Key Takeaways
- Securing last-minute deductions.
- Last-day loss harvest.
- DeFi pushback on crypto reporting.
- Treasury hacked.
- Tax bill: timing fights, scoring fights.
- The future of SALT workaround entity taxes.
- National Champagne Day.
Publication note. Tax News & Views will take New Year's Day off. Happy football and outdoor hockey to those who observe.
Some Tax Moves Worth Considering on the Last Day of 2024
The hours of 2024 dwindle to a precious few - but not too few to affect your 2024 income taxes.
Paying for last-minute deductions. If you are a cash-basis taxpayer, you have until midnight tonight to spend some cash to get a deduction this year. How you do it matters.
– A credit card is as good as cash. Better, even, because if you incur a business expense before the end of the year, you have your credit card statement to prove it.
– If you mail a check for a business expense, the check needs to be in the mail and postmarked in 2024 to be a deductible 2024 expense. If it’s a big check, maybe you should spend a little extra to send it Certified Mail so you can document the postmark.
– If you receive a check in the mail, it’s taxable the day you receive it, even if you don’t deposit it.
– There is no “close is good enough” rule for cash basis taxpayers. Just because you could have paid a bill or made a contribution doesn’t get you a deduction if you didn’t pay it before year-end.
– Don’t overdo it. If you prepay expenses more than a year out, you don’t get the deduction until the year to which the payment applies.
– If you are making a gift to a loved one to qualify for the $18,000 annual gift tax exclusion, having the check in the mail isn’t good enough. A check has to be cashed for the gift to count against this year’s exclusion, unless you are delivering a cashiers check.
Tax loss harvesting. If you had a good year in the stock market, you can sell some losing stocks today to offset capital gains you have incurred during the year. Remember to use a taxable account, and beware the wash sale rules.
If you are a business opting into a SALT workaround pass-through entity tax, elect into the tax by the end of the day. If you are an accrual-basis taxpayer, this helps ensure you have met the "all-events" requirement for accruing deductions. For both cash and accrual basis taxpayers, it helps ensure that the payments made this year are considered 2024 payments, rather than non-deductible "deposits."
Accrual-basis taxpayers should pay the tax by the end of the year as well for a current deduction unless they qualify for the "recurring item exception."
Resolved: Get 2025 Taxes Right
How to Avoid Costly Tax Blunders in 2025 - Laura Saunders, Wall Street Journal:
I WON’T mistake my top income-tax rate for my effective rate
The U.S. income tax is progressive, with higher income taxed at higher rates. As a result, a taxpayer with a top rate of 24% would also have income taxed at 10%, 12%, and 22% under current law.
A filer’s top rate, which is also called the marginal rate, is the one that applies to the last dollars of income. Marginal rates are key when making investment decisions.
Cryptocurrency 1099s
IRS Finalizes Crypto Reporting Rules, Prompting Pushback - Erin Schilling and Rebecca Chen, Bloomberg ($):
Decentralized exchanges, known as DeFi, tend to be automated platforms not backed by a company with a team of people to identify and report the transactions. The platforms argued they shouldn’t be subject to the broker reporting requirements. Treasury and IRS still included them as brokers but delayed finalizing this portion of the rules when they released rules for centralized exchanges in July 2024.
Crypto Industry Seeks to Strike Down DeFi Reporting Regs - Mary Katherine Browne, Tax Notes ($):
In a December 27 complaint in Blockchain Association v. IRS, the Blockchain Association, the Texas Blockchain Council, and the DeFi Education Fund accuse the IRS and Treasury of “unlawful and unconstitutional overreach” and of trying to destroy the DeFi cryptocurrency industry with its digital asset broker reporting regulations.
Hacked off
Treasury Department Says Systems Hacked by China-Backed Actor - Connor Hart and Dustin Volz, Wall Street Journal:
Once alerted, the department said it immediately contacted the Cybersecurity and Infrastructure Security Agency and has since worked with law enforcement partners across the government to assess the incident.
“The compromised BeyondTrust service has been taken offline and there is no evidence indicating the threat actor has continued access to Treasury systems or information,” a spokesperson said.
