U.S. Treasury Department

Head-Scratchers

The Code is chock-full of provisions that will challenge the intellectual capacity, not to mention the patience, of most tax professionals. The complexity of these rules does not arise out of some sadistic intent on the part of Congress, the Treasury, or the IRS to torment taxpayers and their advisers;[i] rather, it is often a reaction to, and a direct function of, the complicated, multifaceted schemes that many of those very same taxpayers and advisers devise with the intent of reducing the taxpayer’s income tax liability.…

Continue Reading Bona Fide Intercompany Loan – Are you Sure?

Extra, Extra![i]

Last Friday afternoon, as millions of unsuspecting Americans prepared for the long Memorial Day weekend[ii] – for many, perhaps, their first mask-less holiday celebration in almost 15 months – the Biden Administration released its 114-page “Green Book” for the federal government’s 2022 fiscal year.[iii]…

Continue Reading The Biden Administration’s Revenue Proposals for Fiscal Year 2022: Tax Increases and Forced Recognition of Capital Gains

Tax Gap

In a report released last week, the U.S. Treasury Department explained that the so-called “tax gap” – i.e., the difference between the amount of federal income taxes owed by taxpayers for a taxable year and the amount actually paid for such year – “disproportionately benefits high earners who accrue more of their income from non-labor sources where misrepresenting is common.”[i]

According to the report, the largest contributors to this shortfall are the underreporting of income and the overclaiming of deductions on tax returns. These practices, the report continues, are prevalent among higher-income taxpayers with “opaque income sources,” among which the report includes sole proprietorships, partnerships and S corporations, rental real estate, and small C corporations;[ii] in other words, the owners of closely held businesses.

The President is relying upon the data in the Treasury’s report to pressure Congress into closing the tax gap, in part, by increasing the IRS’s enforcement capabilities, requiring more information reporting with respect to “opaque income streams,” and regulating tax return preparers.[iii]…

Continue Reading “Opaque Income Sources” + “Tax Gap” = More Enforcement + Tax Hikes = Anyone’s Guess