Bill introduced to ease passthrough entity tax June 15 prepayment requirement

The chair of the California Senate’s Revenue and Taxation Committee, Senator Steve Glazer, has introduced California SB 1501, which would allow entities to qualify to make the passthrough entity tax election even if they do not satisfy the June 15 prepayment requirement.

If enacted, SB 1501 would, retroactive to taxable years beginning on or after January 1, 2024, authorize a qualified passthrough entity (partnership, S corporation, or LLC taxed as a partnership or S corporation) to make a passthrough entity tax election without making the requisite June 15 prepayment, but only if the taxpayer pays a penalty equal to 5% of the elective tax due plus interest. The penalty would have to be paid by the due date of the original return without regard to any extensions.

This bill, if enacted, would provide welcome relief to many taxpayers who may have inadvertently failed to satisfy the June 15 prepayment requirement.

Taxpayers and tax professionals who would like to see this bill passed should contact their legislators.

The text of the bill is available at:

https://go.spidell.com/e/837113/-xhtml-bill-id-202320240SB1501/5wz2gv/1964523670/h/gPH614v58jb5H0l_sigoyfmIUDN5GtyGs2Bua0a0ANk


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2024-11: Bill introduced to ease passthrough entity tax June 15 prepayment requirement

The chair of the California Senate’s Revenue and Taxation Committee, Senator Steve Glazer, has introduced California SB 1501, which would allow entities to qualify to make the passthrough entity tax election even if they do not satisfy the June 15 prepayment requirement.

If enacted, SB 1501 would, retroactive to taxable years beginning on or after January 1, 2024, authorize a qualified passthrough entity (partnership, S corporation, or LLC taxed as a partnership or S corporation) to make a passthrough entity tax election without making the requisite June 15 prepayment, but only if the taxpayer pays a penalty equal to 5% of the elective tax due plus interest. The penalty would have to be paid by the due date of the original return without regard to any extensions.

This bill, if enacted, would provide welcome relief to many taxpayers who may have inadvertently failed to satisfy the June 15 prepayment requirement.

Taxpayers and tax professionals who would like to see this bill passed should contact their legislators.

The text of the bill is available at:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB1501


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Another failed attempt to block application of AB 5 to trucking

A federal district court judge dismissed the California Trucking Association’s case against the application of AB 5 and the ABC worker classification test to the trucking industry. (California Trucking Association v. Bonta (March 15, 2024) U.S. Dist. Ct., Southern Dist. of Calif., Case No. 3:18-cv-02458-BEN-DEB) This means that interstate truckers are subject to the ABC test and will likely be treated as employees of motor carrier companies rather than independent contractors unless one of the exemptions from the ABC test applies, such as the business-to-business exemption.

In his decision, the judge noted, “Remedying complexities and perceived deficiencies in AB 5 are the kind of work better left to the soap box and the ballot box than to the jury box.”

The court’s decision is available at:

www.caltax.com/files/2024/ctavbonta.pdf


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2024-10: Another failed attempt to block application of AB 5 to trucking

A federal district court judge dismissed the California Trucking Association’s case against the application of AB 5 and the ABC worker classification test to the trucking industry. (California Trucking Association v. Bonta (March 15, 2024) U.S. Dist. Ct., Southern Dist. of Calif., Case No. 3:18-cv-02458-BEN-DEB) This means that interstate truckers are subject to the ABC test and will likely be treated as employees of motor carrier companies rather than independent contractors unless one of the exemptions from the ABC test applies, such as the business-to-business exemption.

In his decision, the judge noted, “Remedying complexities and perceived deficiencies in AB 5 are the kind of work better left to the soap box and the ballot box than to the jury box.”

The court’s decision is available at:

www.caltax.com/files/2024/ctavbonta.pdf


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2024-09: Court rules on beneficial ownership reporting requirements

A U.S. District Court has ruled that FinCEN’s beneficial ownership reporting mandate enacted as part of Corporate Transparency Act (Public Law 116-283) constituted Congressional overreach and therefore is unconstitutional and cannot be enforced against the plaintiffs who brought the case.  (National Small Business United v. Yellen (March 1, 2024) U.S. Dist. Ct., North. Dist. Of Ala., Case No. 5:22-cv-1448-LCB)

The plaintiffs are Isaac Wilkes, a small business owner, and National Small Business United, a trade organization representing 65,000 members, including Isaac Wilkes.

In a press release issued on March 4, 2024, FinCEN stated that in compliance with the court’s order, it will not enforce the beneficial ownership reporting requirements against the plaintiffs, indicating that all other reporting companies are still subject to the reporting mandate.

This means that unless a business is a member of the National Small Business United, it must still comply with the reporting mandate. For additional information concerning the reporting requirements, see our January 2, 2024, flash e-mail “FinCEN releases beneficial ownership information report.

The court’s decision is available at: www.govinfo.gov/content/pkg/USCOURTS-alnd-5_22-cv-01448/pdf/USCOURTS-alnd-5_22-cv-01448-0.pdf

FinCEN’s news release is available at: https://fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448


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Court rules on beneficial ownership reporting requirements

A U.S. District Court has ruled that FinCEN’s beneficial ownership reporting mandate enacted as part of Corporate Transparency Act (Public Law 116-283) constituted Congressional overreach and therefore is unconstitutional and cannot be enforced against the plaintiffs who brought the case.  (National Small Business United v. Yellen (March 1, 2024) U.S. Dist. Ct., North. Dist. Of Ala., Case No. 5:22-cv-1448-LCB)

The plaintiffs are Isaac Wilkes, a small business owner, and National Small Business United, a trade organization representing 65,000 members, including Isaac Wilkes.

In a press release issued on March 4, 2024, FinCEN stated that in compliance with the court’s order, it will not enforce the beneficial ownership reporting requirements against the plaintiffs, indicating that all other reporting companies are still subject to the reporting mandate.

This means that unless a business is a member of the National Small Business United, it must still comply with the reporting mandate. For additional information concerning the reporting requirements, see our January 2, 2024, flash e-mail “FinCEN releases beneficial ownership information report.

The court’s decision is available at: www.govinfo.gov/content/pkg/USCOURTS-alnd-5_22-cv-01448/pdf/USCOURTS-alnd-5_22-cv-01448-0.pdf

FinCEN’s news release is available at: https://go.spidell.com/e/837113/-yellen-no-522-cv-01448-nd-ala/5wvy7m/1935380943/h/NC4nZZMHByG8zh08nKAu9O8G6vPoZEoBnMRBDpYo3Oc


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Filing extension announced for San Diego County

UPDATE: The Franchise Tax Board has confirmed that California will conform to the IRS’s storm-related disaster postponement announcement for San Diego County taxpayers, IR-2024-51. (FTB News Release (February 27, 2024)) The FTB’s announcement noted that the postponement includes passthrough entity elective tax payments due on March 15, 2024.

For any given Emergency Measure or Major Disaster Declaration that triggers IRS tax relief or filing/payment postponement in California, the state will evaluate each filing or payment postponement in response to a declaration or emergency on a case-by-case basis. (R&TC §18572)


Due to severe storms, the IRS announced today that individual and business taxpayers located in San Diego County are granted automatic filing relief until June 17, 2024. (IR-2024-51) The June 17 filing postponement matches similar relief provided to taxpayers in other parts of the country suffering from severe storms, such as those for parts of Connecticut, Maine, Michigan, Rhode Island, and West Virginia.

Today’s announcement only covers San Diego county. Currently, no other counties in California are eligible for the filing postponement.

This postponement means that the June 17, 2024, deadline applies to:

  • Individual income tax returns and payments normally due on April 15, 2024;
  • 2023 contributions to IRAs and health savings accounts for eligible taxpayers;
  • 2024 estimated tax payments normally due on April 15, 2024;
  • Quarterly payroll and excise tax returns normally due on January 31 and April 30, 2024;
  • Calendar-year partnership and S corporation returns normally due on March 15, 2024;
  • Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024; and
  • Calendar-year tax-exempt organization returns normally due on May 15, 2024.

Also, penalties for failing to make payroll and excise tax deposits due on or after January 21, 2024, and before February 5, 2024, will be abated as long as the deposits were made by February 5, 2024.

Taxpayers in San Diego county who need filing extensions beyond June 17, 2024, must file extensions by the June 17 deadline.

The full announcement is available at:

www.irs.gov/newsroom/irs-san-diego-area-taxpayers-impacted-by-severe-storms-flooding-qualify-for-tax-relief-various-deadlines-postponed-to-june-17

The Franchise Tax Board has historically conformed to federal filing relief, but the relief is not automatic. We will provide an updated Flash E-mail if and when the FTB provides a conformity announcement.


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2024-08: Filing extension announced for San Diego County

UPDATE: The Franchise Tax Board has confirmed that California will conform to the IRS’s storm-related disaster postponement announcement for San Diego County taxpayers, IR-2024-51. (FTB News Release (February 27, 2024)) The FTB’s announcement noted that the postponement includes passthrough entity elective tax payments due on March 15, 2024.

For any given Emergency Measure or Major Disaster Declaration that triggers IRS tax relief or filing/payment postponement in California, the state will evaluate each filing or payment postponement in response to a declaration or emergency on a case-by-case basis. (R&TC §18572)


Due to severe storms, the IRS announced today that individual and business taxpayers located in San Diego County are granted automatic filing relief until June 17, 2024. (IR-2024-51) The June 17 filing postponement matches similar relief provided to taxpayers in other parts of the country suffering from severe storms, such as those for parts of Connecticut, Maine, Michigan, Rhode Island, and West Virginia.

Today’s announcement only covers San Diego county. Currently, no other counties in California are eligible for the filing postponement.

This postponement means that the June 17, 2024, deadline applies to:

  • Individual income tax returns and payments normally due on April 15, 2024;
  • 2023 contributions to IRAs and health savings accounts for eligible taxpayers;
  • 2024 estimated tax payments normally due on April 15, 2024;
  • Quarterly payroll and excise tax returns normally due on January 31 and April 30, 2024;
  • Calendar-year partnership and S corporation returns normally due on March 15, 2024;
  • Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024; and
  • Calendar-year tax-exempt organization returns normally due on May 15, 2024.

Also, penalties for failing to make payroll and excise tax deposits due on or after January 21, 2024, and before February 5, 2024, will be abated as long as the deposits were made by February 5, 2024.

Taxpayers in San Diego county who need filing extensions beyond June 17, 2024, must file extensions by the June 17 deadline.

The full announcement is available at:

www.irs.gov/newsroom/irs-san-diego-area-taxpayers-impacted-by-severe-storms-flooding-qualify-for-tax-relief-various-deadlines-postponed-to-june-17

The Franchise Tax Board has historically conformed to federal filing relief, but the relief is not automatic. We will provide an updated Flash E-mail if and when the FTB provides a conformity announcement.


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SALT bill fails in House vote

On Wednesday, February 14, 2024, the House failed to pass H.R. 7160, the SALT Marriage Penalty Elimination Act. This is the bill that would have doubled the SALT deduction for married taxpayers filing jointly with adjusted gross income of less than $500,000 for the 2023 tax year only. This means that provision will not be enacted.

This vote does not affect the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). We are still waiting for a vote on that pending bill. For more information on the provisions in that bill, see our February 1, 2024, Flash E-mail (“Tax deal moves to Senate” available at: www.caltax.com/news/flash-email/2024-05-tax-deal-bill-moves-to-senate/). We will keep you updated on the latest developments with this legislation as it moves through the Senate.


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2024-07: SALT bill fails in House vote

On Wednesday, February 14, 2024, the House failed to pass H.R. 7160, the SALT Marriage Penalty Elimination Act. This is the bill that would have doubled the SALT deduction for married taxpayers filing jointly with adjusted gross income of less than $500,000 for the 2023 tax year only. This means that provision will not be enacted.

This vote does not affect the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). We are still waiting for a vote on that pending bill. For more information on the provisions in that bill, see our February 1, 2024, Flash E-mail (“Tax deal moves to Senate” available at: www.caltax.com/news/flash-email/2024-05-tax-deal-bill-moves-to-senate/). We will keep you updated on the latest developments with this legislation as it moves through the Senate.


