At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
If you wish to subscribe and gain access to all articles on the site, be sure to check out the benefits of doing so here!
Check out what’s happening all around the world of tax!
In The Headlines
- Beyoncé is in the business of helping her fans smell great—with the release of her newest perfume. After a 10-year pause in additions to her fragrance line, the famed singer announced a new scent that will cost $160 a bottle. The star first launched her perfume business in 2004, around the same time as other entrepreneurial pop stars like Britney Spears, Jennifer Lopez, and Jessica Simpson.
- The investigation of Hunter Biden will tap two senior IRS officials for their testimony. The officials will be questioned about a meeting where a previous attorney investigating Hunter Biden allegedly said he did not have the authority to bring charges against the president’s son. An IRS whistleblower claimed that the Department of Justice would not allow Hunter Biden to be charged in Washington D.C. or California, his most recent places of residence. This development comes after a Delaware judge recently dismissed misdemeanor charges against Hunter Biden.
- Celebrities are now seeking your endorsement… on LinkedIn. The Financial Times reports that more stars are looking to build a business-centered social media following. Ryan Reynolds was recently highlighted as a stand-out account with over 2.5 million followers. Jennifer Lopez is also active on the platform with 400,000 followers. Within the past five years, there has also been a 37% increase in professional sports players joining the networking site, likely looking to distinguish themselves as influencers.
What's New In The Tax World?
Tax code revamps are a key talking point for 2024 presidential candidates
Even tax laws can have expiration dates—and a major one is drawing near in 2025 as the changes introduced by the Tax Cuts and Jobs Act of 2017 come to an end. This means that the next U.S. president will likely take office amid fervent budget debates as Congress decides whether to extend certain tax breaks or revise them altogether. As the current individual tax rates expire, lawmakers will also be revisiting the debt limit and deciding whether to raise it.
As 2024 campaign efforts ramp up, President Joe Biden has repeated his promise from 2020 that no taxpayers earning less than $400,000 will see a tax hike. Moves to tax the wealthy have generally received support from both Democrats and Republicans, according to recent polls. Biden most recently proposed reverting the top individual tax rate back to the 2017 rate of 39.6%, up from the current rate of 37%. Other measures to reduce the national deficit may include increasing corporate tax rates and capital gains taxes and eliminating tax breaks for fossil fuel companies. The “billionaire tax” has also been a talking point for President Biden. This 25% minimum tax would be applied to unrealized capital gains for taxpayers with a net worth of $100 million or higher.
On the other side of the aisle, Republican candidates mostly agree that extending the 2017 tax cuts is a priority. Donald Trump, Ron DeSantis, and Mike Pence have all spoken in favor of this. In order to extend these cuts, Republican presidential hopefuls will need a plan for reducing federal spending to cover the cost, which is estimated to total $3.6 trillion over the next 10 years. Candidates will also have to answer to their constituents, since about 43% of Republican voters feel that wealthier Americans do not pay their fair share of taxes, according to a recent poll.
One topic liberals and conservatives seem to agree on is preserving Medicare and Social Security payments. Most other issues continue to be divided along party lines, such as setting amounts for the Child Tax Credit and the standard deduction.
State-By-State Updates
- A new tax in Jacksonville, Florida would raise funds for homeless and domestic violence victims. To fund these social services, the bill introduces a 1% tax on food and beverage sold at all restaurants that serve alcohol. The proposal would also impose a 2% tax on food and beverage sold at hotels and motels, which would fund tourism promotion for Jacksonville. A similar tax exists in Miami-Dade County and currently generates $40 million a year. Some restaurant owners have expressed concern about the new tax given ongoing inflation, labor shortages, and the after-effects of COVID-19.
- Minnesota residents are receiving a happy tax surprise in the form of income tax rebates. The rebates are part of a plan to return some of the state’s $17.6 billion budget surplus to lower and middle income taxpayers. Single filers with an adjusted gross income of $75,000 or less received rebates of $260 each, while married couples filing jointly who earned less than $150,000 received $520. Families received up to $1,300 depending on the number of dependents in their household. The state is still awaiting a final ruling from the IRS on whether the rebates will be taxable.
- As many as 140,000 Maryland taxpayers may be eligible for overlooked tax credits. These “forgotten” credits include the Homeowners’ Property Tax Credit program and the Renters’ Property Tax Credit. To qualify, homeowners and renters must meet certain age, income, or other legal requirements. In 2021, over 37,000 homeowners received an average tax credit of $1,501, and renters received an average of $450. Taxpayers must apply every year to receive the credit, and the credit will come via a refund check. This year’s deadline is October 1st.
- North Dakota’s FARGODOME could receive a $131 million facelift if taxpayers vote on “yes” on a tax increase. The stadium hosts around 3,000 events per year, such as NDSU football, major concerts, and regional sporting events. Proposed renovations on the 31-year-old building include more restrooms, meeting rooms, elevators, and accessible seating, as well as expanded space on the concourse. To enable these changes, $30 million will be taken from the FARGODOME’s permanent fund, and the rest would be funded by an increase to the city’s sales tax and lodging tax—if this measure is approved in the special election on December 5th.
Tax Planning Tips
The new 1% stock buyback tax adds up to $3.5 billion for the largest U.S. companies. Implemented at the start of 2023, the stock buyback tax was a late addition to the Inflation Reduction Act. The levy applies to net buybacks, which is equal to the total shares a company repurchases minus new shares issued during the year. The underlying goal is to make taxation for buybacks more comparable to dividends and other means of returning investments to shareholders.
