Tax News & Views Chocolate-Covered Resignation Roundup

Acting I.R.S. Commissioner Is Expected to Announce His Retirement - Andrew Duehren, New York Times:

The acting commissioner of the Internal Revenue Service is expected to announce on Tuesday that he is retiring, according to three people familiar with the move, the latest agency head to depart after Elon Musk’s team pushed for access to sensitive data and mass layoffs.

Doug O’Donnell, who has spent nearly 40 years at the I.R.S., took over the agency last month after the last commissioner stepped down at the beginning of President Trump’s term. Melanie Krause, the chief operating officer at the I.R.S., is expected to become the new acting leader after Mr. O’Donnell leaves on Friday, the people said on condition of anonymity because they were not authorized to speak publicly.

Acting IRS Chief Set to Retire This Week - Richard Rubin, Wall Street Journal:

O’Donnell’s last day will be Friday, and he is expected to be succeeded as acting commissioner by Melanie Krause, one of the people said. President Trump has picked Billy Long, a former Republican House member from Missouri, to run the tax agency for the remainder of Werfel’s term, which ends in November 2027.

Long hasn’t had his Senate confirmation hearing yet. That means Krause, who has been chief operating officer, is likely to run the IRS for much of the individual income tax-filing season that ends in mid-April.

Acting IRS commissioner to step down amid DOGE blitz on agency - Jeff Stein, Lisa Rein and Jacob Bogage, Washington Post. "The people familiar with the matter said O’Donnell was concerned by many of the moves Musk made on the government, including firing probationary employees. As part of Musk-driven cuts, about 7,000 IRS employees are expected to lose their jobs, a person familiar with the matter has said. O’Donnell was also widely expected to retire sometime this year, people familiar with the matter said."

Meanwhile in DOGE

Treasury Employees Directed to Answer OPM Inquiry - Benjamin Valdez, Tax Notes ($):

IRS and Treasury employees were expected to respond to an Office of Personnel Management (OPM) email asking them to account for their recent work, according to a Treasury email following up on the request.

Treasury asked the employees to reply to the OPM email, which requested that they list five bullet points describing “what you accomplished last week.”

Elon Musk Repeats Email Ultimatum to Federal Workers - Lucy Meakin, Bloomberg. "Elon Musk offered a second chance for US federal workers to respond to an email detailing what they did last week, or face termination."

So hundreds of federal janitors are now drafting something like "I mopped the hallways, cleaned the toilets and urinals, scrubbed the sinks, and emptied the wastebaskets. Does that count as five accomplishments?"

Trump’s ‘Accountability’ Exec Order Said to Bypass Tax Guidance - Alexander Rifaat and Nathan Richman, Tax Notes ($):

The IRS’s regulatory framework is likely to remain unchanged by President Trump’s executive order asserting that the president and attorney general are the sole legal interpreters of regulations and guidance, tax policy watchers said.

On February 18 Trump signed an EO titled “Ensuring Accountability for All Agencies,” and although the directive is primarily addressed to independent federal agencies, it includes a provision that “no employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation, unless authorized to do so by the President or in writing by the Attorney General.”

House Budget Showdown Set For Today

House GOP Pushing Ahead on Budget Vote With Uncertain Outcome - Cady Stanton and Doug Sword, Tax Notes ($):

A vote on a budget resolution featuring more than $4 trillion in tax cuts in the coming days is expected to test whether House Republicans can unite to support President Trump's agenda.

House Speaker Mike Johnson, R-La., admitted at a February 24 Americans for Prosperity event there could be multiple holdouts on the budget resolution. At least one, Rep. Victoria Spartz, R-Ind., made her disapproval clear in a post on social media platform X. But Johnson said he was confident he’d be able to whip the votes necessary to adopt the measure. The resolution could come up for a vote as soon as February 25.

Prayers for Mike Johnson - Jack Blanchard, Politico:

Numbers game: Assuming that every single Democrat shows up and opposes the bill, Johnson cannot afford more than one GOP “no” vote. As of this morning, three conservatives put themselves in that column: Rep. Thomas Massie (R-Ky.), who sounds pretty resolute, and Reps. Tim Burchett (R-Tenn.) and Victoria Spartz (R-Ind.), who say they are currently opposed, but still plan to talk with GOP leadership prior to the vote. That’s to say nothing of the swing-district members uneasy with the package’s potential cuts to Medicaid.