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SALT bill would increase deduction for 2023 tax year only

H.R. 7160, the SALT Marriage Penalty Elimination Act, was passed out of the House Rules Committee today. If enacted, the bill would increase the current $10,000 state and local tax (SALT) itemized deduction limitation to $20,000 for married taxpayers filing jointly if their adjusted gross income is less than $500,000.

As currently written:
  • The increase would apply only to the 2023 tax year; and
  • The $500,000 AGI threshold would be a cliff, meaning that MFJ taxpayers with $500,000 or more of AGI would still be limited to the $10,000 deduction.
The bill must still be passed by both the full House and the Senate. We will provide updates as both this legislation and the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) move along. In the meantime, tax professionals should consider putting potentially impacted clients’ returns on extension.

The text of H.R. 7160 is available at:

https://go.spidell.com/e/837113/0Penalty20Elimination20Act-pdf/5wpg9l/1890147251/h/uovL5VJduQ5ggZaDlhAvrJ_rDd5nhIctPpo1hIyIak4


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2024-06: SALT bill would increase deduction for 2023 tax year only

H.R. 7160, the SALT Marriage Penalty Elimination Act, was passed out of the House Rules Committee today. If enacted, the bill would increase the current $10,000 state and local tax (SALT) itemized deduction limitation to $20,000 for married taxpayers filing jointly if their adjusted gross income is less than $500,000.

As currently written:
  • The increase would apply only to the 2023 tax year; and
  • The $500,000 AGI threshold would be a cliff, meaning that MFJ taxpayers with $500,000 or more of AGI would still be limited to the $10,000 deduction.
The bill must still be passed by both the full House and the Senate. We will provide updates as both this legislation and the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) move along. In the meantime, tax professionals should consider putting potentially impacted clients’ returns on extension.

The text of H.R. 7160 is available at:

https://go.spidell.com/e/837113/0Penalty20Elimination20Act-pdf/5wpg9l/1890147251/h/uovL5VJduQ5ggZaDlhAvrJ_rDd5nhIctPpo1hIyIak4


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2024-05: Tax deal bill moves to Senate

On January 31, 2024, the U.S. House approved the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). As we previously reported, this bill would, among other things:

  • Increase the Child Tax Credit;
  • Retroactively reinstate current expensing for domestic qualified research expenses, 100% bonus depreciation, and the larger business interest expense deduction; and
  • Significantly increase Employee Retention Credit (ERC) penalties and impose a January 31, 2024, cutoff date for new ERC claims.

For more information, see Spidell’s January 22, 2024, Flash E-mail (“Text released for proposed federal tax deal bill” available at: www.caltax.com/news/flash-email/2024-03-text-released-for-proposed-federal-tax-deal-bill).

According to news reports, to ensure passage of this bill in the House a deal was also reached to introduce another bill within the next week that would double the state and local tax deduction limit for married taxpayers filing jointly (increasing it to $20,000, from $10,000). We have yet to see the text of this bill, so we do not know whether this change will be retroactive. We will send another Flash E-mail once the text of this proposal is released.

H.R. 7024 will now be taken up in the Senate. It is unclear when the Senate will act on this bill, but we will keep you posted as news develops.

The text of H.R. 7024 is available at:

www.congress.gov/bill/118th-congress/house-bill/7024


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Tax deal bill moves to Senate

On January 31, 2024, the U.S. House approved the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). As we previously reported, this bill would, among other things:

  • Increase the Child Tax Credit;
  • Retroactively reinstate current expensing for domestic qualified research expenses, 100% bonus depreciation, and the larger business interest expense deduction; and
  • Significantly increase Employee Retention Credit (ERC) penalties and impose a January 31, 2024, cutoff date for new ERC claims.

For more information, see Spidell’s January 22, 2024, Flash E-mail (“Text released for proposed federal tax deal bill” available at: www.caltax.com/news/flash-email/2024-03-text-released-for-proposed-federal-tax-deal-bill).

According to news reports, to ensure passage of this bill in the House a deal was also reached to introduce another bill within the next week that would double the state and local tax deduction limit for married taxpayers filing jointly (increasing it to $20,000, from $10,000). We have yet to see the text of this bill, so we do not know whether this change will be retroactive. We will send another Flash E-mail once the text of this proposal is released.

H.R. 7024 will now be taken up in the Senate. It is unclear when the Senate will act on this bill, but we will keep you posted as news develops.

The text of H.R. 7024 is available at:

www.congress.gov/bill/118th-congress/house-bill/7024


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2024-04: FTB admits delays in processing business tax returns

The FTB announced today that there have been delays in processing 2022 business entity tax returns due to systemic issues resulting from programming changes made to accommodate the winter storm disaster extensions. (FTB Tax News, February 2024) This delay is in addition to the stated eight-month time frame for processing business tax refunds.

We have heard from numerous practitioners that the delay is especially impacting LLC refunds claimed on 2022 Form 568, LLC Return of Income, even those that were filed by the original March 15, 2023, deadline.

The FTB anticipates that these returns will now be processed within 30–45 days.


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FTB admits delays in processing business tax returns

The FTB announced today that there have been delays in processing 2022 business entity tax returns due to systemic issues resulting from programming changes made to accommodate the winter storm disaster extensions. (FTB Tax News, February 2024) This delay is in addition to the stated eight-month time frame for processing business tax refunds.

We have heard from numerous practitioners that the delay is especially impacting LLC refunds claimed on 2022 Form 568, LLC Return of Income, even those that were filed by the original March 15, 2023, deadline.

The FTB anticipates that these returns will now be processed within 30–45 days.


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Text released for proposed federal tax deal bill

The U.S. House of Representatives has released revised text of the Tax Relief for American Families and Worker’s Act of 2024 (TRAFWA). We previously reported that Congressional tax leaders agreed to a deal for this bill and highlighted some of the agreed-upon provisions. (See Spidell’s Flash E-mail (January 16, 2024) “Congressional tax leaders agree to deal” Available at: www.caltax.com/news/flash-email/2024-02-congressional-tax-leaders-agree-to-deal/)

The text of the bill, in its current state, does not contain any provisions that change our previous reporting, with the exception of foreign research expenses. It does contain some additional noteworthy details, listed below. The bill can, and will likely, still undergo changes between now and final passage. Also note that the expiration of many of these provisions at the end of 2025 coincides with the expiration of many TCJA provisions, which means these will all be renegotiated again in two years’ time.

Note the following:

  • The Child Tax Credit of $2,000 per child would be increased annually for inflation for the 2024 and 2025 taxable years (TRAFWA §103);
  • When calculating the Child Tax Credit for taxable years 2024 and 2025, taxpayers can elect to use their earned income from the prior taxable year if that helps increase their Child Tax Credit (TRAFWA §104);
  • The required five-year amortization under IRC §174 for domestic research expenses is delayed until 2026 and taxpayers would be able to treat these expenses similarly to how they treated these expenses under prior law under a new IRC §174A, retroactive to the 2022 taxable year. Taxpayers who amortized these domestic research expenses in 2022 would be able to apply a modified cut-off change of accounting method in 2023, thereby foregoing the need to file an amended 2022 return. (TRAFWA §201) The delay does not apply to foreign research, which means that foreign research expenses incurred after 2021 would continue to be amortized over 15 years;
  • The 100% bonus depreciation rate would be extended retroactively to the beginning of 2023 through 2025, then would drop to 20% for 2026 before expiring on December 31, 2026 (TRAFWA §202);
  • Available disaster relief is expanded by:
    • Extending the personal casualty disaster loss provisions to apply to federally declared disasters during the period from January 1, 2020, through 60 days after enactment of the TRAFWA (TRAFWA §402); and
    • Qualified wildfire settlements received by individuals for compensation for losses, expenses, or damages would be excludable from income, but only to the extent these items were not covered by insurance or otherwise. The exclusion would apply to settlements received during the 2020 through 2025 tax year for any post-2014 federally declared disaster. (TRAFWA §403)

Taxpayers may want to consider putting their returns on extension until we see whether this bill is likely to pass.

The text of the bill is available at:

https://go.spidell.com/e/837113/-2024-01-AINS-to-H-R–7024-pdf/5wmgfh/1872520307/h/b4t-988t9r0ma0rLbHzaDBFvZEYIizDfAaDHSi5mz00


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2024-03: Text released for proposed federal tax deal bill

The U.S. House of Representatives has released revised text of the Tax Relief for American Families and Worker’s Act of 2024 (TRAFWA). We previously reported that Congressional tax leaders agreed to a deal for this bill and highlighted some of the agreed-upon provisions. (See Spidell’s Flash E-mail (January 16, 2024) “Congressional tax leaders agree to deal” Available at: www.caltax.com/news/flash-email/2024-02-congressional-tax-leaders-agree-to-deal/)

The text of the bill, in its current state, does not contain any provisions that change our previous reporting, with the exception of foreign research expenses. It does contain some additional noteworthy details, listed below. The bill can, and will likely, still undergo changes between now and final passage. Also note that the expiration of many of these provisions at the end of 2025 coincides with the expiration of many TCJA provisions, which means these will all be renegotiated again in two years’ time.

Note the following:

  • The Child Tax Credit of $2,000 per child would be increased annually for inflation for the 2024 and 2025 taxable years (TRAFWA §103);
  • When calculating the refundable portion of the Child Tax Credit for taxable years 2024 and 2025, taxpayers can elect to use their earned income from the prior taxable year if that helps increase their Child Tax Credit (TRAFWA §104);
  • The required five-year amortization under IRC §174 for domestic research expenses is delayed until 2026 and taxpayers would be able to treat these expenses similarly to how they treated these expenses under prior law under a new IRC §174A, retroactive to the 2022 taxable year. Taxpayers who amortized these domestic research expenses in 2022 would be able to apply a modified cut-off change of accounting method in 2023, thereby foregoing the need to file an amended 2022 return. (TRAFWA §201) The delay does not apply to foreign research, which means that foreign research expenses incurred after 2021 would continue to be amortized over 15 years;
  • The 100% bonus depreciation rate would be extended retroactively to the beginning of 2023 through 2025, then would drop to 20% for 2026 before expiring on December 31, 2026 (TRAFWA §202);
  • Available disaster relief is expanded by:
    • Extending the personal casualty disaster loss provisions to apply to federally declared disasters during the period from January 1, 2020, through 60 days after enactment of the TRAFWA (TRAFWA §402); and
    • Qualified wildfire settlements received by individuals for compensation for losses, expenses, or damages would be excludable from income, but only to the extent these items were not covered by insurance or otherwise. The exclusion would apply to settlements received during the 2020 through 2025 tax year for any post-2014 federally declared disaster. (TRAFWA §403)

Taxpayers may want to consider putting their returns on extension until we see whether this bill is likely to pass.

The text of the bill is available at:

http://gop-waysandmeans.house.gov/wp-content/uploads/2024/01/AINS-to-H.R.-7024.pdf


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Congressional tax leaders agree to deal

Today congressional tax leaders announced that they have reached a deal that includes, among other items, long-awaited business tax relief, expansion of the refundable portion of the Child Tax Credit, and expanded disaster relief. While this bipartisan agreement is a big step forward, there is still no actual bill, nor any guarantee that these provisions will actually be enacted in a highly divided Congress.

