Key Takeaways
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People in Tax-free Tip professions still may not qualify for the break.
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You don't qualify if you are in the wrong "trade or business."
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One ICE agent "personally and directly" engaged in 47,000 cases?
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The end of paper tax checks.
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Work Opportunity Credit at risk.
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Treasury Secretary: "about half" of tariff revenues to be refunded in case of Supreme Court loss.
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TaxProf Blog calls it quits.
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National Iguana Awareness Day.
Tomorrow! Tune in to our webinar "New Tax Legislation: Impacts on Section 1202 Qualified Small Business Stock" at 11:00 Central. Sec. 1202 provides important benefits for owners of qualifying C corporations, benefits which are enhanced by recent legislation. Register here. No charge, CPE available.
Who Gets Tax-Free Tips? Rules Detail What Counts for New Break - Richard Rubin, Wall Street Journal:
That doesn’t mean everyone on the list will get their tips tax-free.
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Consider a bartender at a baseball stadium. If she is an independent contractor or works for a food-service company, she probably qualifies. But if she is employed by the team—in the business of athletics—she might not. A self-employed singer who gets tips could well be ineligible for the tips deduction. But a singer employed by a casino could likely get the deduction.
About That List of Occupations Eligible for “No Tax on Tips…” - Russ Fox, Taxable Talk. "The problem, one noted quickly by Tom Gorczynski (and I agree completely with Tom), is that there are two parts to qualify for this tax break. First, the occupation must be one where tips were customarily and regularly received prior to 2025. Second, the occupation must be one which is not a 'Specified Service Trade or Business (SSTB).'"
IRS Data Dump to ICE Faces Court Scrutiny
Judge Presses IRS After Courtroom Reveal on Tax Data Sharing - Trevor Sikes, Tax Notes ($):
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Kollar-Kotelly, pointing to the MOU, noted that the IRS can share information with an ICE officer or employee only if they are identified as being “personally and directly engaged in” the relevant nontax criminal preparation, investigation, or grand jury proceeding.
The judge asked the IRS how many of its employees ICE identified in its June 27 request as being “personally and directly engaged in” criminal investigations and to whom data was provided by the IRS.
Exactly one individual, answered the IRS, which was represented in court by Justice Department attorneys Bradley Humphreys and Elizabeth Shapiro.
ICE requested data on 1.27 million individuals, and the IRS turned over data on 47,000. That's quite a caseload for one agent to be "personally and directly engaged in."
Judge Grills Gov't On Details Of IRS-ICE Info-Sharing Deal - Kat Lucero, Law360 Tax Authority ($):
This negatively impacted the center's "ability to advise their clients with respect to their obligations under the law to receive the benefits to which they're entitled," Gitomer said.
"Clients are deeply, deeply fearful of further engagement with the IRS as a result of the defendant's action," she said. "It has significantly harmed and perceptively impaired the center's ability to serve these clients because they are no longer willing to engage with the IRS.
Other Risks To Taxpayer Data
IRS Lags on Fixing Taxpayer Data System Flaws, Watchdog Says - Tyrah Burris, Tax Notes ($):
TIGTA based its findings on a review of asset vulnerability reports produced by the IRS’s general support system for big data analytics.
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The weaknesses give attackers a path to gain access to systems, and the existence of unresolved issues increases the risk to the overall security of the IRS’s IT assets, TIGTA said.
The Checks Will No Longer Be in the Mail
Tax Bureau Will Stop Issuing Paper Checks, Including Refunds, In Response To Executive Order - Kelly Phillips Erb, Forbes:
If you don’t have a bank account but possess a prepaid debit card, you might be able to have your refund deposited onto that card. Additionally, some payment apps like CashApp allow for the direct deposit of refund checks (an option that I learned about while preparing tax returns in Alaska). Be sure to check with your platform or financial institution to determine if this option is available, and to find the routing number and account number, which may be different from the card number.
Despite the push, one group of taxpayers may be out of luck: American taxpayers living abroad. If you live out of the country, your federal income tax refund can only be deposited directly into a U.S. bank or affiliated accounts.
Congress Takes its Time
22 days until the shutdown deadline. Republicans need a plan - Jake Sherman and Andrew Desiderio, Punchbowl News:
Hill Republicans wasted last week taking no action on putting together a plan to avoid a shutdown. The House is focusing on the annual defense authorization bill this week, while the Senate is changing its rules and turning back to the NDAA. Only a few appropriations bills have actually reached the floor in either chamber.
