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IRS aims to quickly fill 5,000 jobs, deploy ‘surge’ team to clear backlog of 24 million tax returns – Jacob Bogage, Washington Post. “The Internal Revenue Service will launch a full-court press this month to tackle its massive backlog of tax returns, aiming in the next 30 days to extend the first of 5,000 job offers and add high-tech customer support tools throughout its operations, officials said Thursday.”
The tax collector will deploy a second 'surge team' to sort through its accumulation of 24 million returns and correspondence, reassigning 700 employees at its processing centers in Utah, Missouri and Texas. It will hire more contractors to staff phone lines and complete clerical work. In recent days, it expanded customer callback functions to 70 percent of its phone lines, a move that has already saved taxpayers 1 million hours of hold time.
Treasury and IRS Announce Aggressive Plan to End Pandemic Inventory Backlog This Year – Treasury Department. “Entering a normal filing season, the IRS typically has well under one million pieces of inventory. This year, the IRS entered the filing season with a backlog that is more than 15 times as large. This has a huge impact on people, and Commissioner Rettig has committed to addressing the backlog and returning to normal, healthy levels by the end of this year. To meet this commitment, the IRS has laid out an ‘all-hands-on-deck’ approach."
Hiring 10,000 new employees: The IRS today announced plans to hold job fairs across the country in March in Kansas City (March 18-19), Austin (March 24-25) and Ogden (March 31-April 1) with the aim of filling 5,000 open positions in the coming months. Working with Treasury, the Office of Personnel Management, and the National Treasury Employees Union, the IRS recently secured direct hiring authority for these employees, as well as an additional 5,000 new hires to be made over the course of the next year. Congress also helpfully provided hiring flexibilities in the House-passed omnibus to further expedite hiring in critical positions. This will allow for onboarding and training new emergency teams which will begin working on inventory within just a few weeks.
Also in the Commissioner’s quiver:
Increased Taxpayer Assistance to Reduce Processing Delays
Developing and Deploying Updated Technology to Automate Functions
The IRS announcement is here.
IRS Readies Hiring Binge in Bid to Clear Tax-Return Backlog – Richard Rubin, Wall Street Journal ($):
Using exceptions to normal federal hiring rules, the IRS expects to be able to get people working, on site, within 45 days instead of four to six months, avoiding delays that can lead applicants to take other jobs instead of waiting for the government. Pay rates for the positions would vary. Federal workers earn a minimum wage of $15 an hour.
IRS officials have also struggled to hire new employees, contending that the government can’t compete with companies such as Amazon.com Inc. for lower-wage workers and that the federal hiring process takes too long. Officials hope the special exceptions will improve that hiring rate.
Every party has a pooper: Butch Maier, Bloomberg ($):
Meanwhile, National Taxpayer Advocate Erin Collins… questioned how the reassignments were going to affect audits and collections by the IRS, and said that hiring 10,000 employees, as the IRS intends, would not help with the current filing season.
IRS unveils voice and chat bots to assist taxpayers with simple collection questions and tasks; provides faster service, reduced wait times – IRS. “The Internal Revenue Service today announced it has begun using voice and chat bots on two of its specialized toll-free telephone assistance lines and IRS.gov, enabling taxpayers with simple payment or collection notice questions to get what they need quickly and avoid waiting. Taxpayers can still speak with an IRS telephone representative if needed.”
‘Our phone lines continue to see unprecedented demand, and the IRS continues to look for ways to help people and avoid long wait times,’ said IRS Commissioner Chuck Rettig. ‘Our telephone representatives remain an important part of the service we provide, but these bots can help some people avoid lengthy phone delays for something that could be resolved on the spot. This is part of a larger effort to help people get the assistance they need this tax season.’
Thursday's announcements could be short-term solutions for long-term problems:
IRS Sees Path to Cut Lengthy Phone Waits, Massive Refund Backlog - Laura Davison, Bloomberg ($). “The plans include hiring 10,000 new workers, requiring 6,000 employees to work overtime, and offering up to 10,000 employees the option to work more hours. The IRS is using contractors to help answer taxpayers questions and help process the inventory of returns that has piled up."
However, that relief may be temporary. The agency is likely to continue to face staffing shortages and structural problems in the future.
‘Ultimately, these approaches are short-term salves for 2022’s tax season but don’t address the much deeper structural problem at the IRS,’ according to a Treasury and IRS joint statement. ‘The agency needs stable, long-term funding to be able to modernize outdated technological infrastructure and transition much of its manual work into automated processes that will be more efficient.’