Highlights of the agreement include:

  • Increasing the maximum refundable Child Tax Credit from $1,600 to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025, as well as revising the refundable portion of the credit to be calculated on a per-child basis;
  • Retroactively deferring until 2026:
    • The reduction in the 100% bonus depreciation deduction to 80% (originally scheduled to go into effect for property placed in service in 2023);
    • The implementation of the IRC §174 research expense five- or 15-year amortization mandate until the 2026 tax year. (Mandatory amortization went into effect in 2022. Therefore, if this provision is enacted, it may require taxpayers to file amended tax returns.); and
    • The removal of depreciation, amortization, or depletion deductions in the calculation of the business interest expense adjusted taxable income limitation (again, this provision originally went into effect beginning with 2022 tax year and may require amended tax returns);
  • Increasing the maximum amount of the IRC §179 current expense deduction to $1.29 million and the investment limitation cap to $3.22 million for property placed in service in 2024, providing inflation adjustments for post-2023 tax years;
  • Barring new Employee Retention Credit (ERC) claims after January 31, 2024, and enacting substantial penalties that may be imposed against ERC promoters equal to the greater of:
    • $200,000 ($10,000 in the case of a natural person); or
    • 75% of the gross income derived from the ERC promoter from providing aid, assistance, or advice with respect to a return or claim for ERC refund or a document relating to the return or claim;
  • Extending the current five-year statute of limitations for certain ERC claims to six years;
  • Retroactively excluding qualified wildfire relief payments from gross income for payments received by individuals during the 2020 through 2025 tax years, allowing disaster-related personal casualty loss provisions for victims of post-2019 disasters, and treating disaster relief payments to victims of the East Palestine, Ohio, train derailment as qualified disaster relief payments for purposes of IRC §139(b);
  • Increasing the reporting threshold for filing Form 1099-NEC and 1099-MISC from $600 to $1,000, applicable to payments made after 2023, and providing for inflation adjustments beginning in 2024; and
  • Enacting various provisions to prevent double-taxation on U.S.–Taiwan cross-border investments.
A full summary of the proposals is available at:

www.finance.senate.gov/imo/media/doc/the_tax_relief_for_american_families_and_workers_act_of_2024_technical_summary.pdf


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

2024-02: Congressional tax leaders agree to deal

Today congressional tax leaders announced that they have reached a deal that includes, among other items, long-awaited business tax relief, expansion of the refundable portion of the Child Tax Credit, and expanded disaster relief. While this bipartisan agreement is a big step forward, there is still no actual bill, nor any guarantee that these provisions will actually be enacted in a highly divided Congress.

Highlights of the agreement include:

  • Increasing the maximum refundable Child Tax Credit from $1,600 to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025, as well as revising the refundable portion of the credit to be calculated on a per-child basis;
  • Retroactively deferring until 2026:
    • The reduction in the 100% bonus depreciation deduction to 80% (originally scheduled to go into effect for property placed in service in 2023);
    • The implementation of the IRC §174 research expense five- or 15-year amortization mandate until the 2026 tax year. (Mandatory amortization went into effect in 2022. Therefore, if this provision is enacted, it may require taxpayers to file amended tax returns.); and
    • The removal of depreciation, amortization, or depletion deductions in the calculation of the business interest expense adjusted taxable income limitation (again, this provision originally went into effect beginning with 2022 tax year and may require amended tax returns);
  • Increasing the maximum amount of the IRC §179 current expense deduction to $1.29 million and the investment limitation cap to $3.22 million for property placed in service in 2024, providing inflation adjustments for post-2023 tax years;
  • Barring new Employee Retention Credit (ERC) claims after January 31, 2024, and enacting substantial penalties that may be imposed against ERC promoters equal to the greater of:
    • $200,000 ($10,000 in the case of a natural person); or
    • 75% of the gross income derived from the ERC promoter from providing aid, assistance, or advice with respect to a return or claim for ERC refund or a document relating to the return or claim;
  • Extending the current five-year statute of limitations for certain ERC claims to six years;
  • Retroactively excluding qualified wildfire relief payments from gross income for payments received by individuals during the 2020 through 2025 tax years, allowing disaster-related personal casualty loss provisions for victims of post-2019 disasters, and treating disaster relief payments to victims of the East Palestine, Ohio, train derailment as qualified disaster relief payments for purposes of IRC §139(b);
  • Increasing the reporting threshold for filing Form 1099-NEC and 1099-MISC from $600 to $1,000, applicable to payments made after 2023, and providing for inflation adjustments beginning in 2024; and
  • Enacting various provisions to prevent double-taxation on U.S.–Taiwan cross-border investments.
A full summary of the proposals is available at:

www.finance.senate.gov/imo/media/doc/the_tax_relief_for_american_families_and_workers_act_of_2024_technical_summary.pdf


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

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FinCEN releases beneficial ownership information report

Effective January 1, 2024, the new beneficial ownership reporting requirements kick in for newly formed or registered entities. FinCEN has finally released the new reporting forms, and business entities are now able to complete and submit the FinCEN beneficial ownership report.

This new mandate requires all new, non-exempt entities to complete the report within 90 days after receiving actual or public notice from the Secretary of State’s Office (or similar office) that its creation or registration is effective. Entities in existence prior to January 1, 2024, have until January 1, 2025, to submit the report, but they can do so anytime between now and January 1, 2025.

Reporting companies may upload a completed PDF file on the FinCEN website or fill out a web-based version of the report and submit it online. We’ve had reports of people having difficulties opening up the PDF file, but the web-based version allows people to view the entire form without actually having to complete it.

The reports are available at:

http://boiefiling.fincen.gov/fileboir

FinCEN has also provided detailed instructions on how to complete the form. The instructions are available at:

http://boiefiling.fincen.gov/help

For more information on which entities are required to register, and the substantial penalties for failing to register, attend an upcoming Spidell update webinar or seminar.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

2024-01: FinCEN releases beneficial ownership information report

Effective January 1, 2024, the new beneficial ownership reporting requirements kick in for newly formed or registered entities. FinCEN has finally released the new reporting forms, and business entities are now able to complete and submit the FinCEN beneficial ownership report.

This new mandate requires all new, non-exempt entities to complete the report within 90 days after receiving actual or public notice from the Secretary of State’s Office (or similar office) that its creation or registration is effective. Entities in existence prior to January 1, 2024, have until January 1, 2025, to submit the report, but they can do so anytime between now and January 1, 2025.

Reporting companies may upload a completed PDF file on the FinCEN website or fill out a web-based version of the report and submit it online. We’ve had reports of people having difficulties opening up the PDF file, but the web-based version allows people to view the entire form without actually having to complete it.

The reports are available at:

http://boiefiling.fincen.gov/fileboir

FinCEN has also provided detailed instructions on how to complete the form. The instructions are available at:

http://boiefiling.fincen.gov/help

For more information on which entities are required to register, and the substantial penalties for failing to register, attend an upcoming Spidell update webinar or seminar.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

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New IRS online registration tool opens for monetizing energy credits

On December 22, 2023, the IRS announced a new online registration tool for eligible taxpayers who want to monetize their energy credits. (IR-2023-249) Registration is required before any qualifying business, tax-exempt organization, or government or tribal entity can monetize their energy credits under the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors Act.

Once an entity registers through the IRS’s registration tool, which can be found at the link below, the taxpayer must receive a registration number from the IRS before monetizing their energy credits. The IRS recommends registering at least 120 days prior to filing the entity’s income tax returns for the year it intends to elect to monetize its credits so that the IRS has plenty of time to review the registration process on its end.

Monetizing energy credits involves either selling the credits or electing to treat the credits as tax payments (the latter is generally limited to nonprofits and governmental agencies). Additionally, credit monetization is only available for taxable years beginning after December 31, 2022.

The registration website is at:

www.irs.gov/credits-deductions/register-for-elective-payment-or-transfer-of-credits

The IRS news release is available at:

www.irs.gov/newsroom/irs-opens-free-ira-and-chips-pre-filing-registration-tool-for-organizations-to-register-to-monetize-clean-energy-credits


 Sign up for Spidell’s 2023/24 Federal and California Tax Update for details regarding monetizing energy credits and for registration tips from tax professionals who have already gone through the registration process. Click here to register.

2023-51: New IRS online registration tool opens for monetizing energy credits

On December 22, 2023, the IRS announced a new online registration tool for eligible taxpayers who want to monetize their energy credits. (IR-2023-249) Registration is required before any qualifying business, tax-exempt organization, or government or tribal entity can monetize their energy credits under the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors Act.

Once an entity registers through the IRS’s registration tool, which can be found at the link below, the taxpayer must receive a registration number from the IRS before monetizing their energy credits. The IRS recommends registering at least 120 days prior to filing the entity’s income tax returns for the year it intends to elect to monetize its credits so that the IRS has plenty of time to review the registration process on its end.

Monetizing energy credits involves either selling the credits or electing to treat the credits as tax payments (the latter is generally limited to nonprofits and governmental agencies). Additionally, credit monetization is only available for taxable years beginning after December 31, 2022.

The registration website is at:

www.irs.gov/credits-deductions/register-for-elective-payment-or-transfer-of-credits

The IRS news release is available at:

www.irs.gov/newsroom/irs-opens-free-ira-and-chips-pre-filing-registration-tool-for-organizations-to-register-to-monetize-clean-energy-credits


 Sign up for Spidell’s 2023/24 Federal and California Tax Update for details regarding monetizing energy credits and for registration tips from tax professionals who have already gone through the registration process. Click here to register.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

New Employee Retention Credit Voluntary Disclosure Program

The IRS has announced a new Employee Retention Credit (ERC) Voluntary Disclosure Program, under which eligible taxpayers can repay only 80% of the gross amount of credit erroneously claimed, while retaining the remaining 20%. (IRS Announcement 2024-3)

Taxpayers that want to participate in the Voluntary Disclosure Program must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, on or before 11:59 pm local time March 22, 2024. Form 15434 must be submitted to the IRS through its Document Upload Tool at:

www.irs.gov/help/irs-document-upload-tool

Eligible taxpayers must meet all four of the following requirements:

  1. The taxpayer cannot be under criminal investigation and they cannot have been notified that the IRS intends to commence a criminal investigation;
  2. The IRS has not received information from a third party alerting the IRS to the participant’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action;
  3. The taxpayer is not under an employment tax examination by the IRS for any tax period for which the taxpayer is applying for the ERC Voluntary Disclosure Program; and
  4. The taxpayer has not previously received a notice and demand for repayment of all or part of the claimed ERC.

Taxpayers whose ERC claims were filed by third-party payers, such as an agent or a professional employer organization, must apply for the Voluntary Disclosure Program through the third-party payer.


For more information on how this voluntary disclosure program works, sign up for Spidell’s 2023/24 Federal and California Tax UpdateClick herefor details.

2023-50: New Employee Retention Credit Voluntary Disclosure Program

The IRS has announced a new Employee Retention Credit (ERC) Voluntary Disclosure Program, under which eligible taxpayers can repay only 80% of the gross amount of credit erroneously claimed and received, while retaining the remaining 20%. (IRS Announcement 2024-3)

Taxpayers that want to participate in the Voluntary Disclosure Program must file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, on or before 11:59 pm local time March 22, 2024. Form 15434 must be submitted to the IRS through its Document Upload Tool at:

www.irs.gov/help/irs-document-upload-tool

Eligible taxpayers must meet all four of the following requirements:

  1. The taxpayer cannot be under criminal investigation and they cannot have been notified that the IRS intends to commence a criminal investigation;
  2. The IRS has not received information from a third party alerting the IRS to the participant’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action;
  3. The taxpayer is not under an employment tax examination by the IRS for any tax period for which the taxpayer is applying for the ERC Voluntary Disclosure Program; and
  4. The taxpayer has not previously received a notice and demand for repayment of all or part of the claimed ERC.

Taxpayers whose ERC claims were filed by third-party payers, such as an agent or a professional employer organization, must apply for the Voluntary Disclosure Program through the third-party payer.


For more information on how this voluntary disclosure program works, sign up for Spidell’s 2023/24 Federal and California Tax UpdateClick herefor details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

IRS grants automatic late-payment penalty relief

The IRS is granting about $1 billion in automatic late-payment penalty relief to 4.7 million individuals, businesses, and tax-exempt organizations that were not sent automated collection reminder notices related to 2020 and 2021 tax returns as a result of COVID-19 pandemic relief. (IR-2023-244; IRS Notice 2024-7)

Relief is only available to individuals or entities:

  • With assessed income tax of less than $100,000, excluding any applicable additions to tax, penalties, or interest (determined on a per-return basis);
  • Who were issued an initial balance due on or before December 7, 2023, for the 2020 or 2021 taxable years; and
  • Who are liable for failure-to-pay penalties related to specified eligible returns listed in Notice 2024-7 (Form series 1040, 1041, 1120, and 990-T).

The relief will be automatic and penalties previously paid will be refunded or credited. The relief does not apply to interest accrued.

Adjustments will be made to individual and business accounts in December and January and to trusts, estates, and tax-exempt organizations in late February to early March.

The IRS will issue a notice to each eligible taxpayer that reflects the updated amount owned and any refund or credit due to the taxpayer.

