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Frustration over delayed income tax refunds – Mark Gruba, RochesterFirst.com. “Millions of Americans are still waiting for their income tax refund from the Internal Revenue Service. CPA Garrett Wagner discussed the backlog of refund checks Monday during News 8 at Sunrise.
‘It’s just one of those things that are causing CPAs, myself including, so much stress this year,’ Wagner said. ‘Last year we thought it was bad the IRS by the end of 2020 failed to process around eight million tax returns. We thought that was bad. As of June 2021, the IRS has not processed 35 million tax returns, just an astounding number.’
IRS unemployment tax refund status: Payment schedule, transcripts and more – Oscar Gonzalez, CNET. “Waiting for the IRS to send you a refund for taxes you paid on your 2020 unemployment benefits? The last batch was sent in July, totaling 1.5 million refunds. Some are reporting on social media that they've received IRS updates on their tax transcripts, with pending refund dates later in August. But many other taxpayers say they're still waiting to get their money.”
GOP Rep. Fitzpatrick says Pelosi doesn’t have votes to block infrastructure bill on House floor – Jacqui Heinrich and Tyler Olson, Fox News. "Moderate Republican Rep. Brian Fitzpatrick said Monday that there are likely enough GOP votes for the bipartisan infrastructure bill [BIF] to overcome the number of Democrats vowing to block it, as centrists from both parties pressure House Speaker Nancy Pelosi to bring the legislation for a vote. Fitzpatrick, the co-chairman of the House Problem Solvers Caucus, also warned that moderate Republicans could turn against the compromise legislation passed by the Senate if Pelosi, D-Calif., delays the bill's consideration or ties it to Democrats' $3.5 trillion spending plan they hope to pass via budget reconciliation.”
‘If the BIF is stand-alone, there is significant Republican support,’ the congressman from outside Philadelphia told Fox News. ‘If the BIF is linked to any other bill or held up for months, that support would fall apart.’
Translation: If Speaker Pelosi (D-Calif) links the $1.2 trillion Bipartisan Infrastructure Bill to the budget that allows lawmakers to write a $3.5 trillion bill that includes tax increases on corporations and individuals then Republicans will not support the infrastructure bill. If three Democrats also oppose the bill, it fails. That does not bode well for the passage of the $3.5 trillion measure, which is expected to be voted on in the fall.
Democrats play game of chicken over Biden agenda – Scott Wong and Christina Marcos, The Hill. “Democratic leaders are doubling down on their strategy to advance President Biden’s domestic agenda next week, daring a bloc of centrists in their party to object and risk derailing trillions in federal spending on infrastructure projects and social programs. During a private conference call Tuesday, House Majority Leader Steny Hoyer (D-Md.) strongly urged rank-and-file Democrats to vote on a rule Monday night that would allow Democrats to move forward on their $3.5 trillion budget resolution, the $1.2 trillion Senate-passed infrastructure package and a voting rights bill named for the late Rep. John Lewis (D-Ga.).”
However, the vote on the combined rule is only a procedural vote to greenlight the House floor process for considering those bills. While the House is expected to subsequently vote on adoption of the budget and passage of the voting rights bill, it could be months before the House votes on passage of the bipartisan infrastructure bill.
Democratic leaders made the case to their members during the Tuesday call that both the bipartisan infrastructure bill and budget resolution that kicks off the process for the $3.5 trillion spending package to expand social safety net programs need to move in tandem to accomplish the party’s agenda — not one at a time, as a handful of centrists are demanding.
Here's what's going on: Speaker Pelosi has scheduled a procedural vote next week for the Senate-passed budget (which will allow lawmakers to draft a $3.5 trillion tax and spending bill) and the Senate-passed $1.2 trillion Bipartisan Infrastructure Bill (which after passage can be signed into law). That vote will allow the House to vote on the budget immediately and the infrastructure bill sometime in the future.
Moderate House Democrats support the Senate-passed $1.2 trillion Bipartisan Infrastructure Bill and want to vote on it now so President Biden can sign it into law. House Progressive Democrats support the $3.5 trillion tax and spending bill (which is linked to the budget but the actual bill won't be ready until the fall).
Both factions of the party have vowed to oppose the other's bill if their measure is not voted on first. Pelosi wants to vote on passing both bills after lawmakers complete the $3.5 trillion tax and spending bill in the fall.
Moderate House Democrats oppose Pelosi's plan and want to pass the $1.2 trillion Bipartisan Infrastructure Bill asap. House Progressive Democrats don't like the moderates' plan because they suspect moderate House Democrats will not support the $3.5 trillion tax and spending bill if the infrastructure bill is already signed into law. Nearly all House Democrats must support the $3.5 trillion bill or it fails. Republicans are not expected to support the bill.