Stuck in the middle with you: Johnson’s fundamental problem has not changed. He remains trapped between hardline deficit hawks on one wing of his party and nervous moderates on the other, and trying to keep both sides happy — with so little margin for error — is a Herculean task, given that concessions to one only risk enraging the other. It’s not surprising Johnson spent Monday asking for divine intervention.

The heat: Johnson squeezed by everyone ahead of budget vote - Jake Sherman, Laura Weiss, Andrew Desiderio and Samantha Handler, Punchbowl News. "Unsurprisingly, the moderates who hemmed and hawed about the budget resolution and how the cuts were too deep are now falling in line after heavy lobbying by the GOP leadership."

Bessent, Republicans in Congress Kick Start Tax Cut Talks - Eric Wasson and Billy House, Bloomberg:

Treasury Secretary Scott Bessent and congressional leaders will begin meeting weekly as Republicans look to shape a tax cut package with a year-end deadline, according to people familiar with the matter.

A "year-end deadline" doesn't sound like they are optimistic about taxes being part of one big beautiful bill.

The meetings, which will start this week, will include key Republican leaders, including House Speaker Mike Johnson, Senate Majority Leader John Thune, and Senator Mike Crapo and Representative Jason Smith, who chair the tax committees in each chamber. The people shared the details of the meetings on the condition of anonymity to discuss a matter which isn’t public.

...

Republicans have until the end of the year to renew expiring portions of President Donald Trump’s first-term tax cut law, which reduced income rates on individuals and included a bevy of tax cuts for small businesses. Trump has also said he wants to expand those tax cuts to include a series of campaign trail promises, including ending levies on tipped wages, overtime pay and Social Security benefits.

Tariffic

Trump says Canada and Mexico tariffs are ‘going forward’ with more import taxes to come - Josh Boak and Fabiola Sanchez, Associated Press:

While Trump was answering a specific question about the taxes to be charged on America’s two largest trading partners, the U.S. president also stressed more broadly that his intended “reciprocal” tariffs were on schedule to begin as soon as April.

The tariffs are going forward on time, on schedule,” Trump said.

Companies are unprepared for new tax trade-off in 2025 - Adam Hodge, The Hill:

During President Trump’s first term, as corporate America tried to dodge the torrent of White House controversy and public scrutiny, they clung to the benefits of his tax bill that boosted many a balance sheet — a slashed corporate rate, 100 percent bonus depreciation and incentives for investment abroad.

But the trade disputes with China, Europe, Mexico and Canada that followed increased prices on everyday items and blunted the net benefit of the tax cuts. Foreign countries retaliated against American goods. Farmers were crushed as foreign countries reduced imports of corn, soybeans and key commodities. Taxpayers eventually stepped in to bail out a critical U.S. industry.

A VAT is Not a Tariff - Scott Sumner, Econlog. "The sky is not green, it’s blue. And a value added tax is not a tariff. President Trump once suggested that ‘tariff’ is the most beautiful word in the dictionary, hence you might expect him to know what a tariff actually is."

Other Tax News

Judge Upholds Timeliness of Energy Tycoon’s Data Leak Claim - Caitlin Mullaney, Tax Notes ($):

In a February 21 memorandum opinion in Warren v. Booz Allen Hamilton, Judge Lydia Kay Griggsby of the U.S. District Court for the District of Maryland denied the motion to dismiss the claims alleged by Kelcy L. Warren of illegal disclosure of tax information under section 7431, holding that the claims fall within the two-year statute of limitation window of discovering the disclosure.

Warren, the billionaire CEO of Energy Transfer, filed a complaint in April 2024 alleging that Booz Allen failed to properly monitor employee access to data, protect IRS networks and databases that were entrusted to the firm, and safeguard its own computer systems. Warren claimed that those failures led to the public disclosure of his private information through the data theft conducted by former Booz Allen employee Charles Littlejohn.

