Tax News & Views Someone's Wrong on Social Media Roundup

Taking tax advice on social media can be bad news for taxpayers; schemes circulating involving tax forms - IRS. A shocking revelation (my emphasis):

Social media can circulate inaccurate or misleading tax information, and the IRS has recently seen several examples. These can involve common tax documents like Form W-2 or more obscure ones, like Form 8944 that's aimed at a very limited, specialized group. Both schemes encourage people to submit false, inaccurate information in hopes of getting a refund.

The IRS goes into some detail:

Form 8944 Fraud

A recent example of bad advice circulating on social media that could lead to fraudulent form filing involves Form 8944, Preparer e-file Hardship Waiver Request. There are wildly inaccurate suggestions being made about this form. Posts claim that Form 8944 can be used by taxpayers to receive a refund from the IRS, even if the taxpayer has a balance due. This is false information. Form 8944 is for tax professional use only.

While Form 8944 is a legitimate IRS tax form, it's intended for a targeted group of tax return preparers who are requesting a waiver so they can file tax returns on paper instead of electronically. It is not in any way a form the average taxpayer can use to avoid tax bills. Taxpayers who intentionally file forms with false or fraudulent information can face serious consequences, including potentially civil and criminal penalties.

W-2 Fraud

This scheme, which is circulating on social media, encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement, and include false income information. In this W-2 scheme, scam artists suggest people make up large income and withholding figures as well as the employer its coming from. Scam artists then instruct people to file the bogus tax return electronically in hopes of getting a substantial refund.

While there is plenty of perfectly good tax information on the Internet (like Tax News & Views!), not every Tik Tok Tax video tax tip is entirely trustworthy, believe it or not.

Miss. Storm Victims Get Extensions On Federal Tax Returns - Emlyn Cameron, Law360 Tax Authority ($). "Taxpayers affected by tornadoes and storms in some counties in Mississippi now have until July 31 to submit some returns and payments, the Internal Revenue Service said Tuesday."

Link: IR-2023-60

Missouri House Passes Billion-Dollar Income Tax Cut Bill - Matthew Pertz, Tax Notes ($):

 

The Missouri House has advanced a billion-dollar income tax cut bill along party lines, priming the state to further drop rates only six months after its last massive tax cut.

H.B. 816, which was combined with H.B. 660, would cut the top individual tax rate, which applies to Missouri income over $9,000, from 4.95 percent to 4.5 percent, beginning January 1, 2024. It would also halve the corporate income tax rate from 4 percent to 2 percent. The legislation was passed by the House March 23 on a 111–48 vote.

Missouri has a Republican governor, and the GOP controls both chambers of the Missouri legislature.

GOP Mulls Options for Deal on State and Local Tax Cap - Samantha Handler, Bloomberg ($). "Republicans, as well as some Democrats, are turning to proposals that raise the limit rather than eliminate it, saying those ideas are more likely to draw a broad coalition. Though it’s unlikely the issue will be addressed before the expiration of cap and other aspects of the 2017 tax law in 2025, some say the support is there."

Credit Suisse Violated Plea Deal in Tax Case, Senate Report Says - Richard Rubin, Wall Street Journal. "The Senate Finance Committee’s Democratic staff said Credit Suisse failed to report bank transfers tied to what it says may be an ongoing criminal tax conspiracy involving more than $100 million held by a family with dual citizenship in the U.S. and Latin America."

Prosecutors Raid France’s Biggest Banks in Tax Fraud Sweep - Liz Alderman, New York Times:

More than 150 financial investigators and 16 local magistrates swarmed the Paris-area headquarters of the French banks, as well as the offices of HSBC Holdings, Natixis and BNP’s Exane unit, in an early-morning action intended to gather evidence for an investigation of a tax avoidance scheme in which the banks allegedly bilked the French treasury out of vast sums.

The raids were part of what European authorities previously described as a developing investigation that spans four continents, dozens of banks and as many as 1,500 suspects. The banks under investigation in France were allegedly involved in a scheme known as “cum-cum trading,” from the Latin for “with-with,” in which individuals pocketed hundreds of millions of euros by avoiding the payment of French dividend taxes.

Five last-minute tax tips before the April 18 deadline - Michelle Singletary, Washington Post ($). "Still scared to file because you owe? Do it anyway."

Governor appoints former state auditor to lead tax agency - O. Kay Henderson, Radio Iowa. "Governor Kim Reynolds has appointed former State Auditor Mary Mosiman to lead the Iowa Department of Revenue. Mosiman has been the Iowa Department of Revenue’s deputy director and head of its tax division since 2019."

These tax refund myths won't get you your money sooner - Kay Bell, Don't Mess With Taxes. "Bottom line, is don't call the IRS about your refund unless Where's My Refund? tells you to do so. As for tax advisers, leave them alone. They've submitted your return; it's now out of their hands. They have no insider information that can get you a refund date or get you the money sooner."

