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IRS Warns Taxpayers Against Phone Scammers as Filing Season Starts – Jay Heflin, Eide Bailly. “The IRS issued a warning on January 27th for taxpayers to beware of phone scammers who pose as agency officials to steal their personal or financial information.”
Tax season, which officially kicked-off on Monday, is a prime time for scammers to attempt to steal taxpayer information.
The IRS notes that it initiates most contacts through regular mail, and not through email, text messages or social media channels.
Regarding phone calls, they are rare, but the IRS could call a taxpayer if that person has not responded to mailed communications.
Another noteworthy tip is that Caller ID can be manipulated to falsely show that the IRS is calling when it is actually a scam artist…
The article also cautions that the IRS will never demand that a refund be repaid and to beware of an IRS agent who speaks using poor grammar or hostile tones.
From the IRS press release:
Taxpayers who receive these phone calls should:
Record the number and then hang up the phone immediately.
Report the call to TIGTA using their IRS Impersonation Scam Reporting form or by calling 800-366-4484.
Report the number to phishing@irs.gov and be sure to put "IRS Phone Scam" in the subject line.
IRS Says It’s Making Changes to Speed Tax Filing Process - Alisa Parenti, Bloomberg ($). “The Internal Revenue Service is taking steps to streamline processing income tax returns, according to a statement on its website.”
- The agency will require overtime by employees, redeploy workers between functions, and use new technology to more quickly process tax returns filed with errors
- ‘We are clearly not where we want to be at present’
- ‘But our employees have been hard at work to develop innovative processes to expedite inventory reductions during the past year’
The statement is here.
IRS Should Do More to Provide Taxpayer Relief, Tax Pros Say - Naomi Jagoda, Bloomberg ($). “The Internal Revenue Service could go still further in providing relief to taxpayers during this filing season, tax and accounting professional groups said Thursday.”
The IRS’s announcement 'signals their desire to help taxpayers, but we believe that there is more they can do and respectfully disagree with the IRS’s assertion that congressional action is needed to suspend the automatic issuance of notices,' AICPA President and CEO Barry Melancon said in a statement.
Warren Demands More IRS Money as ‘Frustrating’ Tax Season Begins – Laura Davison, Bloomberg ($). “The Internal Revenue Service needs significantly more money in order to properly help taxpayers and enforce the tax laws, two Democratic senators said.”
Senators including Elizabeth Warren of Massachusetts and Jeff Merkley of Oregon said in a letter on Thursday that the tax agency, at a minimum, requires a 14% increase in annual funding and an $80 billion investment over a decade.
The plea for more resources for the IRS comes after Treasury Department officials cautioned that Americans should prepare for possible delays in getting their tax refunds and difficulties in reaching the agency by phone because of staff shortages and outdated computer systems.
Asking for more money now will likely not help this year's tax season.
IRS backlog delayed emergency relief for businesses – Aaron Lorenzo, Politico. “Emergency tax refunds meant to help businesses weather pandemic woes were significantly delayed because their applications got ensnared in the IRS paperwork backlog, according to a new Government Accountability Office report. The holdup required the IRS to shell out tens of millions of dollars in interest on top of the refunds.”
Businesses could apply for the refunds as part of the CARES Act and other Covid-19 relief laws Congress passed in 2020, allowing them to apply losses to prior-year profits known as carrybacks to generate refunds and to accelerate alternative minimum tax (AMT) credit refunds.
The idea was to help them get cash fast when facing liquidity shortages during the pandemic.
But the IRS took far longer than directed by Congress to process the paperwork, GAO found.
'IRS data show that the agency started to miss the 90-day statutory requirement for applications in September 2020 and missed it throughout 2021,' the report said.
Limited Taxpayer Relief From IRS Getting Lukewarm Response – Fred Stokeld, Tax Notes ($). “The IRS’s decision to provide limited taxpayer relief during this year’s filing season doesn’t go far enough, tax professionals say.”
Under pressure from accountants, enrolled agents, and other tax professionals to reduce taxpayer burdens caused in part by backlogs of unprocessed tax returns and other challenges facing the IRS in the midst of the COVID-19 pandemic, the agency said January 26 that it will suspend notices in cases in which the IRS has credited taxpayers for payments but doesn’t have a record of the tax return being filed.
