Key Takeaways
- Federal judge in Texas enjoins CTA enforcement nationwide.
- Finds act likely to be unconstitutional.
- Paying taxes for your thief.
- Incoming Senate leader says border first, taxes later.
- IRS warns against social media tax advice.
- Judge slams Hunter Biden tax pardon; N.C. man could use one.
- National Sock Day meets Wear Brown Shoes Day.
Texas Court Blocks Treasury From Enforcing Corporate Transparency Act, Impacting Tens Of Millions Of Businesses - Kelly Phillips Erb, Forbes:
The 2021 law has been under fire from consumer groups since at least 2022, though chatter about it has picked up significantly in the past few months. That's because a deadline has been looming: a reporting company created or registered to do business before January 1, 2024, only had until January 1, 2025, to file its initial report. This is true even if the company was created years before 2024.
District Court Finds Transparency Act Is Likely Unconstitutional - Andrew Velarde, Tax Notes ($):
“For good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government. As a result, Plaintiffs contend that the CTA violates the promises our Constitution makes to the People and the States. Despite attempting to reconcile the CTA with the Constitution at every turn, the Government is unable to provide the Court with any tenable theory that the CTA falls within Congress’s power. And even in the face of the deference the Court must give Congress, the CTA appears likely unconstitutional,” the court held.
Corporate Transparency Act/BOI Reporting Enjoined Nationally by Texas Court - Russ Fox, Taxable Talk. "Now, I am not an attorney, so it may be that this injunction is only for the plaintiffs involved. However, my non-attorney view doesn’t see any limitations in the ruling."
Related: Corporate Transparency Act Mandates Stricter Federal Disclosures
Paying your thief's taxes
Americans lose billions to scams, then get taxed on stolen money - Michelle Singletary, Washington Post:
Unless lawmakers act, she will owe nearly $180,000 in state and federal taxes on stolen retirement money.
With traditional 401(k) retirement accounts and IRAs, your contributions are made with pretax dollars. So, when you take a distribution, it becomes part of your taxable income. And if you’re younger than 59½, the distribution also is subject to a penalty that would shave off an additional 10 percent.
It's bad enough to get scammed out of your retirement savings. Paying the taxes for the scammers seems is asking a bit much. When might Congress get around to doing something? Given the items below, not very soon.
Tax bill to take backseat to border?
Senate Republicans Aim to Tackle Border First, Taxes Later - Richard Rubin, Wall Street Journal:
Sen. John Thune (R., S.D.), the incoming majority leader, outlined the approach to GOP lawmakers Tuesday as the party prepares to take control of the House, Senate and White House in January. Lawmakers would aim to move a targeted bill within 30 days after Trump takes office Jan. 20 and then spend more time working on taxes and other issues, according to a person familiar with Thune’s remarks in a closed-door meeting.
Thune lays out plan for separate border and tax reconciliation bills - Alexander Bolton, The Hill:
“We’re going to do multiple packages. We’re not just going to do one reconciliation,” said a Republican senator who participated in the meeting. “The discussion right now, really, is do we do one on the border first, and do we come back and do the tax extensions and relief, because of the complexity of the tax [package].”
These parts of Trump’s tax cut law expire in 2026 - Tobias Burns, The Hill:
From there, people making up to $95,000 will have an increase from 22 percent to 25 percent; people making up to $182,000 will have an increase from 24 percent to 28 percent; people making up to $231,000 will get an increase from 32 percent to 33 percent; and people making more than $580,000 will get a bump from 37 percent to 39.6 percent.
Fast-Moving GOP Agenda Could Punt Tax Law Fight to Later in 2025 - Chris Cioffi and Zach Cohen, Bloomberg ($):
The party wants to speed passage of legislation via so-called reconciliation, averting the need for support from Democrats. But internal deliberations over the scope and size of bills Republicans could move through special procedures could delay any package’s enactment, potentially clashing with House lawmakers’ ambitious 100-day deadline for a tax bill.
It is expected that the GOP will start this legislative session with a 217-215 majority in the House of Representatives after two representatives resign to join the Trump administration. That leaves any GOP member in a position to block a tax bill, as a tie vote defeats a bill in the House. That makes the already complex process of bill drafting that much more difficult.
The House may have it's own ideas, reports Politico Playbook: "Within a few hours, House Ways and Means Chair JASON SMITH panned the idea, telling Punchbowl’s Laura Weiss that it would be 'reckless' to put taxes on the back burner even temporarily and that it would be 'creating an opportunity to increase taxes for all Americans.'"
Register now for Eide Bailly's Quarterly Legislative Update slated for December 19 for the latest on the outlook for 2025 tax legislation.
IRS: Not all tax advice on TikTok is legit.
"Self Employment Tax Credit": Promoters on social media have made misleading claims that taxpayers – particularly self-employed individuals and gig economy workers -- can get up to $32,000 through the so-called “Self Employment Tax Credit.”
In reality, there is no “Self Employment Tax Credit”; rather, scammers are advising taxpayers to incorrectly use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to improperly claim the specialized and very limited Sick Leave and Family Leave Credit on their income.