The IRS press release is available at:

www.irs.gov/newsroom/irs-helps-taxpayers-by-providing-penalty-relief-on-nearly-5-million-2020-and-2021-tax-returns-restart-of-collection-notices-in-2024-marks-end-of-pandemic-related-pause

IRS Notice 2024-7 is available at:

www.irs.gov/pub/irs-drop/n-24-07.pdf


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

2023-49: IRS grants automatic late-payment penalty relief

The IRS is granting about $1 billion in automatic late-payment penalty relief to 4.7 million individuals, businesses, and tax-exempt organizations that were not sent automated collection reminder notices related to 2020 and 2021 tax returns as a result of COVID-19 pandemic relief. (IR-2023-244; IRS Notice 2024-7)

Relief is only available to individuals or entities:

  • With assessed income tax of less than $100,000, excluding any applicable additions to tax, penalties, or interest (determined on a per-return basis);
  • Who were issued an initial balance due on or before December 7, 2023, for the 2020 or 2021 taxable years; and
  • Who are liable for failure-to-pay penalties related to specified eligible returns listed in Notice 2024-7 (Form series 1040, 1041, 1120, and 990-T).

The relief will be automatic and penalties previously paid will be refunded or credited. The relief does not apply to interest accrued.

Adjustments will be made to individual and business accounts in December and January and to trusts, estates, and tax-exempt organizations in late February to early March.

The IRS will issue a notice to each eligible taxpayer that reflects the updated amount owned and any refund or credit due to the taxpayer.

The IRS press release is available at:

www.irs.gov/newsroom/irs-helps-taxpayers-by-providing-penalty-relief-on-nearly-5-million-2020-and-2021-tax-returns-restart-of-collection-notices-in-2024-marks-end-of-pandemic-related-pause

IRS Notice 2024-7 is available at:

www.irs.gov/pub/irs-drop/n-24-07.pdf


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

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Erroneous CP14s being sent to California taxpayers

The IRS has confirmed that some CP14s have been sent out erroneously to California taxpayers who qualified for November 16, 2024, disaster-related payment and filing postponements. If taxpayers received these notices and have confirmed that these payments/filings have been made correctly, no further action is required.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

2023-48: Erroneous CP14s being sent to California taxpayers

The IRS has confirmed that some CP14s have been sent out erroneously to California taxpayers who qualified for November 16, 2023, disaster-related payment and filing postponements. If taxpayers received these notices and have confirmed that these payments/filings have been made correctly, no further action is required.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and see why more than 18,000 tax professionals choose Spidell each year. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

IRS delays lower 1099-K reporting threshold another year, but not for credit card transactions

The IRS will treat 2023 as an additional transition year for implementation of the American Rescue Plan Act’s lower 1099-K reporting threshold, but only for third-party network transactions, such as those through Venmo, PayPal, Apple Pay, online marketplaces, etc. (IRS Notice 2023-74)

The IRS will not regard 2023 as a transition year with respect to payment card transactions, which are transactions where a customer pays with a credit card, such as Visa, Mastercard, or American Express.

This means that taxpayers who receive payments through third-party network transactions should not receive Form 1099-K for the 2023 taxable year, unless the aggregate payments received through a single third-party network exceeded $20,000 and the total number of transactions exceeded 200 for the year.

However, taxpayers should expect to receive Form 1099-K for the 2023 taxable year for credit card transactions if the aggregate payments received through a single credit card company exceeded $600, regardless of the number of transactions.

In the IRS’s press release announcing the 1099-K reporting delay, it stated that at a later date it intends to announce a filing threshold for third-party network transactions for 2024 of $5,000. (IR-2023-221) The $5,000 filing threshold for 2024 was only part of the press release and was not made part of Notice 2023-74.

The IRS Notice 2023-74 is available at: www.irs.gov/pub/irs-drop/n-23-74.pdf

The IRS press release is available at: www.irs.gov/newsroom/irs-announces-delay-in-form-1099-k-reporting-threshold-for-third-party-platform-payments-in-2023-plans-for-a-threshold-of-5000-for-2024-to-phase-in-implementation


We’ll cover this topic and all of the tax law changes that happened in 2023 at Spidell’s 2023/24 Federal and California Tax UpdateClick here for details.

2023-47: IRS delays lower 1099-K reporting threshold another year, but not for credit card transactions

The IRS will treat 2023 as an additional transition year for implementation of the American Rescue Plan Act’s lower 1099-K reporting threshold, but only for third-party network transactions, such as those through Venmo, PayPal, Apple Pay, online marketplaces, etc. (IRS Notice 2023-74)

The IRS will not regard 2023 as a transition year with respect to payment card transactions, which are transactions where a customer pays with a credit card, such as Visa, Mastercard, or American Express.

This means that taxpayers who receive payments through third-party network transactions should not receive Form 1099-K for the 2023 taxable year, unless the aggregate payments received through a single third-party network exceeded $20,000 and the total number of transactions exceeded 200 for the year.

However, taxpayers should expect to receive Form 1099-K for the 2023 taxable year for credit card transactions if the aggregate payments received through a single credit card company exceeded $600, regardless of the number of transactions.

In the IRS’s press release announcing the 1099-K reporting delay, it stated that at a later date it intends to announce a filing threshold for third-party network transactions for 2024 of $5,000. (IR-2023-221) The $5,000 filing threshold for 2024 was only part of the press release and was not made part of Notice 2023-74.

The IRS Notice 2023-74 is available at: www.irs.gov/pub/irs-drop/n-23-74.pdf

The IRS press release is available at: www.irs.gov/newsroom/irs-announces-delay-in-form-1099-k-reporting-threshold-for-third-party-platform-payments-in-2023-plans-for-a-threshold-of-5000-for-2024-to-phase-in-implementation


We’ll cover this topic and all of the tax law changes that happened in 2023 at Spidell’s 2023/24 Federal and California Tax UpdateClick here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

ERC withdrawal procedures announced

The IRS announced new ERC withdrawal procedures today for taxpayers who filed Employee Retention Credit (ERC) claims and are concerned about whether they actually qualify. (IR-2023-93) The withdrawal procedures are in response to IRS concerns about the onslaught of overly aggressive marketers and promoters who mislead businesses into believing they are eligible for refund claims when they are not.

The volume of questionable ERC claims led the IRS to announce a moratorium through the end of 2023 on processing any new ERC claims. (See our September 14, 2023, flash e-mail, “Effective immediately, the IRS is putting a hold on processing new ERC claims,” available at: www.caltax.com/news/flash-email/2023-39-effective-immediately-the-irs-is-putting-a-hold-on-processing-new-erc-claims/)

Taxpayers are eligible to withdraw their ERC claims if all of the following apply:

  • They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, or CT-1X);
  • They filed the adjusted return only to claim the ERC, and they made no other adjustments;
  • They want to withdraw their entire ERC claim; and
  • The IRS has not paid their claim (or if the IRS has paid their claim, the taxpayer hasn’t cashed or deposited the refund check).

Taxpayers who have received their refund but haven’t cashed or deposited their refund check can still withdraw their claim by mailing the voided check back to the IRS with their withdrawal request.

Taxpayers whose ERC claims are currently being audited can send their withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Taxpayers who are not eligible to use the withdrawal procedures because they don’t meet the requirements listed above can still reduce or eliminate penalties by filing amended employment returns.

Detailed procedural instructions for requesting an ERC withdrawal can be found on the IRS’s special webpage set up for this purpose at:

www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

Withdrawing a fraudulently filed claim will not stop criminal prosecution of the taxpayer or preparer if the credit was fraudulently claimed.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and learn more about ERC withdrawals. Click here for details.

2023-46: ERC withdrawal procedures announced

The IRS announced new ERC withdrawal procedures today for taxpayers who filed Employee Retention Credit (ERC) claims and are concerned about whether they actually qualify. (IR-2023-193) The withdrawal procedures are in response to IRS concerns about the onslaught of overly aggressive marketers and promoters who mislead businesses into believing they are eligible for refund claims when they are not.

The volume of questionable ERC claims led the IRS to announce a moratorium through the end of 2023 on processing any new ERC claims. (See our September 14, 2023, flash e-mail, “Effective immediately, the IRS is putting a hold on processing new ERC claims,” available at: www.caltax.com/news/flash-email/2023-39-effective-immediately-the-irs-is-putting-a-hold-on-processing-new-erc-claims/)

Taxpayers are eligible to withdraw their ERC claims if all of the following apply:

  • They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, or CT-1X);
  • They filed the adjusted return only to claim the ERC, and they made no other adjustments;
  • They want to withdraw their entire ERC claim; and
  • The IRS has not paid their claim (or if the IRS has paid their claim, the taxpayer hasn’t cashed or deposited the refund check).

Taxpayers who have received their refund but haven’t cashed or deposited their refund check can still withdraw their claim by mailing the voided check back to the IRS with their withdrawal request.

Taxpayers whose ERC claims are currently being audited can send their withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Taxpayers who are not eligible to use the withdrawal procedures because they don’t meet the requirements listed above can still reduce or eliminate penalties by filing amended employment returns.

Detailed procedural instructions for requesting an ERC withdrawal can be found on the IRS’s special webpage set up for this purpose at:

www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

Withdrawing a fraudulently filed claim will not stop criminal prosecution of the taxpayer or preparer if the credit was fraudulently claimed.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and learn more about ERC withdrawals. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

2023-45: California conforms to November 16 postponement relief

The FTB announced on the evening of October 16, 2023, that it is conforming to the IRS’s latest postponement of tax filing and payment deadlines to November 16, 2023, for California taxpayers in the 55 counties impacted by the storms in December 2022 through March 2023.

In addition to the postponed payment and filing deadlines outlined in the IRS announcement, this also means that California taxpayers will have until November 16, 2023, to:

  • Make the 2022 passthrough entity elective tax election and final payment of the 2022 passthrough entity tax, provided that the entity made a timely June 15, 2022, prepayment;
  • Make the 2023 passthrough entity tax prepayment, which would have been due June 15, 2023, absent the postponement; and
  • File a superseding return and make or revise a 2022 passthrough entity election (again, the June 15, 2022, prepayment must have been made).

The FTB’s news release is available at: www.ftb.ca.gov/about-ftb/newsroom/news-releases/2023-10-due-date-for-tax-returns-payments-moved.html​​​​​


Sign up for Spidell’s 2023/24 Federal and California Tax Update and get the latest updates, along with client planning opportunities. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

California conforms to November 16 postponement relief

The FTB announced on the evening of October 16, 2023, that it is conforming to the IRS’s latest postponement of tax filing and payment deadlines to November 16, 2023, for California taxpayers in the 55 counties impacted by the storms in December 2022 through March 2023.

In addition to the postponed payment and filing deadlines outlined in the IRS announcement, this also means that California taxpayers will have until November 16, 2023, to:

  • Make the 2022 passthrough entity elective tax election and final payment of the 2022 passthrough entity tax, provided that the entity made a timely June 15, 2022, prepayment;
  • Make the 2023 passthrough entity tax prepayment, which would have been due June 15, 2023, absent the postponement; and
  • File a superseding return and make or revise a 2022 passthrough entity election (again, the June 15, 2022, prepayment must have been made).

The FTB’s news release is available at: www.ftb.ca.gov/about-ftb/newsroom/news-releases/2023-10-due-date-for-tax-returns-payments-moved.html​​​​​


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California storm victim deadline pushed to November 16, 2023

In a last-minute filing deadline announcement on October 16, the IRS further postponed tax filing deadlines for most California taxpayers to November 16, 2023. (IR-2023-189)

Affected taxpayers in 55 of California’s 58 counties – all except Lassen, Modoc, and Shasta counties – qualify.

Eligible returns and payments include:

  • 2022 individual income tax return and payments normally due on April 18;
  • 2022 IRA and HSA contributions;
  • Quarterly estimated tax payments normally due on April 18, June 15, and September 15;
  • Calendar-year 2022 partnership and S corporation returns normally due on March 15;
  • Calendar-year 2022 corporate and fiduciary income tax return normally due on April 18;
  • Quarterly payroll and excise tax returns normally due on May 1, July 31, and October 31; and
  • Calendar-year 2022 returns filed by tax-exempt organizations normally due on May 15.

Other return, payment, and time-sensitive tax-related actions outlined in Revenue Procedure 2018-58 that applied for the October 16 filing relief also qualify for the extra time.