Three days after the 2022 tax season started, an overwhelmed IRS suspends some taxpayer notices – Michelle Singletary, Washington Post. "IRS Commissioner Chuck Rettig and Treasury Department officials warned that the 2022 tax season would bring 'enormous challenges.' That prophecy is already coming true.”
The tax season opened Monday. Just three days later, the IRS announced it was suspending the mailing of certain automated notices because of a backlog in processing returns. The move would avert additional correspondence with taxpayers that would only add to the paper logjam and possibly prevent even more stress for filers.
IRS Says It Is Suspending Notices to Taxpayers – Tax Notes ($):
Notices of taxpayers being credited for payments despite there being no record of a filed return are being suspended to reduce confusion, and more steps are under consideration to improve taxpayer services during filing season, the IRS said in a January 27 statement.
The statement is here.
IRS Says Check Child Tax Credit Records Due to ‘Limited’ Errors - Kaustuv Basu, Bloomberg ($). “The IRS is encouraging taxpayers to check their records to see how much child tax credit they received before filing their taxes.”
- The statement from the agency Thursday also said a ‘limited’ number of taxpayers might have received letters that had incorrect information about the amount of credit they received.
- ‘We believe this is a limited group of taxpayers involved out of a much larger set of advance Child Tax Credit recipients,’ the statement said.
Biden Ally in House Floats Lower Child Tax Credit Income Cap – Erik Wasson and Billy House, Bloomberg ($). “A top House Democrat suggested Thursday that his party scale back eligibility for child tax credits as a way to unlock President Joe Biden’s stalled economic agenda.”
Representative Jim Clyburn of South Carolina, speaking in a video interview with the Washington Post, said he would support a lower income cap in a revived form of the child tax credit to get West Virginia Senator Joe Manchin to vote for Biden’s Build Back Better agenda.
‘I would like to see him come forward with a bill for the child tax credit that’s means-tested. I think it would pass. He’d get it through the Senate. I think we could get it through the House,’ Clyburn said. ‘So, there’s a lot in Build Back Better that he says he’s for -- so, let’s do that.’
Employers Push for Renewal of Expired Covid Telehealth Waiver – Sara Hansard, Bloomberg ($). “Employers and health-care organizations are pushing Congress and the IRS to waive deductible requirements for telehealth services for 32 million people with some employer-sponsored plans.”
An emergency Covid-19 policy expired Dec. 31 that enabled people with high-deductible plans and health savings accounts (HSAs) to get telehealth coverage without first having to meet annual deductibles. Some people who had been receiving care at little or no cost by computer or telephone are now receiving bills.
‘They’re unhappy, and they are expressing that to their company and to their insurers,’ said James Gelfand, executive vice president of public affairs for the ERISA Industry Committee (ERIC), which represents large companies that sponsor employee health plans. ‘They don’t understand that it was the federal government that did this to them.’
Democrats look for bipartisan deal on China economic bill as rest of agenda founders – Marianna Sotomayor and Jeanne Whalen, Washington Post. “Democrats are turning their focus to legislation aimed at making the United States more economically competitive with China in hopes of scoring a bipartisan accomplishment as other aspects of the party’s agenda founder.”
As soon as next week, the House is expected to consider a $250 billion proposal to strengthen U.S. technology, manufacturing and research as the Biden administration tries to address global shortages in areas such as computer chips that have contributed to the surge in inflation.
The Senate passed a similar bill last year with the support of 18 Republicans and key Democrats, and administration officials said they believe they can forge a final deal to be signed into law this spring.
Why is an article about trade and China in the blog? Because the House version of this bill includes a health tax credit and more tax provisions could be added. An article on this subject is here.
On The Money — No SALT, and maybe no deal – Sylvan Lane, Aris Folley and Karl Evers-Hillstrom, The Hill. “It doesn’t look like Senate Democrats are going to include SALT relief in their scaled-back Build Back Better plan.”
We included in our January 26th Roundup that the SALT cap may not be addressed in the tax and spending Build Back Better reconciliation bill. The article states the following:
Senate Democrats who were involved in negotiations over the bill before Sen. Joe Manchin (D-W.Va.) blew it up last month say there’s simply not enough room for the expensive tax change, which Republicans argue would benefit wealthy suburban households in blue states.
This sentence has raised a lot of eyebrows in Washington. The reason is that the House-passed reconciliation bill addresses the SALT cap and it is projected to raise over $14 billion in tax revenue, which can offset the cost of other Democratic priorities that increase the deficit.
