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Headaches and Backlogs Loom as Tax Filing Season Nears Again – Richard Rubin, Wall Street Journal ($). “The third tax-filing season during the coronavirus pandemic is set to begin soon with more delays, uncertainty and frustration likely for taxpayers and tax preparers.”
There will be some signs of business as usual. The individual tax deadline will return to its usual mid-April date for the first time since 2019, and the Internal Revenue Service says it has been steadily reducing its backlog of 2020 returns and other lingering paperwork.
Even so, the agency is still contending with piles of work from the messy 2020 tax year while facing new challenges, including the prospect of retroactive legislation and pandemic-era tax-law changes that will require extra attention from taxpayers.
'The IRS is going to start the filing season in a hole,' said Erin Collins, the national taxpayer advocate, who leads an independent group within the IRS.
Pandemic Worsens Longstanding IRS Phone Woes – Kaustuv Basu and Patrick Ambrosio, Bloomberg ($). “It has never been easy to reach the IRS on the phone, especially during the busy tax-filing season, when millions of Americans have questions about their annual tax return."
The agency’s phone service has slipped further during the pandemic. First, Covid-19 brought safety-related facility closures, then a ton of extra work as the IRS was tasked with issuing stimulus checks and advance child tax credit payments—developments that spurred even more phone calls.
With another tax season on the way, there are looming questions about the agency’s ability to handle its workload and whether giving the IRS more resources will improve the situation. Recent tax law changes and more work around the child tax credit payments will likely generate a large volume of calls for the IRS, even as it races to hire more employees and upgrade to newer technology.
Tax professionals who frequently interact with the IRS need 'coping skills' when trying to reach the agency by phone, said St. Louis-based tax preparer Jan Roberg.
Still, some are optimistic that this year will not be like prior years.
Getting ready for the 2022 tax season – Antoinette Alexander, Accounting Today. “It’s the start of another tax season, and while many preparers are cautiously optimistic that this year will mark a return to some sort of ‘normalcy,’ it is likely that keeping pace with legislative changes, late information from clients, and potential filing extensions will result in another complex tax season.”
‘I’m expecting it to be just a normal tax season. My fingers and toes are crossed for that. … However, we are geared up internally for anything because the tax season was July one year and then May another year. We’re geared up. Things get crazy when the IRS, the government, makes tax law changes as they go to apply to 2021 rather than 2022,’ said Renee Daggett, CEO of AdminBooks in Morgan Hill, California.
Democrats hit pause on Biden's climate, social spending package – Alexander Bolton, The Hill. “Senate Democrats are putting President Biden’s climate and social spending plan on the back burner as they plan to debate voting rights legislation this month and hold a vote on changing the Senate's filibuster rule.”
Democratic aides say the Build Back Better bill won't be ready for floor action any time soon and predict the wide-ranging legislation that the White House has negotiated with centrist Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) may have to be completely overhauled.
Democratic aides warn that means Build Back Better probably won’t be ready to come to the floor until March or later. And whatever version of the bill comes up for a vote will be markedly different from the $1.75 trillion framework that Manchin resoundingly rejected during a 'Fox News Sunday' interview on Dec. 19, aides say.
Democrats Search for Path Forward on Biden’s Economic Agenda – Erik Wasson and Laura Davison, Bloomberg ($). “Senate Democrats begin the new year Monday seeking a path forward on President Joe Biden’s stalled domestic economic agenda, hoping to pass a slimmed-down version before midterm election campaigns begin. Senate Majority Leader Chuck Schumer is vowing to bring a revised version of the $2 trillion tax, climate and spending package to the floor for a vote as soon as this month, despite unresolved differences within his party that have stalled the legislation."
A snowstorm in Washington will slow many senators’ return to the Capitol and likely push off informal in-person talks for at least a day.
Falling snow grinds D.C. to a halt - no matter how much falls. Some joked that if Russia wanted to invade our nation's capital it should wait until it snows because no one goes to work and they would have the run of the place.
Oddly, Democrats seem more focused on the verbiage in selling the bill to voters than changing it to ensure passage, according to Punchbowl News ($):
There has been an ongoing debate inside the Democratic Party about whether lawmakers should say that the BBB is ‘transformative’ or ‘transformational.’ Those who are opposed to that kind of verbiage say that Americans don’t want their lives transformed and would prefer more modest changes and lower prices on items they use every day.
Scoop: Manchin returns to Build Back Better negotiations with demands – Hans Nichols, Axios. “Sen. Joe Manchin (D-W.Va.) is open to reengaging on the climate and child care provisions in President Biden's Build Back Better agenda if the White House removes the enhanced child tax credit from the $1.75 trillion package — or dramatically lowers the income caps for eligible families, people familiar with the matter tell Axios.”
The holdback senator's engagement on specifics indicates negotiations between him and the White House could get back on track, even after Manchin declared he was a ‘no’ on the package on Dec. 19.
FWIW, Senator Manchin is a moving target on several issues. Case in point: The Senator opposed the billionaire tax before he supported it. Speaker Nancy Pelosi (D-Calif) once deemed the tax a PR stunt. It'll be interesting to see if she also changes positions.
A Look Ahead: EOs Set Priorities for 2022 – Fred Stokeld, Tax Notes ($). “Enacting tax measures to encourage charitable giving and improving IRS information returns are among the priorities for tax-exempt organizations in 2022, as are concerns about how court opinions and social spending legislation could affect the nonprofit sector.”