The IRS’s announcement can be found at: https://go.spidell.com/e/837113/tax-payment-deadline-to-nov-16/5w2b47/1719552957/h/KxsRwu1p9deuuwFZ5liXDo36q9JvaSBPq1jXgW-q1iI

California generally conforms to disaster-related postponements, so we believe that California will automatically conform to this latest postponement as well. We are awaiting confirmation from the FTB and will update you as soon as we have that information.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and get more information on these rules, along with client planning opportunities. Click here for details.

2023-44: California storm victim deadline pushed to November 16, 2023

In a last-minute filing deadline announcement on October 16, the IRS further postponed tax filing deadlines for most California taxpayers to November 16, 2023. (IR-2023-189)

Affected taxpayers in 55 of California’s 58 counties – all except Lassen, Modoc, and Shasta counties – qualify.

Eligible returns and payments include:

  • 2022 individual income tax return and payments normally due on April 18;
  • 2022 IRA and HSA contributions;
  • Quarterly estimated tax payments normally due on April 18, June 15, and September 15;
  • Calendar-year 2022 partnership and S corporation returns normally due on March 15;
  • Calendar-year 2022 corporate and fiduciary income tax return normally due on April 18;
  • Quarterly payroll and excise tax returns normally due on May 1, July 31, and October 31; and
  • Calendar-year 2022 returns filed by tax-exempt organizations normally due on May 15.

Other return, payment, and time-sensitive tax-related actions outlined in Revenue Procedure 2018-58 that applied for the October 16 filing relief also qualify for the extra time. This includes the 45- and 180-day deadlines for IRC §1031 like-kind exchanges.

The IRS’s announcement can be found at: www.irs.gov/newsroom/for-california-storm-victims-irs-postpones-tax-filing-and-tax-payment-deadline-to-nov-16

California generally conforms to disaster-related postponements, so we believe that California will automatically conform to this latest postponement as well. We are awaiting confirmation from the FTB and will update you as soon as we have that information.


Sign up for Spidell’s 2023/24 Federal and California Tax Update and get more information on these rules, along with client planning opportunities. Click here for details.

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2023-43: Guidance issued for clean vehicle credits

In addition to providing clarity regarding eligibility requirements for the New Clean Vehicle Credit and the Previously-Owned Clean Vehicle Credit, the IRS has issued guidance as to how a taxpayer can transfer the credit to the dealer and receive an advanced vehicle credit. By transferring the credit to the dealer, the dealer can immediately lower the bottom-line price paid by the taxpayer to purchase the vehicle.

Highlights of this new guidance include:

  • Required disclosures that both dealers and taxpayers must make at the point of sale in order to claim the advanced clean vehicle credit at the dealership starting January 1, 2024;
  • Creation of recapture (repayment) rules for taxpayers who claim advanced clean vehicle credits at the dealership, but then don’t qualify for the credit when they file their income tax return;
  • Creation of an exception to the recapture rules: If a taxpayer claims an advanced vehicle credit at the dealer, but then their tax liability is not high enough to use the entire credit, then there is no credit recapture;
  • Creation of a new limitation that taxpayers can only claim two advanced clean vehicle credits per taxable year (in the case of a married couple, the limit is two vehicles each);
  • AGI limitation rules for taxpayers whose filing status has changed from one year to the next;
  • Simplified application of the Previously-Owned Clean Vehicle Credit’s first transfer rule;
  • Defining “purchase price” when applying the $25,000 limitation on the purchase price of a previously owned clean vehicle;
  • Rules for disallowing credits to taxpayers who claim an advanced clean vehicle credit at the dealership and then subsequently return or resell the vehicle within a short time thereafter; and
  • Rules for dealers to register with the IRS (which is required for taxpayers to claim the clean vehicle credits and for dealers to offer advanced payments to vehicle buyers starting January 1, 2024). The IRS will be creating an IRS Energy Credits Online Portal for this purpose.

The guidance was issued in four formats:


Sign up for Spidell’s 2023/24 Federal and California Tax Update and get more information on these rules, along with client planning opportunities. Click here for details.

Sign up for Spidell’s Flash E-mail — Get breaking news delivered to your inbox, plus other free analysis and information for tax professionals. Join our community and stay at the top of your game. Click here to sign up.

Guidance issued for clean vehicle credits

In addition to providing clarity regarding eligibility requirements for the New Clean Vehicle Credit and the Previously-Owned Clean Vehicle Credit, the IRS has issued guidance as to how a taxpayer can transfer the credit to the dealer and receive an advanced vehicle credit. By transferring the credit to the dealer, the dealer can immediately lower the bottom-line price paid by the taxpayer to purchase the vehicle.

Highlights of this new guidance include:

  • Required disclosures that both dealers and taxpayers must make at the point of sale in order to claim the advanced clean vehicle credit at the dealership starting January 1, 2024;
  • Creation of recapture (repayment) rules for taxpayers who claim advanced clean vehicle credits at the dealership, but then don’t qualify for the credit when they file their income tax return;
  • Creation of an exception to the recapture rules: If a taxpayer claims an advanced vehicle credit at the dealer, but then their tax liability is not high enough to use the entire credit, then there is no credit recapture;
  • Creation of a new limitation that taxpayers can only claim two advanced clean vehicle credits per taxable year (in the case of a married couple, the limit is two vehicles each);
  • AGI limitation rules for taxpayers whose filing status has changed from one year to the next;
  • Simplified application of the Previously-Owned Clean Vehicle Credit’s first transfer rule;
  • Defining “purchase price” when applying the $25,000 limitation on the purchase price of a previously owned clean vehicle;
  • Rules for disallowing credits to taxpayers who claim an advanced clean vehicle credit at the dealership and then subsequently return or resell the vehicle within a short time thereafter; and
  • Rules for dealers to register with the IRS (which is required for taxpayers to claim the clean vehicle credits and for dealers to offer advanced payments to vehicle buyers starting January 1, 2024). The IRS will be creating an IRS Energy Credits Online Portal for this purpose.

The guidance was issued in four formats:


Sign up for Spidell’s 2023/24 Federal and California Tax Update and get more information on these rules, along with client planning opportunities. Click here for details.

Fraud Friday: Garbage to gold

Lucent Polymers, Inc. discovered a way to turn “garbage to gold” by using recycled and scrap materials to create high-quality plastics that were flame-resistant and extremely strong. Unfortunately, the business model was a total sham. The flame-resistant products routinely caught fire and impact-resistant materials were too brittle and shattered. But the company’s founders hid this from potential buyers by providing them with falsified lab tests that shows the products performed as claimed. After the company sold twice in quick succession, the SEC caught wind and the founders have been convicted of securities fraud and money laundering.

(https://resource-recycling.com/plastics/2021/03/31/lucent-execs-sentenced-for-federal-crimes/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Fancy colored diamonds

The founder of Argyle Coin, a virtual currency that was allegedly backed by “fancy colored diamonds” received a seven-year sentence and will pay $23 million in restitution for defrauding investors. Argyle Coin, LLC was created when the founder’s prior diamond-selling scam had started to unravel, and he used money from investors in his new “high return, no risk” digital currency to pay off existing investors. He also managed to siphon away $10 million for himself to spend on a house, shopping at Gucci, purchasing horses, and riding lessons for his adult son.

(https://coingeek.com/argyle-coin-founder-involved-in-25m-scam-gets-7-years-in-jail/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: 300 B.C.

One of the earliest recorded instances of fraud took place in 300 B.C. Two Greek merchants, Hegestratos and Zenosthemis, took out an insurance policy and borrowed money on a cargo ship that was allegedly going to be filled with corn, but their plan was to sink the boat, keep the money, and sell the corn elsewhere. As Hegestratos was attempting to chop a hole in the hull of the boat with an axe, one of the crew members discovered him. Hegestratos attempted to escape by jumping off the boat and trying to swim to shore, but he drown at sea; Zenosthemis was tried in an Athenian court.

(www.investopedia.com/articles/financial-theory/09/history-of-fraud.asp)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Celebrity attorney Michael Avenatti

Celebrity attorney Michael Avenatti was sentenced to 168 months in prison for wire fraud and endeavoring to obstruct the administration of the Internal Revenue Code. He was also ordered to pay $10 million in restitution to four clients and the IRS. Avenatti received funds for his clients and placed them into client trust accounts, but then misappropriated the funds to finance an extravagant lifestyle. He then lied to clients about the terms of their settlement or whether he had received their funds. In one case, Avenatti drained a client’s trust account to fund his own coffee business; in another case, he used the bulk of a client’s settlement to purchase a private jet. Regarding the obstruction charge, Avenatti lied to IRS agents, and changed his company’s name, EIN, and bank information to avoid IRS levies.

(www.justice.gov/usao-cdca/pr/lawyer-michael-avenatti-sentenced-14-years-federal-prison-stealing-millions-dollars)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: CAR-HIT-U

A Detroit-area personal injury attorney known for his 855-CAR-HIT-U billboards has been convicted for tax fraud for failing to report over $2.6 million in income. He concealed the funds by placing them in undisclosed Interest on Lawyer’s Trust Accounts, which are used to hold funds on behalf of clients. He failed to disclose these accounts to the Michigan State Bar Foundation and his tax return preparer. He’s facing prison time plus penalties for each count.

(www.detroitnews.com/story/news/local/michigan/2022/11/19/metro-detroit-personal-injury-attorney-convicted-of-tax-fraud/69662737007/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Tax (fraud) preparation manual

A Texas tax preparer and his two children were convicted for defrauding the U.S. after filing false tax returns to inflate their clients’ refunds. They fabricated clients’ Schedule A, itemized deductions, and Schedule C, sole proprietorship profit and loss statements, claiming the taxpayer owned a business when no such business existed, claiming unreimbursed employee expenses such as travel and per diem, and claiming business expenses that were never incurred. The company also had a “tax preparation manual,” which was a handbook that outlined exactly how to commit fraud. The manual advised tax preparers to manipulate income to maximize refunds rather than referring to the law to determine whether an activity was a business for income tax purposes and whether expenses properly qualified as a business deduction.

(www.justice.gov/usao-ndtx/pr/san-angelo-tax-preparer-sentenced-14-years-tax-fraud)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: 13,000 lottery “wins”

A man who has “won” the Massachusetts lottery in excess of 13,000 times has pleaded guilty to charges of tax fraud conspiracy, money laundering conspiracy, and filing false tax returns. The man and family members operated a lottery ticket cashing scheme that brought in $21 million between 2011 and 2019. In Massachusetts, money owed in federal taxes or child support can be deducted from lottery wins over $600. To avoid this deduction, winners often use underground ticket cashing businesses, which take a cut of the winnings. The family members reported fraudulent gambling losses and understated their income, resulting in large refunds. 

(www.casino.org/news/mass-lottery-frequent-winner-pleads-guilty-to-tax-fraud-conspiracy/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: The Nigerian Prince e-mail scam

The Nigerian Prince e-mail scam is a modern interpretation of the Spanish Prisoner scam that dates back to the late 18th century. Originally, businessmen were contacted by an individual allegedly trying to smuggle someone connected to a wealthy family out of a prison in Spain. The scammer promised to share money with the victim in exchange for a small amount of money up front to bribe prison guards. The scam has persisted, shifting to requests for assistance purportedly coming from a Nigerian prince. While Nigeria is most often the nation referred to in these scams, they originate in other nations as well. The scam is also known as the “419 scam”; 419 refers to the article of the Nigerian Criminal Code dealing with fraud (in Chapter 38: “Obtaining property by false pretenses; Cheating”).

(https://en.wikipedia.org/wiki/Advance-fee_scam)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Rap duo

Two female Detroit rappers (known on stage as Deuces Wild) are charged with identity theft and conspiracy for a scheme going back to 2013 that involved filing fraudulent estate and trust tax returns claiming $13.6 million, of which they had already received more than $5 million. The duo filed 122 returns, opened 29 bank accounts, and roped friends and acquaintances into the scheme by promising them a cut of the money in exchange for receiving checks. One of the women used stolen identification to open accounts, rent apartments, open a UPS Box, and purchase expensive items, including jewelry and watches. Both women are facing ten years in prison if convicted.

