Tax News & Views Feral Cat Campaign Roundup
IRS cautions against disaster charity scams. Campaign tax promises for everyone. Estate plan delayed, estate plan denied. Feral cats.
Key Takeaways
Beware disaster scammers.
Use IRS charity verification tool.
Everyone gets a tax break promise.
The hidden 100% tax rate.
Less tax, more partying in Hong Kong?
Maybe don't put off that estate planning.
Central Iowa financial advisor gets nine years for stealing from investors.
National Feral Cat Day.
In the aftermath of Hurricanes Milton and Helene, the Internal Revenue Service today cautioned taxpayers of scammers who use fake charities to gather sensitive personal and financial data from unsuspecting donors.
Scammers commonly set up fake charities to take advantage of peoples’ generosity during natural disasters and other tragic events.
Tips to avoid fake charities
- Always verify. Scammers frequently use names that sound like well-known charities to confuse people. Fake charity promoters may use emails, fake websites, or alter or "spoof" their caller ID to make it look like a real charity is calling to solicit donations. Potential donors should ask the fundraiser for the charity's name, website and mailing address so they can independently confirm the information. Use the TEOS tool to verify if an organization is a legitimate tax exempt charity.
- Be cautious about how a donation is requested. Never work with charities that ask for donations by giving numbers from a gift card or by wiring money. That's a scam. It's safest to pay by credit card or check — and only after verifying the charity is real.
- Don't share too much information. Scammers are on the lookout for both money and personal information. Never disclose Social Security numbers, credit card numbers or personal identification numbers.
- Don't give in to pressure. Scammers often pressure people into making an immediate payment. In contrast, legitimate charities are happy to get a donation at any time. Donors should not feel rushed.
Tax on the Campaign Trail.
The Best Things in Life—and Presidential Campaigns—Are Free - Richard Rubin and Xavier Martinez, Wall Street Journal:
Supposedly, there’s no such thing as a free lunch. But there might soon be tax-free overtime pay, tax-free Social Security benefits, free home healthcare and free assistance with newborn expenses.
This year’s presidential campaign is bringing a whole new meaning to free-market economics. Republican nominee former President Donald Trump, in particular, layers tax giveaway on top of tax giveaway, promising voters everything but the kitchen sink. (So far, there’s no deduction for kitchen sinks, but the campaign isn’t over yet.)
Many of the ideas are more slogans than proposals—concepts of a plan, to borrow a Trump phrase. They are accompanied by no details, fact sheets, white papers or experts. Still, if Republicans sweep November’s election, some of them might be the law of the land in six months. Some might be forgotten except by beleaguered policy analysts who have spent the campaign season trying to figure out, again and again, what Trump is actually suggesting.
How Wall St. Is Subtly Shaping the Harris Economic Agenda - Andrew Duehren and Lauren Hirsch, New York Times:
Ms. Harris has publicly called for billionaires to pay more in taxes, a politically popular idea, and her campaign did not want to explicitly walk back the tax on unrealized gains. But while Ms. Harris has continued to publicly call for a “billionaire minimum tax,” her advisers say the phrase does not necessarily mean she supports Mr. Biden’s version of the idea. People close to the campaign are looking at other ways to raise taxes on the ultrawealthy without taxing unrealized gains.
Ms. Harris was less shy about the other capital gains proposal. In a speech in New Hampshire, she said she would raise the top capital gains rate to 28 percent, an increase from the current top rate of 20 percent, but below Mr. Biden’s proposed increase to 39.6 percent.
That statement, a single line in a longer speech on the economy, has helped fuel support from big-money donors.
5 things to know about Harris and Trump on taxes - Tobias Burns, The Hill:
The 2017 tax cuts were one of Republicans’ signature pieces of legislation during the Trump administration. Some Republicans want a clean extension of the 2017 law.
...
Critics have blasted the law as fueling economic inequality, which has skyrocketed in recent decades. President Biden said he wants the law to expire, while representatives for the Harris campaign remained mum on her position. Harris, however, has tacked rightward relative to the president on some tax-related issues, including setting the capital gains tax rate at a lower level than Biden proposed.
Trump Brags About His Math Skills and Economic Plans. Experts Say Both Are Shaky. - Alan Rappeport and Ana Swanson, New York Times:
“I was always very good at mathematics,” Mr. Trump told John Micklethwait, the editor in chief of Bloomberg News, in an interview at the Economic Club of Chicago.
Faced with repeated questioning about how he could possibly grow the economy enough to pay for those tax cuts, Mr. Trump dismissed criticism of his ideas as misguided. He professed his love of tariffs and insisted that surging output would cover the cost of his plans.
...
“The most beautiful word in the dictionary is tariff,” Mr. Trump said, adding, “It’s my favorite word.”
Policy
At least five interesting things to start your week - Noah Smith, Noahpinion:
6. Implicit taxes are real and important.
Usually, we think of taxes as “the government takes your money”. And the more you make, the more government takes, even with a “flat tax”. But sometimes, what happens is that the government gives you less money as you earn more of it yourself. This is also a kind of tax, even though it doesn’t get counted in the official tax rate or official tax revenue. This is an example of what economists call an “implicit tax”. But in terms of its effect on people’s pocketbooks, it’s just as real as the explicit kind.
The U.S. has a stronger welfare state than most people realize, but it’s also heavily means-tested. If you make more money, you lose your benefits. This can be very frustrating for poor people, since it means they just can’t seem to get ahead no matter how hard they try. For example, Ilin and Sanchez (2023) model the situation of a single parent living in Washington, D.C. with a single three-year-old. They find that once this person hits $13,000 of earned income, they can’t get any more “net resources” — defined as total income minus a set of basic life expenses — until they earn more than $61,000.
