Tax News & Views Monitors the Water and the Shutdown Roundup

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Republicans and Democrats dig in as shutdown looms - Jake Sherman, John Bresnahan and Max Cohen, Punchbowl News:

The battle over government funding has turned into this: Each side claims they’re being completely reasonable while blaming their opponents for the looming showdown.

Yet with less than two weeks to go before the funding deadline, Republican and Democratic leaders are growing further apart rather than closer. Both sides seem content to stand pat, even if that leads to a government shutdown on Oct. 1 and a broader political crisis.

...

Democrats are calling for the permanent extension of enhanced Obamacare premium tax credits, in addition to the reversal of huge Medicaid cuts from the One Big Beautiful Bill. Democrats also want to bar any future rescissions and restore public-broadcasting funding.

W&M Advances Bills on Tax Court Procedure and IRS Penalties - Katie Lobosco, Tax Notes ($):

The bill would allow the Tax Court to issue third-party subpoenas before hearings and pretrial conferences. The court has interpreted the current law to mean it may sign those subpoenas only at a scheduled hearing or deposition, according to the Joint Committee on Taxation (JCX-40-25).

The proposal would also allow the Tax Court to waive certain deadlines. It would be granted jurisdiction to toll the 90- or 150-day period for filing a deficiency petition if the court determines that equitable tolling is warranted.

Other changes would expand the types of proceedings that Tax Court special trial judges can hear, allowing them to be assigned to any proceeding within the court’s jurisdiction, while also giving them the authority to order punishment for contempt of court. The bill would also require Tax Court judges to recuse themselves in the same situations in which U.S. district and appellate judges are required to recuse themselves.

House Committee Advances Tax Court, Penalty Approval Bills - Chris Cioffi, Bloomberg ($). "The second bill would specify that required supervisory approval of proposed penalties are timely only if that approval is obtained in writing before the IRS provides written communication about the penalty to the affected taxpayer. It also clarifies who is considered an “immediate supervisor” for purposes of the approval requirements."

Not Every Problem Is A Tax Problem

Reps. Gomez & Menendez Lead Effort to Expand Access to Diaper Changing Stations - Rep. Jimmy Gomez Press Release. "Today, during National Diaper Need Awareness Week, Congressmen Jimmy Gomez (D-CA) and Rob Menendez (D-NJ), joined by Representatives Ryan Mackenzie (R-PA), and Brittany Pettersen (D-CO), introduced the bipartisan Family-Friendly Facilities Tax Credit Act, which incentivizes small businesses nationwide to install diaper changing stations in family restrooms."

IRS Administration Update

IRS Spent $40M On Outdated Computer Systems, TIGTA Says - Anna Scott Farrell, Law360 Tax Authority ($):

A decade-old plan at the Internal Revenue Service to consolidate dozens of computer systems has made little progress, the Treasury Inspector General for Tax Administration said Wednesday, reporting that the agency spent nearly $40 million last year on maintaining outdated systems.

In a report, the agency watchdog said the IRS has not decommissioned any of its legacy systems for managing tax cases since TIGTA flagged a lack of progress on the 2015 modernization project five years ago.

While the agency developed a decommissioning strategy in 2022 in response to that previous TIGTA report, leaders of the "enterprise case management" program designed to consolidate and modernize the systems did not prioritize the decommissioning, TIGTA said. An IRS policy on improving efficiency that was updated in May 2024 no longer includes a process for taking the old case management systems offline, TIGTA said.

I was told DOGE had an app for this.

How IRS Attorney Departures Will Prolong Cases, Spur Settlements - Michael Rapoport, Bloomberg ($). "The diminished resources suggest it’ll take longer to resolve cases, former attorneys and former IRS and DOJ officials say. The IRS may also be pushed into considering settlements in some cases where perhaps it wouldn’t otherwise. That would mean settling cases on less favorable terms for the agency, and potentially give taxpayers a leg up in dealing with the IRS."

The IRS will rely more on automated notices from an outdated and buggy computer system. With fewer and greener IRS humans available, fixing these notices and preventing automated collection action is likely to become more difficult and expensive.

Checks Checking Out

Paper checks going away soon for Social Security, most federal payments - Shannon Najmabadi and Taylor Telford, Washington Post:

The Treasury Department will stop issuing paper checks for tax refunds, Social Security payments and most other federal programs on Sept. 30 as part of an executive order aimed at modernizing the government.

While experts widely agree that electronic payments are faster to process, and less susceptible to fraud and theft than paper checks, advocates who work with the small percentage of those who still receive checks say the change is being rushed out and worry that some beneficiaries won’t learn of it unless their payment doesn’t show up.

More than 5 million people receive physical checks from the government, a group composed largely of seniors, people with disabilities, immigrants and others without bank accounts — “populations that may be more challenged by having to change the way they receive their federal benefits,” said Jennifer Tescher, founder of the nonprofit Financial Health Network.

According to the article, about 94 percent of tax refunds from the most recent filing season were issued electronically, and over 99 percent of Social Security payments.

Tariff Thursday

Trump tariffs could fund bailout for US farmers, says agriculture secretary - Susannah Savage, Financial Times:

The Trump administration is drawing up plans to use tariff revenue to fund a programme to support US farmers as they head into harvest facing falling export sales and rising input costs, agriculture secretary Brooke Rollins said.

