Tax News & Views House Puts in Its Chips on Budget Roundup

House moves toward tax and budget plan vote - Chris Cioffi, Bloomberg ($). "The House Rules Committee is set to meet Monday to tee up a floor vote as soon as Tuesday on the resolution that advanced out of the chamber’s Budget Committee earlier this month. The resolution calls for enacting President Donald Trump’s agenda in a single package that would include up to $4.5 trillion in tax cuts, boosted spending for border security and defense, and a $4 trillion increase in the debt ceiling."

Johnson’s make-or-break budget week - Mia McCarthy and Lisa Kashinsky, Politico. "Johnson doesn’t yet have the votes to get his budget plan approved on the House floor. He’s barreling ahead anyway."

House Republicans’ moment of truth - Kadia Goba and Burgess Everett, Semafor. "The House will try this week to approve its budget blueprint for an all-encompassing bill addressing border, energy and the 2017 Trump tax cuts. We’re told leadership “feels good” about passing the resolution, which sets up steep spending reductions to pay for the tax cuts. But some members are concerned about potentially slashing entitlement programs."

Mike Johnson’s moment of truth - Jordain Carney and Meredith Lee Hill, Politico:

The Senate’s Plan B is in place. Now it’s up to Speaker Mike Johnson to deliver on Plan A — the “one big, beautiful bill” he’s been promising for weeks.

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But Johnson is facing major skepticism as he plows forward this week. The Rules Committee will meet Monday to ready the House GOP budget plan for the floor as a group of holdouts concerned about deep cuts to Medicaid and other safety-net programs raise increasingly sharp concerns.

GOP Split on Medicaid Imperils Trump’s Tax-Cut Plans - Olivia Beaver and Liz Essley Whyte, Wall Street Journal:

Republicans aren’t allowed to touch Social Security in the fast-track legislative process they are using, and Trump has said he opposes reducing Medicare benefits, leaving Medicaid as one of the remaining ways to significantly shrink spending. Within a 24-hour period, Trump stated that Medicaid shouldn’t be touched but also posted on X that he backs the House-led package that is likely to rely on cuts to Medicaid to meet its targets.

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Some House Republicans say keeping Medicaid intact is essential if they want to hold the House majority in 2026. Some are privately warning party leadership that there are scores of members—including some in safe GOP districts—who oppose deep cuts. Healthcare groups are aggressively lobbying members’ offices to defend Medicaid spending.

IRS Personnel Cut Reverberations and Reactions

State Tax Agencies Brace for Downstream Impact of IRS Cuts - Michael Bologna, Bloomberg ($):

State tax agencies are paying attention as the Trump administration slashes IRS staff and throws agency priorities into limbo, because the trickle-down can change their work and even their revenue.

“If IRS is left with diminished capacity, there will be downstream effects that the states will be dealing with,” said Greg Matson, executive director of the Multistate Tax Commission, which coordinates tax harmony and enforcement activities across the states.

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Most states simply adopt the fundamental figure of federal taxable income to begin their analysis of taxpayers’ state income tax obligations, said John Valentine, Utah’s commissioner of revenue. They deploy more than 90% of their audit and collection resources to factors below that line. Any disruption at the IRS in calculations and compliance processes could filter down to the states, he said.

Tax World Responds to IRS Layoffs - Tim Shaw, RIA Checkpoint ($, my emphasis):

At the TEGE Annual Exempt Organizations Update and Meeting on Friday, Meghan Biss of Loeb & Loeb clarified that so-called probationary employees — the subject of many cuts across agencies — include more than those who are "brand new" and just "coming to the government." A probationary employee "could mean somebody who worked at one agency and is now transferred to another agency," Biss explained. "It could mean somebody who worked in Small Business, Self Employed at the IRS for 15 years and has changed to a new position" in another division.

The layoffs affect "people who have worked at this agency" throughout their careers despite being "in a probationary period." She said "some of them had been there for more than 20 years … and we are now losing their knowledge."

Advocating for Clients Amid IRS Chaos - Thomas Gorczynski, Tom Talks Taxes:

In the future, practitioners can expect reduced service levels (e.g., unanswered phone calls, delayed responses, and active cases being placed on hold).

While you may be either angry or elated about these changes, practitioners must now be invested in proactively and defensively working with clients in this new IRS environment in which taxpayer rights, such as the right to quality service and the right to challenge the IRS position and be heard, can be inadvertently violated.

T rump Just Fired 6,700 I.R.S. Workers in the Middle of Tax Season. That’s a Huge Mistake. - Lawrence Gibbs, Fred T. Goldberg Jr., Charles Rossotti, Mark Everson, John Koskinen, Charles Rettig, and Daniel Werfel. (Former IRS commissioners), New York Times:

Every year, the government receives much less in taxes than it is owed. Closing that gap, which stands at roughly $700 billion annually, would almost certainly require maintaining the I.R.S.’s collection capacity. Depleting it is tantamount to a chief executive saying something like: “We sold a lot of goods and services this year, but let’s limit our ability to collect what we’re owed.”

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So why go down this path? Let’s be clear: Shrinking the I.R.S. will not lower your tax obligation. That’s up to Congress.