The 2025 Tax Battles
Ways and Means chair takes shot at Senate tax delay - Taylor Giorno, The Hill:
House Ways and Means Committee Chair Jason Smith (Mo.) criticized the Senate plan as “reckless” as several provisions in the 2017 Tax Cuts and Jobs Act are set to expire at the end of next year.
...
Several tax lobbyists previously told The Hill that they are also worried the delay could derail reform, especially given the House’s razor-thin Republican majority.
What to Expect From Scoring the 2025 Tax Bill - Doug Sword and Cady Stanton, Tax Notes ($):
Meanwhile, incoming Senate Finance Committee Chair Mike Crapo, R-Idaho, is leading the charge to push for a current-policy baseline, meaning that extending today’s tax rates and tax provisions past their expiration shouldn’t be scored as a cost. Crapo and others also argue that economy-growing tax cuts, such as a return to full research and development expensing, don’t have to be paid for.
That approach, if Crapo can get the House and Senate Budget committees and the Senate parliamentarian to go along with it, could lead to a TCJA extension score closer to zero than $4.6 trillion.
The Coming Tax Package: To Count Tariffs or Not - Doug Sword and Cady Stanton, Tax Notes ($):
But it’s the argument to use tariffs as a “rhetorical” pay-for, rather than one to count on in a budget resolution and eventual tax bills, that seems to have gained ground since the election. That’s because besides the difficulty of getting tariffs through Congress, that route would preclude Trump from using tariffs the way he did during his first term — as a bludgeon to get other countries to the bargaining table.
The future of SALT cap workarounds
Future Uncertain for SALT Cap Workarounds as Congress Debates Extension - Paul Jones, Tax Notes ($):
“Entity-level taxation can also shield passthrough business income from the effects of the federal alternative minimum tax,” Walczak said, noting that the AMT was limited by the Tax Cuts and Jobs Act, a curtailment that is also set to expire. The end of the limitation [on itemized deductions for state and local taxes] “could make the AMT relief these entity-level taxes provide even more salient,” he said.
Blogs and Bits
Tax matters that matter on December 31 - Kay Bell, Don't Mess With Taxes. "If you say "I do" on 12/31, then the Internal Revenue Service considers you married for the whole year. That means when you file your tax return next year, it must be as married filing jointly or married filing separately."
Corporate Transparency Act Disclosure Filing Requirements: Where Things Stand - Adam Sweet, Eide Bailly. "In a confusing sequence of events last week, the 5th Circuit Court of Appeals on December 23rd ordered a “stay” (here) of a nationwide preliminary injunction issued earlier in December by a Texas district court enjoining enforcement of the Corporate Transparency Act (CTA). But this “stay” was then followed three days later by an “order” (here) from the 5th Circuit that the CTA and its Beneficial Ownership Information (BOI) disclosure requirements are once again paused, pending further consideration."
Taxocracy - David Henderson, Econlog. "Did you know that (as of this writing) 75 percent of the overall burden of US tariffs is on apparel? Or that of this burden, 66 percent is on women’s apparel? It’s not just because women buy more clothing than men; it’s also because the US government purposely sets tariff rates higher on women’s clothing (15.1 percent) than on men’s clothing (11.9 percent.)"
Pardon Me Department
Former Attorney Embroiled in Tax Shelter Scandal Gets Commutation - Lauren Loricchio, Nathan Richman, and Alexander Rifaat, Tax Notes ($):
Paul M. Daugerdas was among the commutation recipients who were placed on home confinement during the COVID-19 pandemic. In a December 12 announcement, Biden said the individuals “have successfully reintegrated into their families and communities and have shown that they deserve a second chance.”
Daugerdas was sentenced in 2014 to 15 years in prison for his involvement in a 20-year scheme after being convicted of seven counts of tax evasion and mail fraud. The Justice Department says the scheme began while he was working at the now-defunct accounting firm Arthur Andersen LLP and continued while he was a partner at the law firms Altheimer & Gray and Jenkens & Gilchrist PC, which are no longer in business.
What day is it?
Well, it's New Years Eve, of course. And, perhaps not surprisingly, National Champagne Day.
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