Tax News & Views Scams and Green Beans Roundup

IRS warns of holiday scams, encourages protecting sensitive personal information as 9th annual National Tax Security Awareness Week starts - IRS:

A common example right now involves false messages made to look like they’re coming from delivery services. In these scams, victims receive a text or email purporting to be from a company or business saying a delivery can’t be made along with a link to click to reschedule. But in reality, the link represents a form of phishing that attempts to steal personal information or download malware. It’s a very prevalent scam expected to intensify during the holidays.

Another common scam expected to intensify soon will involve emails pretending to be from the IRS or others in the tax industry. These frequently involve unexpected, good news, like a tax refund. But they can also involve variants telling people they have a tax bill or have tax documents available to download.

Be careful out there. Smart people can fall for foolish scams, as in the following sad story.

She believed she was an FBI ‘asset.’ The scam drained her life’s savings. - Michelle Singletary, Washington Post:

In twice-daily conversations over the next three months, the impostor FBI agent crafted a meticulously detailed story about her stolen Social Security number’s connection to an illicit fentanyl smuggling ring and the possible capture of Ismael “El Mayo” Zambada, a longtime leader of Mexico’s powerful Sinaloa cartel.

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Judith came to learn the lies she was fed were part of a government impersonation scam. These typically start with a call, text or email from someone pretending to be with the IRS, Social Security Administration or, in her case, the FBI. Scammers leverage the veneer of government authority to manipulate their targets into handing over their savings. The money often ends up overseas, with criminal syndicates in Southeast Asia, Russia or China, where it’s generally gone for good.

The looming 2025 tax battles

Republicans headed for a $4.6 trillion brawl over Trump tax cuts - Brian Faler, Politico:

Top House and Senate lawmakers are deeply divided over what, if anything, to do about the hit to the budget that would come by renewing the slew of tax cuts benefiting millions of Americans that are set to expire at the end of next year.

Some, like House Budget Committee Chair Jodey Arrington (R-Texas), are insisting that the effort should not add to the deficit, amid a rising tide of federal red ink. Seizing on the fanfare surrounding a bid by Elon Musk to cut spending, they argue that there are plenty of ways to cut the budget to defray the cost. Among the possibilities: cutting Medicaid, rescinding green energy tax breaks and boosting taxes on corporations’ overseas profits.

On the other side are lawmakers like Sen. Mike Crapo of Idaho, Republicans’ point man on taxes in the Senate, who has long argued against paying much of the cost of any tax agreement.

GOP’s small majority adds to challenge of tax reform - Mychael Schnell, The Hill:

Republicans are on track to have a single-digit-seat edge beginning in January, one that is set to get smaller as some members resign from the House to serve in President-elect Trump’s Cabinet.

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That will make the heavy lift of tax reform even weightier for Republican leaders. A small but influential group of GOP lawmakers want to raise the state and local tax (SALT) deduction cap and are vowing to block any bill without their demand, and deficit hawks are sure to voice their concerns about the price tag.

Four Policy Fights Set to Shake Up the 2025 Tax Cliff, Explained - Chris Cioffi, Bloomberg ($). The four areas: The cost of extending the 2017 tax cuts; The deduction for state and local taxes; The Biden energy tax credits; and "Tariffs, Tips, and More." From the article:

Trump’s transition team has reportedly discussed ending a $7,500 subsidy for electric vehicles to pay for some of the expiring tax provisions from the 2017 law, which could mean billions in offsets. Portions of the billions earmarked for IRS modernization are also likely easy pickings for lawmakers searching for ways to trim spending, though the gains are modest in comparison.

Some credits—like ones related to carbon sequestration, biofuels, hydrogen, and nuclear energy—enjoy Republican support, and have spurred new facilities and jobs in districts represented by GOP lawmakers. Those are harder sells in Congress, and some GOP lawmakers have already said they’d defend them.

Energy Tax Laws and Guidance in the New Administration - Marie Sapirie, Tax Notes Analysis:

Practitioners working with energy tax credits have become comfortable with uncertainty, said Jenny Speck of Vinson & Elkins LLP...

There are some steps that taxpayers should consider in light of the calendar and the administration transition. Speck noted that some credits sunset this year and the required domestic content percentage increases for bonus credits in the new year. Accordingly, developers might want to start construction by the end of the year, she said. Credit buyers should ensure that they have clear change-in-law provisions in their contracts, particularly if credits will be procured in the future, said Andy Moon of Reunion, an energy tax credit marketplace.

IRS News

IRS Posts Adjusted Applicable Amount for Determining PCORI Fees - Tax Notes Research. "The applicable dollar amount that must be used to calculate the fee imposed by sections 4375 and 4376 for policy years and plan years that end on or after October 1, 2024, and before October 1, 2025, is $3.47."

This is the ACA fee on health plans based on the number of participants.

Regs. address partnership recourse liabilities, related-party rules - James Beavers, The Tax Adviser:

The regulations provide guidance as to when and to what extent a partner is treated as bearing the economic risk of loss for a partnership liability when multiple partners bear the economic risk of loss for the same partnership liability (overlapping economic risk of loss).

