Key Takeaways
- IRS extends research credit "perfection period."
- Trump promises 25% tariffs on Canadian, Mexican goods.
- A four-year TCJA extension?
- Five tax issues, four paths.
- IRS ready for a tax bill.
- The Retirement Savers Tax Credit.
- Talking tax at Thanksgiving?
- Florida men sentenced in refund scam.
- National Cake Day - and Anti Obesity Day.
Tax News & Views is taking tomorrow and the rest of the week off for Thanksgiving. Happy travels and see you Monday!
IRS Extends Grace Period for Perfecting Research Credit Claims - Mary Katherine Browne, Tax Notes ($):
In October 2021 the IRS announced changes to requirements for research credit refund claims alongside a field attorney advice (FAA 20214101F) outlining the changes, which require taxpayers to include detailed information, in some cases broken down by business component. Refund claims that fail to meet the requirements are considered invalid.
Related: Understanding the Specificity Requirement for Claiming R&D Tax Credits
Tariff Talk
Trump begins the tariff tango - Eugene Daniels and Rachel Bade, Politico:
Trump said he would sign “all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States” until the countries clamp down on drugs and migrants coming across the U.S. border.
Furthermore, he wrote that China would be receiving “an additional 10% tariff” on top of any already in place unless the country implements a death penalty for drug dealers connected to the fentanyl trade.
Trump Plans Tariffs on Mexico, Canada and China That Could Cripple Trade - Ana Swanson, Matina Stevis-Gridneff, and Simon Romero, New York Times:
The three countries together purchased more than $1 trillion of U.S. exports and provided nearly $1.5 trillion of goods and services to the United States in 2023.
Tax History: How Democrats Might Attack Trump’s Tariffs - Joseph Thorndike, Tax Notes Tax History Project:
...
But if the bipartisan consensus of professional economists is even close to the mark, Trump’s tariffs might prove to be an albatross. “President-elect Trump may want to impose tariffs to encourage investment and work, but his strategy will backfire,” predicted the Tax Foundation’s Erica York. “Tariffs will certainly create benefits for protected industries, but those benefits come at the expense of consumers and other industries throughout the economy.”
Talking Tax Bill
House, Senate GOP battle over length of Trump tax cut extension - Alexander Bolton, The Hill:
Sources familiar with the early discussions between Senate and House Republicans say the House GOP is floating the idea of a four-year extension of the law so that its impact on the federal deficit, as determined by the Joint Committee on Taxation, won’t give House conservatives sticker shock.
...
A 10-year extension of Trump’s tax cuts would add more than $4 trillion, which might not sit well with fiscal hawks in the House who are alarmed over the size of the nation’s $36 trillion debt. Of that staggering sum, $28.5 trillion is held by the public and $7.4 trillion is held by the government.
A temporary extension, punting hard choice a few years down the field, has always seemed a likely possibility for dealing with the expiration of the 2017 tax law. Mark your calendar for December 19, when Mel Schwarz, Eide Bailly's Director of Tax Legislative Affairs, will discuss the state of play as the busy 2025 tax legislative season approaches. Register here, no charge.
Framing the Upcoming Tax Debate: Five Issues, Four Paths - Ian Berlin and William Gale, TaxVox:
Go big, permanently. Republicans might try to pass all the tax cut proposals on a permanent basis. This would cost approximately $10 trillion over the next decade (give or take a trillion). But that price might be too high, especially with required (and substantial) pay-fors after the tenth year.
Go big, temporarily. To keep the reported deficit increase low, Republicans could go for a wide range of tax cuts with expiration dates that can be extended later—exactly like the expiring provisions from TCJA...
Go small, permanently. Alternatively, they might enact some of the tax cuts, but on a longer-term basis. This would still require that the deficit not rise after the tenth year, so Republicans would have to include pay-fors.
Go for two tax cuts. Republicans might use reconciliation to enact the tax changes that lack Democratic support, after which policymakers could come together to pass a bipartisan bill with popular provisions like the Child Tax Credit.
Tax Distribution, OECD, & Temporary Tax Policy - Adam Michel, Liberty Taxed. "Temporary tax cuts—especially for businesses and investment—undermine the potential for long-run economic growth."
