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It tolls for thee, pass-throughs. Tomorrow is the due date for extended 1065 and 1120-S filings. If you miss that deadline by as much as a day, the penalty is $220, multiplied by the number of K-1s in the return. That means missing tomorrow's deadline by as much as a day will cost a partnership or S corporation with 10 owners $2,200. The penalty repeats for each additional month the return is late.
Some taxpayers in federal disaster areas have extra time. Among the localities that have tomorrow's deadline extended by disaster declarations are Vermont, parts of Mississippi, Cook County, Illinois (Chicago and many suburbs), parts of Hawaii, parts of Alaska, and most recently, parts of Florida and Georgia, and all of South Carolina.
Electronic filing is advised. Don't wait until the last second (it's almost here). If you are sitting on an e-filing authorization, sign it and get it to your preparer immediately.
If you must file paper for some reason, use the right address. If you use the U.S. Mail, spring for certified mail, return receipt requested. Get the postmark receipt, keep the original somewhere safe, and scan it where it will be backed up, so you can document that you filed on time.
If you get to the post office too late tomorrow, you can use an authorized private delivery service. Be sure you use one of the "authorized" delivery options - for example, UPS Next Day Air works, but UPS Ground does not. Be sure to use the proper street address, as the delivery services can't use post office box addresses. Save your shipping documents so you can prove you filed on time.
Third quarter estimated tax payments are also due tomorrow. If you are using EFTPS, the Electronic Federal Tax Payment System, you need to queue your payment up today, as if it were still 2005. Other payment means are outlined here.
Werfel Makes Case for Keeping Cash, Punts on Shutdown Plans - Jonathan Curry and Doug Sword, Tax Notes ($).
Meanwhile, whether the $21.4 billion already slated to be clawed back will change the agency’s preparation for government shutdowns hasn’t been determined yet, Werfel told reporters, noting that the agency’s lapse plan for a possible October 1 government shutdown hasn’t yet been completed.
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The OMB has posted new contingency, or lapse, plans for 28 federal agencies, departments, and programs. That’s out of 110 with plans that can be tracked online. Last week, there were only nine new plans on the site. A plan from the Treasury Department, including the IRS, hasn’t been posted yet.
Dems Renew Push For Child Tax Credit Expansion - Asha Glover, Law360 Tax Authority:
The best policy for ending childhood poverty is the expanded child tax credit Congress implemented under the American Rescue Plan Act. Sen. Michael Bennet, D-Colo., said during a press conference Wednesday. Sen. Sherrod Brown, D-Ohio, speaking during the same conference, said he hopes congressional Republicans will support Democrats' efforts to reinstate the ARPA expansion.
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If discussions don't yield a meaningful child tax credit expansion, a number of Democrats are prepared to block any tax benefits for corporations and the wealthiest Americans, Bennet told reporters.
Those "tax benefits" include full expensing of research costs, which went away in 2022.
Amid Rising Child Poverty, Dems ‘Adamant’ on Credit Expansion - Cady Stanton, Tax Notes ($): "Top House taxwriter Jason Smith, R-Mo., and other Republicans — whose expansion of the child tax credit to $2,000 through the 2017 TCJA is set to expire in 2025 — have voiced willingness to talk about expansion of the credit, but only alongside changes to its phased-in income system or work requirements."
Senate To Review Final OECD Profits Plan, Wyden Says - Dylan Moroses, Law360 Tax Authority ($):
Wyden said he is hopeful the jurisdictions negotiating the reallocation plan, known as Pillar One, will reach consensus and publish text of a multilateral convention before the end of the year so senators "can look in earnest" at a finalized policy. Wyden spoke during a virtual conference hosted by the U.S. branch of the International Fiscal Association.
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"It's hard when you strip it down to see this for anything other than Europeans being angry that the United States has been the world leader in all of these companies and all of these technologies and all of these breakthroughs," Wyden said.
Related: Eide Bailly International Tax Services.
Panelists Lambast Narrow Focus on Revenue From IRS Enforcement - Jonathan Curry, Tax Notes:
The focus on enforcement as a measure of the IRS’s effectiveness at carrying out its duties also misses the mark because revenue from enforcement actions makes up a small fraction of the overall amount of revenue collected: about $68 billion of the $3.3 trillion the agency collects annually, according to Jon-Yin Chong of the Center for Taxpayer Rights.
“Service and automation play a much larger role in fulfilling the IRS’s mission,” Chong observed. Because of that, the IRS must be able to better measure how its actions and tools maintain or increase voluntary compliance, he said.
The IRS might not have to spend as much time and money chasing non-compliant taxpayers if they made compliance easier. Of course, a simpler tax law more focused on funding government operations and less on social and industrial policy would help too.
Oklahoma Governor Wants 'Trigger' Law On State Taxes - Ali Sullivan, Law360 Tax Authority ($).
Oklahoma Gov. Kevin Stitt wants state lawmakers to pass a "trigger law" that would eliminate any state tax that a state or federal court rules does not apply to tribal citizens."
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The applicability of state income tax is under consideration in the Oklahoma Supreme Court, where justices are weighing a lawsuit from Muscogee (Creek) Nation citizen Alicia Stroble, who contends that she should not have been taxed for money earned while employed at and living on the Nation's reservation. The Cherokee, Choctaw, Chickasaw, Creek and Seminole Nations have filed amicus briefs in support of Stroble.
IRS Backdating Case Nears an End: Agency Settlement Explained - Erin Slowey, Bloomberg:
An IRS decision to settle and forgo a $15.2 million penalty in a US Tax Court conservation easement case after the agency admitted it backdated a document is shaking confidence that the same didn’t happen in other tax challenges.