In other words, cutting the SALT cap from the reconciliation bill means that Democrats will have less money to pay for their priorities. What’s more, there are a handful of House Democrats who have vowed to oppose the reconciliation bill if the SALT cap is not addressed in the bill. If enough of them keep their word, the re-written bill will not pass the House. Also, the argument that it benefits rich people doesn't hold water because Senate lawmakers wanted to cap the deduction so wealthier taxpayers could not benefit from it.
Why would Democrats strike this provision from their bill?
Tax Pros Starting to Feel Research Amortization Heat – Nathan Richman, Tax Notes ($). “The research amortization provision of the Tax Cuts and Jobs Act has taken effect, and taxpayers may have to start reporting its impact in their first-quarter financial reports.”
There may be bipartisan support for relieving taxpayers of the TCJA pay-for extending cost recovery for research and experimentation expenses, but ‘many companies that are doing their first-quarter provisions are going to have to take [section 174] into account until there’s actually a reversal,’ Kevin M. Jacobs of Alvarez & Marsal Taxand LLC said January 24 on a webcast sponsored by his firm.
Pro Tip: The assumption used to be that when lawmakers enacted a tax increase that took effect in the future, a future Congress would further delay that tax increase so it never really actually happened. Political partisanship has changed that assumption. Now, even provisions with bipartisan support have trouble getting enacted because of partisanship. Ironic.
Joe Manchin says 'there's a lot of areas in climate' spending that he can strike a deal on as Democrats begin revisiting the stalled Build Back Better spending bill – Joseph Zeballos-Roig and Ayelet Sheffey, Insider. “Investments in the climate might be the easiest thing Sen. Joe Manchin and his Democratic colleagues can agree on when it comes to President Joe Biden's stalled $2 trillion social and climate spending legislation.”
In an interview with Newsy, the conservative West Virginia Democrat reiterated his belief that a deal could be struck on the climate and clean energy provisions of Biden's Build Back Better plan.
‘In climate, I think there's a lot of areas in climate that we agree,’ he said. ‘The only thing I've ever said: You cannot eliminate your way to a cleaner environment.’
A substantial sum in the package is devoted to a set of tax credits to ease the transition away from fossil fuels towards cleaner energy sources like wind and solar.
Biden has said he believes that portion of the package could form the basis of a slimmer bill. 'I think it's clear that we would be able to get support for the $500 billion plus for energy and the environment,' he said last week.
The congressional Progressive Caucus has called on Congress to pass Build Back Better by March 1, but so far there is no evidence of this happening:
In the months since Build Back Better negotiations stalled, this legislation has only become more urgent. Relief cannot be delayed any longer. We're calling on
@POTUS
and Senate Dems to pass the Build Back Better Act by the State of the Union on March 1.
Biden tax policy after 1 year - Kyle Pomerleau, AEI:
President Joe Biden campaigned on a tax plan that would have raised nearly $4 trillion in additional revenue over 10 years primarily from high-income households and corporations. The plan would have also expanded tax credits for families, workers, housing, higher education, and green energy. One year into his administration, Joe Biden has signed several temporary tax credit expansions into law, but the future of these policies is uncertain. There is also still a chance that some tax increases on high-income households and corporations and other tax credits will be signed into law, but it’s clear that anything passed in Congress will be scaled back from the president’s campaign proposals.
Tax Effect of Student Loan Relief Is Proper Factor for Discharge – Chandra Wallace, Tax Notes ($). “The prospect of a sizable future tax bill was properly considered in a bankruptcy court discharge of student loan debt for a single mother of three working full time and earning well below the poverty line.”
Judge William R. Sawyer of the U.S. Bankruptcy Court for the Middle District of Alabama entered an order discharging $111,000 in student loan debt following a trial in In re Monique Denise Wheat because requiring debtor Wheat to repay the debt would be an ‘undue hardship.’
Sawyer found that, despite participation in an income-based repayment plan, the debtor’s circumstances made it unlikely she would be able to make a dent in her student loan debt. ‘There’s no way she’ll ever be able to repay’ this debt, he said, ‘even I think to a certainty.’
Passport Revocation Challenge Found Moot, Appeals Court Says - Jeffery Leon, Bloomberg. “A taxpayer’s challenge to the certification of her “seriously delinquent” tax debt to the Secretary of State, which carries the possibility of passport revocation, has been dismissed as moot because the IRS reversed the decision, an appeals court said, in agreement with the U.S. Tax Court.”
