Government Tax Incentives: Not Secretly Signaling the End of Our Existing Reality, Yet Still Manageable Enough to Remain Composure
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Government Tax Incentives: Not Secretly Signaling the End of Our Existing Reality, Yet Still Manageable Enough to Remain Composure
Can you believe it's almost the end of yet another week? I mean, it's both fantastic and frustrating all at once. Let me explain.
To begin with, I had a fantastic holiday week. After a tough December, it was soothing to gaze at the lights and jam to an excessive amount of Christmas music. And I was lucky enough to have my kids home with me—what a wonderful present! I assumed it would be a relaxing finish to the year. However, the Fifth Circuit had other plans.
On December 23, FinCEN was once more inhibited from enforcing the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA). A unified Fifth Circuit bench granted the government's urgent plea for a stay of a preliminary injunction pending an appeal. (☆) (A stay is a court order that halts a legal proceeding—it's usually temporary.)
This announcement caught many by surprise, as just the week prior, a judge in Texas ruled that a nationwide preliminary injunction prohibiting FinCEN from enforcing the CTA would hold. (☆)
Initially, the reversal meant that businesses would need to file BOI reports while the government's appeal made its way through the court system unless they were exempted. In response to the December 23 ruling, FinCEN posted a message to its website just before the Christmas holiday, pushing back the January 1, 2025, reporting deadline (☆) to January 13, 2025.
The courts weren't done yet, though. On December 26, the Fifth Circuit issued another ruling, (☆) vacating the stay. (Vacate is a legal term meaning to set aside a previous judgment or order.) That means that the part of the ruling that stayed the injunction has been removed—the injunction is once more in effect. The court also explained that the appeal had been expedited to the next available oral argument panel—oral arguments are now scheduled for March 2025.
If that sounds complex, it's because there are several moving parts. The injunction was preliminary—the merits of the case have not yet been heard in the Fifth Circuit. That's what's currently moving through the system. The other aspects are primarily concerned with procedure (the stay of the preliminary injunction, for example, was requested by the government while the matter is being heard).
On December 27, FinCEN updated its website to say:
Given a recent federal court order, reporting companies are not, at present, obliged to file beneficial ownership information with FinCEN, and they will not be held liable if they fail to do so while the order is still in effect. However, reporting companies may choose to voluntarily submit BOI reports.
So, to summarize, the preliminary district court injunction prohibiting FinCEN from enforcing the BOI reporting requirements remains in effect. That will remain the case until the spring, except for any further legal actions—but let's be real, that wouldn't surprise anyone at this point. Depending on which side you're on, the extra time can be seen as something of a present.
Some gifts are simpler. The IRS has rules regarding the taxation of gifts, and these rules can impact both what you give and the quantity you give. When it comes to gifting during Christmas, one crucial concept to grasp is the annual gift exclusion. Basically, as of 2024, the IRS allows individuals to give up to $18,000 per recipient each year without activating the gift tax. This means that, in the spirit of the season, you can give a gift valued at up to $18,000 to each person, including kids, parents, or friends, and you won't need to file a gift tax return or pay any taxes on those gifts. (That amount jumps to $19,000 in 2025. I don't know about you, but while I received some amazing presents—that book of cheese trivia won't be enough to surpass the limit from any individual this year.)
Alongside the "nice" list, here's another list you might find yourself on. The IRS reports that over one million taxpayers may have missed out on the Recovery Rebate Credit (RRC) claimed on their 2021 tax returns. The agency is now taking steps to send those checks to eligible taxpayers.
Taxpayers and tax professionals interested in digital assets received one final gift this season: On December 27, 2024, the Treasury Department authorized the final regulations applicable to Decentralized Finance (DeFi), specifically targeting participants in trading front-end services that help retail investors interact with DeFi protocols. (For those of you scratching your head, DeFi refers to peer-to-peer financial services on the blockchain.) Notably, the final regulations include protections that appear to preempt anticipated litigation over government interpretations of statutes previously limited by the Supreme Court Loper Bright. (The IRS also issued draft instructions for Form 1099-DA, Digital Asset Proceeds From Broker Transactions.)
