Key Takeaways
- Canada, Mexico 25% tariffs delayed.
- China tariffed, announces countermeasures.
- Musk says he "deleted" the Free File group - apparently only from X.
- DOGE data access sparks concern.
- Choosing a preparer.
- The quiet bank-credit union lobbying war.
- National Homemade Soup Day.
Trump agrees to pause tariffs on Canada and Mexico but not on China - Madeline Halpert and Jessica Murphy, BBC:
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But a US tariff of 10% on Chinese imports has come into effect, after a deadline of 00:01 EST (05:00 GMT) on Tuesday passed.
China hits back at Donald Trump with tariffs on US - Financial Times:
The measures were announced as Trump’s new levies on China, an additional 10 per cent tariff that the US president has described as an “opening salvo”, came into effect after midnight on Tuesday in Washington.
Beijing’s move was “not an escalatory response”, said Chris Beddor, deputy China research director at Gavekal. “They’re clearly aiming for negotiations and a deal.”
After Tariff Fight With Canada and Mexico, Trump’s Next Target Is Europe - Patricia Cohen, New York Times:
“The European Union has abused the United States for years, and they can’t do that,” Mr. Trump said on Monday.
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Donald Tusk, Poland’s prime minister, said, “We have to do everything to avoid it — totally unnecessary and stupid tariff war or trade wars.”
Trump is using a nearly 50-year-old law to justify new tariffs. It may not be legal. - Ari Hawkins, Politico:
“While it is possible that companies or industry groups would seek an injunction, they probably face an uphill battle blocking the new tariffs,” Brightbill said.
On the DOGE Front
Elon Musk creates confusion about IRS' Direct File — but the free tax program is still available - Fatima Hussein and Barbara Ortutay, Associated Press via Yahoo!Finance:
While Musk’s tweet may have intimated that the group of workers had been eliminated, an individual with knowledge of the IRS workforce said the Direct File program was still accepting tax returns. The individual spoke anonymously with The Associated Press because they were not authorized to talk to the press.
As of Monday evening, 18F’s website was still operational, as was the Direct File website. But the digital services agency’s X account was deleted.
Democrats Sound Alarm at DOGE Access to Treasury Payment System - Cady Stanton, Tax Notes:
“It is clear that unqualified and unaccountable people have seized control of the flow of taxpayer funds and a trove of extremely sensitive data,” Wyden said at a February 3 press conference.
The move allows DOGE employees access to a variety of personal information, including tax refund data, according to Senate Minority Leader Charles E. Schumer, D-N.Y.
Treasury, Bessent Sued Over Giving Access to Musk’s DOGE - Sabrina Willmer, Bloomberg via MSN. "Union groups, which are affiliates of the AFL-CIO, and the Alliance for Retired Americans said in a lawsuit on Monday that Treasury and Scott Bessent, who leads the agency, had illegally allowed their members’ records to be shared with Musk’s group known as DOGE. President Donald Trump has put Musk in charge of an effort to modernize federal information technology."
Tax Rules to Undergo White House Review After Trump Revives Order - Erin Slowey, Bloomberg ($). "This decision included in a Jan. 31 executive order revives a policy from the first Trump administration adding a new layer of review for tax regulations. The order also says that for every new rule, regulation or guidance issued, an agency must get rid of 10 existing guidance documents."
Expect a ruthless evaluation of surviving War Profits Tax guidance.
Speaking of taxpayer information
IRS urges taxpayers to choose tax preparers carefully to protect their personal information - IRS:
Remember: Taxpayers are legally responsible for the accuracy of their income tax return, even if someone else prepares it.
The IRS offers tips for choosing a preparer, including:
Discuss service fees upfront. Avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own accounts. Be wary of those who claim they can get larger refunds than their competitors.
Do not hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is against IRS e-file rules.
Understand the preparer’s credentials and qualifications. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. Annual Filing Season Program participants may represent taxpayers in limited situations if they prepared and signed the tax return.
Never sign a blank or incomplete return. Taxpayers are responsible for filing a complete and correct tax return.
Review the tax return carefully before signing it. Be sure to ask questions if something is not clear or appears inaccurate. Any refund should go directly to the taxpayer – not into the preparer’s bank account. Review the routing and bank account number on the completed return and make sure it’s accurate.