Vivian Ruesch was assessed $160,000 in penalties for her 2005 to 2010 tax years for failing to report foreign business entities. She filed a petition at the Tax Court when the IRS certified that she had a ‘seriously delinquent tax debt’ under tax code Section 7345, which allow the agency to recommend the case to the State Department for possible revocation or denied renewal of the taxpayer’s passport. While the case was pending at the Tax Court, the IRS discovered that Ruesch had requested a due process hearing concerning the debt, but the agency misplaced her request and reversed the certification. As a result, the Tax Court dismissed her petition as moot and also found that Section 7345 limited its jurisdiction in addressing certification matters.
IRS Wrongly Taxed Cannabis Co. On $2M, Tax Court Told - Theresa Schliep, Law360 ($). “The IRS wrongly taxed a Massachusetts cannabis grower on over $2 million in costs that should be subtracted from income, the business told the U.S. Tax Court, claiming the agency unlawfully barred marijuana businesses from certain small-business accounting practices.”
The Internal Revenue Service's decision to disallow over $2 million in costs of goods sold claimed by Curaleaf North Shore Inc. is an attempt to tax the business on more than its income, the company told the Tax Court in a petition obtained by Law360. Those expenses qualify for COGS treatment under Internal Revenue Code Section 471(c), which was created by the 2017 Tax Cuts and Jobs Act and provides accounting rules for small businesses, according to the petition filed Jan. 7.
States dole out mega-subsidies in bid to lure companies – Reid Wilson, The Hill. “State governments are spending parts of their first major cash surpluses in a decade on billions of dollars in tax breaks for some of the world’s largest corporations, hoping to lure new high-tech manufacturing hubs that have become this year’s most sought-after economic development projects.”
For years, states have offered corporations rich incentives to bring thousands of jobs to their communities in what critics have called a race to the economic bottom. But the positive fiscal conditions in which many states now find themselves have accelerated some of those deals, putting the country on pace for a greater number of such agreements than any other year in history.
In just the first few weeks of the new year, at least three mega-deals have been announced, and several more are in the works.
Washington State Delaying Payroll Tax to Fund Long-Term Care - Laura Mahoney, Bloomberg ($). “Washington Gov. Jay Inslee signed two bills Thursday delaying collection of a tax on employee earnings to fund a new long-term care insurance program while lawmakers seek ways to improve its prospects for solvency.”
The Democratic governor’s action will delay the start of WA Cares Fund, the first state program in the country to offer long-term care insurance through a state trust fund. Employers must collect and remit 58 cents per $100 in earnings for people employed in the state.
Battle Lines Drawn As NY Gov. Urges Tax Abatement Revamp – Paul Williams, Law360 ($). “New York Gov. Kathy Hochul's plan to revamp an expiring tax abatement program for affordable housing developments in New York City is primed to ignite a fierce battle between the real estate industry and progressive officials who oppose the initiative.”
Developers have praised Hochul's proposal to let the current program, called 421-a, expire in June and replace it with one requiring certain developments to be more affordable to obtain property tax exemptions. They argue that New York City's high-tax landscape necessitates tax abatements to entice developers to build affordable housing projects. But the plan has attracted the ire of progressives, including several Democratic officials and government watchdog groups who point to its high price tag and say that there are more efficient ways to support affordable housing.
Wisconsin Governor Proposes $150 Refund Checks for Taxpayers – Michael Bologna, Bloomberg ($). “Tapping a healthy revenue surplus, Wisconsin Gov. Tony Evers floated a plan Thursday that would send $150 refund checks to every resident of the state and support families with tax credits for caregiving and childcare.”
Evers, a first-term Democrat running for reelection in November, pointed to a recent report from Wisconsin’s Legislative Fiscal Bureau projecting a $3.8 billion surplus by the end of the 2021-2023 biennium, surpassing a June 2021 estimate by nearly $2.9 billion. Evers offered a $1.7 billion supplemental budget plan that includes $815.7 million for one-time payments of $150 for each resident.
W.Va. Bill Would Alter Flow-Through Income Apportionment – Asha Glover, Law360 ($). “West Virginia would require the income of flow-through entities to be allocated and apportioned in the same way as corporations' income under a bill in the state House of Representatives.”
