Tax News & Views Required Minimum Pie Distribution Roundup

IRS reminds retirees: April 1 final day to begin required withdrawals from IRAs and 401(k)s - IRS.

The Internal Revenue Service issued a reminder today that in most cases retirees who turned 73 in 2024 must begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s and similar workplace retirement plans by Tuesday, April 1, 2025.

Required minimum distributions (RMDs) are payments typically made by year end. However, individuals who turned 73 in 2024 can delay their first RMD until April 1, 2025. This special rule applies to IRA owners and participants born after Dec. 31, 1950.

Two RMD payments are possible in the same year

The April 1 RMD deadline is for the first year only. For subsequent years, the distribution is due by December 31.

Taxpayers receiving their first required distribution for 2024 in 2025 (by April 1) must take their second RMD for 2025 by Dec. 31, 2025. The first distribution is taxable in 2025 and reported on the 2025 tax return, along with the regular 2025 distribution.

Another DOGE Day at IRS

Top IRS lawyer pushed aside as DOGE seeks records and 20% staff cuts - Jeff Stein, Jacob Bogage, Shannon Najmabadi, and Lisa Rein, Washington Post:

William Paul, a career official named acting chief counsel in January, will be replaced by Andrew De Mello, who was nominated to be the Education Department’s inspector general during Trump’s first term, three of the people said. The people spoke on the condition of anonymity because they were not authorized to speak with the media.

Also, DOGE officials instructed the acting IRS commissioner to eliminate 18,141 jobs across the agency by May 15, according to records obtained by The Washington Post.

The tax compliance department would have the largest job cuts (8,260) followed by taxpayer services (3,247) and information technology, the records show. Those moves are only an initial phase of job cuts.

Trump Replaces Acting IRS Chief Counsel - Benjamin Valdez, Tax Notes ($):

Paul’s exit comes amid clashes between employees of the intragovernmental Department of Government Efficiency and several leaders at the IRS — including former acting Commissioner Douglas O’Donnell and former Chief Human Capital Officer Traci DiMartini — as they seek to access sensitive tax databases and cut employees en masse.

...

The IRS reportedly rejected a request by DOGE to share the data of suspected undocumented immigrants with the Department of Homeland Security, sparking concerns among individual taxpayer identification number filers over the use of their personal tax information.

DOGE Getting IRS Data Like Giving Custodians Vault Keys - Danny Werfel (former IRS Commissioner), Bloomberg:

So, yes, the IRS over the years has given some of its employees access to taxpayer data. But they could only access one “closet” of data if they needed to look inside of it as part of tax administration. The IRS provided access to a larger “vault” of data if the employee needed to be in that “vault” for a legitimate tax administration purpose, such as looking for similar areas of math errors to better instruct taxpayers on common mistakes made.

But it was rare for anyone at the IRS to have access to all the data—the keys to every safe deposit box. Those who were granted such comprehensive access had a compelling or urgent need, such as a major power outage at a primary data center. When all the systems need to be ported to a backup system, a comprehensive view ensures the effort was completely successful...

If I, as the former IRS commissioner, had requested access to all the data in the IRS systems, the agency’s data security team would rightfully say “no.” I would have no compelling need, and there was no legal basis for me to demand it.

Back to work at IRS?

Two judges in mass firings cases order Trump administration to rehire probationary workers for now - Janie Har, Brian Witte, and Lindsay Whitehurst, Associated Press:

Two federal judges handed down orders requiring President Donald Trump’s administration to rehire thousands, if not tens of thousands, of probationary workers let go in mass firings across multiple agencies Thursday, slowing down for now the president’s dramatic downsizing of the federal government.

...

Lawyers for the government maintain the mass firings were lawful because individual agencies reviewed and determined whether employees on probation were fit for continued employment.

But Alsup, who was appointed by President Bill Clinton, a Democrat, has found that difficult to believe. He planned to hold an evidentiary hearing Thursday, but Ezell, the OPM acting director, did not appear to testify in court or even sit for a deposition, and the government retracted his written testimony.

Layoffs of Federal Employees Are Unlawful, Judge Says - Mary Katherine Browne, Tax Notes ($):

During the hearing, Assistant U.S. Attorney Kelsey Helland sought to argue that the firing decisions were not made by OPM but were driven by the desire to comply with the Trump administration’s aims to downsize the government.

The court rejected that argument, noting that several federal agencies had told employees that they had been instructed to fire every probationary employee deemed nonessential.

Shutdown Countdown

IRS to Keep All Employees Working During Potential Shutdown - Benjamin Valdez, Tax Notes ($). "The decision comes as the clock winds down for lawmakers to agree on a government funding plan and concerns mount that the IRS could be hit with further staff reductions during the peak of the filing season."

Effects of IRS Cuts

Tax Professionals Observe Impact of IRS Layoffs - Lauren Loricchio, Tax Notes ($):

Maloof Whatley said, “What everyday taxpayers don’t realize is that there’s automation in place to do exams and enforcement of collections on lower-middle-class taxpayers.”

It’s the taxpayers who aren’t subject to automated enforcement that can circumvent the tax system, according to Maloof Whatley, who predicted that that outcome will worsen the tax gap.

“It’s just going to allow people that have been skirting the system to get away with more, because when people aren’t watching them, people will not file and people will not pay,” Maloof Whatley said. “As a tax lawyer, I obviously represent a lot of those people, but I think it’s unfair to the rest of the taxpayers that do . . . file and pay.”

