Tax News & Views Hugs the Tax Cuts Roundup

These tax cuts will go away without action by Congress and Trump - Julie Zauzmer Weil, Washington Post:

Some key features of the 2017 Tax Cuts and Jobs Act — including cutting the corporate tax rate to 21 percent — are permanent. But most of the breaks for individuals and households are temporary.

...

The 2017 law created a generous deduction for business owners whose business income “passes through” to their personal income tax return (instead of being taxed as corporate income). The provision allows gig workers such as Uber drivers and dog walkers, partners in massive business interests, and others to deduct up to 20 percent of their business income. Some Republicans have concerns about the complex ways this deduction was structured and want to revise it in a 2025 tax bill. Others want to simply renew it to prevent it from expiring.

Extending current law would reduce revenue by $548 billion.

How much space will Republicans have for tax cuts? - Bernie Becker, Politico:

Don’t get us wrong. This is a situation that Republicans have been planning and hoping for. A GOP-run government is practically certain to pass a tax bill next year, prompted by the expiration of a bunch of individual provisions from the Trump tax cuts.

But this is also a scenario which could lead to a bunch of difficult decisions for GOP, as they try to figure out how to reconcile Trump’s broader tax-cutting ambitions with a spiraling federal debt.

Corporate Transparency Compliance Coming for You

Many businesses must report beneficial ownership information to Treasury by Jan. 1; free webinar can help - IRS:

Many companies created or registered to do business before Jan. 1, 2024, must e-file their initial beneficial ownership information (BOI) to FinCEN by Jan. 1, 2025. In general, this means reporting the names and other information about the people who own or control the company. Exceptions and special rules apply.

During this free webinar, FinCEN will:

- Explain the Corporate Transparency Act.
- Provide Beneficial Ownership reporting resources.
- Analyze the BOI reporting requirement using the Small Entity Compliance Guide.
- Describe what happens if a company does not timely report BOI to FinCEN.

AICPA Reiterates ‘Grave Concerns’ with BOI Reporting Requirement Timeline, Requests Filing Delay - AICPA:

According to the AICPA, there is a worrisome lack of awareness surrounding the reporting requirements for BOI and they have raised these concerns about the complexities around the rule with FinCEN. Among these concerns are what the AICPA refers to as an “unnecessarily tight 30-day timeline for report amendments and changes,” adding that the timeline makes monitoring client information incredibly complex for tax professionals who would ordinarily catch changes and updates during their annual client meetings prior to their clients’ annual tax filing. The AICPA also noted additional complexities with staggered delays due to natural disasters.

FDIC Special Assessment Deductible

Banks Not Limited in Deducting Special FDIC Assessment, IRS Says - Rebecca Chen, Bloomberg ($):

The FDIC last year imposed a one-time assessment of $16.3 billion to help replenish losses in FDIC funds for protecting uninsured deposits after the closure of Silicon Valley Bank and Signature Bank. The final rule was effective as of April of this year.

An IRS Chief Counsel memo on Friday said banks making special payments are not subject to expense limitations under §162(r) or capitalization under §263(a). The agency said the special premiums imposed by the FDIC exempted payers from the deductible threshold.

The IRS memo also said the premiums are not required to be capitalized as they are not prepaid assets.

Better Taxpayer Service = Better Taxpayer Compliance?

Taxpayer Advocate’s Case Management System to Use AI - Benjamin Valdez, Tax Notes ($):

“I have my own views on enforcement, but I have a lot of strong views on service and modernization,” Collins said at the event. “Do not touch that money.”

Should Republicans maintain control of the House, IRA funding may face further clawbacks. Lawmakers have already cut the original $80 billion IRS funding pool over 10 years to $57.8 billion, with most of the cuts going to enforcement dollars.

Collins thinks that with enough investment in taxpayer service and modernization, the IRS would need less money for enforcement. While much of the IRA service money has gone toward customer service hiring and making a positive impact in that area, that’s not a long-term solution, she argued.

Organizing the Next Congress for Taxes

TCJA’s Extension Might Be a Short One - Doug Sword, Tax Notes ($):

A reconciliation bill might gain the Trump tax cuts less than half a decade of added life, according to Capitol Hill watchers who say a long-term extension of expiring provisions would be too expensive for some congressional Republicans to accept.

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Just as Senate Democrats faced a tough electoral map in 2024, Senate Republicans might have a hard time keeping their majority in 2026 when 20 Republican but only 13 Democratic senators are up for reelection.

So a two-year extension along the lines of the time frame featured in the House-passed tax package (H.R. 7024) is off the table, but a four-year bill might not be prohibitively expensive.

Trump win sets up GOP battle between deficit hawks, tax cutters - Tobias Burns, The Hill:

The Trump tax cut push could easily run into obstacles in the House, where the GOP may have a narrow majority and must contend with party fiscal hawks unwilling to sign off on steep tax cuts without additional spending reductions.

“Not all tax cuts pay for themselves, and we should remember we are in most tax policy areas irrefutably on the left side of the Laffer curve,” Rep. Chip Roy (R-Texas) said in a statement to The Hill.

Senate GOP Weighs Whether to Pick a Tax Writer as Next Leader - Zach Cohen and Chris Cioffi, Bloomberg ($). "Current Senate Minority Whip Thune and Cornyn, a former whip and former National Republican Senatorial Committee chair, are front-runners to become the next Senate majority leader on Wednesday. If one of them gets the top spot, it would put a veteran of tax debates in a pivotal role next year. That experience would allow them to anticipate potential pitfalls when it comes to the policy differences and politics of the high-stakes debate."