Tariff Talk

Donald Trump considers tariffs to counter digital services taxes on Big Tech - Myles McCormick and Demetri Sevastopulo, Financial Times. "The president signed a memo on Friday ordering the US trade representative to look into reopening investigations begun during his first term into digital services taxes imposed by a host of EU countries as well as the UK and Turkey. It also assesses potential new probes into other countries including Canada. "

Continuing Tax Administration

Watchdog Finds Ongoing Problems at Taxpayer Assistance Centers - Tyrah Burris, Tax Notes ($):

Agents of the Treasury Inspector General for Tax Administration conducting unannounced visits to TACs during the 2024 filing season found that some TAC facilities didn’t accept walk-ins or walk-in payments, didn’t provide volunteer income tax assistance information, or didn’t make tax forms available, according to a TIGTA report released February 21.

TACs provide face-to-face tax assistance to customers who can’t resolve their issues through other means or who choose to get help in person, TIGTA noted in its report, dated February 19.

From the report (my emphasis):

We did not notify security guards that we were TIGTA employees, so we could experience how taxpayers who walk into a TAC without an appointment are assisted. For 20 (24 percent) of the 85 TACs we visited, security guards either impeded our access to TAC personnel, provided IRS-related information as if they were TAC personnel, or did not perform security screening of our evaluators.

It's this kind of creative multi-tasking that will be needed in the new era of government efficiency.

IRS Provides Minimum Essential Coverage Public Notice Guidance - Nathan Richman, Tax Notes ($). "Employers can use the website publication alternative for minimum essential coverage statements without regard to the regulatory restriction for zero individual shared responsibility payments, under a recent IRS notice."

Blogs & Bits

10 tips to help you deal with an IRS tax notice - Kay Bell, Don't Mess With Taxes. "Be alert for scams. "Most tax scammers tend to show up online or as phone callers, while the IRS primarily communicates with taxpayers by letters and notices sent via the U.S. Postal Service. Sometimes, though, crooks take the paper route (like here, here, and most recently here)."

Tax Court Finds Electronic Petition Properly Signed by the Taxpayers - Ed Zollars, Current Federal Tax Developments. "The Court concluded that because the Donlans used the online petition generator, which includes each petitioning taxpayer’s name as part of a signature block, the signature requirement was satisfied."

Trump and DOGE are stressing readers about their finances. Here’s what to do. - Michelle Singletary, Washington Post:

If you file electronically and have the funds directly deposited into your bank account, the IRS says you generally can expect your refund in about 21 days.

If you can, avoid filing a paper return.

Required Beneficial Ownership Information Reporting – Back in Effect - Tax School Blog. "Per a FinCEN Notice issued on February 18, 2025, the new deadline to file an initial, updated, and/or corrected BOI report for most reporting companies is March 21, 2025."

Unlike Trump’s $25 Million Meta Deal, Most Legal Settlements Are Taxed - Robert Wood, Forbes. "Taxes are based on the origin of your claim. If you get laid off at work and sue seeking wages, you’ll be taxed as wages, usually with a portion on a Form 1099 for emotional distress. If you sue for damage to your condo by a negligent building contractor, you may be able to treat the recovery as a reduction in your purchase price of the condo. The rules are full of exceptions and nuances, so be careful, how settlement awards are taxed, especially post-tax reform."

What's So Special About Tips to Make This Income Non-taxable? - Annette Nellen, 21st Century Taxation. "H.R. 8785, Tax Free Tips Act (118th Congress) would have changed the law to say that wages do not include tips and make them not subject to income or payroll taxes. The sponsors offered as a rationale that many people getting tips might be 'working a second job to make ends meet' so should be able to keep their money. That sounds reasonable if we are talking about raising the standard deduction for ALL low-income workers, but why single out or assume that only tipped workers are in need of tax relief."

Sometimes it's just easier to pay the taxes

Lobbyist Admits To Evading $1.3M Tax By Blocking Home Sale - Anna Scott Farrell, Law360 Tax Authority ($):

A lobbyist admitted to trying to thwart IRS efforts to collect about $1.3 million in taxes he owed by preventing a real estate agent from widely listing his home and by transferring assets to a family member, according to Florida federal court documents.

How did the lobbyist impede the IRS? Many ways, per the plea agreement, including this:

On May 31, 2012, the defendant signed a listing agreement authorizing Individual 3 to sell Residence 1. The defendant caused to be crossed out the provisions of the form allowing Individual 3 to list the property in the multiple listing service ("MLS") for the locality, to advertise the property, to put up "for sale" signs, and to provide information to other real estate agents; the defendant also caused to be crossed out the provision requiring that the defendant make the property available for showings and inspections. Individual 3 recommended an asking price of $1,750,000, but the defendant specified an asking price of $2,425,000 in the agreement. The defendant caused to be added language stating that, on November 1, 2012, the crossed-out provisions "will become applicable" and the price would be reduced to $1,750,000.

On December 12, 2012, Individual 3 listed Residence 1 in MLS for $ 1,750,000. On December 19, 2012, at the defendant's direction, Individual 3 increased the price to $2,425,000.

It's amazing how easy it can be to not sell a house.

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Tax News & Views House Puts in Its Chips on Budget Roundup

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Joe B. Kristan, CPA