Monthly Archives: April 2022

President Joe Biden’s 2023 federal budget, released Monday April 25, 2022, proposes tax hikes on the ultra-wealthy and corporations while providing billions of dollars in new spending for the Defense Department and the Justice Department.

The proposal sent to Congress touts a reduction in the federal budget deficit of more than $1 trillion over the next 10 years. 

This is paid for, in part, by raising the corporate tax rate from 21% up to 28%, a rate favored by progressive Democrats but opposed by key moderates. Biden also proposes a new 20% minimum tax on the top 0.01% of earners and households worth more than $100 million.

Key revenue raisers:  (Total -$2,545 billion)

1. Raise the corporate tax rate from its current rate of 21% to 28%. 
2. Raise the top individual tax bracket to 39.6%.
3. Impose a 20% minimum tax on the top 0.01% of earners and households worth more than $100 million, the so-called the Billionaire Minimum Tax.
4. Repeal several tax breaks for oil and gas producers and processors.
5. Tax carried interest as regular income, closing the so-called carried interest loophole. and
6. End tax deferrals on the gains from like-kind exchanges.

Increase Taxes on Corporations (-$1,555 billion). The President's budget would raise the corporate income tax rate from 21 percent to 28 percent. This proposal is inclusive of a 20 percent minimum tax (up from 10.5 percent today) on foreign-earned Global Intangible Low-Based Tax Income. The budget would also reform the taxation of foreign business income by incorporating global efforts to combat corporate tax avoidance. 

Increase Taxes on High-Income Households (-$780 billion). The President's budget would increase the top individual income tax rate from 37 percent to 39.6 percent - the top income tax rate prior to the enactment of the Tax Cuts and Jobs Act. It would also establish a 20 percent minimum tax on households with assets worth $100 million or more, tax capital gains as ordinary income for high-income earners, and tax gains at death. Moreover, the budget would close several Estate Tax loopholes by changing rules for certain trusts, improving estate tax administration, improving the valuation of assets, and tightening other exemptions. 

Other Revenue Increases (-$215 billion). The President's budget would close several tax loopholes, including taxing carried interest as ordinary income and repealing "like-kind exchange" rules that allow real estate investors to avoid paying capital gains taxes, among other tax changes. It also proposes reforms to improve tax administration and compliance and would eliminate several fossil fuel tax preferences, such as the expensing of intangible drilling costs. 

 Have an IRS Tax Problem? 

 

   
Contact the Tax Lawyers at 

Marini & Associates, P.A. 

 

 

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

 

Source

Committee for a Responsible Federal Budget

Read more at: Tax Times blog

A "start-stop" approach to congressional funding of the IRS has starved the agency of sustained, long-term investment needed to upgrade its technology systems, and this has contributed to ongoing delays in tax return processing, IRS Commissioner Chuck Rettig told lawmakers.

Having information technology dating back to the 1960s and '70s has meant that his agency must rely on paper-based processes, Rettig testified at an April 21 hearing of the House of Representatives Oversight and Reform subcommittee on government operations. The use of paper processes has exacerbated delays in the IRS's efforts to surmount a backlog of current- and prior-year returns as well as correspondence with taxpayers, millions of whom have been unable to learn the status of their refunds and other matters.

The IRS, along with other parts of the U.S. government, has endured more than 100 continuing resolutions, Congress' method of short-term government funding since 2001, Rettig pointed out to the subcommittee.

"It Is Virtually Impossible For Any Agency, Any Organization, Any Private Sector Organization, To Build Out A Robust, Meaningful Technology Infrastructure With The Start-Stop Going On Like That," He Said.

He further explained that the IRS received its omnibus budget on March 15, leaving just six months in the current federal fiscal year for the agency to use those IT funds.

Also testifying at the subcommittee hearing was National Taxpayer Advocate Erin Collins, who said taxpayers in 2022 are experiencing many of the same challenges the faced last year: delays in processing returns and correspondence with the IRS and difficulty reaching the IRS by phone. Collins added that new digital tools implemented by the IRS for tracking refunds and amended returns have been unable to give taxpayers the information they seek.

Repeating An Observation From Her 2021 Annual Report To Congress, Collins Said The IRS's Continued Reliance On Paper Remains "Kryptonite" To The Agency.

It received almost 170 million individual income tax returns last year, about 10% of which were filed on paper forms, she pointed out.

"Last year, the IRS received about 17 million original paper individual returns, and those processing delays are now running up to 12 months," the taxpayer advocate testified. 

Collins Said About 3 Million Individual And Business Returns And About 3.6 Million Amended Returns Await Processing

From The 2020 Tax Year And Another 9 Million
Paper Returns Filed For 2021.

Over the past two years, the IRS's backlog of unprocessed returns and pending correspondence "has snowballed," she said. "The IRS needs to get current on the inventory and get out of the hole it finds itself in."

In 2021, Collins said, only 32 million of 282 million calls from taxpayers were answered by an IRS employee or contractor.

Members of subcommittee took to partisan bickering at the hearing over whether ensuring multiyear funding for the IRS, a request repeatedly made by Rettig and his predecessors would solve the agency's problems with outdated technology and difficulty meeting taxpayer needs. Democrats on the subcommittee, led by its chairman, Rep. Gerry Connolly (D-VA), agreed that the agency requires more funding and blamed its woes on chronic cuts by past Republican majorities in the House and Senate.

Rep. Jody Hice of Georgia, the ranking Republican on the subcommittee, questioned why earlier efforts to modernize the IRS hadn't yielded better results. He pressed Rettig to explain how additional funding from Congress would improve the agency's systems.

