Key Takeaways
- 25% tariffs to "stop drugs."
- China retaliates with duties on "chicken, wheat, corn... sorghum, soybeans, pork, beef, seafood, fruits, vegetables and dairy products."
- "The United States imported $9.9 billion worth of vegetables and more than $11 billion worth of fruit and frozen juices from Mexico in 2023."
- IRS employees to return to office, if office isn't closed.
- Nonprofits and DOGE.
- Dentist search for Tax Fairy ends badly.
- Mardi Gras and National Marching Band Day.
Trump’s Canada-Mexico Tariffs Take Effect - Gavin Bade, Santiago Pérez, and Vipal Monga, Wall Street Journal:
“Tomorrow, tariffs—25% on Canada, and 25% on Mexico—and that will start tomorrow,” Trump said Monday at the White House. “So they’re going to have a tariff, and what they have to do is build their car plants, frankly, and other things, in the United States, in which case you have no tariffs.”
The 25% tariffs will apply to all imports from Mexico and Canada, with the exception of energy products like crude oil and natural gas, which will be tariffed at 10%. Canada said Monday night that it would impose retaliatory tariffs.
Trump’s Tariffs on Canada, Mexico and China Snap Into Effect - Ana Swanson, Ian Austen and Simon Romero, New York Times:
Canada, Mexico and China are the three largest trading partners of the United States, accounting for more than 40 percent of both U.S. imports and exports last year. The three countries supply the bulk of crude oil, beer, copper wire, toilet paper, hot-rolled iron, cucumbers and chocolate imported by the United States, as well as a dizzying array of other products.
Fact Sheet: President Donald J. Trump Proceeds with Tariffs on Imports from Canada and Mexico - The White House. "President Donald J. Trump is proceeding with implementing tariffs on Canada and Mexico under the International Emergency Economic Powers Act (IEEPA) to combat the extraordinary threat to U.S. national security, including our public health posed by unchecked drug trafficking."
China Retaliates Against U.S. With Tariffs, Controls on U.S. Companies - Hanna Miao and Liza Lin, Wall Street Journal. "China’s finance ministry said the country is imposing an additional 15% tariff on U.S. chicken, wheat, corn and cotton products, and an additional 10% tariff on sorghum, soybeans, pork, beef, seafood, fruits, vegetables and dairy products. The new tariffs from China are set to go into effect on March 10."
How Tariffs Work - Jine Kim, New York Times. "The majority of shoes bought in the United States are made in China"
Here’s what could get more expensive under Trump’s tariffs - Luis Melgar and Rachel Lerman, Washington Post:
“The proposed tariffs would have a significant impact on food prices,” David Ortega, a food economist and professor at Michigan State University, said before the tariffs were officially enacted. Price hikes would come after years of high inflation in grocery aisles, a top concern for Americans in the last election.
IRS in the DOGE era
Too much space for DOGE? - Bernie Becker, Politico. The article is discussing a memo that is said to govern DOGE staffer Gavin Kliger's access to IRS data:
It also doesn’t give a specific purpose for why Musk’s team needs to get into IRS systems, nor was the memo signed by anyone at the IRS. On top of that, the memo —which is for 120 days, but can also be extended — is open to be amended.
Outside taxpayer advocates expressed similar concerns about DOGE’s access at the tax collector, even before the Trump administration gave the memo to Congress.
IRS In-Person Work Plan Sparks Questions About Office Space - Benjamin Valdez, Tax Notes ($):
The first phase of Treasury’s plan will require 100 percent in-person work for all IRS employees within 50 miles of an office location starting March 10, including members of a bargaining unit and employees already partially working on hybrid in-person schedules, according to a Treasury memo published February 28 by the National Treasury Employees Union.
...
Former National Taxpayer Advocate Nina Olson, now with the Center for Taxpayer Rights, said the memo leaves several questions unanswered, including what might happen if an employee decides to move beyond the 50-mile threshold to continue to telework and whether the IRS has enough space for all its current staff.
Non-profits in the Trump era
Nonprofits Warn Cuts May Force Closures, End Tax Exemption - Stephen Cooper, Law360 Tax Authority ($):
Diane Yentel, president of the National Council of Nonprofits, said the essential work of the nation's nonprofit sector is under attack by President Donald Trump's administration, and that smaller organizations with limited budgets could lay off workers, shut down their operations and stop providing help to underserved communities if federal funding evaporates.
Nonprofit Reps Fear Losing Exemption for Opposing Trump Policies - Fred Stokeld, Tax Notes ($). "Representatives of the nonprofit sector are concerned that charitable and social welfare organizations could risk losing their tax-exempt status by speaking out against proposed Trump administration cuts to nonprofit funding and other administration policies."
IRS Oversight of Nonprofits' Jet Use Deemed Weak by Watchdog - Rebecca Chen, Bloomberg ($):
The agency doesn’t receive specific data about private plane usage on tax returns, and doesn’t have a way in its systems to track audits of nonprofits related to private plane issues, the Treasury Inspector General for Tax Administration said in a report issued Feb. 26 and released Monday.
Related: Eide Bailly Exempt Organization Tax Services
Remember that other branch?
Ways and Means committee to start drafting plans for enacting Trump tax agenda next week - Benjamin Guggenheim and Meredith Lee Hill, Politico:
Ways and Means committee Republicans have floated various proposals, including a cap on certain deductions for companies, in order to tamp down on the costs. Tax writers have indicated they may have to implement some tax policies on a short-term basis to fit everything in.
Daines on why permanent tax cuts is ‘the hill I’m willing to die on’ - Laura Weiss and John Bresnahan, Punchbowl News:
...
Rather than paying the corporate rate, those businesses’ owners pay income taxes directly on earnings. Many U.S. businesses, big and small, are set up this way. The 2017 law’s pass-through deduction sunsets after this year, but corporations got permanent tax cuts in 2017.
Daines emphasized the pass-through deduction must be permanent and that’s a “non-negotiable” for him, although he wants all the provisions locked in.
Nonpartisan Group Blasts House Tax Bill as Irresponsible - Katie Lobosco, Tax Notes ($). "The House bill “does not get you to anything close to a fiscally responsible deal,” said Maya MacGuineas of the Committee for a Responsible Federal Budget at a National Association for Business Economics conference March 3."
In Other News
California Affirms Penalties for Late SALT Cap Election Payments - Laura Mahoney, Bloomberg ($). "Two family partnerships must pay late penalties and interest tied to California’s elective pass-through entity tax, a workaround for the $10,000 federal cap on deducting state and local tax payments, the Office of Tax Appeals said."
Supreme Court Won’t Hear Individual, Self-Employment Tax Cases - Patrice Gay, Tax Notes ($). "The Court also declined review to Frank W. Bibeau, who challenged an Eighth Circuit decision regarding self-employment tax on income from his law practice. Bibeau, an enrolled member of the Chippewa Tribe, challenged the assessed liability in the Tax Court after the IRS sustained a collection action against him. The Tax Court held that his income was not exempt from taxation under a treaty that gave the Chippewa the right to 'hunt, fish, and gather the wild rice' on their lands and that there was no exemption from tax in the Indian Citizenship Act."
Blogs and Bits
4 tax moves to make in March - Kay Bell, Don't Mess With Taxes. "1. Establish or add to your IRA. If you have an IRA, Roth or traditional, and didn't max out your contributions last year, do so now. That money can count as 2024 tax year contributions."
Treasury Announces that it Will Not Be Enforcing BOI Reporting for Domestic Companies - Kristine Tidgren, Ag Docket. "On March 2, 2025, the U.S. Treasury issued a press release announcing that it will not be enforcing any penalties or fines associated with BOI reporting even after the promised new rule takes effect. The new rule will narrow the scope to foreign companies only:"
Tax Court Disallows Deductions for Failed Home Renovation Business - Parker Tax Pro Library. "The Tax Court held that a taxpayer was not entitled to deduct payments he made to fund home renovation and demolition/excavation businesses because he was an investor rather than an active participant in the businesses."
After Legal Settlement Payment, You May Receive Two IRS Forms 1099 - Robert Wood, Forbes. "If you received a lawsuit settlement in 2024, you probably received an IRS Form 1099 from the defendant in early 2025. Some types of cases are exempt, but most are not. And if you receive a Form 1099, you need to report it on your taxes. But what if you also receive a Form 1099 from your own lawyer for the same money? It happens more than you might think."
Learning about the Tax Fairy the hard way
Colorado Dentist Pleads Guilty to Multiple Tax Evasion Charges - US Department of Justice (Defendant name omitted, emphasis added):
According to court documents and statements made in court, since 2014, Defendant owned and operated [a dental practice] in Fort Collins, Colorado. In 2016, Defendant purchased an abusive-trust tax shelter for $50,000. The tax shelter involved concealing income and creating false tax deductions through the use of a so-called business trust, family trust, charitable trust and a private family foundation, all of which Defendant created and controlled. From 2017 through 2022, Defendant used this tax shelter to conceal from the IRS over $3.5 million in income he earned from his dental practice.
To set up the tax shelter, Defendant, as the purported trustee, signed trust instruments purporting to create the three trusts and foundation, and he opened bank accounts in the name of each. He further recruited friends to falsely sign his trust instruments as the purported creators of the trusts. Defendant then transferred majority ownership of his dental practice to the business trust. Defendant did this despite having been warned by attorneys and CPAs that, in Colorado, a trust could not own a dental practice.
He then transferred over $3 million he earned from his dental practice into the bank accounts of the various trusts and foundation to create the illusion that the funds belonged to those entities. In reality, Defendant retained complete control over the funds and used the funds to pay for personal expenses including his home mortgage, credit card bills, boats and professional baseball season tickets. Finally, he filed false tax returns for himself, his dental practice, the trusts and foundation that falsely reported the income he earned from his dental practice as income of the trusts. On those tax returns Defendant also claimed fraudulent deductions for his personal living expenses which he disguised as trust expenses and charitable donations.
My AI tool says that a $1 million tax loss would indicate a prison sentence of 21 to 27 months under federal sentencing guidelines.
The trusts involved are similar to those cited in the indictment of an Estes Park, Colorado tax shelter promoter, though it's possible a different promoter was involved. We can draw some timeless lessons from this case:
- If it sounds too good to be true, it probably is.
- There is no Tax Fairy.
- Sometimes it's better to just pay the taxes.
What day is it?
It's Mardi Gras, of course, but don't just parade by National Marching Band Day!
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