Key Takeaways
- Cost of tax complexity.
- Republicans market the OBBBA.
- OBBBA and tipped income.
- Digital services taxes.
- IRS navigates AI.
- 50% tariff on Indian goods.
- National Just Because Day!
Tax Complexity
Tax Complexity Now Costs the US Economy over $536 Billion Annually - Sam Cluggish & Alex Muresianu, Tax Foundation:
The federal tax code imposes many costs on the US economy. The most direct costs, of course, are the roughly $4.9 trillion in federal taxes (as of 2024) that consume 17.1 percent of US gross domestic product (GDP). Our tax system is heavily reliant on individual and corporate income taxes, which economists at the Organisation for Economic Co-operation and Development have determined are the most harmful for economic growth.
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According to the latest estimates from the White House Office of Information and Regulatory Affairs (OIRA), Americans will spend almost 7.1 billion hours complying with IRS tax filing and reporting requirements in 2025. This is equal to 3.4 million full-time workers—almost the population of Los Angeles and nearly 38 times the workforce the IRS employed in FY 2024—doing nothing but tax return paperwork for a full year.
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According to the latest estimates from the White House Office of Information and Regulatory Affairs (OIRA), Americans will spend almost 7.1 billion hours complying with IRS tax filing and reporting requirements in 2025. This is equal to 3.4 million full-time workers—almost the population of Los Angeles and nearly 38 times the workforce the IRS employed in FY 2024—doing nothing but tax return paperwork for a full year.
OBBBA
Trump: Megabill’s name ‘not good for explaining’ what it does - Jordain Carney and Meredith Lee Hill, Politico:
“I’m not going to use the term ‘great, big, beautiful,’” Trump told reporters Tuesday. “That was good for getting it approved, but it’s not good for explaining to people what it’s all about.”
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Republicans’ challenge is compounded by the reality that a major hurdle in selling the megabill has nothing to do with the name but with the fact that many of its policies won’t fully go into effect until at least next year. That means voters won’t feel the immediate impact from what Republicans believe are some of the new law’s biggest benefits, while Democrats tout findings from the Congressional Budget Office showing that millions of people are on track to lose health insurance.
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Republicans’ challenge is compounded by the reality that a major hurdle in selling the megabill has nothing to do with the name but with the fact that many of its policies won’t fully go into effect until at least next year. That means voters won’t feel the immediate impact from what Republicans believe are some of the new law’s biggest benefits, while Democrats tout findings from the Congressional Budget Office showing that millions of people are on track to lose health insurance.
The Tax Angle: Tariff Troubles, Tipped Income: Stephen Cooper, Law 360 Tax Authority ($):
The lawmakers also want the tax deduction to be available for tip income from autogratuities or suggested tip amounts. The method of collecting tips doesn't make a difference for employees, and neither should the tax law, the lawmakers said, warning that arbitrary distinctions between tip practices would disadvantage workers based solely on the business model of their employer.
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The lawmakers also asked that the IRS provide a definitive list of occupations that are eligible for the deduction; that includes a wide range of occupations such as valets, cooks, hosts, cocktail servers and others. The law seeks to prevent workers who do not typically earn tipped income from gaming the system to avoid taxation.
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The lawmakers also asked that the IRS provide a definitive list of occupations that are eligible for the deduction; that includes a wide range of occupations such as valets, cooks, hosts, cocktail servers and others. The law seeks to prevent workers who do not typically earn tipped income from gaming the system to avoid taxation.
Digital Services Tax
What is a digital services tax, and why is Trump against it? - Kelly Kasulis Cho, Washington Post:
A digital services tax is generally levied on the gross revenue that multinational tech firms earn in a particular country once they earn above a certain threshold from users in that jurisdiction. It’s a relatively new idea intended to make up for decreases in tax revenue from purchases in brick-and-mortar stores and traditional advertising, as consumers and advertisers moved online.
Trump Vows to Retaliate Over Taxes on Tech Giants - Gavin Bade, Wall Street Journal:
“I put all Countries with Digital Taxes, Legislation, Rules, or Regulations, on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country’s Exports,” Trump said on Truth Social.
The post marks his most direct threat yet to retaliate against nations he views as discriminating against companies such as Alphabet's Google and Facebook parent Meta Platforms.
The post marks his most direct threat yet to retaliate against nations he views as discriminating against companies such as Alphabet's Google and Facebook parent Meta Platforms.
Tariffs
Full Weight of American Tariffs Slams Into Effect Against India - Alex Travelli, New York Times:
President Trump on Wednesday followed through on his threat to impose a 50 percent tariff on nearly all goods arriving from India, leveling one of his most punitive tariffs at a country with deep ties to the United States.
