Key Takeaways
- IRS rewards whistleblowers for $263M offshore tax recovery.
- Romney, Manchin, Tillis introduce stand alone 1/31/24 ERC repeal bill.
- "Giving away the store on taxes."
- House GOP vows retaliation on Pillar 2 taxes.
- Canada capital gains tax boost blasted.
- French wealth tax "impoverishes France."
- A self-reporting tax crime.
- National Butterscotch Pudding Day.
They exposed a tax cheater. They’ll share a $74 million reward. - Julie Zauzmer Weil, Washington Post:
The three informants will split $74 million, nearly a third of the government’s proceeds and the largest award allowed by law, the lawyers said.
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The whistleblowers, who plan to remain anonymous, helped expose “an offshore tax evasion scheme” spanning about 15 years of tax returns, according to Getnick Law.
Tax Tipsters Getting $74 Million Shows IRS Progress, Lawyers Say - Sabrina Willmer and David Voreacos, Bloomberg ($).
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Chris McLamb, an attorney at Whistleblower Partners who represented another one of the tipsters, said his client benefited from recent improvements to the program. For example, the agency rewarded the whistleblowers for helping it fully recoup money from one taxpayer even as it continues to examine other taxpayers in the case. For years, the IRS typically refused to pay up if there was a chance of recovery from other taxpayers based on a whistleblower’s information.
It can hard to commit tax crimes alone. If whistleblowing catches on, it will worsen the odds for tax evasion.
Meanwhile in Congress
Senators Announce Employee Retention Credit Repeal Bill - Tax Notes ($). "The Employee Retention Tax Credit (ERTC) Repeal Act of 2024 would bar processing of employee retention credit claims filed after January 31, 2024, and stiffen penalties on fraud involving the credit, Sens. Mitt Romney, R-Utah, and Joe Manchin III, I-W.Va., and Senate Finance Committee member Thom Tillis, R-N.C., said in a September 18 release."
The January 31 date is the same date that was included in a bill passed by the House in January that would have restored several business tax breaks, including current deductions for domestic research costs. That bill appears dead in the Senate. The IRS still is not processing post January 31 claims, and this bill hints that this could be a live issue in the lame-duck session after the election.
Taxes on the Campaign Trail
Trump, Harris give lawmakers whiplash with costly campaign promises - Alexander Bolton, The Hill:
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The exploding costs of both candidates’ policy platforms have experts predicting $2-trillion annual deficits well into the future.
Trump is giving away the store on taxes - Brian Faler, Politico:
Republicans have been blindsided by many of Trump’s proposals and there has not been a great show of enthusiasm for his ideas in Washington. Many Republicans declined to discuss the plans in detail, but some acknowledge he is promising more than they can deliver.
Trump’s growing tax cut promises will give GOP a huge headache - Joseph Zeballos-Roig and Burgess Everett, Semafor. "Decreasing revenues by enacting even one or two of Trump’s pitches would make it that much harder for Republicans to extend his 2017 tax cuts for individuals, which expire next year."
To Win Votes, Trump Floats an Array of Expensive Tax Cuts - Andrew Duehren and Michael Gold, New York Times:
But that would still come nowhere near covering the cost of all the tax cuts Mr. Trump has proposed during the presidential campaign
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House GOP Vows Blowback Over OECD's Min. Tax Backstop - Kevin Pinner, Law360 Tax Authority ($):
"Should foreign governments seek to target Americans through the UTPR or other mechanisms in the OECD global tax deal, we will be forced to pursue countermeasures," the letter said.
The UTPR is part of the "Pillar 2" OECD plan for international corporate taxes. The UTPR would allow other countries to tax a corporation up to 15% of financial statement income if it is taxed at less than that in other countries.
Courting Trouble for the OECD - Alex Parker, Things of Caesar. "The OECD’s position is that Pillar Two is treaty-compliant due to the “savings clause”--the provision in both the U.S. and OECD’s model treaty that preserves a country’s right to tax its own citizens, notwithstanding the treaty’s limitations. This would seem to broad protection, applying in cases with both a parent organization and local subsidiaries–but critics claim that to interpret it this broadly would be to nullify the whole point of tax treaties. Why create rules for allocating income between related parties if both treaty countries reserve the right to disregard that allocation for anyone it has the ability to tax?"
Capital Gains Tax Hike Panned by Canadian Doctors, Businesses - James Munson, Bloomberg ($). "The inclusion rate is the amount of a capital gain that is included in a taxpayer’s income and then taxed at the taxpayer’s marginal tax rate when a capital gain—or loss—is realized, such as when real estate or a stock is sold. The government has proposed expanding the rate from 50% to 66%, meaning 66% of a gain would be included as income instead of 50% of a gain."