IRS Layoffs Could Slash Revenue By $2.4 Trillion, Report Says - Asha Glover, Law360 Tax Authority ($). "The Trump administration's "reductions in force" strategy at the IRS, which could result in the agency's staff slashed by half, would lower gross tax collections by about $395 billion during that time, according to the report. If taxpayer behavior adjusts so that noncompliance increases, that 50% reduction in workforce would cost about $2.4 trillion over the next decade and increase the tax gap — which currently totals an estimated $700 billion per year — by 25%, according to the report. The tax gap represents the difference between taxes legally owed and taxes actually collected."

DOGE says it’s saving $100 billion. It’s about to lose a lot more. - Natasha Sarin, Washington Post. "Much is uncertain, but here is an alternative, back-of-the-envelope estimate: Assume that a depleted IRS would lead taxpayers to evade more. If high-compliance taxpayers became medium-compliance taxpayers, and medium-compliance taxpayers became low-compliance taxpayers, losses could easily total well above $2 trillion, or about a 25 percent increase in unpaid taxes."

Tariffism

Trump’s Tariff Threat Sends French Wine and Champagne Makers Reeling - Liz Alderman, New York Times:

“A 200 percent tax on European wines and spirits would mean an immediate halt to all shipments to the United States,” Gabriel Picard, chairman of the Federation of Wine and Spirits Exporters, told French media on Thursday. “That’s almost 4 billion euros wiped off the French trade balance, for zero gain.”

The size of the tariff suggested by Mr. Trump drew reactions of disbelief. “We are in shock,” said Laurent Delaunay, the president of the Burgundy Interprofessional Wine Bureau, which represents Burgundy winemakers, who added that the tariffs would be “catastrophic” if imposed.

It's not clear that the President is allowed to do this under his "national security" tariff powers.

Meanwhile in Congress

Trump backs key Senate tax plan strategy in struggle with House - Meredith Lee Hill, Benjamin Guggenheim, and Jordain Carney, Politico. "President Donald Trump indicated to GOP senators during a White House meeting Thursday that he supports using an accounting method that would treat trillions of dollars in tax cuts in a massive GOP package as costing nothing, according to three senators who attended the meeting and three other people familiar with the conversation."

Hern on reconciliation and the GOP’s road ahead - Laura Weiss, Punchbowl News:

There are a lot of big GOP voices on the House Ways and Means Committee as Republicans work to produce a tax bill. Among them, Rep. Kevin Hern (R-Okla.) has once again carved out a notable role for himself.

...

Hern told us that Senate Republicans can make some “structural tweaks” or “process formalities” – like the “current policy baseline” to make it easier to permanently extend tax cuts. But big changes that give more room for taxes and also mandate fewer spending cuts won’t pass the House, he warned. Hern also said $1.5 trillion in cuts is likely the floor for what House spending hawks need to pass a resolution.

Learning from the First Trade War: Retaliation Hurts US Exporters - Erica York, Tax Policy Blog. "To compensate ag producers for their lost exports due to the trade war, the US government provided direct payments to producers, adding up to $28 billion in relief across 2018 and 2019."

Blogs and Bits

Don’t miss out on these 10 often overlooked tax breaks - Kay Bell, Don't Mess With Taxes. "6. Retirement savings credit: If you do put some money into an IRA, traditional or Roth version, or a workplace or self-employment retirement plan, you also might be able to get a bonus tax break. The Saver's Credit is available to lower- and middle-income earners who contribute to retirement savings. It's worth up to $1,000. And because it's a tax credit, that $1,000 can erase that much of any tax you owe."

Taxpayers Filing Court Challenges to Attempt to Obtain Employee Retention Tax Credits - Ed Zollars, Current Federal Tax Developments. "Both plaintiffs are also suing the IRS to set aside IRS Notice 2021-20 and enjoin the IRS from enforcing it, arguing that it is invalid."

Can a Taxpayer Deduct a Theft Loss? - Thomas Gorczynski, Tom Talks Taxes. "However, thanks to changes made by the Tax Cuts and Jobs Act (TCJA), it is now much more challenging to deduct many theft losses, and the determination can be quite complex. "

Before Filing Taxes, It Pays To Double-Check All Your IRS Forms 1099 - Robert Wood, Forbes. "Mistakes happen, and reporting errors is wise. So, don't just put arriving 1099s in a pile; open them immediately."

The Price Of Trump’s Threats To IRS Data - Howard Gleckman, TaxVox. "Slashing research capacity now risks making the federal tax system less transparent to outside analysts, lawmakers, and the public; stifling innovation; and leaving policymakers and tax administrators blind to the effects of what they do on households and businesses."

A losing bet

Newport Beach man indicted for allegedly using sports gambling losses as business expenses to evade federal tax payments - IRS (Defendant name omitted, emphasis added):

An Orange County man is scheduled to be arraigned today on a federal grand jury indictment alleging he committed tax evasion by deducting millions of dollars in gambling losses and other personal expenditures as business expenses.

Defendant, of Newport Beach, is charged with four counts of tax evasion.

Defendant is scheduled to be arraigned this afternoon in United States District Court in downtown Los Angeles.

According to the indictment, Defendant owned an insurance salvage company... From 2017 to 2020, Defendant allegedly used the company’s bank accounts to pay for personal expenses, including payments to bookmakers... to cover sports gambling losses, and to purchase a 2021 Mercedes-Benz automobile.

The indictment further alleges that Defendant concealed these personal payments in the company’s business records, and in many cases directed to payments to be recorded as business expenses to reduce the company’s income.

IRS examination programs look for this sort of thing.

What day is it?

It is, of course, Pi Day. If that's not colorful enough, it is also Holi, India's festival of color. Have a great weekend!

Tax News & Views Required Minimum Pie Distribution Roundup

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