Justices Won't Hear Challenge To Colo. Tax Ballot Title Law - Maria Koklanaris, Law360 Tax Authority ($). "The U.S. Supreme Court on Monday let stand a ruling by the Tenth Circuit that a Colorado law requiring that financial impacts be included in the titles of some tax-related ballot initiatives does not cause 'improperly compelled' speech."

Interposed Partnership Disrupts Eaton’s Foreign Tax Credit Claim - Michael Smith, Tax Notes ($). "Eaton Corp.'s decision to interpose a domestic partnership between upper-tier and lower-tier controlled foreign corporations derailed its ability to immediately receive a foreign tax credit for deemed partnership distributions."

Wealth Taxes in Europe, 2025 - Christina Enache, Tax Foundation. "Wealth taxes not only collect little revenue and create legal uncertainty, but an OECD report argues that they can also disincentivize entrepreneurship, harming innovation and long-term growth. Instead of reforming and hiking the wealth tax, one of the most harmful taxes ever created, countries should repeal it."

Blogs and Bits

Tracking down your federal tax refund - Kay Bell, Don't Mess With Taxes. "The best way to find where it is in the IRS system is to use the agency’s online tracking tool Where’s My Refund?"

California’s FTB Issued Incorrect 1099-G’s - Russ Fox, Taxable Talk. "The FTB will be sending corrected 1099-G’s. For now, taxpayers should review the 1099-G’s carefully and use the correct amount of the tax refund, not what is on the 1099-G. Tax refunds can (but are not necessarily) taxable income the following year for federal income tax if the taxpayer itemized in the previous year and deducted income taxes (not sales tax)."

Taxpayers should also keep in mind that credits from state pass-through entity taxes are likely to generate taxable refunds, even when taxpayers don't itemize, if the tax paid at the entity level reduced the entity owner's taxable income.

BOI is Back With a New March 21, 2025 Deadline! - Ronald Marini, The Tax Times. "For the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025."

BS Tax Shelter "Investors" Reach the End Game on Tax Dodging from 1999 BLIPS "Transaction" - Jack Townsend, Federal Tax Procedure. "Through the arrangement, Blum claimed a '$78.5 million in artificial tax loss.'"

No Matter The Accounting, Extending The 2017 Tax Cuts Will Cost Over $4 Trillion - Howard Gleckman, Forbes. "But don’t be fooled by the debate over current law versus current policy baselines, or by unfounded claims that tax cuts pay for themselves. No matter how Congress formally scores the price of extending the 2017 Tax Cuts and Jobs Act, as well as other Trump initiatives, accounting legerdemain can’t make fiscal reality disappear."

Luxury Goods Watch

Oklahoma City woman sentenced for stealing more than $1.1m from her employer - IRS; defendant name omitted, emphasis added):

Today, U.S. District Judge Gregory K. Frizzell sentenced Defendant for Bank Fraud and Willfully Making and Subscribing a False Federal Income Tax Return. Judge Frizzell ordered Defendant to be imprisoned for 30 months, followed by five years of supervised release. Further, Judge Frizzell ordered Defendant to pay $870,934.67 in restitution to her former employer and $309,167 to the IRS.

“Defendant not only stole from a local business owner, but she also betrayed her employer’s trust,” said U.S. Attorney Clint Johnson. “This deliberate decision not only affected her employer but also defrauded the government, harming taxpayers.”

...

According to court documents, Defendant began working as an account manager for her employer in 2015. She was entrusted with handling payroll, paying bills, collecting rent, and updating financial documents. From May 2019 through November 2022, Defendant wrote more than 150 checks to herself, totaling more than 1.1 million dollars. With those funds, Defendant purchased luxury items, including recreational vehicles, purses, jewelry, and dozens of firearms. Further, Defendant did not report her income accurately and falsified her tax refunds.

Maybe when you steal that much you need a lot of purses.

What day is it?

It's National Chocolate Covered Nut Day! It's also National Billy Day, which may or may not mean we might get some news on the IRS commissioner-designate.

Tax News & Views Chocolate-Covered Resignation Roundup

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Joe B. Kristan, CPA