And with that, we've reached the end of the year. It's just a few days until a new year begins—and it could be an important year from a tax perspective. A new Congress, a new administration, and potentially a new IRS Commissioner are on the horizon. We anticipate some regulatory rollback, and parts of the Tax Cuts and Jobs Act are set to expire. That means there's uncertainty—which can be frightening—but there's also room for opportunity. Engaging in a little tax planning now (☆) can help you start 2025 off on the right foot.
By the time you receive the subsequent issue of the newsletter, we will have commenced a fresh, squeaky-clean new year. I wish you plenty of awe and ambition for it. Happy New Year! I'll see you on the other side.
Have a delightful weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Inquiries
This week, a reader inquires:
I am only anticipating income of $1050 from CD interest for the year. Consequently, I won't be subject to any tax liabilities towards the IRS for the year. And yet, am I obligated to file, regardless of the absence of tax liabilities?
Not every individual is required to submit a tax return. Whether you are obliged to submit a tax return hinges upon your filing status, age, and total income. Determine this by referencing this diagram:
For the purpose of this diagram, total income refers to all income obtained in the form of money, goods, property, and services excluding any income exempt from taxation. This includes income from sources beyond the U.S. and from selling primary dwellings or other assets, as well as losses from your business.
When calculating total income, do not include Social Security benefits if you are married filing separately and resided with your spouse at any point in the current year, or if the sum of half of your Social Security benefits along with your other total income and any tax-exempt interest exceeds $25,000 ($32,000 if married filing jointly).
Even if you do not have to submit a tax return, you may opt to submit one to claim a refund of any withheld federal income tax. You should also file if you are eligible for any of the following credits:
- Earned Income Tax Credit (EITC)
- Additional Child Tax Credit (ACTC)
- American Opportunity Credit
- Credit for Federal Tax on Fuels
- Premium Tax Credit
- Credits for Sick and Family Leave
Do you have a tax-related question or issue that you believe we should address in the next newsletter? We’d be pleased to help if we can. *Submit your question using these guidelines*.
Statistics, Graphs, and Maps (Oh My!)
Contrary to circulating speculations implying that the IRS has announced the commencement of the tax filing season in 2025, that has yet to occur. Further, it appears that numerous taxpayers have a propensity to forget that the tax filing season generally commences in early January—a tendency which is rarely true. Typically, the tax filing seasons of the past decade or so have opened at the end of January (or February)—a review of which is provided below:
A Deeper Dive
Given the vast amount of discussion revolving around reporting requirements and late domestic tax maneuvers, it is easy to overlook the significance of international taxation. Ignoring this arena would be a mistake, as international events will significantly impact American taxpayers, including, among other things, corporate tax rates.
Significantly, the Organization for Economic Cooperation and Development (OECD) has been focusing on efforts to implement Pillars One and Two. Pillar One deals with the determination of where tax should be levied. This can be likened to discussions held in the U.S. between states concerning nexus, with the crucial question being: Who has the right to levy tax on income even in the absence of a physical presence? Pillar Two examines the amount of tax to be levied, with a focus on the disparate tax rates from country to country.
In April, the OECD published an updated commentary on the GLOBE (global anti-base-erosion) model rules. The GLOBE model rules are intended to ensure that large multinational enterprises pay a minimum effective tax rate of 15% in all countries where they operate.
Several jurisdictions have adopted the GLOBE (and related) rules, including the U.K., Belgium, the UAE, Switzerland, Poland, the U.K. crown dependencies, Canada, Singapore, and Kenya. This trend will undoubtedly place pressure on the U.S. as the new administration reconsiders corporate tax rates.
Pillar One is more complex, due in large part to digital services taxes. As part of the negotiations, countries were expected to abolish digital services taxes. No agreement was reached, so Canada chose to enact its DST in June. This move did not please U.S. companies, who already feel targeted by DSTs. Meanwhile, Pillar One negotiations continue.
It is worth monitoring what the U.S. does next. The U.S. has yet to adopt Pillar Two, and Republicans (who will control the White House and both chambers of Congress in 2025) are not enthusiastic about the proposal. However, they are also opposed to DSTs, which could lead to some compromises.
In related news, 11 years ago, the U.K. Labour Party considered a proposal to require large multinational companies to publicly report their profits and taxes in the countries where they conduct business. In 2016, U.K. lawmakers reached a compromise: The finance bill would not mandate public country-by-country reporting, but the Treasury could implement it at its discretion. Given changing governments and attitudes, could now be the optimal time?