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Republicans are beginning to come to grips with the fact that they have to consider extending Obamacare premium tax credits. Speaker Mike Johnson acknowledged the political reality during an appearance on Fly Out Day last week. House Ways and Means Chair Jason Smith (R-Mo.) talked about means-testing the tax credits during an appearance on Bloomberg TV Friday.
Somewhat related: Eide Bailly Affordable Care Act Compliance and Consulting
Work Opportunity Credit at Risk as End-of-Year Deadline Looms - Cady Stanton, Tax Notes ($):
The provision allows employers to claim a credit equal to 40 percent of the qualified first-year wages paid to members of targeted groups, including certain veterans, individuals with disabilities, and individuals experiencing long-term unemployment under section 51(d). The credit was extended in 2021 to the end of 2025.
State workforce development agencies administered more than 1.9 million WOTC certifications in fiscal 2023 and 2.5 million in fiscal 2022, according to data from the Department of Labor.
Congress eyes stock-trading ban — with tax break sweetener - Benjamin Guggenheim, Politico:
If passed, the bill would permanently change the financial calculations of any member or would-be lawmaker. The tax arrangement, for instance, could prove immensely useful to wealthy people who want to diversify their assets. But it could dissuade investors who have no interest in abandoning lucrative stakes for workaday mutual funds.
Proponents of the new bill say taking historic steps towards eliminating conflicts of interest for lawmakers who hold stocks is worth the upheaval.
Tariffs, Refunds, and Red Tape
Bessent: US would have to give back half of tariffs if it loses at Supreme Court - Rachel Scully, The Hill:
“I am confident that we will win at the Supreme Court,” he said.
Pushed as to whether the administration would “be prepared” to offer rebates, Bessent said the U.S. “would have to give a refund on about half the tariffs,” adding that it “would be terrible for the Treasury.”
Or, "Heads we win, tails we win about half."
Trump’s Tariffs Leave US Business Tied Up in Costly Red Tape - Jordan Fabian, Laura Curtis and Enda Curran, Bloomberg via MSN:
The bureaucratic burden is a less-discussed consequence of Trump’s move to hike import taxes to a hundred-year high. America Inc., which broadly cheered his election win, is already bristling at the direct cost of tariffs. Uncertainty around their on-again, off-again rollout is a drag on investment plans, too. The challenges of compliance add another layer of hurt.
Postal traffic to U.S. plunged as tariffs hit cheap goods, U.N. agency says - Annabelle Timsit, Washington Post:
Blogs and Bits
Work Opportunity Tax Credit helps businesses meet staffing needs and cut taxes - Kay Bell, Don't Mess With Taxes. "The Work Opportunity Tax Credit (WOTC), administered in conjunction with the U.S. Department of Labor (DoL), is a federal business tax credit available to employers who hire individuals from certain groups who tend to consistently have trouble getting hired."
Comedian Found to Be a California Resident by OTA - Ed Zollars, Current Federal Tax Developments. "The data showed he consistently spent far more time in California than in Nevada and regularly departed from and returned to California for business."
Related: Eide Bailly State & Local Tax Services
Mend, Don’t End the Property Tax - Thomas Brosy, TaxVox. "Yet economists and policymakers have many reasons to love the property tax. It is more reliable and stable than other taxes and government transfers. It is more efficient than income taxes, because taxing land and buildings—capital that can’t move—is less disruptive to economic decisions than taxing income. And, despite issues with assessment practices and debates on its regressivity or progressivity, it is usually more equitable than sales taxes or charges, the other two largest sources of locally raised revenue."
End of an Era
My Last TaxProf Blog Post - Paul Caron, TaxProf Blog:
I am proud of the role TaxProf Blog has played in the tax and legal education communities over the past 21 years. My boyhood dream was to be a sports reporter covering the Boston Red Sox on a daily basis for The Boston Globe (after it became obvious even to me that my dream of playing first base for the Red Sox would not pan out). My wife Courtney early on said the blog scratched that itch for me in academics rather than sports.
Before TaxProf Blog sunsets on September 30th, I would greatly appreciate it if readers who have enjoyed my tax, legal education, and/or faith coverage through the years would drop a short note in the comment section at the bottom of this post. When I eventually retire, I will cherish the memories of the time I spent writing this blog for over two decades in the hope that it enriched your lives just a little bit.
One of the earliest tax bloggers, Paul has been a resource and an inspiration for me for... well, decades now. Happy trails, TaxProf.
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