Colombia Should Lower 35% Corporate Tax Rate, OECD Says - Jack McLoone, Law360 Tax Authority ($). "Colombia can reignite the since-slowed growth it experienced following the COVID-19 pandemic through a series of tax changes, in particular lowering its 35% corporate income tax as part of an overall rebalancing of the tax burden from corporate to personal income, according to the OECD."
The U.S. corporation tax rate is 21%, while the average rate in Europe is 21.3%.
Estonia to Raise Taxes to Cover Higher Defense Spending - Jan Stojaspal, Bloomberg. "The 2% tax on companies’ accounting profits — to be paid both by resident companies and permanent establishments of non-resident companies — will be in addition to the corporate tax Estonia charges on dividend payments."
Estonia normally only taxes corporate income when it is distributed as dividends.
The Economic Consequences of the French Wealth Tax - Tyler Cowen, Marginal Revolution, quoting this paper: "The ISF causes an annual fiscal shortfall of €7 billion, or about twice what it yields; The ISF wealth tax has probably reduced GDP growth by 0.2% per annum, or around 3.5 billion (roughly the same as it yields); In an open world, the ISF wealth tax impoverishes France, shifting the tax burden from wealthy taxpayers leaving the country onto other taxpayers."
Blogs and Bits
You missed the estimated tax deadline! What now? - Kay Bell, Don't Mess With Taxes. "If the due date just slipped your mind, the easiest way to stop or reduce penalty and interest charges is to pay your missed 1040-ES amount as soon as possible. The longer you wait, the more you’ll owe."
As The Corporate Transparency Act Deadline Creeps Closer, FinCEN Updates Guidance - Kelly Phillips Erb, Forbes ($). "A person who willfully violates the reporting requirements may be subject to civil penalties of up to $500 for each day (adjusted for inflation) the violation continues, as well as criminal penalties of up to two years imprisonment and a fine of up to $10,000."
Related: Corporate Transparency Act Mandates Stricter Federal Disclosures.
Willful Violations of FBAR Include Both Knowing and Reckless Violations - Parker Tax Pro Library. "A panel of the Ninth Circuit affirmed in part a district court and held that a taxpayer willfully failed to report foreign bank accounts in violation of 31 U.S.C. Secs. 5314 and 5321 after finding that for purposes of calculating civil penalties, willful violations of the FBAR statute include both knowing and reckless violations. However, the panel also reversed the district court's holding that the government was required to prove the applicable rates for determining prejudgment interest and late payment penalties because both rates are prescribed by statute and are not questions of fact that must be proven at trial."
IRS relief now available to Debby victims in parts of Pennsylvania; various deadlines postponed to Feb. 3, 2025 - IRS. "The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Lycoming, Potter, Tioga and Union counties in Pennsylvania."
Americans Abroad, Tax Scams And IRS’ New Coalition To Combat Tax Fraud - Virginia La Torre Jeker, US Tax Talk. "Some scams aimed at Americans overseas take advantage of the unique challenges faced by this group such as navigating dual tax obligations and unfamiliar U.S. international tax rules. Other tax scams target foreign persons who may have U.S. investments or other U.S. connections. The scams, by email or phone calls, include phishing scams with the scammers often posing as IRS agents or tax preparation services. Phishing attempts may involve fraudulent requests for personal information, such as Social Security numbers, under the guise of needing to verify tax details or resolve issues with overseas tax obligations."
Tax Crime Corner, Self-reporting Edition
Businessman sentenced in tax scheme, ordered to pay $38.9 million in restitution - IRS (Defendant name omitted, emphasis added):
Defendant, the co-founder and employee of American Management Staffing (AMS), was charged by felony information in January 2023 and pleaded guilty in February 2023 to conspiracy to defraud the United States and making and subscribing a false tax return. He was sentenced Monday by U.S. District Judge Sam A, Lindsay.
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According to court documents, AMS provided temporary staffing services to business clients. Defendant was employed by AMS from approximately 2011 through 2020 and had control over AMS’ business affairs, including, approving payments and controlling AMS’s bank accounts.
Here is the part that pretty much reported his own lawbreaking to the IRS:
Some employers pay employees in cash to avoid payroll taxes. This is a terrible idea, as each employee becomes a potential informant. But if you actually issue W-2s, those employees will claim refunds of their withholding - and if the employer never paid it, the IRS computers notice. Pretty much a self-reporting tax violation.
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