(www.fox2detroit.com/news/metro-detroit-rappers-charged-with-stealing-over-5-million-from-irs)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Julia Butterfly

“Tax redirection” is a form of tax rebellion where the individual pays their tax directly to another source rather than the IRS as a form of protest. Julia “Butterfly” Hill, an environmentalist turned proponent of tax redirection, sent about $150,000 in federal taxes directly to schools, arts and culture programs, community gardens, and other recipients, stating in a letter to the IRS, “I’m not refusing to pay my taxes. I’m actually paying them but I’m paying them where they belong because you refuse to do so.” Hill is best known for her tree sit in the late 1990s, when she lived in a 180-foot tall Redwood tree named Luna for 738 days to protect it from being cut down by the Pacific Lumber Company.

(https://en.wikipedia.org/wiki/Julia_Butterfly_Hill)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: The Whiskey Rebellion

In 1791, Treasury Secretary Alexander Hamilton proposed the first U.S. tax, an excise on distilled spirits, to pay down the debt incurred from the American Revolution. Large whiskey producers paid the tax annually at a rate of six cents per gallon, with further tax breaks the more they produced. But small producers were charged nine cents per gallon in taxes. Farmers in western Pennsylvania who used whiskey for trade objected to the tax and protested by tarring and feathering the tax collectors. The rebellion lasted from 1791 to 1794, ending with a confrontation that caused President George Washington to send 13,000 troops to contain what some feared would become another revolution. (www.history.com/topics/early-us/whiskey-rebellion)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: “Illegal tax protestors”

Tax protestors rely on various arguments, such as the Sixteenth Amendment not being properly ratified, income is not defined in the Internal Revenue Code or the Constitution, or that the Internal Revenue Code actually doesn’t require anyone to pay tax. Prior to 1998, the IRS would label such individuals as “illegal tax protestors” in their system to flag them for enforcement actions and alert IRS employees to be cautious in dealing with them. But in 1998, Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206) prohibiting the IRS from continuing this practice because it stigmatized these individuals and biased IRS employees against them, even if they had ultimately paid their tax.

(www.washingtonpost.com/news/federal-eye/wp/2014/09/11/what-is-an-illegal-tax-protester-and-why-cant-the-irs-use-that-term-any-more/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: In the doghouse

A Minnesota dog breeder is in the doghouse after an investigation discovered that they were reporting income on their tax returns from fewer sales of puppies than they actually made in the years at issue. The Facebook page for BrookeMarie’s Goldendoodle Love clearly showed the number of litters and how many total puppies were for sale, which did not match up with the amounts reported. The puppies were going for between $2,500 and $3,500 each, plus there should have been charged 7% Minnesota sales tax, which the breeder also failed to pay. The owner has been charged with three felony counts of filing fraudulent income and sales tax returns and failing to pay or collect income and sales tax.

(www.southernminnesotanews.com/dog-breeder-accused-of-tax-fraud/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: $62 million in Paycheck Protection Program fraud

A California tax preparer was sentenced to ten years in prison for orchestrating a scheme that defrauded the Paycheck Protection Program out of $62 million. At the time he engaged in the fraud, he was on supervised release for a previous fraud scheme in which he filed false income tax returns on behalf of more than nine professional athletes. In the PPP scam, he filed false applications for PPP loans on behalf of small businesses and shell companies in exchange for 30% of the loan proceeds. He also filed fraudulent supporting tax returns that the small business owners never saw or approved. To hide the funds he received from the scam, he asked the businesses to pay the fee with cashier’s checks and to write “payroll” in the memo line.

(www.wric.com/news/crime/man-sentenced-for-tax-fraud-schemes-resulting-in-more-than-62-million-loss-for-us-government/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Distributing false resale certificates

Sotheby’s auction house is under investigation in New York for allegedly distributing false resale certificates to around a dozen clients, allowing them to pose as art dealers and avoid paying tax on revenue from their sales. The scheme is related to a lawsuit in which a Sotheby’s client purchased $27 million in art for his personal collection in transactions that avoided tax. Initially, it seemed this was an isolated incident, but further investigation revealed multiple fraudulent resale certificates, indicating that staff at Sotheby’s had “willfully turned a blind eye to the fraudulent distribution of resale certificates.” Sotheby’s argues it shouldn’t be held responsible for the actions of low-level employees. (www.artnews.com/art-news/news/sothebys-tax-fraud-investigation-expands-1234637480/)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: AI pool-finding

France is using AI to find undeclared swimming pools, which so far has generated 10 million in tax. In France, a swimming pool can affect tax because housing taxes are calculated based on a property’s rental value. Since the beginning of the pandemic, and with recent heat waves affecting Europe, the number of pools in France has greatly increased. The AI pool-finding project so far has only covered nine of France’s 96 metropolitan areas, but it has already discovered 20,356 undeclared swimming pools. The French tax office DGFiP (a.k.a., Le Fisc) estimates it can bring in an additional €40 million in tax once it’s finished using AI to analyze the rest of metropolitan France. (www.theverge.com/2022/8/30/23328442/france-ai-swimming-pool-tax-aerial-photos)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Romanian taxes on imported diesel fuel

The U.S. will return $1.2 million in forfeited funds to Romania, stemming from a tax fraud scheme involving diesel fuel. A Romanian couple avoided Romanian taxes on imported diesel fuel by claiming the fuel was a lower grade of industrial and maritime fuel. The untaxed income from the sale of the higher value diesel was laundered through a number of bank accounts and shell companies controlled by the couple, and resulted in an overall $58.677 million tax loss to Romania. Before they could be arrested, the couple fled to Washington state, but eventually were extradited, leaving behind a large piece of property and assets that were sold. The funds from the sale will be returned to the government of Romania. 

(www.justice.gov/opa/pr/12-million-be-returned-romanian-government-victim-international-tax-fraud-and-money, www.justice.gov/opa/pr/12-million-be-returned-romanian-government-victim-international-tax-fraud-and-money)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Paid public restrooms

A German woman who owns a cleaning company that earns revenue from paid public restrooms is on trial for failing to report around €1.2 million. The restrooms have voluntary contribution plates where visitors can leave change, which generated the income that she failed to report. But the case is complicated in that some of the charges date back more than 14 years, the German statute of limitations for tax fraud. Also, some of the restrooms were near the Austrian border and present a jurisdictional problem. And because income from the restrooms is based on voluntary donations, it’s difficult to nail down an exact amount of revenue; even the judge in the case suggested that an amount of €600,000 may be more appropriate than €1.2 million. 

(www.taxbuzz.com/blog/germany-toilet-tax-evasion-trial-begins)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Yoga studio stacking parties

Owners of a NYC yoga studio are facing 30 years in prison for conspiracy and tax evasion for failing to file returns while the yoga studio raked in millions. The chain of studios closed in 2020 following allegations of questionable business practices such as pressuring instructors to work for free. Yoga session fees were donation-based and collected in tissue boxes that were passed around, but instructors were not allowed to count the money collected. Instead, the cash was brought to one studio owner’s home for “stacking parties” where the bills were counted and stacked. The owners spent the funds on personal items such as $270,000 on airfare, $76,000 on hotels, $40,000 on Denver Broncos season tickets, $39,000 at restaurants, and more than $60,000 spent at country clubs and on event tickets. 

(www.nytimes.com/2022/08/24/nyregion/tax-fraud-yoga-to-the-people.html)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Imprecise IQ scores

A Court of Appeals upheld a ruling against a taxpayer for filing false tax returns connected to his wife’s embezzlement of millions of dollars from her employer. The taxpayer argued he thought the funds were his wife’s gambling winnings, which he used to buy a yacht, a snowmobile, and other luxury items. At the appeal trial, the taxpayer argued the district court erred in not allowing evidence of his cognitive deficiencies, consisting of expert testimony and his high school transcript that contained numerous “E” grades. However, the expert could not rule out that the taxpayer’s performance during his cognitive exam was the result of malingering, and the high school transcript contained “an unexplained grading system and imprecise IQ scores.” Based on these and the taxpayer’s own testimony, the court agreed he was aware the couple was spending more than they reported and was found to have not disclosed all income to his accountants. (U.S. v. Mills (July 22, 2022) U.S. Court of Appeals, Third Circuit, Case No. 21-2423)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: 76 fraudulent charities

The House Ways and Means Oversight Subcommittee has contacted the IRS looking for answers regarding the streamlined process for applications for tax-exempt status, which allowed one fraudster to have 76 fraudulent charities approved. The fake nonprofits all had names that sounded similar to legitimate nonprofits, such as “American Cancer Society of Michigan.” The actual American Cancer Society had even gotten wind of its fraudulent namesake and contacted the IRS. The IRS is now under fire for not noticing that this particular group of fraudulent charities all used the same Staten Island address. It also highlights the IRS’s own statistics that only one in 2,400 of these streamlined applications gets denied. (www.wealthmanagement.com/philanthropy/irs-hot-water-over-fraudulent-charities)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A vexatious litigant

After being disbarred for bringing numerous unmeritorious litigations and being declared a vexatious litigant (one trial judge wrote in a statement of decision that the taxpayer is “a relentless bully” who displays “terrifying arrogance”), a former attorney found himself in Tax Court regarding disallowed Schedule C expenses. The claimed Schedule C business activities did not generate a profit and mostly stemmed from litigation relating to challenging the taxpayer’s disbarment and lawsuits that would otherwise personally benefit him. He deducted court filing fees, life insurance policy expenses, and various utility expenses, none of which were allowable expenses because the taxpayer failed to show that he engaged in any business activities for the year at issue. (Kinney v. Comm., TCM 2022-81)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A sovereign citizen

A Michigan man is facing felony charges and prison time for bouncing three checks he wrote to pay his taxes. The man, who also claims to be a sovereign citizen, sent the State of Michigan three checks for $1 million each, which bounced because they had routing numbers for TCF Bank. That in and of itself is not a crime, except he did not actually have an account at TCF Bank. Under Michigan law, no-account checks/writing checks on closed account is a class H felony that carries up to 2 years in prison. (www.michigan.gov/ag/news/press-releases/2022/02/10/self-proclaimed-sovereign-citizen-charged-with-writing-fake-checks)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Shakira, Shakira

After being accused by the Spanish government of failing to pay €14 million in tax on income earned between 2012 and 2014, pop star Shakira has rejected a plea deal with Spanish authorities and is moving forward with a trial that she says will prove she has already paid the tax in question and owes no tax debt. For the tax years at issue, Shakira’s official residence was the Bahamas, but she also lived with footballer Gerard Pique in Barcelona. If found guilty, she could face fines and a prison term. (www.euronews.com/2022/07/27/shakira-opts-to-go-to-trial-in-spain-over-alleged-145m-tax-fraud)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Nine professional athletes

A Los Angeles tax preparer has pleaded guilty to engaging in two separate fraud schemes. The first involved filing fraudulent income tax returns for at least nine professional athletes, reporting fabricated business and personal losses. The tax pro and his associates claimed they had specialized knowledge that the athletes’ prior tax professionals lacked and convinced the athletes to amend past returns to generate large fraudulent refunds. They then charged the athletes a fee of 30% of the resulting refund and directed the athletes to send the fee to shell entities. Second, the tax pro and his associates applied for PPP loans on behalf of a number of small businesses, shell entities with few or no employees that they controlled, and business entities controlled by others. They inflated the number of employees and monthly payroll costs claimed on the PPP loan applications and submitted fabricated tax returns in support of the applications. Some of the business owners never saw their loan applications before they were filed. The tax pro charged a fee of 30% of the loan amounts. He’s facing up to 25 years in prison. (https://www.justice.gov/opa/pr/second-defendant-pleads-guilty-multimillion-dollar-tax-fraud-scheme-involving-professional)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Capital with a K

A North Carolina tax preparation business owner has been sentenced to almost four years in prison for a tax fraud scheme that involved hundreds of tax returns and that netted him $700,000. Kapital Financial Services had two locations in Charlotte, and the business owner directed employees to falsify clients’ tax returns, including claiming false deductions, business losses, American Opportunity credits, education credits and earned income tax credits. He also trained his employees on how to create the fraudulent returns to avoid IRS detection and provided them with scripts and cheat sheets. Employees were not allowed to provide clients with copies of their returns, they were only allowed to give clients their refund amount because the fees Kapital charged were taken from the inflated refunds. (https://www.justice.gov/opa/pr/charlotte-tax-preparer-sentenced-prison)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: $1 billion in crypto scams

Crypto scams have reached the $1 billion mark for the period between January 2021 and March 2022. Almost 40% of the scams originated on social media. In terms of type of fraud, most scams relate to fake investments that promise large returns, with second place going to “romance scams” that involve gaining trust using a fake online identity and then manipulating funds out of the victim. Most of the scams involve Bitcoin (70%), followed by tether (10%) and Ethereum (9%). (www.forbes.com/sites/rosemariemiller/2022/06/06/bitcoin-leads-crypto-fraud-as-ftc-confirms-1-billion-milestone)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A seized show jumping horse

After busting a tax shelter promoter, the U.S. government seized many of the assets he purchased with the proceeds, including a $750,000 show jumping horse. However, after realizing that it was going to cost at least $50,000 to feed and care for the horse, the government agreed to sell the horse back to the tax shelter promoter’s daughter for $25,000. The daughter had been planning to ride the horse down the aisle on her wedding day. The government has seized horses before; in 2012 they sold 150 horses for $4.8 million, which were seized from a comptroller who had been misappropriating city funds. But maintaining assets before they’re sold can be expensive, as the government has found regarding the maintenance of superyachts seized from Russian oligarchs. (https://finance.yahoo.com/news/horse-seized-tax-fraud-case-133413396.html)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Counterfeit chocolate

A bust of U.S.-themed candy stores on Oxford Street in London raked in £22,000 worth of counterfeit Wonka bars and over £100,000 of counterfeit goods such as vapes, Apple and Samsung products, hookah products, and watches. All counterfeit vapes recovered contained excessive levels of nicotine and had not been approved by the Medicines and Healthcare Products Regulatory Agency. The Food Standard Agency also warned anyone who purchased the counterfeit Wonka bars not to eat them, as there is no way of knowing what ingredients were used or whether food hygiene practices were followed. The stores are being investigated for millions of pounds in tax evasion as well.

