Key Takeaways
-
Donald Korb's second act in a diminished IRS.
-
Former IRS Commissioner on IRS tech needs.
-
Trump threatens new tariffs to retaliate for tech taxes.
-
ACA change hits court roadblock.
-
What billionaires pay in taxes.
-
Coffee, Chocolate, Denmark, taxes.
-
Beach House to Big House.
-
National Dog Day.
Top IRS Lawyer Pick Poised for Second Act at Besieged Tax Agency - Erin Schilling And Erin Slowey, Bloomberg ($):
Known as a deft litigator, Korb helped the IRS collect over $3 billion from abusive transactions and aided the Justice Department in pursuing a multibillion-dollar criminal tax fraud case that led to accounting giant KPMG paying $456 million in penalties.
Now, Korb is poised to return to the agency, where he could face a new wave of aggressive tax planning expected by some professionals. This time around, the Trump administration has prodded out about a quarter of the IRS workforce, and the agency is without most of its top brass, as well as a commissioner after the president removed Billy Long this month. Republicans have been clawing back billions the agency got to step up enforcement, suggesting it won’t be the highest priority.
Will budget, staff cuts impede IRS modernization? Former commissioner weighs in - Martha Waggoner, The Tax Adviser:
Werfel, who resigned in January ahead of President Donald Trump’s inauguration after almost two years as commissioner, said during Thursday’s AICPA Town Hall webcast that the IRS has not released its modernization plan, so it’s hard to judge what it can do under new budgetary and staffing constraints.
...
“I suppose that with even on a smaller budget footprint, you could outfit some important and fundamental technology changes that will make up for lost staff and benefit all taxpayers with better service, better enforcement, and better data security, and other infrastructure needs,” he said. “But we haven’t seen that plan.”
Tariffs and Trade
US Takes Steps to Hit India With 50% Tariff From Wednesday - Justin Sink, Bloomberg via MSN:
The notice posted by the Department of Homeland Security said that the increased levies would hit Indian products “that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on August 27, 2025.”
Trump Threatens New Tariffs on Countries That Tax Tech Companies - Gavin Bade and Amrith Ramkumar, Wall Street Journal:
...
Although Trump has at times clashed with big tech companies over censorship and other domestic issues, his administration has taken up their cause across a number of trade negotiations.
Trump and his team have long opposed proposals from the European Union, Canada and other nations to regulate and tax tech firms and web platforms—many of which are American. Earlier this year, he threatened higher tariffs on Canada, forcing it to back away from a digital tax proposal, and initiated a tariff investigation in response to Brazilian tech laws. European digital policies have also been a key issue in trade negotiations between Washington and Brussels, and the recent tariff deal between the economies appeared to leave the issue unresolved.
Temu resumes direct shipping from China to US after Trump truce - William Langley and Zijing Wu, Financial Times:
“Because of across-the-board tariff increases . . . even regular brands and retailers have to increase their price substantially,” said Sheng Lu, a fashion industry professor at the University of Delaware. “This will reduce the price pressure facing Temu and Shein.”
...
A person familiar with Temu’s operations said the company had also observed how rival Shein, which has a subsidiary to handle cross-border logistics including customs clearing, was able to increase revenue and remain profitable in the US after Trump cancelled the de minimis exemption.
Arm's Length and Strong Arms: The Geopolitical Elements of Transfer Pricing - Chad Martin, Eide Bailly. "Transfer pricing can be a tool of economic statecraft. A prime example is US tariff policy, where transfer pricing is both a planning opportunity for mitigating tariff costs and a means for tax administrations to retaliate against such other countries' policies."
Courtroom Tax: ACA Changes Hit Court Roadblock
Federal Court Blocks Most New Tax-Related Changes to ACA - Trevor Sikes, Tax Notes ($):
...
The HHS rule would implement a “failure to file and reconcile” policy that a return filer is ineligible for an advance premium tax credit (APTC) if they received an APTC in the prior year and failed to file a tax return and reconcile the APTC for the relevant year.
The plaintiffs claimed that the government doesn’t have authority under the ACA statute to “condition eligibility for a tax credit on the reconciliation of old tax debts.” Hurson agreed, noting that the statute doesn’t address a prior tax debt’s effect on APTC eligibility.
Somewhat related: Eide Bailly Affordable Care Act Compliance & Consulting.
OBBBA: Built to Last?
Why OBBBA’s Permanent Tax Provisions May Not Last Forever - Katie Lobosco, Tax Notes ($):
But the bill, signed into law by President Trump July 4, was passed without any Democratic votes, and the provisions could be rewritten should the party return to power in Washington.