If you found this information overwhelming, you are not alone. International taxation can be complex. Here is a lighter take on U.S. international taxes and filing requirements—the holiday season is upon us!
📅 February 3, 2025. Deadline for individuals and businesses impacted by Hurricanes Beryl and Debby (more info here and here), residents of South Dakota affected by severe storms, straight-line winds, and flooding that started on June 16, 2024, taxpayers in Puerto Rico affected by Tropical Storm Ernesto, and persons and businesses in Connecticut and New York affected by severe storms and flooding resulting from heavy rainfall starting on August 18, 2024.
📅 May 1, 2025. Deadline for individuals and businesses from entire states of Alabama, Georgia, North Carolina and South Carolina, as well as parts of Florida, Tennessee, and Virginia, impacted by severe storms and flooding due to Hurricane Helene (☆) and Hurricane Milton.
📅 September 30, 2025. Deadline for individuals and businesses affected by recent acts of terrorism in Israel.
Tax Conferences and Events
📅 February 19-25, 2025. ABA Tax Section's 2025 Midyear Tax Meeting at JW Marriott Los Angeles L.A. Requires registration.
📅 May 13-14, 2025. National Association of Enrolled Agents' 2025 Capitol Hill Fly-In, Washington, D.C. Requires registration (for NAEA members only).
📅 July 21-23, 2025. National Association of Tax Professionals' Taxposium 2025 at Caesars Palace, Las Vegas. Requires registration.
Trivia
How many gifts in total were given in "The Twelve Days of Christmas" song?
(A) 12
(B) 60
(C) 144
(D) 364
Find the answer at the bottom of this newsletter.
Positions and Guidance
The IRS has released Internal Revenue Bulletins 2024-52 and 2025-01.
The IRS has an online portal on their website, named "Get Ready," aimed at assisting taxpayers in preparation for filing in 2025.
As tax season approaches, the IRS has published a series of draft forms and instructions, including draft instructions for Forms 1099-MISC and 1099-NEC.
Noteworthy
The IRS is inviting qualified candidates for nomination to the Electronic Tax Administration Advisory Committee (ETAAC), a public platform for discussions centered around electronic tax administration-related issues, such as combating identity theft and tax refund fraud. New committee members will begin serving their 3-year terms in September 2025. Applications will be accepted until January 31, 2025. More details about ETAAC, the application process, and eligibility criteria can be obtained by emailing publicliaison@irs.gov.
The AICPA & CIMA, collectively referred to as the Association of International Certified Professional Accountants, announced the winners of their first-ever Chartered Global Management Accountant (CGMA) Professional Awards for Asia Pacific in a virtual ceremony on December 20, 2024. Over 1,200 applications and nominations from individuals, businesses, and educational institutions in countries such as Sri Lanka, Malaysia, India, Pakistan, Thailand, Maldives, Australia, and New Zealand were considered for the four categories: CGMA Leadership Award, CGMA Sustainability Award, CGMA Innovation Award, and CGMA Digital Transformation Award.
If you have career or industry news, submit it for consideration here or email me directly.*
In Case You Missed It
The following were the most frequently clicked articles last week:
- Tax Preparer Known as “The Magician” Pleads Guilty in $145 Million Tax Fraud Scheme
- Biden’s Recent Clemency Move is Controversial (and it’s not Hunter Biden)
You can view the complete newsletter here.
Trivia Answer
The answer is (D) 364.
- The Courts have once again changed their ruling on the beneficial ownership information (BOI) reporting, vacating the stay that had previously permitted businesses to file BOI reports, thereby reinstating the preliminary injunction prohibiting FinCEN from enforcing the CTA.
- Kelly Phillips Erb, Senior Writer, Tax, highlights the significance of the annual gift exclusion, stating that, as of 2024, the IRS allows individuals to give up to $18,000 per recipient each year without activating the gift tax, which increases to $19,000 in 2025.
- In response to the Tax Cuts and Jobs Act's set expiration dates, Erb suggests engaging in a little tax planning now to start 2025 off on the right foot.
- According to Erb, the IRS has yet to announce the commencement of the tax filing season for 2025, and numerous taxpayers tend to forget that the season generally commences in early January.