Tax News & Views IRS Audit Goals and College Colors Roundup

IRS Audit Goals

IRS Lacking In Limiting Below - $400k Audits, TIGTA Says - Jack McLoone, Law360 Tax Authority ($). "The IRS has made only partial progress toward complying with a U.S. Treasury Department directive to develop methodology to ensure the agency doesn't increase the audit rate for businesses and households with annual incomes below $400,000, the Treasury Inspector General for Tax Administration reported Thursday."

Further,

IRS Still Weighing Implementation of Treasury Audit Goal - Benjamin Valdez, Tax Notes ($):

TIGTA raised several concerns about the IRS’s progress in developing an implementation plan for the directive, including that the agency isn’t considering the possibility that married couples filing jointly will cross the $400,000 threshold and be subject to the same audit risk as individual taxpayers earning that amount.

...

The IRS agreed to pick up the pace on finalizing a method for calculating the audit coverage rate, according to the report. It disagreed with a recommendation from TIGTA to use return transaction file data to measure how many taxpayers will fall on either side of the new threshold instead of the data behind the agency’s annual data book.

From the report:

Small business definition still needs to be addressed in order to ensure compliance with the 2022 Treasury Directive

Along with the directive not to increase audits on individuals with incomes under $400,000, the 2022 Treasury Directive also includes small businesses. However, the Treasury Department and the IRS have not yet defined small business with regard to the 2022 Treasury Directive. Further, the IRS has made no assumptions regarding small businesses in the FY 2024 Examination Plan because relatively few business return examinations are expected to be started for TY 2023 in FY 2024.

New Developments

Applications Open for $6B In Advanced Energy Tax Credits - Jack McLoone, Law 360 Tax Authority ($):

Full applications are now open for manufacturers seeking a share of a second-round $6 billion tax-credit allocation for their development projects that support the clean energy industry, the Internal Revenue Service and U.S. Department of Energy said Thursday.

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Projects must meet prevailing wage and apprenticeship requirements to receive a 30% investment tax credit, the agencies said. The agencies said they received more than 800 project proposals seeking a total of nearly $40 billion in tax credits for this round. Applications are due by Oct. 18.

Americans Abroad, Tax Scams and IRS' New Coalition To Combat Tax Fraud - Virginia La Torre Jeker, J.D., Forbes:

The coalition has three core strategies to help address the growth of tax scams. These are expanding outreach and education which includes continuous efforts to raise awareness about scams and blatantly incorrect tax strategies touted on social media; developing new detection approaches, and improving infrastructure to bolster the defenses of federal, state, and industry tax systems.

IRS Adds Short-Year Guidance on Research Amortization Transition - Nathan J. Richman, Tax Notes ($). "Rev. Proc. 2024-34, 2024-38 IRB 1, was issued August 29 in response to concerns about taxpayers with short tax years in 2022 or 2023. It tweaks a section 174 accounting method change in the current list of changes subject to automatic consent found in Rev. Proc. 2024-23, 2024-23 IRB 1334."

IRS provides relief to Ernesto victims throughout the U.S. Virgin Islands; various deadlines postponed to Feb. 3, 2025 - IRS. "The Internal Revenue Service announced today tax relief for individuals and businesses throughout the U.S. Virgin Islands affected by Tropical Storm Ernesto that began on Aug. 13, 2024. These taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments."

Tax Policy

Meal Taxes across the Nation - Andrey Yushkov, Tax Foundation:

For state and local policymakers, this trend toward restaurant meals and prepared foods offers an opportunity to generate additional tax revenue with relatively minimal effort. In most US states, prepared food—unlike food purchased for home consumption, which is often tax-exempt—is subject to the general sales tax. Therefore, increased spending on restaurant meals automatically leads to higher sales tax receipts.

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The largest US cities generally have higher sales tax rates compared to their smaller counterparts in states where local sales taxes are authorized. Additionally, 13 of the 50 largest cities impose extra meals taxes—i.e., special taxes that apply to purchases of prepared foods for immediate consumption—while 37 do not charge a higher tax on meals than on other goods.

Taxes on the Campaign Trail

Unrealized Gains Tax - Visualizing $100m And When To Be Concerned - Andrew Leahey, Forbes:

The Biden administration proposed FY 2025 budget contains a 25% wealth tax on unrealized gains of folks owning more than $100 million in assets—this has drawn criticism and engendered some concern on social media.

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In the end, while the proposed tax on unrealized gains for individuals with over $100 million in assets has stirred debate—it is important to recognize that this policy is designed to target the ultra-wealthy. For the vast majority of taxpayers, unrealized gains at these levels remains a concept that is largely academic, but the services funded by such a tax are decidedly not.

A Newborn Tax Credit Could Be Worthwhile, With Sound Administration - Margot Crandall-Hollick, Tax Policy Center:

Grabbing the most attention, however, is Harris’s proposal for a larger CTC for families with newborns. Parents would receive up to $6,000 for their newborn—a $2,400 boost on the $3,600 ARP child credit for young children under 6 years old. The boost could help low-income families, especially if planned and administered well.

Assuming these provisions went into effect in 2025, the Tax Policy Center estimates that reinstating the 2021 expansions of the EITC and CTC plus a larger CTC for newborns would cost $105 billion for that year. After 2025, the cost would increase substantially compared to current law because CTC enhancements enacted through the 2017 Tax Cuts and Jobs Act are scheduled to expire.

Tax Crime Watch

New England man admits embezzling $2 million from Connecticut business, tax evasion - IRS (Defendant name omitted):

According to court documents and statements made in court, from July 2013 until December 2023, Defendant was an employee of Hoffman’s Gun Center (“Hoffman’s”) in Newington and, in 2016, he became the head of information technology at Hoffman’s. In January 2016, Defendant began to steal cash receipts from a safe in Hoffman’s front office. Defendant would arrive at work before other employees, disconnect ethernet cables from the company’s computers servers to cameras that captured views of the safe, enter the front office, open the safe, steal thousands of dollars in cash from receipt pouches, return the pouches to the safe, and then reconnect the ethernet cables. He would then deposit some of all of the cash proceeds into his personal bank accounts.

Between 2016 and 2023, Defendant and his former spouse made 287 cash deposits of stolen money from Hoffman’s totaling $1,901,250 into his bank accounts, and seven cash purchases of cashier’s checks totaling $161,330. Defendant used the funds to pay for personal expenses, including to pay monthly American Express bill and to make mortgage payments.

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Tax News & Views IRS Audit Goals and College Colors Roundup

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