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The IRS braces for the unthinkable: A normal tax season – Jacob Bogage, Washington Post:
The Internal Revenue Service’s massive — and controversial — funding boost has begun to reach the front lines of tax season, and it’s vaulted the agency from more than a decade of disarray, tax experts say, to a once-unimaginable position: a functioning tax service.
The IRS is answering 90 percent of its phone calls, has squashed its backlog of overdue returns, introduced new online taxpayer tools to keep pace with private software companies and processed 99.7 percent of returns filed this tax season, according to agency reports.
Taxpayers could see 1st 'normal filing season' in years – Alexis Christoforous, ABC News:
You could say the Internal Revenue Service is undergoing a Renaissance. After years of criticism for being inefficient and antiquated, the IRS has spent nearly $1 billion to improve its service.
‘So far, so good,’ Ted Rossman, senior industry analyst at Bankrate.com, told ABC News about the current tax-filing season.
Fear an IRS audit? Here are six alarms that trigger the system – Michelle Singletary, Washington Post. “IRS audits aren’t personal. It’s not you. It’s all about your return — and the inconsistencies identified by the agency’s computer system.”
Top reasons to get audited, according to the article:
- Being a millionaire
- Failing to report all your income
- Forgetting the IRS is receiving income information about you
- Out-of-the-ordinary deductions
- Showing a pattern of losses for your small business
- Claiming business deductions for meals, travel and entertainment
Manchin Says Talks With Yellen Underway Over EV Tax Credits - Ari Natter and Jennifer Dlouhy, Bloomberg ($):
US Senator Joe Manchin said he’s working with Treasury Secretary Janet Yellen and other Biden administration officials as they finalize limits on electric-vehicle tax credits he enshrined in the Democrats’ signature climate law.
The talks don’t appear to be going well:
‘We have an agreement to disagree,’ Manchin said. ‘I’m working with her but we’re going to be self-sufficient.’
Related:
EU and U.S. Draw Closer to Energy Tax Credit Deal – Alexander Rifaat, Tax Notes ($). “The EU and the United States are working on an agreement that will allow European companies to qualify for at least a portion of a clean vehicle tax credit enacted as part of the Inflation Reduction Act…”
Five Challenges Facing New IRS Chief Danny Werfel on Day One - Naomi Jagoda and Chris Cioffi, Bloomberg ($):
Here are a two of the challenges Werfel faces upon starting his new jobm according to the article:
How to spend the $80 billion:
Werfel’s biggest task as IRS commissioner will be to lead the agency as it implements its new multiyear funds.
Tax Filing Season:
Werfel will be sworn in during the middle of the tax-filing season, always an important time for the agency.
In some key ways, this year’s filing season has been smoother than many others in recent years due to the new influx of funds and the end of pandemic-relief programs. The IRS has seen significant improvements to its telephone service, and it has processed more tax returns than it had at the same point last year.
Companies Keep Up Crusade to Revive Immediate R&D Expensing - Lauren Vella and Samantha Handler, Bloomberg ($):
Companies and industry groups are keeping up their crusade to get research and development amortization reversed after Congress failed to pass legislation to do so last year.
The roadblock for expensing R&D is the same from last year: Expensing must come with expanding the Child Tax Credit. So far, there is not enough appetite on Capitol Hill to do this.
Cannabis NOLs May Not Go Up in Smoke – Nathan Richman, Tax Notes ($). “The federal restriction on state-legal marijuana business tax deductions shouldn’t hit net operating loss carryforwards so long as the restriction was correctly applied in the earlier years, according to pot tax experts.”
States See Chance to Fix Tax ‘Bracket Creep’ as Inflation Persists - Donna Borak and Angélica Serrano-Román, Bloomberg ($):
Policy makers in a handful of states are seeing an opportune moment to adjust their personal income tax brackets to inflation as the financial stress of housing costs and high grocery bills continues…
If any are successful, they would join the large majority of states. Currently, just 14 states don’t index their income tax brackets for inflation—including Connecticut, Georgia, New York, New Jersey, and Virginia—causing millions of Americans to finance a hidden tax in their paychecks.
How have last year's tax cuts affected Iowa's state revenue? What the numbers show – Katie Akin, Des Moines Register. "As Iowa Republicans consider another round of tax cuts, members of a state financial panel say that last year's income tax overhaul had a less dramatic fiscal impact than they originally predicted."
West Virginia to Join States With SALT Cap Workarounds - Angélica Serrano-Román, Bloomberg ($):
West Virginia would soon enact a pass-through entity tax workaround to the federal state and local tax deduction cap, under a bill heading to the desk of Gov. Jim Justice (R).
The measure, SB 151, would allow partnerships and other pass-through businesses to pay West Virginia income tax at the entity level, instead of having their income passed through to individual owners for taxation. The individuals would get a state tax credit for the amount paid, thus easing the impact of the $10,000 federal limit on deductions for state and local taxes.
New Jersey Pursues Holistic Approach to Taxing Digital Economy - Michael Bologna, Bloomberg ($). “The digital economy in the US is valued at roughly $2.1 trillion, but states are having a hard time figuring out how to tax it.”
Mass. Justices Nix Cap Gains Tax On Exempt Urban Projects – Chris Villani, Law360 Tax Authority ($). “The highest appellate court in Massachusetts ruled Friday that the state cannot impose a capital gains tax on the sale of a tax-exempt urban development project, flipping a ruling by the state's appellate tax board.”
Global Deal Disputes Prevent Exact Revenue Estimate, Yellen Says - Isabel Gottlieb, Bloomberg ($). “The revenue impact on the US of part of the OECD-led global tax deal can’t be exactly calculated while ‘significant disagreements’ remain in the negotiations, Treasury Secretary Janet Yellen said Friday.”
Further down the article:
The US stands to gain revenue, since it’s “a very large market jurisdiction” that would receive reallocated profits, Yellen said, but because it’s home to so many of the multinationals that would be caught by Pillar One—approximately 100 of the world’s largest and most profitable companies—profits also would be reallocated out of the US.
‘There are also provisions on which we will lose, and it’s a very fine balance,’ Yellen said, testifying before the House Ways and Means Committee.
‘Zero is certainly a possibility with respect to revenue, and there remain significant disagreements in the Pillar One negotiations,’ she added.
House Republicans control the chamber and oppose enacting Pillar One. Yellen informed the tax committee that Pillar One could produce “zero” revenue for the U.S. is music to their ears and they will likely repeat this statement when arguing against this tax.
From the “Good News/Bad News” file:
Some of Hollywood’s finest last night walked away with Oscars. They also received gift bags filled with fantastic offerings that might seem free until the Tax Man comes.
Good news:
2023 Oscar nominees are getting pricey gift bags: Here's what's inside – Caitlin O-Kane, CBS News:
The gift bags at the Oscars seem more like Mary Poppins' purse – unbelievably filled with unexpected items. The gift bags, which will be given to Academy Award nominees at the ceremony on Sunday, is appropriately named the ‘Everyone Wins’ Nominee Gift Bags – because even if you don't take home an Oscar, you're taking home a lot of so-called 'swag.'
This year's bag included some crazy stuff, like a trip to Italy.
Bad News:
Yes, the $126K Oscar gift bags are taxable – Erin Jones, Verify:
Oscar nominees who accept gift bags have to claim them on their federal income taxes because the IRS treats these swag bags as income.
Happy National Napping Day! Clocks jumped an hour ahead on Sunday. Naps required!