In other words, a 100% effective tax rate on lower incomes.
Hong Kong slashes tax on spirits to boost nightlife - Chan Ho-him, Financial Times:
Hong Kong’s Beijing-backed chief executive John Lee, who took office in 2022 with a mandate to restore order in the wake of a tough crackdown on pro-democracy protesters, has recently switched his focus to an economy that has struggled to recover from pandemic-era restrictions.
...
From Wednesday, the duty rate for spirits with an import price of more than HK$200 (US$26) will be slashed from 100 per cent to 10 per cent for the portion of its value above that price.
There might be other reasons people don't think of Hong Kong as a place to have fun. Taxes are a thing, but they aren't everything.
Blogs and Bits
After 3 hurricanes, IRS grants tax relief to all Florida taxpayers - Kay Bell, Don't Mess With Taxes. "As a result, notes the IRS, all Florida taxpayers now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments."
Charitable Easement Deduction $16,745,000 Claimed $93,690 Allowed - Peter Reilly, Forbes. "It happens that except in pretty exceptional circumstances syndicated conservation easements don't work without inflated valuations. That does not mean that there were not inflated valuations elsewhere."
IRS Announces Annual Per-Diem Guidance for 2024-2025 - Parker Tax Pro Library. "The IRS announced the special per diem rates effective October 1, 2024, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home."
TIGTA Issues Report That The IRS Has Expended $6.9 Billion (11.9 percent) of its $57.8 Billion IRA Funding. - Ronald Marini, The Tax Times. "For FY 2024, the IRS estimates that $1.6 billion of IRA funding will be needed to cover its annual appropriation shortfalls for pay raises, inflationary increases already built into contracts, and other current services. IRS officials noted that the continued use of IRA funds to cover shortfalls in the annual appropriation will impact its ability to successfully deliver transformation objectives."
Red Flags Aren’t Just For Exes: Trouble In Estate Planning Paradise - Ashley Case, Forbes. "While focusing on a career can seem like a reasonable excuse to avoid romantic entanglements, it can also be a way to delay meaningful commitments. Similarly, many people delay estate planning, assuming they’ll get to it once things 'calm down' professionally. But life doesn’t wait for the perfect time; the unexpected can derail even the best-laid plans."
Estate plan delayed, estate plan denied.
Last-Minute $17 Million Transfer Doesn’t Escape Estate Tax - Chandra Wallace, Tax Notes ($):
The full value of assets transferred during the last month of a decedent’s life, and not in a bona fide sale, must be included in her estate, the Tax Court ruled.
In a September 26 memorandum opinion in Estate of Fields v. Commissioner, Judge Elizabeth A. Copeland found that the full value of more than $17 million in assets belonging to the decedent, Anne Milner Fields, and transferred into a partnership after she fell ill was included in her estate.
The transfers were made by Fields’s great nephew, Bryan Milner, under a general power of attorney and in accordance with an estate plan he implemented between May 11, 2016, and Fields’s death on June 23, 2016, the court found.
Perhaps the estate planning should have been done sooner. Devin Hecht, Leader of Eide Bailly's Wealth Transition Services team, comments:
Fields provides cautionary estate tax planning lessons for individuals with family limited partnerships/closely-held business entities and potential inclusion arguments from the IRS. Taxpayers should be aware that the IRS is on the look out for circumstances of retained enjoyment of assets (substantial economic benefits) or “strings” to pull assets back into taxpayer’s estate for federal estate tax purposes under Section 2036. While Section 2036 provides an exception for “bona fide sales”, there should be a substantial nontax purpose for the planning. Time and planning long before terminal conditions is very important in the area of estate tax planning. Even with good intentions, Fields serves as a reminder that the IRS is keen to criticize the facts and circumstances with end-of-life or deathbed estate tax planning strategies.
The best time to do your estate planning is already. The next best time is right now.
Bad Financial Adviser
Financial adviser who bought cars and jewelry with client money gets 9 years in prison - William Morris, Des Moines Register (Defendant name omitted, emphasis added):
A former Waukee financial adviser was sentenced to nine years in prison Friday after pleading guilty to defrauding clients of more than $2 million.
Defendant, 52, was indicted in March on charges of money laundering and more than a dozen charges of wire fraud, and briefly appeared on the FBI's Most Wanted list before he was apprehended the following month in Kansas. He pleaded guilty in June to two charges.
According to court filings, Defendant acted as a financial adviser and sold life insurance and other financial products. Starting in 2016, prosecutors say he encouraged at least 17 clients to invest in two shell companies that he secretly owned, using the money to pay for vehicles, travel and jewelry, including a $37,000 custom engagement ring and other pieces of diamond jewelry that he forfeited to the government as part of his plea.
No word on whether she said "yes."
The article says the defendant targeted "vulnerable victims, including elderly widowers with limited education and financial know-how." Be careful out there. If an elderly or unsophisticated family member seems to be dealing with questionable investments or advisers, you might become a hero by asking some questions.
What day is it?
It's National Feral Cat Day! It's somehow appropriate for all the tax cats who suddenly find themselves with a bit of free time after the extension deadline.
Visit us at www.eidebailly.com!
About the Author
Joe B. Kristan CPA
Partner, Eide Bailly LLP
After 38 years centered on tax consulting for closely held businesses and their owners, Joe is joining Eide Bailly's National Tax Office. Joe's responsibilities include communication, process improvement and training. He is a principal contributor to the Eide Bailly Tax News and Views blog, providing daily updates on tax reform and other tax news. Joe is a Certified Public Accountant and a member of the AICPA Tax Section and Iowa Society of Public Accountants.
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