Key Takeaways
- Taxpayer Advocate pushes online accounts and tax IP-Pins.
- Don't email your tax documents.
- TIGTA asked to probe ICE data disclosures.
- Devilish tip deduction details.
- The "domestic terrorism" risk to tax-exempts.
- Chief economic adviser wants to discipline Fed economists over tariff study he doesn't like.
- National Tug of War Day meats National Chocolate Mint Day.
Protect Yourself From Tax-Related Identity Theft: Get an Identity Protection PIN - Erin Collins, NTA Blog:
One way to protect against tax-related identity theft is to get an Identity Protection PIN (IP PIN) from the IRS. An IP PIN is a six-digit number issued by the IRS that helps protect against someone else filing a tax return using your name and SSN or ITIN by serving as an additional authentication factor. When you are enrolled in the IP PIN program, the IRS will reject any e-filed return with your information that does not include the IP PIN and will subject any paper return without the IP PIN to additional scrutiny, which can significantly delay processing because the IRS must manually verify the taxpayer’s identity.
One small six-digit number can stop a much bigger tax nightmare and can save you months – or even years – of frustration.
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The fastest way to enroll is through an IRS online account, which allows you to join the IP PIN program and view your PIN immediately. If you have not yet set up an online account, enrolling in the IP PIN program is yet one more reason to do so. If you voluntarily enroll, you will receive a new IP PIN each year unless you choose one-time enrollment (which lasts one calendar year only) or you later opt out.
It takes months to undo the damage when an ID thief files a return under your name. An understaffed IRS will have to straighten out your accounts. So yes, get an IRS personal online account and an IP PIN. Also remember basic steps to protect yourself:
- When transmitting tax documents, always use your preparer's secure portal. Never send copies or images of tax documents as email attachments.
- Use good antivirus software.
- Use strong passwords. Disclosure: I once had a colleague who thought a 3-letter password was secure.
- Don't fall for "phishing" emails and don't click on links for emails you don't expect.
IRS Taxpayer Disclosure Drama Continues
More digging on IRS and ICE - Bernie Becker, Politico:
Trump is suing Treasury and the IRS for at least $10 billion over the leak of his returns, underscoring that the hundreds of taxpayers whose data was incorrectly sent to Immigration and Customs Enforcement might be able to seek similar remedies. (One of the questions that Democrats have, for instance, is whether the government has told affected taxpayers that their information was compromised.)
On top of that, the House Democratic tax writers made it clear that they were asking for much the same as House Ways and Means Chair Jason Smith (R-Mo.) when he wrote to TIGTA three years ago about the leak of Trump’s returns — namely, for the watchdog to produce and publicize a report about the disclosures.
IRS Asks Court To Deny Probe Of Improper ICE Data-Sharing - Anna Scott Farrell, Law360 Tax Authority ($):
In a brief Tuesday, the Internal Revenue Service urged the court to reject a request from the coalition to allow discovery into the agency's Feb. 11 declaration that the IRS had given immigration authorities some taxpayer addresses that didn't meet disclosure requirements.
Treasury and IRS Involvement in Trump Lawsuit Still Unclear - Tyrah Burris, Tax Notes ($):
But Wyden’s spokesperson told Tax Notes on February 18 that neither Bessent nor Bondi had responded to the letter.
The senators asked for all communications between or among Treasury, the IRS, and the White House related to the disclosure of Trump’s family, business, or personal tax returns. They also asked if Treasury and the IRS plan to recommend that the Justice Department challenge Trump’s demands for payment.
The Devil is in the Details in Tip Tax Break
‘No Tax on Tips’ — Unless the Government Doesn’t Like Your Job - Francesca Ugolini, Procedurally Taxing via Tax Notes:
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Yet buried in the proposed regulations is a categorical exclusion from “qualified tips” for “any amount received for pornographic activity.” Prop. reg. section 1.224-1(c)(8). The regulation does not define “pornographic activity” or provide any indication how Treasury intends to interpret the provision and whether it will apply to dancers, entertainers, or performers at strip clubs. The regulation also categorically excludes “any amount received for prostitution services,” id. at section 1.224-1(c)(7), which is legal in 10 of Nevada’s 17 counties, although illegal in Clark County, where Las Vegas is located.
This is also an issue for what might be called the OnlyFans economy of adult websites. The article author questions the Treasury's authority to impose a pornography exclusion from the tip break.
You May Already Be A Domestic Terrorist Organization
What DOJ’s New Blueprint on Domestic Terrorism Means for Nonprofits - Carolyn Schenck and Amanda Tomack, Tax Notes ($):
Another suggestion is to strengthen documentation protocols to guard against allegations of providing organizational or financial support for unlawful conduct. Finally, taxpayers should seek counsel at the earliest sign of federal interest, especially if approached by a JTTF, an FBI field office, or the IRS Criminal Investigation division.
The memo represents a substantial escalation in domestic terrorism investigation and enforcement and a material increase in legal and tax-related risk for organizations and donors engaged in politically sensitive work. Taxpayers should treat this directive as a serious compliance event and consult experienced counsel to mitigate exposure.
Related: Eide Bailly Exempt Organization Tax Services.