Speaker Pelosi "sent another 'Dear Colleague' letter on Tuesday night reiterating her position", reports Punchbowl News ($):
Pelosi sent another 'Dear Colleague' on Tuesday night reiterating her position. In the letter, Pelosi played her biggest card in the dispute -- she’s got Biden’s support for her plan.
'Today, President Biden endorsed the House Rule which will allow us to consider the budget resolution, H.R. 4 and the bipartisan infrastructure bill next week. The budget resolution is the key to unlocking the 51-vote privilege of the reconciliation path for our transformative Build Back Better bill. Again, any delay in passing the budget resolution could threaten our ability to pass this essential legislation through reconciliation.'
The letter can be found here.
More from Punchbowl News: “Meanwhile, [Rep.] Gottheimer [(D-NJ)] and his crew [of moderate House Democrats] can’t give in either if they want to be taken seriously in the future. If Gottheimer folds after such a loud public stand, it’ll diminish whatever influence he’s amassed. So he has to either stand pat or become another one of the members Pelosi rolls.”
Pelosi has rolled a lot of her members. The Obamacare vote over a decade ago was kinda a bloodbath in terms of getting it passed.
Yellen pushes 'fiscally responsible' Biden agenda ahead of planned House vote – Naomi Jagoda, The Hill. “Treasury Secretary Janet Yellen on Tuesday touted President Biden's spending proposals, pushing back on criticisms about the big price tags on his infrastructure and social spending measures ahead of a key House vote next week. ‘We are now engaged in the most important economic project in recent history: Repairing the broken foundations of our economy, and on top of them, building something stronger and fairer than what came before,’ Yellen wrote in a Yahoo Finance op-ed."
She said that 'now is the right time' to make the investments because of low interest rates, and that the proposals are 'fiscally responsible' because the spending would be spread out over time and their costs would be offset by tax increases on wealthy individuals and corporations.
The crypto tax provision in the infrastructure bill is ‘potentially unworkable’—but Treasury may say it doesn’t matter – Taylor Locke, CNBC. “After contention over the language in its provision on cryptocurrency tax reporting, the Senate passed the $1 trillion infrastructure bill on Tuesday without an amendment. Now, many House Democrats are calling for change, just like crypto advocates and many senators have already attempted. The debate is centered around how the bill defines a ‘broker,’ who, under the current provision text, will be required to report crypto gains in a type of 1099 form.”
Currently, the bill defines a ‘broker’ as ‘any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person,’ which crypto advocates say is too broad. As written, it could potentially target miners, developers, stakers and others who do not have customers and therefore wouldn’t have access to the information needed to comply.
Podcast: Crypto goes to Washington - Chris Brummer and Evan Campbell, Roll Call. “Kristin Smith provides a behind-the-scenes look at the infrastructure bill and crypto-lobbying in Washington.”
IRS Managers Group Warns Against Early End to Business Tax Perk – Allyson Versprille, Bloomberg ($). “A provision in the Senate’s infrastructure bill to eliminate the employee retention credit after September will place more strain on an already under-resourced IRS, according to an association that represents the interests of the agency’s managers and supervisors.”
The proposal would force the IRS to reprogram software, revise tax forms and publications, create new educational materials for both taxpayers and internal employees, and issue new guidance, said Chad Hooper, executive director of the Professional Managers Association. At the same time, the Senate chose not to increase the IRS’s funding in the infrastructure bill—as had been originally considered—which ‘feels in some ways like adding insult to injury,’ Hooper said.
Practitioners call for fixes to the ERC – Roger Russell, Accounting Today. “The timing of legislation in late December 2020 and IRS guidance in August 2021 has created complexity and cost for small businesses attempting retroactive access to the Employee Retention Tax Credit.”
‘Originally, a business needed to choose between Paycheck Protection Program loans and ERCs. The CARES Act said to pick one or the other, and most small businesses picked PPP loans because they gave faster access to money,’ explained Roger Harris, president of Padgett Businesses. ‘Then the Consolidated Appropriations Act, passed in late December 2020, retroactively removed the prohibition from using both PPP loans and ERCs. IRS guidance on Aug. 4, 2021 clarified that the taxpayer must reduce their wage expense equal to the amount of ERC credits received. This reduction would normally be done on the tax return in the year the qualifying wages were paid, and the credits were claimed.’