Trump Should Finish What He Started - Jason Harrison, Cremieux Recueil. "For some, it was an idealistic endeavor, and for others, it was simply 'another GOP tax cut.' But for those of us who spend way too much time immersed in public finance and tax policy, it felt inevitable. It was the logical next step in a long-evolving narrative. At the heart of the blueprint was the Destination-Based Cash Flow Tax (DBCFT), a model born from years of academic work and championed by economists like David Bradford, Alan Auerbach, and Jim Hines. The DBCFT represents a synthesis of decades-long debates on optimal taxation, incorporating principles designed to raise substantial revenue to finance what the government deems worthy without throwing wrenches into business decisions."
News from the IRS
IRS Is Well Positioned to Handle Tax Bill, Werfel Says - Benjamin Valdez, Tax Notes ($):
...
Werfel said he is aware of the open questions regarding funding and the goals of the incoming Treasury leadership but said that the IRS is confident the new team will support some of its fundamental goals. Those goals include answering more taxpayer phone calls, moving away from paper documents, and automating more communications so that the agency can be contacted at all hours, he added.
Save for retirement now, get a tax credit later: Saver’s Credit can help low- and moderate-income taxpayers save more in 2025 - IRS. "The Retirement Savings Contributions Credit, also known as the Saver’s Credit, helps taxpayers offset a portion of the first $2,000 ($4,000 if married filing jointly) they voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs."
Blogs and Bits
IP PIN adds taxpayer security, and in 2025 will help processing duplicate dependent claims - Kay Bell, Don't Mess With Taxes. "Since only IP PIN recipients and the IRS know their number, the special code serves as a way to guard against identity thieves filing a bogus tax return. If a crook tries to file a tax return in someone's name, that fake filer will be stopped if they don't have the code that IP PIN participants have."
I have one. It can save a world of hassle.
The Hardest Part of Cashing In Bitcoin Is Getting the Taxes Right - Ashlea Ebeling, Wall Street Journal. "The IRS is stepping up oversight, and any taxes owed will need to be paid. Tax audits and criminal cases are happening more often, and new rules starting next year mean the IRS will know even more about your crypto stash."
Millions from tax refunds go to pay hidden fees, report finds - Julie Zauzmer Weil, Washington Post. "In a report last week, the Treasury Inspector General for Tax Administration found that nearly 22 million taxpayers used a tax refund product provided by their tax preparer last year — primarily temporary bank accounts created to receive the refund, but also loans that gave them early access to the money. Both services often come with fees, the report said — and the IRS has no warnings about them."
Let’s Talk Tax At Thanksgiving Edition - Kelly Phillips Erb, Forbes:
But what about tax? Hear me out.
I once put a crying infant niece to sleep at Thanksgiving by gently reciting a code section from memory. Leave that sort of thing to professionals. Tax talk at Thanksgiving is fraught.
Tax in the Courts
High Court To Review Legality Of FCC's Subsidy Fees - Christopher Cole, Law360 Tax Authority ($):
The high court's decision is expected to resolve a split between the Fifth Circuit and the Sixth and Eleventh Circuits over whether Congress unlawfully handed off taxing power to the FCC, and if the agency then impermissibly let a private company, the Universal Service Administrative Co., manage the multibillion-dollar universal service program.
Suit For Return Preparer’s Negligence Survives Summary Judgment - Leslie Book, Procedurally Taxing via Tax Notes. "The case continues to trial, with the fact finder to wrestle with some of the tricky issues of apportioning fault and whether mistakes other than Seiler’s should limit or eliminate any finding of damages. I am somewhat surprised that the case has gone this far without settling, and perhaps the order will generate some enthusiasm for resolving this without trial. In the meantime, the case serves as yet another cautionary tale for practitioners to double-check their clients’ address when preparing a tax return, as well as a trigger to remember the sad tale of Ms. Palsgraf."
Two Florida men sentenced in multimillion-dollar tax refund scheme - IRS (Defendant names omitted emphasis added):
According to court documents and statements made in court, from 2015 to 2018, Defendants conspired to promote a scheme in which Defendant J and others prepared tax returns for clients that claimed that large, nonexistent income tax withholdings had been paid to the IRS on behalf of clients and sought large refunds based on those purported withholdings. The conspirators charged clients fees and required the clients to pay a share of the fraudulently obtained refunds to them.
Overall, the defendants claimed over $3 million in fraudulent refunds on their clients’ returns, of which the IRS paid about $1.5 million.
The moral? Magical refunds can have a downside. The IRS is surely going through the defendant's client list. Even though the returns go back to 2015, the Tax Court has ruled that preparer fraud keeps them open for examination and assessment forever. Unfortunately, a lot of that $1.5 million is likely to never be recovered.
What day is it?
It's National Cake Day, a poor companion for Anti Obesity Day.
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