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A general rule of thumb is that taxpayers should make estimated tax payments if they expect:
-To owe at least $1,000 in taxes for 2023 after subtracting their withholding and tax credits.
-Their withholding and tax credits to be less than the smaller of:90% of the tax to be shown on their 2023 tax return or
100% of the tax shown on their complete 12-month 2022 tax return.
The IRS encourages electronic payment of estimates:
An electronic payment is the easiest, fastest and most secure way to make an estimated tax payment. The Payments page on IRS.gov provides complete tax payment information, how and when to pay, payment options and more.
Taxpayers can securely log into their IRS Online Account or use IRS Direct Pay to submit a payment from their checking or savings account.
Taxpayers can also pay using a debit card, credit card or digital wallet. Taxpayers should note that the payment processor, not the IRS, charges a fee for debit and credit card payments. Both Direct Pay and the pay by debit card, credit card or digital wallet options are available online at IRS.gov/payments and through the IRS2Go app.
Taxpayers can also use the Electronic Federal Tax Payment System (EFTPS) to make an estimated tax payment. Payment by check or money order made payable to the "United States Treasury" is also an option.
Tax Pros Fear High Court Will Go Too Far in Transition-Tax Case - Michael Rapoport and Isabel Gottlieb, Bloomberg ($): "Tax practitioners are getting increasingly anxious about a major foreign income tax case before the Supreme Court that they fear could tear down wide swaths of the tax code, as a deadline approaches for parties to weigh in."
Justices Can Narrowly Nix Repatriation Tax, US Chamber Says - Dylan Moroses, Law360 Tax Authority ($):
The U.S. Supreme Court should find the one-time repatriation tax passed as part of the 2017 Tax Cuts and Jobs Act unconstitutional without upending other parts of the federal tax code, the U.S. Chamber of Commerce said in a brief filed Wednesday.
The Chamber said that the mandatory repatriation tax, or MRT, faced by Charles and Kathleen Moore is different from taxes that apply to so-called constructive realization events upheld under the 16th Amendment, which prohibits federal taxes on unrealized income.
Moore Amici Assert Transition Tax Damages Treaty Principles - Andrew Velarde, Tax Notes ($). "Americans for Tax Reform also cautioned the Court not to dismiss the wealth tax issue as a concern only for high-net-worth individuals. 'The federal income tax and the [alternative minimum tax] teach a lesson: When it comes to taxation, Congress will test the waters with a small number of wealthy taxpayers. But eventually, Congress’s appetite for new revenue ensnares far more Americans. Indeed, over 60 percent of Americans own securities, making them susceptible to congressional attempts to tax unrealized capital gains. . . . Taking the Ninth Circuit at its word, the decision . . . authorizes Congress to tax every single American’s retirement and investment accounts before they are liquidated,' the group's brief argues."
Here’s what a new Supreme Court case could mean for federal wealth tax proposals - Kate Dore, CNBC.
Should You File a Protective Refund Claim for the Transition Tax While Waiting for the US Supreme Court? Moore Might Mean More! - Virginia La Torre Jeker, US Tax Talk. "While we wait for the Court to decide on this hot constitutional issue, what can taxpayers who have paid the transition tax do to preserve their chance of a refund in the event of a favorable outcome?"
Related: Tax Reform: What Does It Mean for My International Business.
South Carolina gets Feb. 15 tax deadline in wake of Idalia - Kay Bell, Don't Mess With Taxes:
Although Idalia had weakened to a tropical storm by the time she pushed into South Carolina, her heavy rainfall and strong wind gusts caused substantial damage across the state.
That's why Federal Emergency Management Agency (FEMA) included all of South Caolina's 46 counties in its major disaster designation, made official on Aug. 31 by President Joe Biden's declaration.
This means, for example, that the Feb. 15, 2024, deadline will now apply to:
- Individuals who had a valid extension to file their 2022 return due to run out on Oct. 16, 2023. The IRS noted, however, that because tax payments related to these 2022 returns were due on April 18, 2023, those payments are not eligible for this relief.
- Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
- Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
- Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
- Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
- Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.