Tax Attorney Recalls FBAR Case Journey From IRS Dispute To Supreme Court Decision - Kelly Phillips Erb, Forbes. "The case was eye-opening for Rubenstein, who noted that early on, it wasn't the government that identified the errors on previously submitted FBARs—the taxpayer did. What followed, she said, were years of attempts to resolve the case. It was clear, she believed, that the taxpayer had not known about the FBAR requirement. The government didn't argue differently. They merely took the position that non-willful penalties would apply to each account not accurately or timely reported, resulting in a $2.72 million penalty."

Washington Supreme Court Affirms Capital Gains Tax and Invites Challenge to Broader Income Tax Restrictions - Jared Walczak, Tax Policy Blog. "For now, the new tax on aggregate net capital gains income rests uneasily in a framework where the state supreme court still acknowledges that income is property, and that the tax would fail under that definition if it were, in fact, an income tax. Hence the ingenious (or perhaps disingenuous) solution: this tax, imposed on a class of net income, is actually an excise tax on the privilege of earning capital gains income, measured in income."

$4 Trillion In US Wealth Is Stashed Overseas, Much Of It In Tax Havens - Howard Gleckman, TaxVox. "Ownership of offshore assets was highly concentrated among a small number of very wealthy households. About one-in-five of those in the highest-income 1 percent held assets overseas, increasing to more than 60 percent for households in the top 0.01 percent. And that very small group controlled roughly one-third of the assets in overseas accounts."

The Qualified Domestic Minimum Top-Up Tax--Corporate Taxpayers' New Nightmare, or Pillar Two's Missing Piece? - Alex Parker, Things of Caesar. "For taxpayers, this raises the exhausting possibility of needing to calculate the Pillar Two tax based on slightly different rules in every jurisdiction they operate in, rather than using one measurement for all of the countries at the outset. And this is if the system is working as intended–in all likelihood this exercise will be on top of calculating overlapping IIR and UTPR payments as some countries fail to enact everything the OECD is asking for."

Russian Gas Company's Ex-CFO Convicted Of Tax Crimes - Anna Scott Farrell, Law360 Tax Authority (Defendant name omitted):

Casualty Loss Deduction Argument Sinks in Tax Court - Caitlin Mullaney, Tax Notes ($). "A couple didn’t qualify for a casualty loss deduction because they failed to prove that damage to their New Jersey vacation home and boat was caused by an eligible casualty, the Tax Court held."

The case was heard by Judge Holmes, who seldom fails to make his opinions a good read. His opinion starts off (Taxpayer names omitted):

Taxpayers claim that their vacation home and boat were damaged by a storm in 2017. They reported a very large casualty-loss deduction of nearly $740,000 which, when lashed to Mr. Taxpayer's very large wage income, enabled them to report zero taxable income for the year. The Commissioner says that the couple haven't substantiated the cost of the damage that they suffered and haven't even proved that any of the damage was caused by the storm.

Whom are we to believe?

When claiming a casualty loss, a taxpayer has do demonstrate that there is a casualty, and that the casualty reduced the value of property. Judge Holmes addresses the first issue: 

The couple's case began taking on water right at the start, when Husband was asked about any proof he had that the storm itself had caused damage to his property. He testified that he had taken pictures of the damage to both home and boat on his phone shortly after the storm. He explained, however, that a later software update to his phone deleted them. That left him to introduce only photographs of the house taken in 2018, nearly a year after the storm hit and after reconstruction had already begun. These photographs depict no visible damage other than that which one might see at any construction site, and we could see nothing that showed damage that we could specifically attribute to the storm. They are insufficient to prove that the property was damaged let alone that the damage was attributable to Stella, and we do not find Husband's testimony, standing alone, credible on this point.

Looking at the loss in value:

Husband and Wife did not get an appraisal of their own home valuing it before and after the storm. Husband instead consulted a real-estate agent who provided them with Multiple Listing Service (MLS) printouts of other people's homes. This is a problem for many different reasons. The first, and on this point we believe Husband's testimony, is that he didn't talk to this agent until after the audit had begun. We conclude from this that the values reported on the return were not a result of an appraisal, but rather of the couple's own estimate. And the MLS printouts are not an appraisal at all, but rather a rationalization of the couple's guess about the before and after values of their home.

The conclusion?

Husband and Wife have thus failed to prove that Stella caused damage to either their vacation home or boat. Even if they had, they did not give us sufficient evidence to substantiate the value of their losses. Even if they had substantiated the value of those losses, they did not give us sufficient evidence of their basis in the boat. And even if they had proved that the basis limitation did not apply, they filed no insurance claims for property that was protected by insurance. All these attacks by the Commissioner have picked completely clean the flesh of their claimed deduction, and —

Decision will be entered for respondent as to the deficiency and for petitioners as to the accuracy-related penalty under section 6662(a).

The moral? If you need to demonstrate an $740,000 loss, it might be worth a few extra dollars for appraisals to support the deduction. Also keep in mind that under the 2017 Tax Cuts and Jobs Act, casualty losses are only available in federally-declared disaster areas. 

Related: Eide Bailly Valuation Services.

They aren't the same thing? Today is Manatee Appreciation Day and Mermaid Day.