax-preparer firm’s computer network and modified in-progress tax documents for more than 40 individuals without their knowledge or the knowledge of the firm. Defendant then opened 10 bank accounts at different banks, and numerous tax refunds based upon the modified tax documents were deposited into those accounts. Defendant ultimately transferred more than $2.5 million from the accounts that received fraudulent tax refunds to purchase cryptocurrency.

Fraudsters target preparers for the opportunity to do stuff like this. That's why the IRS requires preparers to have a written data security plan. That's also why preparers and clients should practice good data hygiene like using secure portals to transfer information and keeping security software updated. And never, ever, click on the link.

What day is it?

It's International Carrot Day! I prefer to eat them in the form of carrot cake, but I'm told that there are other options.

Tax News & Views Carrots and Tariff Sticks Roundup

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Joe B. Kristan, CPA