Wyden Passthrough Proposal Estimated to Raise $114 Billion – Tax Notes ($). “The Small Business Tax Fairness Act, which would modify the passthrough deduction, would raise $114 billion over four years on a conventional basis, or $112 billion on a dynamic basis, the Tax Foundation estimated August 17.”
The report can be found here.
From the report:
Wyden’s bill would make the following changes to the deduction, which is scheduled to expire altogether in 2026:
- Phase out the deduction for taxpayers with taxable income above $400,000, with a full phaseout at $500,000
- Remove the limitations of the deduction for a ‘specified service trade and business,’ which include services in health care, law, finance, accounting, athletics, consulting, and the performing arts
- Forbid deduction for married taxpayers filing separately, and for estates and trusts
15% of Paycheck Protection Program Loans Could Be Fraudulent, Study Shows – Stacy Cowely, New York Times. “When the Paycheck Protection Program began last year to help small businesses that were struggling during the pandemic, the federal government was determined to get the relief money out fast — so it waived much of the vetting lenders traditionally do on business loans. The absence of those safeguards meant that fraud was highly likely. But just how much of the program’s $800 billion was taken illicitly?”
A new academic working paper released on Tuesday contains an estimate: Around 1.8 million of the program’s 11.8 million loans — more than 15 percent — totaling $76 billion had at least one indication of potential fraud, the researchers concluded.
The paper can be found here.
States boost earned income tax credits for pandemic relief – Kate Dore, CNBC. “A growing number of states have leveraged funds from the American Rescue Plan to add or improve earned income tax credits for families most affected by the coronavirus pandemic.”
The earned income tax credit, known as EITC, provides low- to moderate-income families with a write-off. To qualify, taxpayers must have earned income, which is wages and payments other than investments. The federal EITC is refundable, meaning it can reduce tax bills or provide a refund, regardless of liability. However, some state-level EITCs may be nonrefundable, covering only up to taxes owed.
Billions From Biden Aid Plan Left Untapped by Cash-Flush States – Amanda Albright and Danielle Moran, Bloomberg ($). “Tens of billions of dollars that U.S. states got as a lifeline from the Biden administration is sitting idle in local coffers already flush with cash. Michigan has budgeted just 7% of its $6.5 billion allocation and hadn’t spent any as of last week. South Dakota officials haven’t even gotten around to asking for their $974 million allotted under the White House’s American Rescue Plan legislation. In West Virginia, a state website says detailed plans for its $1.35 billion are ‘COMING SOON.’"
Officials nationwide are grappling with how to spend an unprecedented infusion at a time when their coffers have been replenished by a rebounding economy that in many cases is generating billions more in tax revenue than budgeted for.
MTC Project Eyes Gaps In State Partnership Tax Rules – Maria Koklanaris, Law360 ($). “The Multistate Tax Commission outlined a plan Tuesday to identify where states can achieve uniformity in sourcing and treatment of income from pass-through businesses, saying it would seek to address gaps in state partnership tax rules.”
In an online meeting of its partnership tax work group, the MTC's uniformity counsel, Helen Hecht, presented the outline and said some gaps in the rules point to a need for more detailed guidance in taxing partnerships. But other gaps, she said, ‘represent more fundamental questions, including constitutional issues.’ As an example, she provided the question of whether a state could compel a partnership to keep records and file information returns if the only connection between the partnerships and the state was that the group included a resident partner with an indirect, limited role.
La. Proposes Sales Tax E-Filing For Consolidated Filers – Jaqueline McCool, Law360 ($). “Louisiana would require consolidated filers to submit state sales tax returns electronically for tax periods beginning on or after Dec. 1 under a rule proposed by the state Department of Revenue in the August register, which was released Tuesday.”
Under the rule, consolidated filers who file state sales tax returns would be required to file electronically or their tax payments would be considered delinquent. The proposed rule says the mandate is a response to recent legislative changes that require more specific tracking of sales tax revenue. If a filer can prove that submitting funds electronically would create undue hardship, they may be exempt, the proposal said.
Agency Floats Clarifying Tax On Goodwill Vehicle Repairs – Daniel Tay, Law360 ($). “The Washington state tax department proposed clarifying that goodwill repairs of vehicles by dealers do not result in state sales or use tax owed by vehicle owners, with the liability falling on either the dealer or manufacturer. The state Department of Revenue would clarify under a proposed advisory released Monday that no sales tax is owed by the customer when a goodwill repair is made because no sale is made to the customer. The proposed advisory would define a goodwill repair as a repair or service performed free of charge when not covered by a warranty.”