Firm Calls For Ending IRS Microcaptive Disclosure Notice - Emlyn Cameron, Law360 ($). “An Internal Revenue Service notice requiring disclosure of microcaptive insurance arrangements under threat of penalty should be vacated, a microcaptive consulting firm told a Tennessee federal court, citing a Sixth Circuit decision regarding the agency's comment period obligations.”
The recent decision in Mann Construction Inc. v. United States vacated an IRS notice requiring disclosure of potentially abusive benefit trust arrangements on pain of penalty as having violated administrative law because it didn't go through public comment. Microcaptive consulting firm CIC Services LLC told the Tennessee federal court on Tuesday that the Mann decision applies to part of its own case against the IRS.
Treasury Urges Justices To Reject States' SALT Cap Challenge - Asha Glover, Law360 ($). “The Second Circuit correctly determined that Congress acted within its power when lawmakers imposed the federal cap on state and local tax deductions, counsel for the U.S. Treasury Department told the U.S. Supreme Court on Wednesday.”
There is no constitutional principle obligating Congress to provide for any SALT deduction, Treasury said, urging the justices to deny a certiorari petition from New York, New Jersey, Connecticut and Maryland. Treasury also argued that Congress is not precluded from imposing a new limit on the deduction nor does the cap constitute coercion of the states in violation of the 10th Amendment.
‘The court of appeals correctly concluded that Congress did not exceed its broad authority over taxation by placing a $10,000 limit on the amount of state and local taxes that individual taxpayers may deduct from their incomes,’ Treasury said.
Justice Department reports more than $8 billion in alleged fraud tied to federal coronavirus aid programs – Tony Romm, Washington Post. “Since the U.S. government first marshaled its historic economic response to the coronavirus pandemic, the Justice Department has uncovered a vast array of alleged fraud, resulting in charges and investigations involving more than $8 billion in federal aid.”
In one such case last March, a judge sentenced a 55-year-old man in Coppell, Tex., for seeking $24.8 million in PPP loans to assist businesses that actually did not have any employees. He falsified tax documents, federal officials said at the time, and created bank statements showing wages that were never paid to workers. The suspect then used the proceeds to 'buy a fleet of luxury cars,' including a Bentley convertible, a Corvette Stingray and a Porsche Macan.
TEFRA Filing Deadline Is Jurisdictional, Says Ninth Circuit – Kristen Parillo, Tax Notes ($). “The deadline for seeking judicial review of audit adjustments under the old partnership regime is jurisdictional, the Ninth Circuit held in only the second appellate decision to consider the issue.”
The 1982 Tax Equity and Fiscal Responsibility Act provisions link the filing deadline to the court’s jurisdiction, the Ninth Circuit concluded in a March 10 opinion in SNJ Ltd. v. Commissioner.
The panel was reviewing a November 2019 Tax Court order that granted an IRS motion to dismiss a petition that sought review of notices of final partnership administrative adjustment for tax years 2006 and 2008.
The Tax Court had concluded that the husband-and-wife partners, Ritchie Stevens and Julie Keene-Stevens, failed to file their petition within the deadlines set by section 6226, the provision addressing judicial review of FPAAs in TEFRA proceedings.
Senate Passes $1.5 Trillion Omnibus Spending Bill – Tax Notes:
The Senate passed 68 to 31 the $1.5 trillion omnibus spending bill late March 10, setting fiscal 2022 spending limits five and a half months into the fiscal year.
The omnibus boosts defense spending by nearly 6 percent to $782 billion and nondefense spending by nearly 7 percent to $730 billion.
Must-pass bills like the omnibus are usually vehicles for tax legislation, but that wasn’t the case this year. There was no tax title in the 2,741-page bill, which contains 34 titles, from defense spending to $14 billion for Ukraine, and from the reauthorization of the Violence Against Women Act to a giant spending plan for Medicare, Medicaid, education, and labor.
Key House Democrat Says Tax Break Extension for R&D to Pass Soon – Laura Davison, Bloomberg ($). “House Ways and Means Chairman Richard Neal says he believes Congress will renew a series of expired tax benefits this year, including a deduction for research and development costs worth about $30 billion a year to corporations.”
- Neal says he’s waiting on Republicans to negotiate a final deal on the package of tax items, which also include credits for renewable energy and other miscellaneous industries.
- NOTE: The tax items under discussion include an extension for a more generous R&D expense write-off that was initially passed in President Donald Trump’s tax law, in 2017.