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: That’s a lot of Happy Meals

McDonald’s France has agreed to pay a total of €1.25 billion in fines, penalties, and back taxes to settle a tax evasion case after years of negotiations.  McDonalds France was accused of hiding French profits in lower-tax Luxembourg from 2009 through 2020, and reporting lower profits in France. An investigation was started in 2016 after union officials reported the company for tax evasion. The settlement is made up of a €508 million fine and €737 million in back taxes and is the second-biggest tax settlement in French history. (The largest was the €2.1 billion fine paid by aircraft builder Airbus in 2020.) (https://abcnews.go.com/Business/wireStory/mcdonalds-pay-france-13-billion-tax-fraud-case-85434599)

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: Go Go Power Ranger

Austin St. John, the actor who played the Red Power Ranger in the 1990s TV show Mighty Morphin’ Power Rangers is facing up to 20 years in prison for participating in COVID-19–related wire fraud. St. John was part of a ring of 18 people who filed for $3.5 million in fraudulent PPP loans for existing or newly created small businesses. This is just the latest in the curse of the Red Power Ranger: in 2017 the actor who portrayed the Red Wild Force Ranger in Power Rangers Wild Force pled guilty to voluntary manslaughter for stabbing his roommate with a sword.

CPAs, get four hours of fraud CPE with our Fraud Essentials for CPAs WebinarClick here for more information.

Fraud Friday: A 70-year-old tax collector

A 70-year-old tax collector in Pennsylvania was sentenced to one year in prison for filing false returns that understated her income. She started underreporting in 2014 and gradually increased the unreported amount each year until her actual income was six times higher than what she reported to the IRS in 2018. She used the funds to buy a mobile home at the Jersey Shore, fund home renovations, and pay for a family vacation to Hawaii. The tax collector and her family argued for her to serve the sentence at home so she could begin paying restitution to the IRS, but the judge was unmoved considering the seriousness of the crime and the fact that she was an elected county tax collector who used her position to not pay her own taxes. (https://www.inquirer.com/news/rosezanna-czwalina-ridley-township-false-income-tax-sentence-20220518.html)

Fraud Friday: Sheep Ministries, Inc

A Tennessee woman is serving 51 months in prison for attempting to cash a fraudulent $1 million bill of exchange from a foreign source. The bill of exchange was flagged because it didn’t have magnetic ink coding like an ordinary check, it contained an “autograph” line instead of a signature line, and wording at the bottom of the document contained the misspelled word “neogotobile.” A private investigator at the bank alerted the police that the bill of exchange was fraudulent. Just prior to the bank fraud incident, she had also filed a fraudulent tax return claiming a $250,000 refund. At trial, it was revealed that in 2006 she had been convicted of multiple counts of filing fraudulent returns using personal information stolen through Sheep Ministries, Inc., the faith-based nonprofit that she ran. (United States v. Marilyn Cook (May 6, 2022) U.S. Court of Appeals, Sixth Circuit, Case No. 20-5622)

Fraud Friday: $1 billion cryptocurrency Ponzi scheme

Tax investigators from the J5 (Joint Chiefs of Global Tax Enforcement) have uncovered evidence of a $1 billion cryptocurrency Ponzi scheme. The leads concern transactions around the world, including crypto transactions in the J5 nations: the U.S., the U.K., the Netherlands, Canada, and Australia. Some of the leads involve individuals with significant NFT transactions; NFTs are becoming a new tool in money laundering practices. The IRS is now making tracking cryptocurrency one of its primary priorities, because the lack of regulation and oversight makes cryptocurrency vulnerable to fraud. (https://www.thestreet.com/investing/crypto-ponzi-scheme-irs-regulators)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Daycare center credit cards

Married taxpayers were liable for fraud penalties for failing to report wage and dividend income from the daycare centers they owned and operated. The taxpayers also each had a credit card tied to the corporate bank account, which they used to purchase personal items such as college tuition, vacations, jewelry, and other luxury items. Their adult children also made personal purchases using the corporate credit cards, even though they were not employees of the daycare centers. The daycare center also paid for a Hummer, a BMW, and an Escalade for the taxpayers and their children to drive as their personal vehicles. (Hacker v. Comm., TCM 2022-16)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Consulate conspiracy

A U.S. Consulate officer in Vietnam was charged with conspiracy after participating in a scheme where nonimmigrant visa applicants paid him to approve their visas, netting him over $3 million. He initially kept his payments in a home safe, but as the stash grew, he purchased nine properties in Thailand to attempt to hide the proceeds of the scam. On his tax return for the year at issue, he reported his income from the Consulate Office, but did not report the bribery income. As part of his plea agreement, he agreed to sell the Thailand properties to help pay off the money judgement against him. The properties were sold at a loss, which the taxpayer deducted from his bribery proceeds. But the Tax Court determined that loss deductions are disallowed where the deduction would frustrate federal or state policy. Allowing a deduction for losses arising from the properties obtained through illegal activities would undermine public policy because a portion of the forfeiture would be borne by the Government. (Sestak v. Comm., TCM 2022-41)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Questionable business practices

A real estate developer in Michigan is facing five years in prison plus penalties and restitution for lying to the IRS in an attempt to hide his failure to pay employment taxes he withheld from employee wages. During the investigation, the developer (who is a former CPA) lied to IRS special agents about his companies’ assets income, filed false employment tax returns stating he had no employees, and claimed he could not afford to pay his tax debts. Meanwhile, he was using business accounts to pay for his Lake Michigan vacation home, Lansing condo, car payments, college tuition, personal credit card bills, and his boat. In 2021, he had filed a defamation suit against an East Lansing news outlet for publishing a story on his questionable business practices. The suit was dismissed. (www.justice.gov/Usao-wdmi/pr/2022_0426_Chappelle)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Putting your child’s name on your home

Dear [CLIENT NAME]:

Many people think it’s a good idea to put their child’s name on the title to their home. Sometimes the parent adds the child’s name to the title and sometimes the parent changes the title to the child’s name. This is generally a very bad idea. Here are five reasons why:

  1. Gift tax return: If you give your child a gift of equity in the home that exceeds $16,000 in value (in 2022), there may be a gift tax to pay and a gift tax return to file.
  2. No gain exclusion: Tax law allows a taxpayer to exclude up to $250,000 of the gain on the sale of a principal residence ($500,000 for a married couple). However, the exclusion is only available if the seller owns and occupies the property for at least two out of the last five years. If the child does not live in the home for that period, the gain on the child’s share of the home is fully taxable.
  3. Equity subject to debts of the child: Property is subject to the debts of its owners. If the child owns the home or is a partial owner, a creditor may file a lien on the property for any of the child’s debts. Although your child may have excellent credit and good fiscal responsibility, your home could be lost if there is an accident or a lawsuit.
  4. You are now a renter: If you give 100% of the property to a child, you are now at the mercy of the child. If the child decides to sell the property, you must move out. There is no guarantee that the child will continue to care for you.
  5. Medicaid problems: Under some circumstances, the gift of the home to the child could be considered a gift for Medicaid purposes. If you give the home to the child and the child subsequently sells it, you could be ineligible for Medicaid benefits in the event of a long-term health crisis.

What should you do instead?

Usually a parent gives the home to the child to make sure that the child easily gets the home at the parent’s death or so the child can manage the affairs of the parent. If this is the case, the parent will be better served by establishing a living trust, along with powers of attorney, so the child can manage the parent’s affairs.

If the reason is to help the child buy his or her first house, a better way is to lend the child money with a low but reasonable interest rate, and set up a program to give annual gifts in the form of principal forgiveness.

If you are considering giving your home to your child, contact me so we can discuss alternatives.

Sincerely,

Your tax professional

Fraud Friday: Philadelphia cheesesteak

In 2020, the 82-year-old owner of a South Philadelphia cheesesteak shop and his son were indicted on tax fraud charges for failing to report more than $8 million between 2006 and 2016. However, there’s so much material to discover in their complex tax case that a Pennsylvania federal court continued discovery until May 2022. The father-son duo are accused of paying wages partially in cash to avoid payroll taxes and filing numerous false returns understating their business income. During a franchising rights dispute, the pair worried their tax fraud scheme would come to light, so they amended several returns to increase reported sales, but then claimed additional fraudulent expenses to offset the income. If they’re convicted, they face five years in prison for conspiracy and for each count of tax evasion, and three years in prison for each false return charge. (https://6abc.com/tony-lukes-tax-fraud-evasion-anthony-lucidonio-sr-nicholas/6332901/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: If preparing (fraudulent) tax returns is wrong…

If preparing (fraudulent) tax returns is wrong, then I don’t want to be right! A Texas tax pro was banned in 2011 from conducting a tax preparation business after she admitted to preparing or assisting to prepare approximately 200 false tax returns. The tax credits she tried to obtain in that case were described in a filing as “so exaggerated that no reasonable person could conclude they were anything but deliberately fabricated.” But she was back at it again, and since 2016, she had been preparing income tax returns for clients despite the prohibition. She prepared numerous false returns which claimed various false items on her clients’ behalf: false wages, salaries, tips, and tax credits such as the Earned Income Credit, Child Tax Credit, and American Opportunity Tax Credit. She has been sentenced to 15 months in prison. (www.justice.gov/usao-sdtx/pr/tax-preparer-sent-prison-tax-fraud-again)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: The taxpayer hatched a plan for revenge

After a routine inspection by the Bureau of Alcohol, Firearms, Tobacco, and Explosives (ATF) uncovered violations that resulted in a taxpayer’s business ultimately closing, the taxpayer hatched a plan for revenge. Five years later, he issued W-9s to the two ATF agents, requesting their Social Security numbers. He never received that information, and he then issued a Form 1099-MISC to each of the agents, showing he paid them $250,000 apiece. The agents did not report the income, and the taxpayer deducted $500,000 on the company’s return, flowing the loss through to his individual return. At trial, the taxpayer insisted he had spoken with an IRS agent who said it was acceptable to write off the $500,000. He was sentenced to two years in prison for filing false returns. (U.S. v. Petrunak (May 4, 2017) U.S. Court of Appeals, Seventh Circuit, Case No. 16-3631)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Detached and disinterested generosity

A taxpayer successfully argued that $10,500 in checks she received from her boyfriend were gifts, not income. Her boyfriend had reported the payments on a 1099-MISC and deducted them from his income, claiming that he had paid her wages. As a result, the IRS had come looking for income tax since the taxpayer had not reported the income. At trial, the ex-boyfriend changed his story and was evasive in answering questions. The taxpayer, on the other hand, answered every question asked — even those that did not help her case. The court found the taxpayer’s testimony to be forthright and the ex-boyfriends to be untrue, and determined that the $10,500 was paid to the taxpayer with “detached and disinterested generosity,” and held that it was a gift, not reportable income. (Jue-Ya Yang v. Comm., TCS 2008-156)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Stolen identities and fraudulent tax returns