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The optics of the IRS admitting to backdating a form and agreeing to drop penalties in the LakePoint case may further undermine confidence in the agency.
Related: Eide Bailly Penalty Help.
Georgians pummeled by Idalia finally get tax relief, including new Feb. 15, 2024, deadline - Kay Bell, Don't Mess With Taxes. "The Internal Revenue Service announced today that individuals and businesses in 28 of the Peach State's counties qualify for special tax consideration, including a new Feb. 15, 2024, deadline for filing and paying certain taxes."
Georgia Suspends Gas Tax After Declaring State Of Emergency Over Higher Prices - Kelly Phillips Erb, Forbes. "While gas tax holidays can prove popular with taxpayers, there are some criticisms. One argument is that it disrupts the natural consequences of supply and demand—typically when supply is low, prices increase. But, critics say that a gas tax holiday creates an artificial incentive to increase consumption while low supply boosts demand."
IRS Issues Proposed Regulations on Broker Reporting of Digital Asset Transactions - Parker Tax Pro Library. "The IRS issued proposed regulations that require brokers, including digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallet providers, to report gross proceeds from sales and exchanges of digital assets by customers that take place on or after January 1, 2025, on new Form 1099-DA and to provide payee statements to customers"
Form 3520-A Explained - Kasia Strzelczyk, 1040 Abroad. "Form 3520-A, also known as the “Annual Information Return of Foreign Trust With a U.S. Owner,” is a tax form required by the Internal Revenue Service (IRS) to report information about foreign trusts. If you are a U.S. person who is treated as the owner of any part of the assets of a foreign trust, you are obligated to ensure that this form is filed annually as part of your income tax return."
Related: Foreign Trust & Estate Tax Compliance
U.S. Businesses Face Growing Impact from Tightened Interest Deductions and Higher Interest Rates - Garrett Watson and William McBride, Tax Policy Blog. "While the amount of deductible interest varies across countries, an EBIT-based limit makes the U.S. an outlier in the Organisation for Economic Co-operation and Development (OECD). 27 OECD countries use EBITDA to limit interest deductions... Notably, no country in the OECD uses an EBIT-based limitation."
Will The Supreme Court Use A Fishing Dispute To Curb Treasury and IRS Tax Rules? - Howard Gleckman, TaxVox. "Loper Bright involves a dispute over regulation of commercial fishing boats. But many conservative advocates (here and here) see it as an opportunity for the Supreme Court to vastly expand on its recent, incremental efforts to limit executive branch authority."
Fuzzy Story No Reasonable Cause for Improper Hotel Depreciation - Nathan Richman, Tax Notes:
Rather than depreciate the buildings over 39 years, he claimed that they were seven-year property. The IRS caught wind of the error and changed his accounting method to a proper one in 2015, with a nearly $2 million section 481(a) adjustment. The change also affected his characterization of the $5 million in proceeds he received for selling the parcel in 2016.
The taxpayer claimed that he relied on his CPA in depreciating a building over 7 years, rather than the required 39 years, and therefore had reasonable cause for paying too little in taxes. Tax Court Judge Nega was unconvinced. From his opinion (taxpayer name omitted, emphasis added):
Failing to show that they received any advice about the correct tax treatment of any of the items noted in the deficiency, petitioners' last remaining contention is that they are entitled to the reasonable cause and good faith exception merely because their CPA prepared the returns. “The mere fact that a certified public accountant has prepared a tax return does not mean that he or she has opined on any or all of the items reported therein.”... [The taxpayer] later claimed that depreciation schedules are incomprehensible numbers of which he has no understanding. We find that Mr. Johnson's self-serving testimony as to this issue lacked credibility. Petitioners have failed to carry their burden of establishing reasonable cause.
The opinion states that the taxpayer "...has been engaged in the business of buying, selling, and leasing real estate for more than 50 years." It's remarkable for someone to be in the business that long without figuring out depreciation. Math truly is hard.
The moral? Well, there are a couple. One is that the IRS can get excessive depreciation deductions back from otherwise closed years by invoking accounting method correction rules, as they did here. Another is that having your return prepared by a CPA doesn't get you off the hook for errors if the IRS and the courts think you should know better.
Former Portland Marathon president sentenced in federal court - IRS (defendant name omitted, emphasis added):
The former president and event director of the Portland Marathon pleaded guilty and was sentenced in federal court today for evading taxes due on the funds he stole from the charitable organization that had backed the race since the early 1980s.
Defendant, of Tomball, Texas, was sentenced to three years' federal probation to include eight months of home confinement. Defendant was also ordered to pay $411,279 in restitution to the IRS.
Prior to being sentenced, Defendant pleaded guilty to one count of attempting to evade and defeat income taxes.
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According to court documents, for nearly 35 years, Defendant served as the president and event director of Portland Marathon Inc. (PMI), the charitable organization formerly responsible for planning and operating the Portland Marathon. In these roles, Defendant managed the organization's day-to-day operations and finances, and had sole authority to approve expenses paid from PMI's business bank account.
Beginning in January 2012 and continuing through 2017, Defendant made or directed others to make unauthorized transfers of funds from PMI's bank account to his own personal checking account, paid various personal credit cards with PMI funds, and wrote unauthorized checks from PMI payable to himself. On one occasion, Defendant used a PMI check to purchase a $60,000 Infiniti sport utility vehicle. Defendant also used stolen funds to pay for home remodeling projects, shopping sprees at department stores, home décor, furniture, and other luxury goods and services.
Embezzlement from non-profits is all too common, though when it happens, it is typically not reported on the thief's 1040 for some reason. Non-profits can protect themselves through sound system and organization controls.
Messy, but worth it. It's National Cream Filled Donut Day!