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I came across a recent case (Gericke v Truist, No. 20-3053 (DC NJ 3/26/21)) that once again highlights the mismatch between the law on Form 1099-C, Cancellation of Debt, issuance and when a debt is actually discharged.  The District Court of New Jersey issued a ruling that reminds us all (again) that getting a Form 1099-C doesn’t mean that the debt was discharged, it just means the lender met one of the seven requirements of the regulations under Section 6050P to issue a 1099-C. So, when a borrower receives a Form 1099-C it is not necessarily clear that…
Happy Earth Day!  I hope we treat everyday as Earth Day. Before getting to taxes, I have to note anytime I mention Earth Day that is was created in 1970 by Gaylord Nelson who was later a senator and governor from Wisconsin. But, he is an alum of San Jose State University! Our federal income tax is an odd and unfortunate mix of incentives for oil and gas (such as benefits for intangible drilling costs) and incentives for clean or alternative energy such as a vehicle credit for hybrid and electric cars among other credits. Thus, our income tax…
Our expectations for what technology can do to improve our experiences with shopping, banking, communication, entertainment and more seems to not exist for filing our income tax returns by April 15 each year. Technology exists, along with security measures already in place and more that can be added, to eliminate the need to even have a due date or get a return filed with the IRS (or state). I’ve been writing and speaking about this since at least summer 2018. This week I have an op ed explaining how we could have just-in-time income tax filings and payments and eliminate…
Today (April 13, 2021) the Senate Finance Committee held a hearing on The 2021 Filing Season and 21st Century IRS.  The sole witness was IRS Commissioner Charles Rettig.  There are three takeaways I want to share: 1. The IRS is Overburdened! I encourage you to at least skim Commissioner Rettig’s written testimony. He lays out numerous challenges that that IRS has faced for years and even more due to COVID-19 tax law changes. Consider the three rounds of Economic Impact Payments they had to issue while sheltering in place (each round went to about 160 million individuals), new…
We are in tough times! The pandemic is in it’s second year and the March 13, 2020 disaster declaration is still in effect. The American Rescue Plan Act of 2021 signed into law on March 11, 2021 is the 5th major piece of COVID-19 relief enacted since mid-March 2020. The tax changes in these laws are numerous and complex in terms of new definitions, special rules, confusing interaction with other rules, and being effective before IRS can get adequate guidance released. The IRS could not even open the 2021 filing season until February 12 – later than usual. The IRS…
The American Rescue Plan Act of 2021 (P.L. 117-2; H.R. 1319; 3/11/21) provides a variety of financial and other relief for COVID-19 problems. Most of the changes are only for 2021.  At least two are for 2020 and mean that the IRS has to update forms and computer systems and get information out to taxpayers quickly including what to do if you already filed your return.  These two changes for 2020: $10,200 of unemployment compensation receivd in 2020 is non-taxable if the taxpayer’s AGI is under $150,000 (if MFJ and both spouses received such comp, each get to…
Figure from Appendix of CBO Report (Feb 2021) On February 11, 2021, the Congressional Budget Office (CBO) released: The Budget and Economic Outlook: 2021 to 2031. It is grim as CBO estimates that the federal budget deficit for FY 2021 will be $2.3 trillion. But, that is $900 billion less than for 2020. The 2021 deficit is the second largest since 1945 (WWII) based on the deficit as a percent of GDP. Something else interesting in the report is an appendix on tax expenditures. Tax expenditures are spending that exists in the tax law. For example, the American Opportunity…
My latest Moving Forward? article for Tax Notes State is: Suggestions for Pandemic State Tax Policy Endurance (12/17/20). I include a variety of suggestions to help individuals, businesses and state and local governments. I hope you’ll take a look – here. Examples: Federally-declared disasters such as the COVID-19 pandemic allow the IRS to extend due datesfor tax returns and tax payments. Last year, the result was a July 15 due date rather than April 15. Most states followed suit. But a big deal for states is that their fiscal years end June 30. The shift of payments to the…
We have a few proposed changes under consideration that very much need a deep policy discussion rather than only a cost estimate and a general like or dislike. Here are three such items: 1. What is an appropriate phase-out rule for the next economic impact payments? The current ones cause a credit to still be allowed for high income taxpayers who have a few children. The CASH Act (H.R. 9051; 116th Congress) that the House passed late 2020, called for EIP of $2,000 including for dependents. If a married couple has 4 dependents, they credit would be $12,000.…
To help figure out all of the COVID-19 tax law changes enacted since March 2020, we have seen a variety of guidance from the IRS. This includes FAQs and some items just posted to an IRS website. These are non-binding items. Some guidance was published in the weekly Internal Revenue Bulletin (revenue rulings, revenue procedure, notices and announcements) so is binding on the IRS. Since these changes mostly expired in less than one year, there wasn’t time for public comment and binding guidance for everything. Taxpayers and practitioners wanted insights as quickly as possible. But what about other tax…