New IRS Memo on Small Business Trusts Sparks Curiosity - Kristen Parillo, Tax Notes ($).
The IRS Office of Chief Counsel memo (ILM 202335014), dated May 11 and released September 1, concluded that the S corporation portion of an ESBT can carry forward an NOL attributable to a loss that the S corporation passed through to the trust.
The office rejected speculation that its conclusion in a 2007 legal memo (ILM 200734019) — which addressed an ESBT that had acquired unused NOL carryovers from a terminated estate under the special rule of section 642(h)(1) — could be interpreted as forbidding so-called S portions of ESBTs from using NOL carryovers in any situation.
NJ To Follow MTC's Tax Guidance On Internet Activities - Paul Williams, Law360 Tax Authority ($):
The state Division of Taxation released a bulletin Tuesday incorporating much of the MTC's guidance advising states on how to interpret the Interstate Income Act of 1959, more commonly known as P.L. 86-272, for modern internet activities. The law insulates businesses from state taxes on net income when their only connection to the state is solicitation of orders of tangible personal property or activities that are ancillary to solicitation.
New Jersey said it will apply the new guidelines, which provide that certain post-sale assistance to customers through electronic means or the placement of certain internet cookies on customers' devices are among the activities that exceed the law's protections, for tax periods ending on and after July 31, 2023
Related: Is It War?
Collection Part 1 – Do You Have an Outstanding Tax Due? Why Wait? - Erin Collins, NTA Blog:
In a March 2022 blog, I wrote about the IRS suspension of more than a dozen automated collection letters and notices associated with the filing of a tax return or payment of tax. The suspension was in response to the enormous processing backlog of paper tax returns and correspondence. At the time, I was one of the individuals advocating to stop the notices until the IRS addressed the high volume of calls and millions of pieces of unprocessed correspondence. However, a year and a half later, the suspension of those letters and notices is still in place, but is expected to come to an end sometime this calendar year.
My concern is the longer the notices are delayed, the more that taxpayers may have a false sense that the IRS may have forgotten about their tax balance—or maybe taxpayers fail to understand that interest and penalties continue to accrue until final payment. But regardless of a taxpayer’s understanding, the IRS does remember those outstanding balances, and as long as the balance goes unpaid, interest and applicable penalties continue to accrue.
Related: IRS Dispute Resolution & Collections
IRS Delays Effective Date of SECURE 2.0 Act Roth Catchup Provision Two Years - Parker Tax Pro Library. "In addition, the IRS announced that although Section 603 of the SECURE 2.0 Act applies to tax years beginning after December 31, 2023, years 2024 and 2025 will be regarded as an administrative transition period and therefore, catch-up contributions made on behalf of certain eligible participants during those years will be treated as satisfying the requirements of Code Sec. 414(v)(7)(A) even if they are not designated as Roth contributions."
Appeals court finds joint return signed by only one spouse is valid - National Association of Tax Professonals. "In its decision on the issue, the U.S. Court of Appeals for the 2nd Circuit found the taxpayers had filed a joint return despite the couple’s son having signed his mother’s name to the return without authority to do so."
EITC Audits and Destroyed Information Returns - Leslie Book, Procedurally Taxing/Tax Notes. "What could the IRS have done here? Perhaps it should have anticipated that expunging the Forms 1099 would have a downstream impact on EITC claimants."
Understand Form 5471 and Controlled Foreign Corporations (CFC) - 1040 Abroad. "A Controlled Foreign Corporation is a corporate entity registered and operated in a foreign jurisdiction, where more than 50% of the total combined voting power or value is owned by U.S. shareholders. According to IRC Section 957, U.S. shareholders are defined as U.S. persons who own at least 10% of the foreign entity’s voting shares. This direct ownership is crucial for determining whether a corporation is a CFC under U.S. tax rules."
European Commission Leaning Away From Directive on Remote Work - Leonard Wagenaar, Leonard's Tax Posts. "Overall, the tax and regulatory barriers are real and for now, conservative instincts of business and government leaders seem to prevail. Still, the pandemic and technology have reshaped working patterns, creating an undercurrent for more location flexible work. People will keep searching for ways to make it work and if it does, the precedent will mean more people will follow. But right now, it’s not moving at the pace of a revolution, it’s more like a slow burn."