...
Household employment taxes: In a variation on the “Self Employment Tax Credit” scheme, taxpayers are being advised to “invent” fictional household employees and then file Schedule H (Form 1040), Household Employment Taxes, to claim a refund based on false sick and family medical leave wages they never paid.
Fuel Tax Credit: This specialized credit is designed for off-highway business and farming use. Taxpayers need a business purpose and a qualifying business activity such as running a farm or purchasing aviation gasoline to be eligible for the credit.
The vast majority of individual taxpayers do not qualify for the Fuel Tax Credit...
Claim of Right: In this long-seen scheme, taxpayers are advised to file tax returns and attempt to take a deduction equal to the entire amount of their wages. Promoters advise them to label the deduction as “a necessary expense for the production of income” or “compensation for personal services actually rendered.” The deduction is based on a complete misinterpretation of the Internal Revenue Code and has no basis in law.
Basis Shifting for Big Bucks
Closing asset loophole can raise $100 billion in taxes, Treasury now says - Julie Zauzmer Weil, Washington Post:
The IRS’s pledge to go after the practice known as “basis shifting” has made waves among accountants for the largest and most complex business partnerships. Some of them say that the true amount of taxes avoided far dwarfs even the $100 billion figure, though the IRS is unlikely to ever find anywhere close to all of the money.
Blogs and Bits
Gift cards are for good boys and girls, not to pay IRS tax bills - Kay Bell, Don't Mess With Taxes. "After following the crooks’ instructions to buy a card — or usually several cards from different stores — scam victims then call the fake IRS agents at a number left by the crooks and give them the gift card numbers and PINs."
Eleventh Circuit Reverses District Court; Excise Tax Applies to Peanut-Drying Trailers - Parker Tax Pro Library. "The Eleventh Circuit reversed in part a district court decision and held that a company's specially designed peanut-drying trailers are not off-highway transportation vehicles that are exempt from the 12 percent excise tax under Code Sec. 4051(a)(1) that applies to the first retail sale of a truck trailer and semitrailer chassis and truck trailer and semitrailer bodies."
Deducting Food and Beverage Expenses - Thomas Gorczynski, Tom Talks Taxes. "The deductible amount permitted for a business’s food and beverage expenses can be confusing. In general, 50% of the expenses are deductible under §274(n)(1) unless an exception under §274(n)(2) applies that permits 100% of the expenses to be deductible. However, if the food and beverage expense is inextricably bundled with an entertainment expense, it may be nondeductible under §274(a)(1)."
IRS Voluntary Disclosure Practice (VDP) Requires Taxpayer Admit Criminal Willfulness - Jack Townsend, Federal Tax Procedure. "Accordingly, I think that at each step in the process the taxpayer must admit criminal willfulness. The consequences of that admission must be carefully considered, particularly in a situation where the facts are inconclusive (dare I say, in equipoise) as to criminal willfulness."
Related: Eide Bailly IRS Dispute Resolution & Collections Services.
Crime and Punishment
Judge Slams Hunter Biden Pardon but Tosses California Tax Case - Maia Spoto, Bloomberg ($):
Other judges have rejected that argument he said, adding, “the President’s own Attorney General and Department of Justice personnel oversaw the investigation leading to the charges. In the President’s estimation, this legion of federal civil servants, the undersigned included, are unreasonable people.”
...
Scarsi also noted that Biden said his son was “treated differently” from others who paid taxes late due to addiction, but Hunter Biden admitted to the court that he evaded taxes while he was sober.
Cary businessman sentenced to prison for over $1 million in tax evasion scheme - IRS (Defendant name omitted, emphasis added):
“We are turbocharging white collar enforcement in North Carolina with groundbreaking state and federal partnerships,” said U.S. Attorney Michael F. Easley, Jr. “This businessman’s convoluted scheme involved titling cars for cash and using that cash to creatively conceal his income and fuel a lifestyle complete with high-end vehicles and a million-dollar home. This partnership with NC Division of Motor Vehicles, Homeland Security Investigations, and the NC Department of Insurance worked together seamlessly with IRS to build the case.”
...
The investigation disclosed that in July 2018, Defendant filed a falsified 2017 federal income tax return that concealed over $300,000 in business revenue. Subsequent evidence showed Defendant stopped filing tax returns entirely after that year, despite generating receipts exceeding $1 million annually between 2018 and 2022. To evade IRS scrutiny, Defendant used various methods, such as titling assets under nominees, depositing business proceeds into personal accounts, and handling large amounts of cash to conceal income. Defendant used his untaxed gains to fund his personal lifestyle, including the purchase of high-end vehicles and a $1 million residence.
The plan worked perfectly, until one day it didn't. When you stop filing returns, the IRS computers notice, and humans get involved. They pick up on the big houses pretty quickly. This defendant probably won't get a presidential pardon.
What day is it?
It's National Sock Day! And Wear Brown Shoes Day! I observe both holidays.
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