Concerns about the deficit could also be a factor in reversing some of the tax breaks
OBBBA Includes 2 Marriage Penalties, 1 Neutral, and 1 Marriage Bonus - Annette Nellen, 21st Century Taxation. "So, why was the OBBBA deduction for overtime income written differently for married couples than the tip income deduction? Drafting error? Purposeful?"
Taxing at the Top
The Tax That Billionaires Actually Pay - Richard Rubin, Wall Street Journal:
A new study estimates that nearly 40% of the taxes paid by the 400 wealthiest Americans from 2018 to 2020 came from corporate taxes.
...
The study, conducted with access to anonymized Internal Revenue Service data, attempts to create a comprehensive estimate of income and taxes for the very small group of people on the Forbes 400 list of the wealthiest Americans. It finds that they paid 23.8% of their economic income in taxes from 2018 to 2020. Of those taxes, 37% come through corporate taxes, with the bulk of the rest from individual income and payroll taxes.
Tyler Cowen, quoting from the study:
Readers might recall the Biden administration claim that the rate on top taxpayers was 8.2%.
Comment on "How Much Tax Do Billionaires Pay?" - David Splinter. "End-of-life giving suggests long-run top 400 effective tax-and-giving rates could exceed 75%."
The Kindest Tax Cut of All?
Inflation Sweetener? Denmark Plans Tax Cut on Chocolate and Coffee. - Jenny Gross, New York Times:
...
Coffee consumption in Scandinavia is among the highest in Europe, and it’s not unusual for Danish people to drink “aftenkaffe,” or evening coffee. In Denmark, Sweden and Norway, people consume about three cups of coffee a day, only slightly less than in Finland, where people drink about 3.5 cups per day, according to Kaffe Information, a website about coffee drinking habits.
Three cups is a good start.
Blogs and Bits
IRS tweaks EV tax credit’s Sept. 30 ending date - Kay Bell, Don't Mess With Taxes. "Now, simply signing a contract for and making a down payment on an EV is sufficient to qualify for the tax credit."
Summer Weddings and Tax-Deductible Expenses - Ashley Akin, Tax School Blog. "Clients should be aware that fees for services or goods are not tax-deductible, but donations in excess of the fair market value (FMV) of the benefit received are."
Reckoning with Fiscal Reality - Romina Boccia, The Debt Dispatch. "Delay has serious cost implications as every dollar in additional debt adds to ballooning interest costs and every year of delay in reforming Social Security and Medicare – two key drivers of US debt growth – inflates those programs’ long-term spending burdens. Americans will pay for Congress’s unsustainable giveaways and reform cowardice—if not through higher taxes, then by means of inflation."
From Boats and Beach Houses to the Big House
Summerfield Man Sentenced to 19 Years for Ponzi Scheme and Tax Fraud - US Department of Justice (Defendant name omitted, emphasis added):
According to court records, from November 2017 to December 2023, Defendant defrauded at least 117 investors of at least $24 million. He induced victims to invest with his company Chadley Capital, LLC which would allegedly buy accounts receivable at a discount, sell them for a profit, and provide consistently high rates of return on investment. Defendant touted the company’s increasing deal flow and underwriting standards and, in offering materials, claimed $300 million in transactions in 2023, consistent returns in excess of 20% per year, and nearly 74% total growth over 24 months. All of Defendant’s representations were false. Instead of investing victims’ funds as promised, Defendant used their money to pay his personal expenses including the purchases of a boat, a beach house, and luxury cars, payments on his personal credit cards, and to make “interest” and “withdrawal” payments to other victim-investors as part of the Ponzi scheme.
In addition, for Tax Years 2018 through 2022, Defendant willfully failed to report nearly $9 million in income to the Internal Revenue Service (IRS) and evaded over $3 million in taxes. According to court records, Defendant maintained a shell business entity, funded in part by Chadley Capital, LLC victim funds, to support his personal lifestyle. Defendant claimed payments into this shell business entity as business expenses but lied to his accountant about the existence of any corresponding reportable income. Defendant also falsely reported his personal spending from Chadley Capital, LLC as business expenses. Finally, Defendant willfully failed to file Forms 1040, U.S. Individual Income Tax Return, for the tax years 2018, 2020, 2021, and 2022.
This is a YOLO fraud scheme. A Ponzi scheme eventually falls apart. Failing to file returns when you are spending that kind of money tickles IRS antennae. But a lot of people lost a lot of money along the way. You can read details of the case at fraudswatch.com. Be very wary of anybody offering "safe, above market" investment returns. And file all of your returns on time.
Related: Eide Bailly Fraud Prevention and Detection Services.
What Day is it?
It's National Dog Day. Celebrate the noble canine with a belly rub and a treat!
We're Here to Help