“There may be circumstances under which we will be very seriously looking to and announcing a package soon,” Rollins told the Financial Times on Wednesday. “We are reviewing markets every day.”

...

The move follows mounting pressure from farm groups after China curbed purchases of new crop US soyabeans and as tariffs have pushed up costs for fertiliser, machinery and other imported inputs. With the soyabean harvest already under way, farmers warn the crisis is deepening.

Bringing back memories of this from 2018: Trump administration announces $12 billion "bailout" for farmers hit by tariffs,

The New Pitfall of Online Shopping: A Surprise Tariff Bill - Esther Fung, Wall Street Journal:

Anthony DeSousa, a pizza shop owner in Estes Park, Colo., was expecting his annual shipment of oven replacement parts from Canada this month. They were worth around $640. Before delivery, he received an email from UPS, saying that he owed “government charges” of $1,196.12 and “brokerage charges” of $128.17. The bill didn’t break down how the tariffs were calculated.

The email said he could prepay the fees online or pay the UPS carrier when the package was delivered.

“At first I thought it was a scam,” said DeSousa.

Disclosure Down Under

Tax News & Views International Weekly: Tax Transparency in the Outback - Alex Parker, Eide Bailly:

Last year Australia enacted one of the most aggressive international tax transparency reporting rules in the country—and despite strong pushback from many multinational companies and organizations, it is still on track to apply it, effective this year.

The reporting regime is a variation of country-by-country reporting rules that have been used by many jurisdictions, and which were recommended by the Organization for Economic Cooperation and Development in its 2015 Action Plan on Base Erosion and Profit Shifting. The difference is that Australia’s will require public reporting for many (although not all) global jurisdictions, a concept that the business sector has been fighting back since the idea was first suggested decades ago.

This Offer Expires Soon

Grab Your Home Energy Tax Credits While You Still Can - Rachel Wharton, New York Times:

The tax breaks were designed to be available for a decade, but the tax and domestic policy bill that passed in July now terminates them at the end of 2025. To use them, said Noah Goldmann, a policy manager at the energy-efficiency nonprofit Rewiring America, you must buy any new products and have them installed by Dec. 31.

Get it while you can, because the Residential Clean Energy Tax Credit and Energy Efficient Home Improvement Tax Credit, as these programs are known, can save homeowners thousands of dollars.

Blogs and Bits

IRS has updated its online EIN application tool - Kay Bell, Don't Mess With Taxes. "While the online EIN tool has a new look, the IRS says its overall functionality is the same."

The Progressivity of the US Tax Code - William McBride and Nate Scherer, Tax Policy Blog. "The latest IRS tax data reveals that the top 50 percent of US taxpayers paid 97 percent of all federal income taxes in 2022, while the bottom 50 percent paid the other 3 percent. In fact, taxpayers in the bottom 20 percent enjoy a negative effective tax rate, meaning they are eligible to receive more in tax breaks than they owe in taxes, thanks in part to refundable tax credits like the earned income tax credit (EITC)."

IRS Draft Form Confirms Tip Deduction Marriage Penalty - Peter Reilly, Forbes. "Shortly after the release of the One Big Beautiful Bill, I noted an apparent marriage penalty in the No Tax on Tips provision."

State Revenue Departments Issue Urgent Warnings on Phishing Scams - Ed Zollars, Current Federal Tax Developments. "Taxpayers have reported receiving text messages that appear to be from the Minnesota Department of Revenue, asking them to update their banking information."

No Longer Playing in Peoria

Former Peoria store owner convicted of twenty-one felonies after being a fugitive for fifteen years - IRS (Defendant name omitted, emphasis added):

A federal jury returned a guilty verdict at approximately 9:00 pm on September 10, 2025, against Defendant, of Lindenhurst, Illinois, on twenty-one felony offenses for his role in separate but related conspiracies charged in two cases. In the first case, Defendant was convicted of conspiracy to defraud the United States and violate the tax laws, six counts of tax evasion, and nine counts of mail fraud. In the second case, Defendant was convicted of conspiracy to structure financial transactions and four counts of structuring financial transactions to avoid reporting requirements. Sentencing for Defendant has been scheduled on January 8, 2026, at 10:00 am at the U.S. Courthouse in Peoria, Illinois.

Over seven days of testimony, the government presented evidence establishing that Defendant had been the leader of a group of individuals that owned and operated several convenience and liquor stores in the Central District of Illinois. During trial, the government established that Defendant and his cohorts (all of whom had pleaded guilty or been convicted following trial over 15 years ago) kept two sets of books, a true set and a false set, in order to underreport their earnings and pay less state and federal taxes. The government also proved that Defendant structured financial transactions to withdraw more than $4 million in cash without triggering the bank’s reporting requirements.

This case might illustrate two complications that arise for tax cheats. One is the way the banking system is incentivized to flag taxpayers trying to avoid filing Form 8300, required for cash transactions over $10,000.

The other is the inherent problem of keeping two sets of books. When you go to sell out (everybody does some day), you have to explain to the buyer why the numbers you gave the IRS are so much worse than your "real" numbers. This doesn't give the buyer a lot of confidence in either set of numbers. The other problem is your buyer might be an IRS secret shopper, who would find the two sets of books fascinating.

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Tax News & Views Monitors the Water and the Shutdown Roundup

Make a habit of sustained success.

Joe B. Kristan, CPA