Related: Eide Bailly Global Mobility Services.
The Short Form: Debunking Myths about the Trade Deficit - Erica York, Tax Policy Blog. "Rather than reflecting the practices of foreign nations, the trade deficit primarily represents our decisions about how much to save (or spend) versus invest. In economic terms: saving minus investment equals exports minus imports. The nearby chart illustrates the resulting mirror image. Year after year, our trade deficit is matched by a surplus, or inflow, of foreign investment."
State Rainy Day Fund Balances Reached All-Time Highs Last Year - Aravind Boddupalli, TaxVox. "Measured as a share of their respective spending, Wyoming (96 percent), Alaska (48 percent), New Mexico (38 percent) and California (34 percent) had the highest state rainy day fund balances. Besides New Jersey, Washington (1.2 percent), Illinois (1.6 percent), Hawaii (3.7 percent), and New York (3.9 percent) had the lowest fund balances."
$18 Million FBAR Penalty Survives Violator's Death, Court Says - Amanda Athanasiou, Tax Notes ($). "A district court has found for the government on the issue of whether a willful foreign bank account reporting penalty abated upon a taxpayer’s death and declined to classify the penalty as a fine under the Eighth Amendment."
Link: No. 2:21-cv-00382
Prosecutors Will Seek to Indict Hunter Biden This Month - Aruna Viswanatha, Wall Street Journal:
Special counsel David Weiss said Wednesday he would seek an indictment of Hunter Biden by Sept. 29, keeping the younger Biden’s legal problems in the spotlight as President Biden pursues his re-election campaign.
Prosecutors plan to seek Hunter Biden indictment this month - Devlin Barrett, Washington Post:Weiss’s statement, issued in an update to the federal court in Delaware, provided confirmation that prosecutors are moving ahead with a criminal case against the younger Biden, after his legal team and the government have traded blame in recent weeks over the implosion of two previously negotiated agreements that would have resolved a long-running investigation into Hunter Biden’s tax and business dealings.
Weiss’s three-page filing to the federal court in Delaware suggests the indictment will be on a gun charge...Prosecutors previously have signaled that the proper place to file any tax charges against the younger Biden would not be in Delaware, but in D.C. and California. It was not clear from Wednesday’s filing if one or more indictments in those jurisdictions may land at the same time as a gun charge.
Former accounting manager at Everett manufacturing company sentenced to three years in prison for 2.5 million dollar embezzlement - IRS (Defendant name omitted):
A Kent, Washington, woman was sentenced today in U.S. District Court in Seattle to three years in prison for wire fraud and tax fraud related to a 10-year embezzlement scheme, announced Acting U.S. Attorney Tessa M. Gorman. Defendant, an Accounting Manager at an Everett-based manufacturing company, stole more than $2.5 million from her employer by transferring funds to accounts Defendant set up in the names of fake companies, and then routing the funds to her own bank accounts.
...
"Defendant betrayed colleagues who were also her friends," said Acting U.S. Attorney Gorman. "For nine years she engaged in a meticulous scheme to hide her theft. Over those nine years, she deliberately chose to steal from the company 867 times. And she did it while working side-by-side with colleagues who trusted her."
According to records in the case, in April 2013, Defendant set up an account with payment processor Square that used a display name that made it appear it was an account of a commercial shipping company. Between 2014 and 2019, Defendant secretly paid $1,695,591 to that account and then transferred the money to her own bank accounts. She made false entries in the company books to conceal the theft.
And to think she didn't put the income on her tax return.
Cases like this are a good reminder that every business needs sound accounting controls. The IRS doesn't explain how the theft was discovered. Eide Bailly's Forensic Accounting team is good at finding that sort of thing.
Today is "International Day of Clean Air for Blue Skies Day." Great idea, considering the Canadian smoke that is visiting Tax News & Views World Headquarters this week.