In Congress
House Republicans Are Split on How Deeply to Cut Federal Spending; Disagreement stalls progress on broader tax-and spending package - Richard Rubin and Olivia Beavers, Wall Street Journal:
The other is by arguing that the extension of expiring tax cuts doesn’t actually cost anything. The Republican Study Committee, a core group of conservative members, said any tax bill must reduce the deficit—but didn’t specify whether that was being measured before or after extending $5 trillion in tax cuts.
Ultimately, the important numbers won’t be measured in the trillions but in the votes needed to get majorities in the House and Senate
The quiet lobbying war you might have missed - Brendan Pedersen, Punchbowl News:
But community bank advocates see a narrow opening to rally lawmakers to close what they’ve long described as a tax “loophole” for the nonprofit credit union sector.
The credit union industry has doubled in assets since 2017 — though its share of the financial sector has stayed flat — and some larger players have demonstrated an M&A appetite for smaller banks. That has made smaller community banks increasingly nervous.
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Blogs and Bits
3 tax moves to make this February - Kay Bell, Don't Mess With Taxes. "1. Keep an eye out for tax statements. Jan. 31 is the day that W-2 and various other earnings statements are supposed to be delivered to workers. Guess what? That date usually slips. Today, for example, I got five 1099-MISC statements in my snail mail box, and a 1099-DIV issuer says to keep check online this week for that document. So, try to be patient. Keep an eye on your curbside and computer mailboxes."
Tax season 2025 scam alert: text messages impersonating the IRS - National Association of Tax Professionals. "Scammers are exploiting the promise of financial assistance by sending texts that claim to be from the IRS. These messages often include links to malicious websites or requests for personal information, such as Social Security numbers or bank account details. It’s important to remind clients that the IRS never communicates about EIPs or other sensitive matters via text."
IRS’s Direct File Makes It Easier For Eligible Families To Claim The Earned Income Tax Credit And Child Tax Credit - Elaine Maag, TaxVox. "Filing taxes is complicated. Taxpayers who used Direct File last year said it was an easier tax preparation method than they had previously used. When word spreads about Direct File, its relative ease might further encourage both tax filing and credit claiming."
Digital Dump Truck Department
Poor Recordkeeping Dooms Partnership Loss Claims - Kristen Parillo, Tax Notes ($). "A Connecticut man failed to show he had enough basis to deduct partnership losses by providing a 'digital dump truck of receipts' as evidence of his purported capital contributions, the Tax Court held."
I wonder if you can get a Clean Commercial Vehicle Credit for a digital dump truck.
Related: How the Inflation Reduction Act is Boosting Clean Energy & Energy Efficiency Incentives
Watch Out
Former owner of "Timepiece Gentleman" luxury watch consignment store in Beverly Hills sentenced to nearly 6 years in federal prison - IRS (Defendant name omitted; my emphasis):
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From November 2022 to November 2023, Defendant used his business – also called “The Timepiece Gentlemen” – to connect purchasers and sellers of high-end watches. In a typical consignment sale, a client would ship a watch to The Timepiece Gentleman and Defendant would take possession of the watch, agreeing to display it at his Beverly Hills store and through online and social media marketing. The items involved in this case included luxury watches by Rolex, Richard Mille, and Patek Phillipe, among others.
It's always watches.
But instead of remitting watch sales proceeds – or the unsold watches themselves – back to the clients, Defendant sold the client watches and kept the proceeds for himself. He also used client watches – without the client’s knowledge or permission – as collateral for loans that he took out from lenders.
When a client asked about the status of a watch on consignment sale, Defendant lied and said that the watch had not yet been sold. In fact, Defendant already had sold the watch or otherwise disposed of it, keeping the funds for his own personal benefit.
In addition to his consignment sale business, Defendant also purported to purchase watches on behalf of his clients. Typically, a client sent funds to Defendant, often by wire transfers to his bank accounts or through payment processors such as Zelle, for the purpose of Defendant locating and buying a specified watch on the client’s behalf.
But Defendant took the clients’ money and used it for other purposes, including to fund his lavish lifestyle such as buying or leasing luxury automobiles, apartments, and other luxury goods.
Fancy cars, luxury goods - but he already had enough watches, it seems.
What day is it?
Leave the can opener alone. It's National Homemade Soup Day!
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