Senator Pitches Stiff New Tax on Profits of Chevron, Shell, BP - Laura Davison, Bloomberg ($). “Senator Sheldon Whitehouse is pitching a steep new tax on oil companies, such as Chevron Corp. and Shell Plc, as part of a broader plan to mitigate the impact of inflation on middle-income families. Whitehouse, a Rhode Island Democrat, said taxing the corporate profits that are the result of high oil prices would be preferable to a suspension of the 18-cent-a-gallon federal levy on gasoline, an idea that some of his Senate colleagues have floated.”
‘There’s absolutely no guarantee that if we pulled back the gas tax, big oil just wouldn’t jack its prices another 18 cents,’ Whitehouse said in a call with reporters on Thursday. ‘The gas tax doesn’t distinguish between a billionaire’s Escalade and a school teacher’s Taurus.’
Whitehouse said his plan -- putting put a 50% tax on the difference between the price of a barrel of oil today and the average price from 2015 to 2019 -- would subject oil producers and importers, rather than consumers to the tax. He said he expects large oil companies like Chevron, Shell, BP Plc, EOG Resources Inc., Occidental Petroleum Corp. and Exxon Mobil Corp. would be forced to pay the tax if his plan were to become law.
Interesting proposal: raise the cost for manufacturing a product where the increase will likely be incorporated into the sale price.
Lawmaker Launches Probe of Exxon, BP on Buybacks, Tax Breaks – Laura Davison, Bloomberg ($). “Representative Bill Pascrell is beginning an inquiry into how 11 oil companies, including Exxon Mobil Corp. and BP Plc, are using tax benefits and going about stock buybacks amid surging crude prices and a sharp rise in gasoline costs.”
Pascrell, who leads a House Ways and Means Oversight panel, sent letters to the companies’ chief executive officers Thursday asking them which tax code preferences they claim, to list the tax breaks they received from President Donald Trump’s 2017 tax overhaul and for information about stock buybacks in recent years.
Coal Miners Seek Legislative Fix for Black Lung Disease Benefit - Kellie Lunney, Bloomberg ($). “Coal miner advocates, disappointed that a spending deal for fiscal 2022 fails to extend an excise tax rate that helps pay for black-lung disability benefits, are pressing Congress for a legislative remedy.”
Disabled miners and their dependents have continued to receive their benefit since the rate expired on Dec. 31. The tax, contributed by coal companies, is the primary source of money for the Black Lung Disability Trust Fund. The federal fund is shrinking and will continue to do so rapidly unless Congress renews the tax rate at the 2021 level, the advocates say.
Lawmakers have introduced stand-alone bills in both chambers (S. 2810, H.R. 6462) that would extend the tax rate at its pre-expiration level for the Black Lung Disability Fund for a decade through 2031. The stalled Build Back Better bill included a four-year extension.
‘Bracket Creep’ Squeezes Some Taxpayers Amid High Inflation – Donna Borak, Bloomberg ($). “Millions of Americans are facing hidden tax increases in their paychecks because they live in one of more than a dozen states that don’t adjust their tax brackets for surging inflation.”
Rising prices are sapping consumers’ purchasing power and setting the stage for the Federal Reserve to begin raising interest rates at next week’s meeting. U.S. consumer prices jumped 7.9% in February from a year earlier to a fresh 40-year high, Labor Department data showed Thursday.
But along with record gasoline prices, skyrocketing rents and food costs, residents of New York, New Jersey, Connecticut, West Virginia and nine other states are facing an additional wage squeeze: state fiscal policies that fail to index any part of their personal income taxes for inflation.
Washington State Bill Targets Businesses Using Tax Zappers – Laura Mahoney, Bloomberg ($). “Washington state tax enforcers could claw back six years to prosecute businesses that use sales suppression software to evade taxes under a bill sent to the desk of Gov. Jay Inslee Thursday.”
The bill (S.B. 2099) doubles the statute of limitations from three to six years for prosecution of felony charges for filing fraudulent or false returns tied to the use of the software. The House passed the bill 47-2 following Senate approval 86-9 on Feb. 26 at the request of the Department of Revenue. The Democratic governor hasn’t taken a position on the bill.
Maryland Prepares Forms for Filing of Embattled Digital Ad Tax – Michael Bologna, Bloomberg ($). “Despite a raging legal fight over the constitutionality of Maryland’s tax on digital advertising, the state is moving forward with plans to collect the first round of payments due April 15.”
The state comptroller will release its “estimated tax declaration form” by the end of the month for companies to pay the state’s first-in-the-nation digital advertising gross revenues tax. The actual tax return, for taxes due on annual gross advertising revenue attributable to Maryland, will be published in December, Debora Gorman, deputy director of the Revenue Administration Division, said in an email Wednesday.
