Key Takeaways
- ERC fraud floated as lame-duck tax bill target.
- IRS said to be "summarily dismissing" ERC claims.
- House rejects bill giving Treasury power over "terrorist" nonprofits.
- IRS outlines role of new unit to examine, partnerships, S corporations, and Trusts.
- Health FSA open enrollment time.
- Global tax deal imperiled by Trump victory.
- Expat taxes "too complicated."
- UK pub owners look overseas to avoid tax boost.
- Former IRS employee pleads guilty to preparer fraud.
- National Pickle Day.
Tax Fraud A Potential Topic In Lame-Duck Session, Aides Say - Asha Glover, Law360 Tax Authority ($):
...
Don Snyder, senior tax and oversight counsel for Senate Finance Committee Republicans, said there's also bipartisan interest in making a legislative change to the employee retention tax credit. In September 2023, the Internal Revenue Service announced a moratorium on processing new claims and Internal Revenue Commissioner Daniel Werfel said June 20 that it will stay in place.
If a tax package is included in a year-end bill, a legislative fix to make the credit less prone to fraud could be included, Snyder said.
The article doesn't say what that "legislative change" might be. A cutoff on claims filed after January 31 of this year passed the House of Representatives, but never cleared the Senate. This is a likely candidate.
Related: IRS Announces Next Steps for ERC.
IRS Accused of 'Summarily Disallowing' Employee Retention Claims - Tristan Navera, Bloomberg ($):
The plaintiffs allege that, ever since the IRS reopened its 11-month moratorium on the program in August, the agency has been “summarily disallowing” ERC claims without reviewing them and issuing denials without giving companies a chance to provide more information that could help bolster their claims.
House narrowly rejects bill to give U.S. new power to vet nonprofits - Jacob Bogage, Washington Post:
The Stop Terror-Financing and Tax Penalties on American Hostages Act allows the treasury secretary to revoke nonprofit status for groups suspected of providing “material support or resources” to terrorist organizations. That designation would be made at the sole discretion of the secretary,with no role for Congress in the determination. The bill also relieves penalties for American hostages held overseas who don’t file tax returns or pay taxes while detained.
Related: How to Protect your Tax-Exempt Status.
IRS and Partnerships
IRS Provides More Details on Passthrough Field Unit - Nathan Richman, Tax Notes ($):
Maria Dolan of the IRS Large Business and International Division provided new details about the passthrough field unit at the American Institute of CPAs’ November 13 Fall Tax Division Meeting.
...
The unit will focus on more than partnerships — although it anticipates they will remain popular business transaction vehicles — but knows that S corporations file more tax returns, Dolan said. The IRS hasn’t been able to examine trusts well before, and the unit will try to reverse that, which will include hiring outside trust experts, she said.
Open enrollment time
Healthcare FSA reminder: Employees can contribute up to $3,300 in 2025; must elect every year - IRS:
An employee who chooses to participate in an FSA can contribute up to $3,300 through payroll deductions during the 2025 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax.
International Terminal
Eide Bailly's International Tax Team and our affiliates at HLB, the Global Advisory and Accounting Network stand ready to help with your worldwide tax planning and compliance needs.
Trump win puts global corporate tax deal ‘in peril’ - Emma Agyemang and Paola Tamma, Financial Times:
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Under pillar two, if corporate profits were taxed below 15 per cent in the country where the multinational was headquartered, signatories could charge a top-up levy, known as the undertaxed profits rule (UTPR).
But experts believe that countries will now be unlikely to apply the rule to US companies for fear that a Trump-led administration would retaliate against them — including through steep tariffs on their US exports.
Trump, GOP Victories May Imperil OECD Global Tax Plan - Dylan Moroses, Law360 Tax Authority ($):
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Alex Cobham at the Tax Justice Network called Trump's and Republicans' election victories "a clarifying moment" for the OECD's work on the pillars, which he said has "been slowly falling apart since the 2021 agreement." According to Cobham, Trump's win effectively dooms the OECD project from progressing further in its current form.
Racing Through 2025 - Alex Parker, Things of Caesar:
Post-election, it seems possible for Congress to avoid a rate hike, while also repealing many of the provisions in the TCJA that hit corporate pocketbooks. Those include the 2026 increase in the tax...
And, while they’re at it, they could smooth out some of the troublesome (for businesses) parts of the TCJA that have been there all along. They could add net operating losses and foreign tax credit carryforwards to GILTI, for instance, while also ensuring that foreign tax credit limitations don’t apply. To fit the bill in the $1.5 trillion window mandated by the process in 2017, tax-writers wove in all kinds of weird little kinks to save revenue, at least on paper–now there’s a chance to take those out.