GOP Wins Signal Changes to SALT Cap and to State Workarounds - Michael Bologna, Bloomberg ($):

Kyle Pomerleau, a federal tax policy senior fellow at the American Enterprise Institute, agreed saying, “full repeal seems unlikely to me, but boosted, yes.”

Pomerleau dismissed suggestions that Congress would use the extension process to cut off state workaround structures. At the same time, PTETs have proven expensive to the federal government and Congress may consider some limitations on the states. Pomerleau recently estimated that eliminating PTETs would raise $20 billion in 2026 and roughly $250 billion over a decade. Despite the high price tag, the Treasury Department blessed PTET structures four years ago but hasn’t issued any additional guidance.

Republican Euphoria Punctured by Tough Math in the House - Katy Stech Ferek, Wall Street Journal. "With GOP control of the Senate and Trump’s policy agenda on taxes and other priorities on the line—and his well-earned reputation for imposing party discipline—top House Republicans predicted a smoother, more unified ride, even if they can spare to lose only a handful of defections on any bill. But with Democrats expected to be largely united against the Trump agenda, any number of issues could trip up the majority, ranging from spending cuts, to raising the debt limit, to ending the $10,000 cap on state and local tax deductions."

GOP to Take Surgical Approach to Energy Tax Credits Rollback - Erin Schilling, Bloomberg ($):

GOP lawmakers have said the so-called Inflation Reduction Act is an early target to raise cash for extension of the 2017 GOP tax overhaul, which has many provisions expiring at the end of next year. But despite Trump’s calls for a full repeal, other Republicans have signaled that they’ll take a more targeted approach in dismantling parts of the climate law, in part because of the job creation the law inspired in red districts.

Even for the credits that may end up on the chopping block, tax credit repeals typically aren’t retroactive, and tax professionals say deals will continue through the end of 2025 at least.

What Trump Means for the Future of Heat Pump and EV Incentives - Todd Woody, Bloomberg via MSN. "If you’re thinking of buying an electric car or an energy-saving heat pump eligible for federal tax credits and rebates, now might be the time."

Tax Tracker | Resources for the 2025 Tax Debate - Adam Michel, Liberty Taxed. "Post election, tax policy will take center stage as the Republican’s 2017 tax cuts are scheduled to expire next year. Likely full Republican control of Washington means that Congress will pursue a tax package through the reconciliation budget procedure, which allows certain legislative changes to bypass the Senate filibuster with a simple majority. This post includes an overview of important resources for the coming tax debates."

Blogs and Bits

ERC voluntary disclosure deadline is Nov. 22 - Kay Bell, Don't Mess With Taxes. "If your company received an incorrect Employee Retention Credit (ERC) payment, you have 10 more days to set things right with the Internal Revenue Service."

Taxpayer advocate: Unprocessed ERC claims could total 1 million at year end - Martha Waggoner, The Tax Adviser. "While Collins said she thought some ERC claims are aggressive or involve taxpayers who were hoodwinked by promoters, she said she does not agree with the IRS that fraud is rampant. And she said it is imperative that the IRS pay all legitimate claims."

IRS Proposed Regulations on Third Party Contacts Unfairly Erode Taxpayer Notice Requirements - Erin Collins, NTA Blog. "Contacting a third party about a taxpayer’s potential underpayment or nonpayment of tax could cause personal embarrassment or damage to a business’s reputation. Given the extremely short ten day timeframe the IRS regulations propose, where one year or less remains on the statute of limitations, it is not unreasonable to believe that some taxpayers will feel pressured to agree to extend the statute of limitations or otherwise settle the underlying issue to avoid the potential embarrassment of the IRS contacting a third party."

2024 Year-End Tax Planning for Individuals - Parker Tax Pro Library. "Clients can save a lot on taxes by making the maximum contributions to a qualified retirement plan. Individuals under 50 years old who work for an employer that has a 401(k) plan can defer up to $23,000 of income into that plan for 2024."

Tax Court Schools Teacher

Tax Court Drills Teacher With Frivolous Argument Penalty - Jack McLoone, Law360 Tax Authority ($). "A Georgia high school teacher's claim that roughly $86,000 in income he received didn't qualify as wages was not just incorrect but frivolous, the U.S. Tax Court said Tuesday, upholding the IRS' determination that he owed taxes on that income as well a $25,000 penalty."

This isn't the first time this teacher's arguments have flunked out in court. From the Tax Court opinion (citations and footnotes omitted, emphasis added):

As stated supra p. 6, petitioner has a long history of taking frivolous positions with respect to his tax liability, and he has continued to take frivolous positions in this case. We take judicial notice that the Eleventh Circuit has sanctioned petitioner in the amount of $8,000 at least three separate times for taking such positions and that the Southern District of Georgia has also sanctioned him by permanently enjoining him from filing refund suits in federal court for any tax year in which he has failed to report his wages as income. We take further notice that this Court has sanctioned petitioner in the amount of $15,000 for making frivolous arguments. As these sanctions appear to have left petitioner undeterred, we will grant respondent's Motion and impose a penalty of the full $25,000 permitted in the hopes that petitioner will in fact think and conform his conduct to settled principles going forward.

The moral? Not all teachers are math teachers. I'll venture to guess that $25,000 frivolity penalty exceeds the federal tax he owes on the income in the first place.

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Tax News & Views Hugs the Tax Cuts Roundup

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Joe B. Kristan, CPA