Maryland’s unprecedented surplus grows by $1.6 billion, setting stage for renewed tax cut debate – Erin Cox, Washington Post. “Maryland’s already swollen bank accounts are expected to grow by $1.6 billion, state forecasters said Thursday, setting the stage for renewed debate on how to spend the state’s historic surplus.”
Democrats have pushed extra funding for schools, child care and tax breaks on necessities such as diapers and medical equipment. Republicans have called for across-the-board tax breaks for retirees.
States across the country have balance sheets dripping with extra money as federal and state stimulus cash circulates through the economy. Nationwide, 32 states reported higher-than-expected revenue, according to the National Association of State budget Officers.
Storage Facility Assessment Approved by Minnesota High Court – Perry Cooper, Bloomberg ($). “Chambers Self-Storage Oakdale LLC failed to convince the Minnesota Supreme Court that its property was unfairly assessed for tax years 2016 and 2017.”
The Minnesota Tax Court increased Washington County’s assessments to $2.74 million for 2016 and $2.81 million for 2017. The high court upheld the ruling, rejecting Chambers’ argument that the assessment was unfair compared with assessments of other self-storage facilities in the county.
Minn. Bill Would OK Credit For Some LLC Tax Payments - Sanjay Talwani, Law360 ($). “Minnesota would allow resident sole members of disregarded limited liability companies to claim tax credits for payments made by those LLCs to other states under a bill introduced in the state Senate.”
S.F. 3852, introduced Wednesday by Sen. Mark Johnson, R-East Grand Forks, would consider a tax paid to another state by a disregarded LLC with a sole member to have been paid by that member for the purpose of a credit against Minnesota income tax.
That measure would take effect starting in tax year 2022.
Ga. House OKs Flat Income Tax Rate - Jaqueline McCool, Law360 ($). “Georgia would do away with its tax brackets and create a flat income tax rate of 5.25% under a bill passed by the state House of Representatives."
H.B. 1437, which the House passed Wednesday, 115-52, with some bipartisan support, would reduce the tax rate from 5.75% to 5.25% for single filers making over $7,000 annually and joint filers making over $10,000 annually. However, for filers in the state's lower income tax brackets who had income tax rates of 2%, 3%, 4% and 5%, their rates would increase under the flat tax rate.
The new rate would take effect beginning in the 2024 tax year.
Ind. Lawmakers Advance Income Tax Cut - Michael Nunes, Law360 ($). “The Indiana Legislature passed a bill that would decrease the state's gross income tax rate over the next two years, with the option of further lowering rates if the state revenue meets certain targets."
Both chambers approved H.B. 1002 on Wednesday when the state House of Representatives and Senate adopted a conference committee report. The report was passed by the Senate unanimously, and passed the House by an 82-17 vote. The bill would lower the state's gross income tax rate from 3.23% to 3.15% in 2023 and 2024.
Treasury Fends Off GOP Queries on Unfinished Global Tax Deal - Christopher Condon and Isabel Gottlieb, Bloomberg ($). “The Treasury has sought to reassure a group of Republican senators the global tax agreement it struck in 2021 with nearly 140 countries will have a negligible impact on U.S. tax revenue, while stopping short of addressing a raft of GOP questions and concerns about the deal, which has yet to be finalized.”
In a letter dated March 1 obtained by Bloomberg News, the Treasury’s assistant secretary for legislative affairs, Jonathan Davidson, said many questions put by a group of Republican lawmakers to Treasury Secretary Janet Yellen couldn’t yet be answered because of ongoing negotiations over the details of the agreement… ‘We continue to believe that any U.S. revenue impact would be relatively small to non-existent,’ Davidson wrote. But ‘important design elements remain open in the negotiations, and it is premature to provide a precise impact assessment,’ he added.
War Complicates Minimum Tax For Estonia, Official Says - Todd Buell, Law360 ($). “Ramifications of Russia's invasion of Ukraine and the war between the two countries are making it difficult for Estonia to implement the minimum corporate tax it agreed to under a sweeping global deal, a senior tax official told Law360.”
Helen Pahapill said Thursday that the Baltic country's finance officials are now working on tasks related to the conflict in Ukraine, which makes enacting the tax more challenging than before. Pahapill, a tax policy adviser in Estonia's finance ministry, spoke about the war's impact on the global minimum tax, the second so-called pillar of the massive tax revamp that her country and 136 others signed on to in October.
Not a tax, but taxing: “The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in February on a seasonally adjusted basis after rising 0.6 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the [sic] all items index increased 7.9 percent before seasonal adjustment,” the Bureau of Labor Statistics reported on Thursday.