The Eternal Statute of Limitations of the Spotless Taxpayer
Taxpayer Asks SCOTUS to Resolve Circuit Split on Fraud Extension - Nathan Richman, Tax Notes ($):
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While section 6501(a) normally gives the IRS three years to assert a deficiency, the agency invoked the section 6501(c)(1) fraud exception that fully removes its statute of limitations on assessment.
The Third Circuit Court of Appeals and the Tax Court have ruled that 6501(c)(1) applies to preparer fraud, even if the taxpayer is unaware of it. This has enabled the IRS to assess back taxes, penalties, and interest for decades as a result of preparer fraud.
The Federal Circuit Court of Appeals has ruled that preparer fraud doesn't keep the statute open for unsuspecting taxpayers.
While the Supreme Court doesn't routinely take on tax cases, it may do so when there is a split among the circuits, subjecting taxpayers to different rules based on where they litigate.
Meanwhile, the possibility of an eternal IRS statute of limitations is a good reason be careful when choosing a tax preparer.
Related: Eide Bailly IRS Dispute Resolution and Collections Services.
Tariffs and Discipline
White House economic adviser says Fed researchers should be punished - Andrew Ackerman, Washington Post:
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The White House has also repeatedly attacked economic data and research that reached conclusions it did not like. The president in August called on Goldman Sachs to replace its top economist after the bank concluded U.S. firms and consumers would bear most of the tariffs’ costs — a conclusion that tracks the New York Fed’s. Trump also fired the head of the Bureau of Labor Statistics that month following the release of bleak labor market news.
Hassett had been viewed as the leading contender to succeed Powell when the Fed chair’s term expires in mid-May.
Trump’s Options If Supreme Court Says His Tariffs Are Illegal - Isabel Gottlieb, Bloomberg ($):
IEEPA says that the president can regulate imports “by means of instructions, licenses, or otherwise.” This section of the law came up during oral arguments before the Supreme Court in November. There was a discussion about how licenses are treated under IEEPA and how licensing fees and tariffs — neither of which are explicitly mentioned in the law — could fit into this, if at all.
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He has at least five fallback options to impose tariffs in different ways. In general, these alternatives come with more limits and procedural restrictions, meaning there’s less leeway for Trump to impose tariffs virtually immediately and set the rates as high as he chooses.
Blogs and Bits
VITA and TCE offer free help to taxpayers across the country - Kay Bell, Don't Mess With Taxes. "VITA volunteers’ keen eyes are in particular demand this year as taxpayers look to claim some of the new tax breaks that were added as part of the One Big Beautiful Bill Act."
Even California Non-Residents Can Face California Taxes - Robert Wood, Forbes. "Some people seem to exit the Golden State shortly before a big income event, and as a result, California’s tax agency likes to check on “move then sell” fact patterns. Timing matters a lot."
How Does the Additional Senior Deduction Compare to No Tax on Social Security? - Alex Durante, Tax Policy Blog. "Exempting Social Security from income taxation would not change the after-tax income for the bottom quintile, as those taxpayers are already exempt from taxation on their Social Security benefits. The tax cut would be tilted more toward higher-income taxpayers than either of the proposed senior deductions: the top quintile would see its after-tax income increase by 0.6 percent, compared to a less than 0.05 percent increase under the expanded senior deduction in OBBBA."
USPS Postmark Rule Change: Why “Mailed on Time” May No Longer Mean “Filed on Time” - Ronald Marini, The Tax Times. "The problem is that the USPS's Regional Transportation Optimization (RTO) initiative has increased the likelihood that mail will not arrive at processing facilities on the same day it was collected or dropped off. As a result, a taxpayer who deposits a return in the mail on April 15 could receive a postmark dated April 16 or later, making the return appear late even though it was mailed on time."
Lesson: E-file.
Regretting the Road Not Taken
Woodbridge man sentenced to three years in prison for obstructing the IRS and failing to file tax returns - U.S. Attorney, Eastern District of Virginia (defendant name omitted, emphasis asdded):
According to court documents and evidence presented at trial, Defendant, 60, earned income as an information technology specialist and landlord. Defendant filed false individual tax returns with the IRS for the years 2013 and 2014, which resulted in him receiving refunds for both years that he was not entitled to receive.
After the IRS paid out the refunds, Defendant obstructed the IRS’s subsequent efforts to recoup the money. Defendant transferred his property to a trust to hide it from the IRS, opened bank accounts in the name of the trust and directed his income to be deposited there, and submitted false documents claiming that the IRS collections officer handling his case had personally received over $600,000 from Defendant, which, if accepted by the IRS, would have jeopardized the IRS officer’s job and increased the officer’s personal tax liability.
Defendant also stopped filing tax returns for the years 2018 through 2023, even though he received a total of more than $854,000 during that period and was required to file each year. In total, Defendant caused a tax loss to the IRS exceeding $500,000. Defendant was convicted by a jury in November 2025.
It's said that the first rule of holes is to stop digging. Had the taxpayer returned the erroneous refund with an "oops, my bad!" things might have ended quietly. Instead he went all out to keep it with false documents, a shady trust, and by accusing the IRS officer of malfeasance. Then to top it off, he just stopped filing.
As a man has said, sometimes you should just pay the taxes.
What day is it?
It's National Tug of War Day and National Chocolate Mint Day. Face up to your internal tug of war over whether to eat another Thin Mint.
Make a habit of sustained success.