Trump Is Right, Expat Taxes Are Too Complicated - Tyler Cowen, Bloomberg ($):
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In any case, this is not mainly about revenue. The bigger problem is simply that dealing with two (or more) national tax systems is an extreme burden in terms of paperwork and legal fees — and the complications, it must be said, come from the American side. This is officially ranked as one of the most serious procedural problems with the US tax system, and if you have American friends living abroad, you have undoubtedly heard about it. I know a few who have actually repudiated their citizenship because of it.
France’s Government to Soften Plan to Raise Employer Taxes - William Horobin, Bloomberg ($). "France ’s government plans to reduce the scale of proposed tax increases for employers as it seeks to preserve pro-business policies while also plugging holes in public finances, budget minister Laurent Saint-Martin said."
Small UK pub owners look overseas after Budget tax rises sap profits - Eri Sugiura, Financial Times:
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The Budget last month raised taxes on business, with a jump in employers’ national insurance payments from 13.8 per cent to 15 per cent, and the threshold at which the levy kicks in almost halved to £5,000 from next April.
In addition, the minimum wage will increase 6.7 per cent to £12.21 per hour, with larger increases for younger staff. The relief on business rates will also fall to 40 per cent from 75 per cent, meaning the rates bills of hundreds of thousands of businesses will more than double.
Blogs and Bits
Tax preparer and his company enjoined from using questionable tax scheme - Kay Bell, Don't Mess With Taxes. "The U.S. District Court for the Northern District of Texas on Nov. 1 entered permanent injunctions against Charles Dombek and The Optimal Financial Group LLC barring both from promoting any tax plan that involves creating or using sham management companies, deducting personal non-deductible expenses as business expenses, or assisting in the creation of “captive” insurance companies."
How to save money with the Inflation Reduction Act before Trump is in charge - Shannon Osaka, Washington Post. "Currently, dozens of vehicles qualify for a $3,750 or $7,500 tax credit. (The Energy Department has a full list here.) Eliminating that tax credit would require an act of Congress, but a Trump administration could also change the Treasury Department’s tax requirements, making fewer vehicles eligible."
IRS Updates Guidance on Preventive Care Benefits and Medical Expense Deductions - Parker Tax Pro Library. "The IRS issued a notice that includes over-the-counter oral contraceptives and male condoms in the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) under Code Sec. 223(c)(2)(C) and clarifies that breast cancer screening and continuous glucose monitors are treated as preventive care under Code Sec. 223(c)(2)(C). "
Do Expats Pay Social Security Tax? - Olivier Wagner, 1040 Abroad. "Whether U.S. expats need to pay Social Security tax depends primarily on where they live and work"
Related: Eide Bailly Global Mobility Services.
Tax Crime Doesn't Pay Corner
Former IRS employee pleads guilty to fraudulent tax returns - IRS (Defendant name omitted, emphasis added):
A former IRS employee pleaded guilty in federal court today to preparing fraudulent tax returns that illegally claimed more than $200,000 in refunds for her clients.
Defendant previously worked for the IRS as a contact representative before retiring.
By pleading guilty today, Defendant admitted that she prepared federal income tax returns for clients that contained false and fraudulent claims. The indictment charged her with assisting at least 11 individuals to file at least 39 false and fraudulent income tax returns for the tax years 2019 through 2021. The tax loss associated with those false returns is approximately $237,329. The parties do not agree on the total tax loss.
By including fraudulent items on her clients’ tax returns, Defendant was able to manufacture substantial refunds to her clients that they would not have been entitled to if the returns had been accurately prepared. Defendant charged her clients a fee, which was either a fixed dollar amount and/or a percentage of the tax refund.
The moral? More than one.
First, beware of of preparers charging a percentage of the refund. They have an incentive to cheat.
Second, the IRS gets to see her customer list. They will use it. Preparer fraud keeps client returns open for examination indefinitely, even if the client was unaware of it.
Finally, cases like this call into question IRS preparer licensing schemes. If somebody who works at the IRS didn't learn competent ethical behavior, it's unlikely an IRS seal of approval will achieve good behavior by licensed preparers. It will just give the unethical ones a government seal of approval, while raising tax prep costs.
What day is it?
It's National Pickle Day! And boy, do I have a dill for you!
I'll show myself out.
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