 Have an IRS Tax Problem? 

 

   
Contact the Tax Lawyers at 

Marini & Associates, P.A. 

 

 

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

 

Read more at: Tax Times blog

The Infrastructure Investment and Jobs Act of 2021 (IIJA) was signed into law on Nov. 15, 2021. The IIJA includes IRS information reporting requirements that will require cryptocurrency exchanges to perform intermediary Form 1099 reporting for cryptocurrency transactions. Generally, these rules will apply to digital asset transactions starting in 2023.

Currently if you have a stock brokerage account, then whenever you sell stock or other securities you receive a Form 1099-B at the end of the year. Your broker uses that form to report details of transactions such as sale proceeds, relevant dates, your tax basis for the sale, and the character of gains or losses. Furthermore, if you transfer stock from one broker to another broker, then the old broker is required to furnish a statement with relevant information, such as tax basis, to the new broker.

The IIJA expands the definition of brokers who must furnish Forms 1099-B to include businesses that are responsible for regularly providing any service accomplishing transfers of digital assets on behalf of another person ("Crypto Exchanges"). Thus, any platform on which you can buy and sell cryptocurrency will be required to report digital asset transactions to you and the IRS at the end of each year.

Sometimes you may have a transfer transaction that is not a sale or exchange. For example, if you transfer cryptocurrency from your wallet at one Crypto Exchange to your wallet at another Crypto Exchange, the transaction is not a sale or exchange. For that type of transfer, as with stock, the old Crypto Exchange will be required to furnish relevant digital asset information to the new Crypto Exchange. Additionally, if the transfer is to an account maintained by a party that is not a Crypto Exchange (or broker), the IIJA requires the old Crypto Exchange to file a return with the IRS. It is anticipated that such return will include generally the same information that is furnished in a broker-to-broker transfer.

For the reporting requirements, a "digital asset" is any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology. Furthermore, the IRS can modify this definition. As it stands, the definition will capture most cryptocurrencies as well as potentially include some non-fungible tokens (NFTs) that are using blockchain technology for one-of-a-kind assets like digital artwork.

Furthermore, when a business receives $10,000 or more in cash in a transaction, that business is required to report the transaction, including the identity of the person from whom the cash was received, to the IRS on Form 8300. The IIJA will require businesses to treat digital assets like cash for purposes of this reporting requirement.

These digital asset reporting rules will apply to information reporting that is due after December 31, 2023. For Form 1099-B reporting, this means that applicable transactions occurring after January 1, 2023 will be reported. Whether the IRS will refine the Form 1099-B for digital asset nuances, or come up with an entirely new form, is yet to be seen. Form 8300 reporting of cash transactions will presumably follow the same effective dates.

Some things to keep in mind: 

1. If you use a Crypto Exchange, and it has not already collected a Form W-9 from you (seeking your taxpayer identification number), expect it to do so. 
2. The transactions subject to the reporting will include not only selling cryptocurrencies for fiat currencies (like U.S. dollars), but also exchanging cryptocurrencies for other cryptocurrencies. 
3. A reporting intermediary does not always have perfect information, especially when it comes to an entirely new type of reporting. 

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at

Marini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243). 

Read more at: Tax Times blog

In Jones (CA9 2/03/2022) 129 AFTR 2d ¶2022-380, another innocent spouse was found to be not so innocent and is was decided that the Tax Court properly determined that a taxpayer's joint return was valid and she wasn't entitled to innocent spouse relief. The Tax Court's determination that the taxpayer consented to filing a joint return was supported by the record, according to the Ninth Circuit.

Innocent spouse relief. Generally, married individuals can file joint returns with their spouses. Spouses who file joint returns are jointly and severally liable for the tax liability reported on that return. However, an individual who has filed a joint return may seek relief from that joint liability under the innocent spouse procedures. 

To be relieved of a tax liability on a joint return, a spouse seeking relief must, among other things, prove that when they signed the return (1) they didn't know and had no reason to know of the tax liability, and (2) they didn't have reason to know that their spouse wouldn't pay the tax due.

Lindsey Jones Argued That Her 2010 Joint Return, Which Was Filed After Her Divorce From Her Husband In November 2012 Was Invalid Because She Didn’t Consent To Filing A Joint Return And Her Ex-Husband Signed Her Name
To The Joint Return Without Her Consent. 

However, the Tax Court found that even though Jones didn't sign the 2010 joint return, she consented to her former husband signing and filing it because: 

1.      she provided her ex-spouse with her W-2s and other tax information,

2.      she failed to file a separate income tax return, and

3.      she also allowed her current spouse to sign her name to their joint tax return. (Jones, TC Memo 2019-139)

The Ninth Circuit agreed that Jones was not entitled to innocent-spouse relief. The Tax Court properly determined that Jones's 2010 joint return was valid and she wasn't entitled to innocent- spouse relief, the Ninth Circuit held.

According to the Appeals Court, the Tax Court's finding that Jones had reason to know that her ex-husband couldn't pay the tax liability reported on their 2010 joint return was supported by the record. 

In addition, given the circumstances (Jones and her ex-husband had to sell their home to satisfy their 2008 tax liability) she should have taken some steps to "assure herself" that the tax liabilities on the 2010 joint return would be paid.

 Have an IRS Tax Problem? 

 

   
Contact the Tax Lawyers at 

Marini & Associates, P.A. 

 

 

for a FREE Tax HELP contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog