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13th May 2022
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IRS promises that destruction of tax forms won't lead to penalties
In a statement issued Thursday, the IRS said taxpayers will not be subject to penalties as a consequence of the IRS' destruction of millions of paper-filled tax forms last year. The announcement follows a TIGTA report earlier this week that the IRS had destroyed around 30m paper-filed information returns in March 2021. "Ninety-nine percent of the information returns we used were matched to corresponding tax returns and processed,” the IRS said. “The remaining 1% of those documents were destroyed due to a software limitation and to make room for new documents relevant to the pending 2021 filing season.” The IRS added the agency expects to process all paper information returns received last year and this year. News of the audit has sparked anger in the tax community. “I was horrified when I read the report describing the destruction of paper-filed information returns,” said Phyllis Jo Kubey, a New York-based enrolled agent and president of the New York State Society of Enrolled Agents. “If they’re not putting those into the system, there’s going to be discrepancies, which means potential notices that are sent out,” said Dan Herron, a San Luis Obispo, California-based certified financial planner and CPA with Elemental Wealth Advisors. Although the IRS halted more than a dozen types of automated notices in February, Herron says the constant correspondence is still creating headaches for taxpayers and advisors. Brian Streig, a CPA with Calhoun, Thomson and Matza in Austin, Texas, said the news was a “break of our trust,” pointing to the burden on the business community.
California Gov. offers tax breaks for companies in anti-abortion states
California Gov. Gavin Newsom has proposed a series of tax incentives explicitly aimed at recruiting employers from states that restrict reproductive and LGBTQ rights, such as Florida and Texas. Mr. Newsom’s proposal to draw business to California would update tax credits, employer grants and other business incentive programs to “provide additional consideration for companies leaving states that have enacted restrictions on reproductive rights and anti-LGBTQ+ laws.” Last month, after Disney condemned the Florida education law and paused political donations in the state, Florida lawmakers revoked Disney World’s designation as a special tax district, a privilege that effectively allowed the company — the state’s largest employer — to self-govern its 25,000-acre theme park complex.
Appeals court rules that ACA payments get priority in bankruptcy
A federal appeals court ruled on Wednesday that payments individuals owe to the IRS for failing to obtain health insurance under the Affordable Care Act should be given priority in bankruptcy. The 3rd U.S. Circuit Court of Appeals affirmed a lower court's ruling that payments owed to the IRS are entitled to be paid off before other debts in a Chapter 13 bankruptcy because they qualify as taxes. The decision came in the case of a Pennsylvania couple who filed for bankruptcy in 2019 owing $927 to the IRS for failing to obtain health insurance as required by the ACA. The individual mandate of the landmark healthcare law had required Americans to obtain health insurance or make a so-called "shared responsibility payment," but that requirement was eliminated for individuals in late 2018.
ERC: What You Need to Know

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Deloitte opens DEI Institute
Deloitte has created a DEI Institute, an initiative aimed at advancing diversity, equity and inclusion (DEI) through research, collaboration and events focusing on emerging DEI trends and issues. The institute will focus on three priorities: driving new research on emerging DEI issues, building on earlier research such as The Equity Imperative; convening and collaborating with organizations, businesses and advocates to multiply impact; and leveraging Deloitte's experience and network to champion DEI in business and as a corporate citizen.
U.S. jobless claims rose 1,000 last week
New applications for unemployment benefits rose for the second week in a row last week but remained near historic lows in a sign of a tight U.S. labor market. Initial jobless claims, a proxy for layoffs, increased by 1,000 to 203,000 from the previous week’s revised level of 202,000, the Labor Department said Thursday. Economists polled by the Wall Street Journal had estimated new claims would fall to 194,000. The four-week average for claims, which smooths out volatility in the weekly figures, rose to 192,750. Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, fell to 1.3m for the week ended April 30th, the lowest level since January 1970. "There is no change in the underlying message of a very tight labor market and employers unwilling to lay off existing workers in the face of extreme labor scarcity," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Producer price gains edged downward in April
U.S. suppliers’ price increases eased a little in April as energy and food costs dropped, but producer-level inflation remained close to historic highs. The Labor Department on Thursday said the producer-price index, which generally reflects supply conditions in the economy, increased a seasonally adjusted 0.5% in April from the prior month. That marks a deceleration from the upwardly revised 1.6% gain in March, which was pushed up by surging energy prices after Russia invaded Ukraine. April’s rate of increase was the lowest since September 2021, but was higher than the average monthly gain of 0.2% in the two years before the pandemic. Producer prices rose 11% on a 12-month basis in April, its fifth consecutive double-digit gain. The so-called core price index—which excludes the often-volatile categories of food, energy and supplier margins—slipped slightly, climbing 0.6% in April from a month earlier, after jumping 0.9% in March. "The end result is that even if easing in April's PPI inflation has staying power, consumers can still expect to see rising prices for several more months based solely upon producers and services providers accounting for the higher costs they themselves have endured," said PNC senior economist Kurt Rankin.
Jerome Powell confirmed for second term as Fed Chair
The U.S. Senate on Thursday overwhelmingly confirmed Jerome Powell to a second term as chairman of the Federal Reserve. The final vote was 80-19. Mr. Powell was nominated in 2017 by former President Donald Trump to serve as head of the central bank, replacing Janet Yellen. After serving out his four-year term in February, Powell had been acting as chair pro tempore after Republican lawmakers had blocked the confirmation process. At issue was President Joe Biden's pick for chair of supervision, Sarah Bloom Raskin, who ultimately withdrew herself from consideration in March.
Treasury proposal takes aim at wealthy investors' tax strategies
The Treasury Department recently set out proposals targeting strategies in which a taxpayer gives assets to a beneficiary while maintaining control over, or a substantial interest in, them. “People need to re-evaluate the transactions they’ve done,” said Martin Shenkman, an estate planning lawyer in Fort Lee, New Jersey. “There will be unpleasant surprises for some, and the challenges are daunting.” One arrangement in the crosshairs is a partnership in which a regular interest is given to an heir while the donor retains a preferred interest. Another scenario concerns a promise by a donor to make gifts to a recipient in the future. Still another example involves a trust to which a grantor transfers assets but also receives income from the gifted property.  In all three instances, the moves use up some or all of a donor’s exemption, which this year is just over $12m (twice that for married couples). Those temporarily higher levels, a product of the 2017 tax-code overhaul, will fall by roughly half come 2026. For people using the strategies who die that year, the Treasury proposal would claw back taxes on transferred amounts that exceed the lower exemption levels. The lifetime gift and estate tax rate is 40%. Such taxpayers “would not be able to lock in the currently high use-it-or-lose exemption amount,” said Justin Miller, a partner and the national director of wealth planning at Evercore Wealth Management, in San Francisco.
More than one-third of Americans support a meat tax
Meat has been one of the foods most affected by inflation, but despite high prices, a new survey found that 37% of participants said they would support an extra 10% meat tax to cut consumption. The survey from Veylinx, a consumer research company, was conducted in March among 3,538 US consumers over the age of 18. In 2011, the Danish government implemented a saturated tax fat, which raised prices on items like meat and eggs, but the plan was scrapped a year later over concerns about food prices and jobs. A study published in Nature found that the Danish tax reduced saturated fat intake by 4%. Since then, cities like Philadelphia, Pennsylvania and Berkeley, California have passed soda taxes, and the experience has taught public health groups how to more clearly communicate what taxes on food would mean for US consumers, said Marco Springmann, a senior researcher in population health at University of Oxford. In the US, opponents say that a meat tax could disproportionately hurt low-income communities where access to fresh fruit and vegetables is limited, and for whom meat is more accessible.

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