Under the proposed advisory, the tax would be owed by either the vehicle dealer or the manufacturer, depending on whether the manufacturer reimbursed the dealer for the cost of the repairs.
Four Revenue Scores on Options to Change U.S. International Tax Rules – Thomas Locher, Tax Foundation. “As lawmakers in Congress consider ways to change tax rules, a recent Tax Foundation study shows the effects of four options to overhaul the United States’ international tax regime. These options include changes to policies such as the corporate tax rate, Global Intangible Low-Taxed Income (GILTI), Foreign Derived Intangible Income (FDII), Qualified Business Asset Investment (QBAI), and other related issues. The results focus on the change to federal corporate tax revenue from U.S. multinational companies, and do not include revenue from non-multinationals or derivative effects of increased corporate tax liabilities, such as reduced capital gains and dividends for the shareholders of multinationals.”
The four proposals modeled are:
1. the Biden administration’s proposal;
2. a partial version of the Biden administration’s proposal;
3. a revenue-neutral change to GILTI;
4. an option that would align GILTI to the recent global minimum tax proposal (Pillar 2) that was outlined by the OECD at the beginning of July.
AICPA Elaborates on Request for Pandemic Inventory Relief – Nathan Richman, Tax Notes ($). “The IRS should consider expediting any safe harbor guidance for inventory replacement difficulties induced by foreign trade disruption caused by the COVID-19 pandemic, according to the American Institute of CPAs.”
In an August 17 letter to the IRS, the AICPA followed up on a request for guidance it made in April, providing more details illustrating the need for a safe harbor and examples of the suggested relief in action.
The AICPA, like the National Automobile Dealers Association before it, wants taxpayer relief from possible inventory tax consequences related to COVID-19 pandemic trade disruptions. The groups argue that the trade difficulties could leave taxpayers with last-in, first-out inventories unable to replenish their stocks, which could cause the liquidation of those taxpayers’ LIFO layers.
Not All Digital Taxes Clash With OECD Deal, Saint-Amans Says – Matt Thompson, Law360 ($). “The global deal the Organization for Economic Cooperation and Development reached last month to prevent the proliferation of digital services taxes is not in principle incompatible with taxing digital activity, said Pascal Saint-Amans, the OECD's tax chief.”
Speaking at an online conference hosted by the Bombay Chartered Accountants' Society on Saturday, Saint-Amans told delegates that under the new regime, taxes can't target tech companies specifically. However, there is nothing to stop countries from imposing other taxes that may capture digital activity as long as they are broad-based and nondiscriminatory.
‘Countries remain sovereign. If a country wants to introduce a value-added tax on digital services, that is tax policy,’ Saint-Amans said. ‘If you want to introduce an excise tax on some form of transaction, as long as you have an extremely broad coverage and low rate, I don't see any contradiction with our deal.’
Woman With Reason to Know of Unpaid Taxes Gets Spousal Relief – Aysha Bagchi, Bloomberg ($). “A woman is entitled to innocent spouse relief from tax liabilities because, although she had reason to know her ex-husband wasn’t paying their tax bills, the overall facts and circumstances support her claim, the U.S. Tax Court ruled.”
The Tuesday victory for Jessica Lynn Gans fell under tax code Section 6015(f), which enables a spouse on a joint tax return to get relief from their tax bill if holding the spouse liable would be inequitable. Special Trial Judge Diana L. Leyden concluded in the non-precedential opinion that all but one factor—whether Gans “knew or had reason to know” when she and her ex-husband signed their return that the taxes wouldn’t be paid—weighed in her favor.
Tax Pro Organizations Rally Around Preparer Regulation Bill – William Hoffman, Tax Notes ($). “Two of the largest tax professional associations joined two of the largest preparer companies to endorse legislation requiring practitioners to prove their competence to the IRS. The Taxpayer Protection and Preparer Proficiency Act of 2021 (H.R. 4184), introduced in the House June 25, gained the support of four large tax professional organizations that announced August 17 that they would hold a press conference on August 24 to discuss how the legislation to require IRS preparer certification would improve the industry and protect taxpayers.”
Tax Pros Must Know the Warning Signs of Identity Theft – Tax Notes ($). “The IRS and its Security Summit partners have urged (IR-2021-170) tax professionals to learn the signs of data theft so they can react quickly to protect clients, noting that they should immediately contact the IRS along with insurance or cybersecurity experts when there’s an identity theft issue.”
Happy Congressional Startup Day! Today prompts start-up business owners to share their concerns with lawmakers. I wonder how many entrepreneurs would rather say “you’re fired” than share their concerns.