Loading component...
Lawmakers Knock Decision to Leave Estimated Tax Deadline in Place - Jonathan Curry, Tax Notes:
Lawmakers at a House committee hearing disagreed on the merits of raising taxes while the U.S. economy recovers, but were unified in criticizing the IRS and Treasury for declining to extend a tax deadline.
The IRS announced March 17 that, following enactment of the American Rescue Plan Act of 2021 (P.L. 117-2), the April 15 tax return filing season deadline would be extended to May 17, but that the April 15 deadline for making the first of the year’s quarterly estimated tax payments would remain in place. Lawmakers from both parties at a March 23 House Financial Services Committee hearing weren't pleased with that decision.
Also:
Treasury Secretary Janet Yellen repeated the same defense invoked by IRS Commissioner Charles Rettig at a March 18 House Ways and Means Oversight Subcommittee hearing, explaining that the logic behind shifting one date but not the other is “based on the idea that it’s mainly high-income taxpayers who make estimated payments, and that they’re able to file by April 15.”
That idea has never worked a tax season. It's not just "high income" taxpayers who make estimated payments. It's gig economy workers, real estate agents, retirees, and anyone with a small business or K-1 investments.
The assumption that high-income taxpayers are "able to file by April 15" is illogical. High income taxpayers are, by their nature, the ones most likely to have complex returns, to be waiting on K-1s from partnerships and S corporations, and to have other complex tax issues that take extra time.
Five holdouts. Only five states have yet to delay their 1040 filing deadlines to conform with the new IRS May 17 deadline: Arizona, Hawaii, Idaho, Iowa, and Ohio. Mississippi got off the list yesterday. A list of conforming states may be found here.
Pandemic tax season just got worse. Here’s what to expect now - Lynnley Browning, Accounting Today. "In any case, the May 17 federal deadline is only for individuals, not for returns for estates, trusts, corporations and other businesses. Taxpayers required to make quarterly estimated payments, on self-employment income, dividends, rental income and the like, still have to send them in by the traditional April 15 deadline."
2021 Individual Tax Deadline Extension – Déjà Vu All Over Again - Tax Warrior Chronicles. "The Tax Warriors have been patiently waiting for the additional guidance promised by the IRS, however, here we are 6 days later, with no such guidance. Today we will discuss what we know about the extensions, how they compare to last year, what is not extended (hint – Q1 2021 estimates are still due April 15) and several questions that remain."
More Taxpayers to Get Unemployment Tax Relief, IRS Says - William Hoffman, Tax Notes. "Taxpayers will no longer have to count unemployment income toward the $150,000 modified adjusted gross income cap for claiming a new income tax exclusion."
IRS Makes a Significant Modification to Computation of ARPA Excludable Unemployment Compensation - Ed Zollars, Current Federal Tax Developments. "Now it turns out that, due to an IRS change of heart on how to read IRC §85(c)(2)(B), your software may now be subjecting unemployment to tax the IRS has now decided is not to be subject to such tax."
Court Tosses Crypto Data Seizure Suit - Kristen Parillo, Tax Notes ($):
The court’s dismissal of Harper’s suit was appropriate, James Creech of the Law Offices of James Creech told Tax Notes...
Harper may have been better off not fighting the issue, Creech added. “The IRS has dramatically improved its virtual currency tracing ability during the last few years,” he said. “If, hypothetically, he had X virtual currency at Coinbase and other exchanges and Y held in self-custody and obtained outside of an exchange, at the start of the litigation the IRS might have only caught the X currency. Now, I’m confident they could find the Y currency if he reused any of the self-custodied wallets when he closed his Coinbase accounts.”
Assuming the IRS can't find your cryptocurrency is a bad bet.
Related: Bitcoin — What Should You Know.
New York ALJ: Shareholders Received Distributions, Not Loans - Andrea Muse, Tax Notes ($)
The corporation received a bank loan of $5.7 million to refinance and increase an existing mortgage on a building in 2015, which was required to be paid in full in five years, and the funds were distributed to the siblings based on their ownership interests in the company. According to the ALJ, the siblings “testified that there was no written loan agreement for the Sushell loans to them because the transaction was between relatives and the company was wholly owned by them together.”
Financial records of the corporation originally listed the disbursements to the siblings as “drawings,” but they were reclassified as “shareholder loans” when the corporation’s accountant told the siblings that they did not have sufficient basis in the company when the disbursements were originally made to otherwise withdraw the money.
It's tempting for taxpayers and return prepares to say "oh, we'll just call that a loan" when a corporation overdistributes its earnings, triggering dividend income or capital gains to shareholders. Just calling something a loan doesn't make it one.
Link to case: DTA Nos. 828818, 828822
Where's your tax refund? Find out with IRS online tracker - Kay Bell, Don't Mess With Taxes. "So what's an anxious and financially-strapped taxpayer to do, aside from wait for his or her refund to show up? You can check the status at the IRS' Where's My Refund? online search tool."
Biden’s Likely Tax Wins Are Personal-Rate Hikes, Audits of Rich - Laura Davidson, Bloomberg News ($):
Democrats will likely prove successful in raising individual income tax rates and in strengthening audits of wealthy Americans as they work on overhauling the U.S. tax code in coming months.
That’s a key takeaway from a survey of 15 current and former White House and congressional aides specializing in tax policy completed by Bloomberg this month. A tax on unrealized capital gains, as envisioned by Senate Finance Committee Chair Ron Wyden, was deemed impossible to get through Congress, the survey showed.
The next three most likely measures to pass in the survey are a corporate rate increase to maybe 25%, an increase in the estate tax rate to 45%, and a "Made-in-America" tax credit.
Taking Cues From Other Countries, States Target Big Tech With Taxes - Lauren Loricchio, Tax Notes ($). "Maryland recently became the first state to adopt a gross revenues tax on digital advertising services after the General Assembly overrode Republican Gov. Larry Hogan’s veto of the bill, despite lobbying by a coalition of more than 200 businesses to sustain the governor’s veto."
A Neutral Tax Code Counts Unemployment Compensation as Taxable Income - Erica York, Tax Policy Blog. "Since 1987, unemployment compensation benefits have been subject to federal income tax and, in most states, to state income tax. According to the Congressional Research Service, such treatment—including unemployment compensation benefits in taxable income—is common across industrial nations."
Are The American Rescue Plan’s Tax Cliffs Really Such A Big Deal? Howard Gleckman, TaxVox. "Congress created not one but two cliffs—or at least one precipice and one really, really steep hill. But these abrupt phase-outs may not be as bad as many fear. Let me explain why."
Cliffs are no big deal, except when you have to climb one, or fall off one.
Now for something completely different, from a galaxy that is closer than it appears:
From Allison Christians.
Hungry? Today is both National Chocolate Covered Raisin Day and National Cheesesteak Day. Why not both?