The owner of a Georgia IT business is in prison for almost seven years for using a computer program that he built to store stolen identities and automatically submit fraudulent tax returns using those stolen identities. The program could be accessed remotely, and he hid his IP address whenever he accessed the program, making it difficult for the IRS to trace a tax return back to “one particular origination point.” Refunds were issued on prepaid debit cards and totaled around $600,000. After being indicted, he was out on bond, but was discovered to be threatening potential witnesses against his case and sent back to prison. (www.sacbee.com/news/nation-world/national/article259620689.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: $3.6 billion in illicit cryptocurrency

IRS Criminal Investigation (IRS-CI) is the only federal law enforcement agency authorized to investigate federal criminal tax violations and related financial crimes: money laundering, corruption, currency violations, and terrorist financing. IRS-CI seized more than $3.5 billion of illicit cryptocurrency in fiscal year 2021, and they’ve already seized more than this amount in fiscal year 2022. So far in 2022, $3.6 billion has been seized by CI agents who tracked unauthorized transactions that sent stolen Bitcoin from a 2016 digital asset exchange hack to digital wallets under the control of the launderers. (FS-2022-18)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Defrauding the California Department of Public Health

A California woman and her five co-conspirators have been charged with defrauding the California Department of Public Health for a scheme that diverted CDPH funds for their private use. The woman was a former manager at CDPH and she billed the agency for “consulting work” that included purchasing a large number of gift cards supposedly as patient incentives, but which she herself used. She and the other fraudsters also billed the state for HIV prevention services that were never provided. Together, the group scammed CDPH out of $2 million; the woman is liable for $750,000 and faces 20 years in prison if charged. (https://fox40.com/news/local-news/former-manager-with-cdph-office-of-aids-charged-in-connection-with-fraud-scheme/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Software and dementia

In 2020, Robert Brockman was charged with tax evasion, wire fraud, money laundering and other crimes as part of a nearly 20-year scheme to conceal billions in income from the IRS and defraud investors in software company Reynolds & Reynolds, of which he was the CEO. In December 2020, Brockman’s attorneys announced that despite the fact that he was running a multi-billion dollar software company up until November 2020, he was suffering from extreme dementia which prevents him from standing trial. Most recently, he has been accused of continuing to hide assets offshore and transferring property to family members in an attempt to avoid paying his $1.4 billion tax bill. (https://www.autonews.com/dealers/former-reynolds-and-reynolds-ceo-robert-brockman-still-hiding-assets)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Two sisters, five different companies, 16,000 false returns

Two sisters are serving prison sentences for tax evasion and defrauding the government. The sisters created five different companies, some in the names of other people, and filed over 16,000 false returns that netted them almost $25 million in fraudulent refunds. The sisters used the funds to purchase multiple luxury homes and vehicles, before the IRS caught on that one sister had earned over $1 million during one year they were engaged in the fraud, but she had only reported earning around $200,000. In addition to prison time the sisters will pay to the IRS restitution of $24.9 million plus $500,000 for tax evasion. (www.irs.gov/compliance/criminal-investigation/orlando-sisters-sentenced-in-25-million-tax-fraud-scheme)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Dozens of fraudulent and stolen identities

In the first pandemic relief fraud case to go to trial, three San Fernando Valley family members were sentenced to prison for fraudulently obtaining $20 million in PPP loans and EIDL relief funds. The family used dozens of fraudulent and stolen identities – including names belonging to elderly or deceased people and foreign exchange students who briefly visited the U.S. and never returned — to submit fraudulent applications for approximately 150 PPP and EIDL loans. They used the funds to buy homes in Tarzana, Glendale, and Palm Desert, as well as gold coins, diamonds, jewelry, luxury watches, fine imported furnishings, designer handbags, clothing and a Harley-Davidson motorcycle. Two of the sentenced family members are fugitives, having cut their tracking bracelets and going on the run. (https://www.justice.gov/usao-cdca/pr/san-fernando-valley-family-members-sentenced-years-prison-fraudulently-obtaining-tens)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Online auction fraud

A Bulgarian national was sentenced to 10 years and one month in prison for operating an online auction fraud that posted ads on craigslist and eBay for high-cost goods like vehicles that did not actually exist. The buyer’s payment then went through a complex money laundering scheme where someone in the U.S. would receive the payment, convert it to cryptocurrency, and then transfer it to foreign money launderers. The man sentenced had laundered nearly $5 million in cryptocurrency over three years. (https://www.justice.gov/opa/pr/owner-bitcoin-exchange-sentenced-prison-money-laundering)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Renounced U.S. citizenship

The founder of a Russian online bank was required to pay $508 million in tax, interest, and a $100 million fraud penalty for large stock gains following taking his company public on the London Stock Exchange. Three days after the IPO, which netted $1.1 billion, he renounced his U.S. citizenship. He did not report his assets on his expatriation forms, which require expats with a net worth of $2 million or more to report their assets and pay tax; he reported a net worth of $300,000. He also filed a false tax return, leading to his arrest and extradition. Had he paid the tax owed after the IPO ($248,525,339), his bill would have been less than half of what he paid with his plea agreement. (www.justice.gov/opa/pr/founder-russian-bank-pleads-guilty-tax-fraud)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

 

Fraud Friday: $11 million from the Department of Veterans Affairs

A New Mexico couple has been sentenced to prison for embezzling $11 million over a decade from their guardianship and financial services firm. The couple siphoned payments to clients from the Department of Veterans Affairs and Social Security Administration and used the funds to buy RVs, homes, luxury vacations, and to pay over $4 million in AmEx charges. The authorities began an investigation when employees noticed funds were missing from client accounts. The couple fled before their sentencing because they “wanted to get away one last time before they went to prison,” but were located in Oklahoma and arrested, and handed harsher prison sentences. (www.abqjournal.com/2409934/founder-of-guardianship-firms-gets-47-years-in-federal-prison.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Chief of the Questionable Refund Unit

The chief of the Questionable Refund Unit for the New Mexico Taxation and Revenue Department was apparently confused about the purpose of his job. Rather than making sure taxpayer returns and refund claims were on the up-and-up, he altered returns and had the resulting fraudulent refunds deposited into his own bank account. In total, he siphoned almost $700,000 from New Mexico’s taxpayers. He’s facing a minimum of 32 years in federal prison on charges of wire fraud, identity theft, and money laundering. (https://www.krqe.com/news/crime/tax-official-pleads-guilty-to-stealing-nearly-700k-in-taxpayer-money/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Banned for life from acquiring antiquities

An antiquities collector has been banned for life from acquiring antiquities after numerous pieces in his collection were determined to be stolen. An investigation into a statue stolen from Lebanon during the Lebanese Civil War led authorities to the collector, and it was determined that 180 pieces worth $70 million in his possession were stolen or had other evidence of looting. The collector claims he had no idea the items were stolen. The lifetime ban was imposed in lieu of a criminal trial, and the collector has stated that he plans to recoup his losses from the antiquities dealers he was working with. (www.wealthmanagement.com/high-net-worth/billionare-michael-steinhardt-surrenders-70-million-stolen-antiquities)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: Attorney in hot water

A French attorney for years had been hounding her client’s stepson, accusing him of stealing her client’s inheritance, which triggered a criminal investigation into his tax reporting of various trusts. The stepson was acquitted of fraud, but the attorney is now in hot water for not reporting the $5 million her client paid her for her efforts. She has been found guilty of aggravated tax fraud and money laundering for her attempt to hide that money, on which she now owes $170,000 in income tax, $135,000 in wealth tax, and $800,000 in fines. (www.artnews.com/art-news/news/claude-dumont-beghi-1234613490/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: $3.5 billion in cryptocurrency

The Cyber Crime Unit of the Internal Revenue Service’s Criminal Investigation Division released a report on its activities, which included seizing $3.5 billion in cryptocurrency in fiscal year 2021 (93% of all of its seizures). The Infrastructure Investment and Jobs Act contained provisions expanding the reporting requirements for cryptocurrency, so this will continue to be a focus for the CI division. The report also noted that in 2021, the CI division identified $2.19 billion in tax fraud and another $8.18 billion in other financial crimes. Tax-related issues accounted for 72% of its direct investigative time, with 15.4% spent on non-tax issues such as money laundering and corporate fraud, and 11.2% spent on narcotics crimes. (www.irs.gov/pub/irs-pdf/p3583.pdf)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: The fall of Enron

Although it’s probably not reason to celebrate, the 20-year anniversary of the fall of Enron is upon us. While most of the main players have served their time and moved on (many back into the energy world), they left behind a legacy of corporate greed. The company’s predecessors were formed in the 1920s and 30s and through a series of mergers, landed with Kenneth Lay. It was then known as InterNorth, and Lay spent over $100,000 on focus groups to come up with a new name: Enteron. Since this word was already taken (it means “digestive tract or system”), it was shortened to Enron. But this never-adopted moniker seemed to inform company practices, which took shady accounting practices and lying to investors to new heights before a whistleblower pulled the chain and sent it all down the drain. (https://en.wikipedia.org/wiki/Enron)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A typo in the plea agreement

In 2006, Walter Anderson was convicted of tax evasion for his scheme that hid $450 million in income over five years, the largest individual tax fraud case in history at the time. However, there was a typo in the plea agreement: the wrong law was cited in the restitution order and a judge ruled there was nothing he could do about it. The judge noted, “The court is not free to read something into a contract that is not there or to interpret uncertain language in the government’s favor.” The mistake essentially erased the almost $200 million of restitution that Anderson was required to pay. However, an appeals court allowed the restitution order to stand because the “conduct of the parties made it very clear that they intended the plea agreement to provide restitution authority.” (https://en.wikipedia.org/wiki/Walter_Anderson_(entrepreneur))

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A solar energy Ponzi scheme

One of the owners of a California solar energy company was sentenced to 30 years in prison for engaging in a $1 billion Ponzi scheme that fooled investors like Berkshire Hathaway and Sherwin-Williams. The company built mobile solar generators, which investors purchased at a reduced cost. The company then leased the generators to end-users to pay down the remainder and any profit would go to the investors. Except the generators weren’t leased, and investors were paid from money coming in from new investors. The company owners acquired a baseball team, the ubiquitous stable of 150 classic cars, and threw a holiday party headlined by Pitbull. A former employee tipped off federal authorities that the company was lying about the number of leased units it had. The feds have since auctioned off 148 of the vehicles, including the 1978 Firebird previously owned by Burt Reynolds. (www.yahoo.com/news/california-man-gets-30-years-005549058.html)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: An entire family

An entire family landed in prison after alluding police and the FBI for a decade, for a string of thefts that targeted banks and armored vehicles. The Cabello family moved to Oregon after the father, Archie, was fired from his job in Wisconsin as an armored car driver when a bag of cash containing $150,000 went missing. No one was able to pin the theft on him, but then the bank his son Vincent worked at was robbed. The thief stole $750,000 from the vault, and while police suspected Vincent was involved, he stuck to his story. Archie landed another job as an armored vehicle driver, and was the “victim” of a heist that grabbed $3 million from the truck. The family lived very modestly but a closer look discovered huge credit card bills paid off with money orders. When Vincent paid cash for a Hummer, the authorities moved in and ultimately Vincent cracked and spilled the beans. And in case you were wondering, no, they didn’t report any of the income on their tax returns. (https://abcnews.go.com/US/family-thieves-hide-4m-stolen-cash-finally-caught/story?id=40782366)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.

Fraud Friday: A single Pokémon card

In case you thought the things people spent PPP loan money on couldn’t get any weirder, one man in Georgia is charged with wire fraud after spending most of his loan disbursement on a single Pokémon card. He claimed he had a business with 10 employees and revenue of $235,000 over a year, netting him $85,000. The court documents don’t say which card he purchased for $57,789, but unopened first-edition Pokémon cards can go for as much as $400,000. (www.washingtonpost.com/nation/2021/10/24/pokemon-card-fraud-case-covid-relief/)

CPAs, get four hours of fraud CPE with our 2021 Fundamentals of Fraud Prevention & Detection On-Demand WebinarClick here for more information.