Charitable organizations have been seeking extension of the universal charitable deduction for non-itemizers, extension of the 100 percent adjusted gross income deduction for individuals and 25 percent AGI deduction for corporations, and restoration of the employee retention credit, said David L. Thompson of the National Council of Nonprofits.
If any of those measures aren’t extended by January 1, ‘they automatically become our top 2022 priorities,’ Thompson told Tax Notes December 13.
State tax collections continue topping expectations - News Service of Florida, Tampa Bay Times. “Florida lawmakers got another boost Thursday as they prepare to start the 2022 legislative session and draw up a new state budget.”
The state in November collected $398.8 million more in general-revenue taxes than expected, continuing a series of months of higher-than-projected revenues, according to a report released by state economists.
That is good news for lawmakers, in part, because general revenue plays a critical role in paying for schools, health care and prisons.
State Sales Tax Revenue Totaled $3.6 Billion in December – Comptroller.Texas.Gov:
Texas Comptroller Glenn Hegar today said state sales tax revenue totaled $3.56 billion in December, 24.4 percent more than in December 2020. The majority of December sales tax revenue is based on sales made in November and remitted to the agency in December.
New York, New Jersey Take SALT Cap Lawsuit to Supreme Court – Aysha Bagchi, Bloomberg ($). “New York and three other states took their challenge against a $10,000 cap on federal tax deductions for taxes paid to state and local governments to the U.S. Supreme Court on Monday.”
The states—New York, Connecticut, Maryland, and New Jersey—are appealing an October ruling from the U.S. Court of Appeals for the Second Circuit, which affirmed a 2019 federal district court decision. The ruling upheld the $10,000 cap that Congress enacted in 2017 despite the states’ claims that all or much of the deduction was mandated by the U.S. Constitution and that the cap unconstitutionally coerced the states into discarding their preferred fiscal policies.
New State Laws Address Taxes, Housing Deregulation, Other Issues – Jacob Gershman, Wall Street Journal ($). “Hundreds of state laws across the country are set to take effect in January, dealing with issues including housing deregulation, foam containers and the cost of dating apps.
In Arkansas, state agencies will be barred from conducting employee training sessions that teach that the state or the U.S. is fundamentally racist or sexist or that one race or sex is inherently superior to another, among other concepts labeled as divisive. Several other states have passed similar laws.
The state is also lowering its top individual income-tax rate to 5.5% from 5.9%, the first step of a multiyear tax cut backed by Republican Gov. Asa Hutchinson.
Hochul Vetoes Tougher N.Y. Whistleblower Law Aimed at Tax Cheats – Donna Borak, Bloomberg ($). “New York Gov. Kathy Hochul (D) has vetoed a bill that would have strengthened a state whistleblower law to penalize wealthy taxpayers and corporations that deliberately don’t file tax returns.”
As written, the bill would have swept up more than just non-filers “and would implicate more tax filing controversies to the False Claims Act than just non-filers,” Hochul said in disapproving the measure shortly before midnight on New Year’s Eve.
‘This would be incongruent with the way other states and the federal government pursue False Claims Act violations, and could have the effect of incentivizing private parties to bring unjustified claims under the law,’ Hochul wrote in her veto message.
Indiana Governor Pushes Business, Remote Worker Tax Incentives – Alex Ebert, Bloomberg ($). “Indiana manufacturers and remote workers would see new tax incentives under Gov. Eric Holcomb’s (R) plan to spend part of the state’s more than $3 billion budget surplus to fight interstate battles over corporate investment and talent.”
His legislative agenda, released Monday, seeks to eliminate personal property tax on new manufacturing equipment, front-load corporate tax incentives, expand the state’s automatic income tax refund system, and create incentives for remote workers who locate to Indiana. Legislators have filed broader tax-cut proposals, but Holcomb said Monday in an Indianapolis news conference that he’d rather focus on revenue-neutral incentives to ensure the state can fund priorities in a budget cycle without federal pandemic assistance.
‘I love that we’re in this position to talk about cutting taxes, but we have a lot up in the air right now,’ he said, mentioning the public health crisis, inflation and a statewide effort to raise teacher pay. ‘We’ve had tens of billions of dollars flow into our state from the federal government over a two-year period. I want to make sure we have an accurate picture.’
Oregon Launches Independent Taxpayer Advocate Office – Sam McQuillan, Bloomberg ($). “Oregon has launched a tax office within its revenue department to provide taxpayer assistance and address tax-related issues.”
The Office of the Taxpayer Advocate was announced Monday by Betsy Imholt, director of the state Department of Revenue. Codi Trudell, who previously served in several roles within Oregon agencies, will head the independent office as the state’s first taxpayer advocate.
Oakland Parcel Tax Valid on Majority Vote, California Court Says – Laura Mahoney, Bloomberg ($). “A real property tax proposed on the 2018 ballot in Oakland, Calif., needed only a simple majority of voters for approval, despite statements in the ballot materials that it needed a two-thirds majority, a California appellate court has found.”
The Dec. 30 ruling validating Measure AA, creating the so-called parcel tax to fund education programs, is the latest in a string of cases affirming that California local tax measures placed on the ballot through citizen initiatives require a majority vote, while those placed by the government require two-thirds. It passed with 62.47% approval.
Mamma Mia! It’s National Spaghetti Day!
“The word spaghetti is plural for the Italian word spaghetto, which is a diminutive of spago, meaning ‘thin string’ or ‘twine,’” according to National Calendar Day. No matter how you say it, eat up!