The 50 percent rate, half of which is punishment for India’s buying Russian oil, is expected to damage many Indian exporters that collectively employ millions of people. The move could rupture America’s expanding economic relationship with India, where two-thirds of the largest U.S. corporations have offshore operations. The tariff also undermines the stability of billions of dollars of foreign investment in India’s stock market, the world’s fourth largest.
The 50 percent rate, half of which is punishment for India’s buying Russian oil, is expected to damage many Indian exporters that collectively employ millions of people. The move could rupture America’s expanding economic relationship with India, where two-thirds of the largest U.S. corporations have offshore operations. The tariff also undermines the stability of billions of dollars of foreign investment in India’s stock market, the world’s fourth largest.
Blogs and Bits
Security Summit: IRS reminds tax pros to guard against identity theft as summer series wraps up - IRS:
Common schemes include:
- Fake “new client” schemes: Fraudsters pose as prospective clients, sending malicious attachments or links to steal login credentials or install malware.
- Phishing emails: Designed to trick people into sharing sensitive information, such as passwords, Social Security numbers, Central Authorization File (CAF) information or into clicking harmful links.
- Other scams: Calls, texts, fake printed correspondence and misleading social media posts to gain access to client data.
- Social media scams circulating inaccurate or misleading tax information.
- Fake “new client” schemes: Fraudsters pose as prospective clients, sending malicious attachments or links to steal login credentials or install malware.
- Phishing emails: Designed to trick people into sharing sensitive information, such as passwords, Social Security numbers, Central Authorization File (CAF) information or into clicking harmful links.
- Other scams: Calls, texts, fake printed correspondence and misleading social media posts to gain access to client data.
- Social media scams circulating inaccurate or misleading tax information.
ID theft protection tips in wake of whistleblower's report on DOGE Social Security data collection - Kay Bell, Don't Mess with Taxes:
Blowing the whistle on DOGE data practices: Social Security Administration (SSA) Chief Data Officer Charles Borges says that DOGE personnel bypassed agency safeguards, circumvented a court order, and created a copy of the SSA’s entire collection of all the data on the cloud.
Borges alleges that DOGE did not involve him in discussions about the project, despite his position. He said he pieced the evidence together, and provided examples in his whistleblower report, after the information, known as the Numerical Identification System (NUMIDENT) database, had been copied to the cloud.
Borges alleges that DOGE did not involve him in discussions about the project, despite his position. He said he pieced the evidence together, and provided examples in his whistleblower report, after the information, known as the Numerical Identification System (NUMIDENT) database, had been copied to the cloud.
An Examination of Innocent Spouse Relief: Walsh v. Commissioner - Ed Zollars, Current Federal Tax Developments:
In summary, the Tax Court found that only one factor, Ms. Walsh’s divorced status, weighed in favor of granting relief. Her knowledge of the underpayments, the significant benefit she received from the nonpayment of tax liabilities, and her subsequent noncompliance with federal income tax laws all weighed against relief. The remaining factors were neutral.
IRS announces underpayment, overpayment rates for 2025 Fourth Quarter - Bailey Finney, Eide Bailly.
Tax Trouble
Californian Indicted Over $700M In Tax Refund Claims - Anna Scott Farrell, Law 360 Tax Authority (defendant name omitted) ($):
A California man faces decades in prison after being accused of causing $13 million in tax losses to the U.S. through a refund scheme involving reporting false withholdings on returns for estates and trusts, the U.S. Department of Justice said Tuesday.
Defendant, who was also known as "Bandele El," claimed more than $360 million in fraudulent tax refunds based on made-up federal income tax withholdings that he submitted for himself and others on returns for estates and trusts, according to the DOJ.
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Defendant also promoted the scheme to at least 17 others and collected fees from them in exchange for his advice, according to the charges. He told some of those taxpayers to pay 10% of the refunds they received to a trust he had created and to claim the payments were charitable donations.
Overall, he received $867,000 in fees by promoting the scheme, the DOJ said.
Defendant, who was also known as "Bandele El," claimed more than $360 million in fraudulent tax refunds based on made-up federal income tax withholdings that he submitted for himself and others on returns for estates and trusts, according to the DOJ.
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Defendant also promoted the scheme to at least 17 others and collected fees from them in exchange for his advice, according to the charges. He told some of those taxpayers to pay 10% of the refunds they received to a trust he had created and to claim the payments were charitable donations.
Overall, he received $867,000 in fees by promoting the scheme, the DOJ said.
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