In addition, the regulations provide guidance when a partner has a payment obligation with respect to a liability or makes a nonrecourse loan to the partnership (and no other partner bears the economic risk of loss for that liability) and such partner is related to another partner in the partnership.

Blogs and Bits

10 tax moves to make this December - Kay Bell, Don't Mess With Taxes. "1. Contribute to tax-advantaged accounts. You have until the tax filing deadline of April 15, 2025, to contribute to your IRA, either traditional or Roth, but if you also have a workplace retirement plan, typically a 401(k) or 403(b), the deadline to add money is Dec. 31 of the tax year."

Tax Breaks: The End Of The Year Will Be Here Before You Know It Edition - Kelly Phillips Erb, Forbes. "But don’t rush into anything without considering the big picture–for example, prepaying income tax on a retirement account by funding a Roth might be a good idea. Or it could be a really bad idea. Think before you pull the trigger."

Doing the Best You Can for Your Community This Giving Tuesday - Erin Collins, NTA Blog. "Plus, there are potential tax benefits to charitable giving. For helpful information about which contributions are tax deductible read our Charitable Giving Get Help page. It has a lot of helpful tips."

2024 Year-End Tax Planning for Businesses - Parker Tax Pro Library. "If a client is a partner in a partnership or a shareholder in an S corporation, and the entity is expecting to pass through a loss for the year, it's important to determine if the partner or shareholder has enough basis to absorb the loss."

IRS Clarifies Form 1099-K Filing Requirements Starting in 2024 - Tax School Blog. "While the IRS announced the over $5,000 threshold back in November 2023, this news release further delays the original over $600 threshold from 2022 to 2026. However, with the confirmation of the $5,000 threshold for 2024, practitioners may see more Form 1099-K forms issued compared to the prior year, where the threshold was over 200 transactions totaling over $20,000 in a calendar year."

Some Aspects of Economic Illiteracy - Pierre Lemieux, Econlog. "A tax on imports is also a quasi-tax on domestically produced substitutes–except that the latter tax is not paid to the government imposing it, but instead to the domestic producers of these substitutes."

Reforming Treatment of Business Start-up Expenditures - Annette Nellen, 21st Century Taxation:

Today, once a business starts carrying on business (when it is no longer getting ready, but is instead ready to serve customers), it can start amortizing its start-up expenditures as defined under IRC Section 195 over 15 years. If the total is $55,000 or less, up to $5,000 can be expensed immediately and this amount phases down as the aggregate expenditures range from $50,001 to $55,000.

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Meanwhile, we allow use of the cash method of accounting by most businesses, and have Section 179 expensing of over $1 million. Why not just allow the small business to expense up to the Section 179 amount along with other eligible section 179 property? This sounds like simpler and would truly help small businesses.

Attorney, approach the bench.

LLC, Owner Liable for Unpaid Taxes and Penalties - US District Court - Minnesota via Tax Notes Research (individual taxpayer name omitted). This case involves a single-member LLC, the aptly-named "Tax and Bankruptcy Attorney, PLC," and its attorney-owner. From the opinion:

Here, Attorney admits to being the person responsible for collecting, truthfully accounting for, or paying over the trust fund taxes. Attorney also admits to directing, authorizing, or otherwise causing to be paid TAB's other creditors ahead of the United States. These admissions support a determination that Attorney's failure to pay the required trust fund taxes was willful... The United States is thus entitled to summary judgment on Count 5 for the amount of $34,577.27 plus statutory interest and additions accruing after May 20, 2024.

The moral? Even though the business was run through an LLC, the owner responsible for remitting payroll taxes and withholdings to the IRS is still on the hook for them if they aren't paid.

Independence attorney pleads guilty to $857,000 tax evasion - IRS (Defendant name omitted, emphasis added):

An Independence, Mo., attorney pleaded guilty in court today to evading payment of $857,000 in income taxes.

Defendant pleaded guilty before U.S. District Judge Howard F. Sachs to one count of tax evasion.

By pleading guilty today, Defendant admitted that he willfully attempted to evade paying his personal income taxes for tax years 2012 through 2018. Defendant kept his income in his attorney trust accounts, then withdrew cash from his attorney trust accounts to pay for personal and business expenses. An attorney trust account is a bank account in which a lawyer has a fiduciary duty to hold property of clients or third persons, including prospective clients. It is for funds that are in a lawyer’s possession in connection with representation, separate from the lawyer’s own property.

Defendant had two trust fund accounts. He withdrew $444,527 in cash from one account from 2016 through 2019, and he withdrew $144,364 from the second account from 2013 through 2015. Defendant used the cash to gamble and pay personal expenses.

Defendant deposited $232,000 in fees received for services provided in the sale of the former Rockwood Golf Course property in November 2017 and the Missouri City Power Plant project, and other income, into his attorney trust accounts.

While the IRS doesn't mention how they found out about this, I suspect the requirement that businesses have to issue 1099s to attorneys to whom they pay fees is responsible for a mini-epidemic of attorney trust-fund tax crime cases.

What day is it?

It's Giving Tuesday, but it's also National Green Bean Casserole Day, which many of us observed early last Thursday.

Tax News & Views Scams and Green Beans Roundup

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Joe B. Kristan, CPA