So far, the tax has not significantly slowed down company buybacks. In the first quarter of 2023, the tax collected $1.98 billion from S&P 500 companies. That number dropped in the second quarter to $1.6 billion, but this still amounts to 0.34% of companies’ collective operating income. Over the next decade, the tax is projected to raise $74 billion that will go toward expanded federal programs.
For now, the IRS has suspended reporting and payment requirements related to this tax until the agency is ready to publish guidance. This means companies will owe the 1% tax but will not have to pay it until the IRS provides more information. By the time this happens, the buyback tax could see an increase. President Biden has already suggested quadrupling the rate, and a group of Democratic senators proposed a bill in this vein. However, analysts say that given the divisions in Congress, a compromise of around 2% is more likely to be approved.
When should taxpayers have to report Venmo and PayPal payments? The debate continues. The American Rescue Plan Act of 2021 significantly changed the threshold for reporting. Previously, taxpayers only had to report yearly totals over $20,000 and more than 200 transactions—now total payments over $600 must be reported, even if that amounts to a single transaction. Companies like Venmo, PayPal, and ecommerce sites like eBay or Etsy will have to send 1099-K forms to all taxpayers who meet this threshold.
A number of lawmakers are proposing changes to this rule, hoping to get a new threshold approved before the end of the tax year. The House Ways and Means Committee has put forth legislation to shift the thresholds back to the 2022 levels, and a bill introduced in the Senate would lower the reporting amount to $10,000.
With the rise of the gig economy, form 1099-K has come under increased scrutiny. Though the reporting requirements do not apply to personal transfers, such as sending a friend or family member money, many have expressed concern that taxpayers could easily receive a 1099-K by mistake and have to spend time untangling messes. The American Institute of CPAs issued a statement agreeing that the new, lower threshold could cause undue stress and confusion and supporting a higher threshold.
Even amid the pushback, tax laws may not change before 2024, so experts recommend preparing your tax documentation if you are likely to receive a 1099-K. Regardless of the rules for third-party payments, business transactions overall remain taxable.
NOT A MEMBER YET?
SUBSCRIBE TO GET ALL OF OUR
GREAT ARTICLES AND RESOURCES!
CURRENT EDITION
Building a Strong Personal Brand as an Accountant: Strategies for Success
What is a personal brand?
If you asked me that question in 2018, I would not know how to answer it.
As I embarked on my journey to entrepreneurship, I took on any accounting-related project that came my way. I had yet to learn about the meaning of a personal brand. Fast forward to 2020, I launched my CPA firm just before the COVID shutdown. While established CPA firms could sustain or pivot to new services, I still had to figure out how to get clients, build my online presence, and establish trust to create my brand.
I learned on my journey that in today’s competitive landscape, a personal brand has become more critical than ever. Professional success is directly related to one’s brand, especially in service-based industries such as accounting. Surveys show that more business owners and young entrepreneurs are looking for accountants they can rely on for not only their technical skills and qualifications but also for a personal connection. Therefore, creating a solid personal brand distinguishes accountants from the rest of the crowd, enhances their credibility, fosters loyalty, and opens doors for new opportunities.
I will share my experience, dive into the significance of a personal brand for accountants, and provide actionable strategies to help you build a solid personal brand that resonates with your target audience.
Salt Miner’s Run for the Roses Ends with a Big Tax Bill
Judge Mark Holmes of the United States Tax Court expressed admiration for the achievements of Joseph G. Bucci Sr. whose American Rock Salt provides the salt to keep many of the streets in the Northeast passable in the winter. You can learn a bit about that from an interview in New York by Adriane Quinlan . The positive remarks were no help in the ultimate result. Judge Holmes agreed with the IRS that Bucci’s three side hustles — a real estate enterprise, a farm, and some racing horses — were “Activities not engaged in for profit” making losses unallowable. The total tab including accuracy penalties for 2016 and 2017 was $711,980. Judge Holmes explained the result in a bench opinion, which is less formal than a memo decision. The trial began in Buffalo on June 14, 2023.
Injured Spouse Relief
“It feels like a sucker punch to the gut.”
I was on the phone with a client who was a newlywed and filing with their new spouse for the first time. They kept their paycheck withholding as single. So, they were anticipating a larger than usual tax refund.
Like a lot of taxpayers, they spent their refund before they even received it. Each day, they were checking “Where is My Refund ?” and even their IRS account. Then, it happened.
Code 898: Refund applied to non-IRS debt .
It looked as if they wouldn’t receive that refund they already spent. Now, my client did not know what to do. Before getting married, my client’s spouse told them, “I never get a tax refund.”
But they failed to mention why they never got a refund. Honestly, they did not know what their refund was paying for. We later found out that each year the Treasury Department garnished the refund for back child support. My client knew their spouse had child support but did not know they were behind on it.
If you have a client in this situation, all hope is not gone. I could help my client find out what offset the tax refund. We could also get a portion of the refund back.
You can do the same thing for your client. That is assuming that one spouse is not liable for the debt that offset the tax refund. The IRS calls this injured spouse relief.
I’ll walk you through how you can help your client with their refund garnishment sucker punch. Yes, you can help them get their part of the refund back. Let’s start with what injured spouse relief is. Then we’ll look at who qualifies as an injured spouse and how to request injured spouse relief.