H.B. 4410, introduced Wednesday by Rep. Vernon Criss, R-Wood, would require that apportioned income for flow-through entities be apportioned by applying a single sales factor. Income of a flow-through entity would be allocated income in the hands of a shareholder, interest owner, partner, member or other recipient of flow-through income and taxable as income allocated to the state, according to the bill.
Massachusetts Governor Proposes $700 Million in Tax Relief – Michael Bologna, Bloomberg ($). “Massachusetts senior citizens, renters, and low-income taxpayers would be able to claim $700 million in tax benefits under Gov. Charlie Baker’s $48.5 billion fiscal year 2023 budget proposal.”
Key features of Baker’s tax relief plan include doubling the dependent care credit, doubling the property tax credit for taxpayers age 65 and older, and exempting taxpayers on the lowest tier of the wage scale from the state’s 5% income tax. In a Wednesday letter to the legislature, Baker said his budget would ‘provide significant relief for housing and childcare costs, relieve the tax burden for very low-income residents, and improve the state’s competitiveness.’
Cigarette Distributor’s Secret Rebates Violated State Tax Law – Donna Borak, Bloomberg ($). “The New York Supreme Court should have listened to arguments from a cigarette distributor because the company “sufficiently” showed that rebates used by a competitor violated a state tax law.”
The Appellate Division, Second Department of the New York Supreme Court argued in a Jan. 26 opinion that the state’s highest court should have denied a motion to dismiss by defendant Harold Levinson Associates LLC (HLA) because the Cigarette Marketing Standards Act (CMSA) makes clear that rebates, which directly or indirectly reduce prices below the legal minimum, are a violation of a prohibition of the sale of cigarettes that intends to harm competition or evade taxes.
Mich. Gov. Seeks To Eliminate Retirement Tax, Raise EITC – Paul Williams, Law360 ($). “Michigan Gov. Gretchen Whitmer called on state lawmakers to eliminate the state's tax on retirement income and restore the earned income tax credit back to the level it was at before it was cut 11 years ago.”
Whitmer said during her State of the State address, presented online Wednesday, that doing away with Michigan's tax on retirement income would save 500,000 households an average of $1,000 annually. She also said resorting the earned income tax credit to 20% of the federal limit from its current 6% rate would provide about 730,000 families with an average tax refund of nearly $3,000.
Tax Lien Purchaser Didn’t Properly Notify Louisiana Homeowners – Sam McQuillan, Bloomberg ($). “A dispute between a property tax lien purchasing company and the son of the original property owner is headed back to trial court after a Louisiana appellate court ruled the property tax deed was incorrectly served.”
The Louisiana Fifth Circuit Court of Appeals on Wednesday vacated and remanded a lower court’s ruling that granted the company possession of a family home.
Bryan Kuhn, a son of the property’s original owners, came into full possession of the home after his two siblings donated their shares to him. NARS came into possession of the tax deed following a tax sale that resulted from four years of unpaid ad valorem taxes on the siblings’ shares.
Tax Executives’ Angst Shifting from D.C. to OECD – Jonathan Curry, Tax Notes ($). “Worry by business leaders over the tax increases they’d have to reckon with under a potential Build Back Better agenda is giving way to planning for how they’ll comply with the OECD’s international tax projects.”
‘The outlook for U.S. [tax] policy in 2022 remains really uncertain,’ Ken Kuykendall of PwC said during a January 27 call with reporters. Momentum for the Build Back Better Act (H.R. 5376) in Congress has stalled, and meanwhile, sweeping changes are coming into focus this year, with international tax negotiators targeting an effective date as early as 2023 for the OECD’s pillar 1 and pillar 2 global tax reform projects.
According to a PwC survey of almost 700 C-suite executives, 42 percent of the respondents were considering speeding up their digital transformation initiatives; 38 percent were considering automating their processes; and 36 percent were weighing sizable investments in technology.
Companies Must Prepare for EU’s Changing Tax Landscape (Podcast) - Isabel Gottlieb, Bloomberg ($):
Companies operating in the EU are facing a changing tax landscape in the years ahead, which means they must prepare now to set up systems to report and comply with the new measures.
Happy National Fun At Work Day! And if you’re working from home, does that mean you can take a nap? Naps are fun!
From National Day Calendar:
Make sure to obtain your boss’s approval for whatever fun and exciting things you choose to do. Better yet, get your boss involved in the fun!
I guess naps are a no-go. Bummer.