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Normally, when I start writing the newsletter, I am pretty confident about what it will look like. This week, however, has thrown us a few curves—the tax world is a bit topsy-turvy, so buckle up.
First up, the government spending bill. Earlier this week, Congressional leaders released the text of a proposed funding measure (☆) to keep the lights on. As expected, it was a short-term bill intended to fund the government through March 14, 2025.
Don’t be fooled by the “short” in the phrase “short-term”: the bill was 1,547 pages long. (By contrast, the September 25, 2024, continuing resolution, which extended funding through December 20, 2024, was just 21 pages.)
Notably, tucked into the spending bill was language that would delay the BOI reporting requirements under the Corporate Transparency Act (CTA) for existing owners for one year (to January 1, 2026). The CTA, intended to make it harder for bad actors to hide their identities and ill-gotten gains through shell companies or opaque corporate structures, pulls in companies and owners.
The bill did not address IRS funding. (☆) As part of the Inflation Reduction Act, Congress provided an additional $80 billion in funding to the IRS over ten years. In 2023, Congress took a bite out of that funding—as part of the debt ceiling agreement, a little over $1 billion was pulled back from the agency. The IRA tax enforcement budget was cut by $20 billion shortly after. The cuts were supposed to happen over two years, but the entire $20 billion was included in the first year, 2024. Any continuing resolution that largely funds programs at the 2024 levels would include cuts. That means that, without language to the contrary, a continuing resolution extending funding levels from 2024 would include an additional $20 billion funding cut to the IRS. What that will mean for the 2025 tax season and beyond is yet to be determined.
Soon after the bill was released, President-elect Donald Trump slammed it, causing the House to put on the brakes. On Thursday, Speaker Johnson pulled the bill and introduced a new version that included Trump’s debt limit demands. That version was voted down, attracting Democrat and Republican “no” votes and sending the House back to the drawing board.
On Friday evening, Johnson brought a new bill to the floor that would fund the government at the current levels through March and provide farm and disaster aid. That bill passed 366-34 and is expected to pass the Senate.
Congress did not address the CTA in a revised bill, so business owners and advisors have turned their attention back to the courts. Earlier this month, a U.S. District Court judge ruled that the CTA was likely unconstitutional and imposed a nationwide preliminary injunction barring FinCEN from enforcing it while the government’s appeal winds its way through the court system. In response, FinCEN confirmed it would follow the court’s ruling but added that “reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The government subsequently filed a notice of appeal and two motions–one with the District Court and another with the Fifth Circuit–asking the court to lift the injunction while the matter was being heard. This week, the District Court issued a ruling refusing to grant a stay (☆) (meaning that the injunction stays in place). A motion is still pending in the Fifth Circuit. It’s likely that a ruling could come shortly after that—bringing the deadline of January 1, 2025, for reporting companies formed before January 1, 2024, to file their BOI reports back into play. My best advice? Pay attention to trusted sources as we get closer to the deadline.
Those moves overshadowed some other tax news this week, including Rep. LaHood’s proposal to replace U.S. citizenship-based taxation with residence-based taxation, easing burdens for Americans abroad. The move would allow Americans living abroad who elect to transition into this new framework to be taxed solely in their country of residence. For U.S. tax purposes, they would be treated as nonresident aliens, subject only to tax on U.S.-source income.
Also making news? In a move the White House called “the largest single-day grant of clemency in modern history,” President Joe Biden has commuted the sentences of 1,499 people, including one woman convicted of embezzling more than $53 million in taxpayer money. The news that Rita Crundwell would finally be set free has been met with dismay in some circles, (☆) including in the city whose accounts she raided.
Another big dollar fraud story was in the headlines this week when a 61-year-old New York tax preparer pleaded guilty to conspiracy to defraud the U.S. and steal government funds and aiding and assisting in preparing a false and fraudulent tax return. His crimes–including preparing tax returns with bogus deductions and credits—allegedly cost the government $145 million. (☆)
It seems fitting that there has been such a flurry of activities in the tax world since we’re currently having a few flurries of our own in Pennsylvania. A snow shower blew in earlier this evening and it almost (!) looks peaceful. Wishing you and yours some peace through the year end.
Enjoy your weekend and the holidays,
Kelly Phillips Erb (Senior Writer, Tax)
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Questions
This week, a reader asks:
I need a copy of my tax return from last year, but I can’t find it. How can I get a copy?
If you used a tax preparer to file your return, ask your preparer for a copy (there may be a charge to provide it if you’ve already been provided with a copy).
If you filed using software or online, you can often retrieve a copy using the software or by going online. Your results may vary depending on the company, but try logging in and seeing what happens.
If you need a copy of your tax return with attachments, you can get it from the IRS by filing Form 4506, Request for Copy of Tax Return. There is a fee for each return when using this form (it’s currently $30). This option isn’t a good one if you need your return quickly—expect to wait a bit for processing, especially during tax season.
If you don’t want to pay, you can request a tax transcript from the IRS. Your transcript isn’t going to look like a copy of your tax return, but it does contain all of the information that’s on your return. You can request a free transcript online by visiting the IRS website and clicking “Get Your Tax Records.” From there, you must sign into your irs.gov online account to view and download your transcript.
You can also request your transcript by calling the automated phone transcript service at 1.800.908.9946. The IRS will send the transcript to you, but allow at least five to 10 calendar days for delivery.
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Statistics, Charts, and Maps (Oh My!)
It appears that we narrowly avoided another shutdown.
How did we get here? Earlier this year, there were worries that the government would run out of money for the next fiscal year. The deadline at that time was September 30. On September 25, Congress passed a funding measure to fund the government through December 20.
While some politicians were cheering the idea of another shutdown, it was clear that Republican leadership in the House wanted to avoid it. According to the Congressional Budget Office, the government shutdown in 2018 reduced economic output by $11 billion in the following two quarters—including $3 billion that the economy never regained. The last three government shutdowns led to the equivalent of 56,940 years in lost productivity from federal workers being furloughed, costing the government at least $338 million in additional processing costs and late fees. Moody’s Analytics estimated that the 2013 government shutdown reduced GDP growth by $20 billion.
If the government had shut down this year, it would be the first in nearly six years (though we had two in 2018 for good measure). Here’s a look at the history of government shutdowns since 1981.
Why 1981? That’s the first year the “modern” shutdown went into effect, thanks to a 1980 legal memorandum written by then-Attorney General Benjamin Civiletti (more on that in a moment). Before 1980, when the government failed to appropriate funding for agencies, they kept working—but Civiletti argued that ran afoul of an 1884 law called the Anti-Deficiency Act. The Act is codified at Title 31 (Money and Finance) and is intended to stop federal agencies from spending federal dollars that aren’t authorized, as well as barring them from accepting voluntary services (meaning that employees can’t work for free during a shutdown). The penalties for violating the Act can be severe.
A Deeper Dive
Bitcoin has been riding high since the elections, encouraged by President-elect Trump’s pro-crypto stance. The cryptocurrency has climbed over 45% since November 5, tiptoeing over the $100,000 mark earlier this month (as of this writing, however, it’s down to $96,517.50).
With perceived promises of anonymity and decentralization, writes Andrew Leahey, “Bitcoin has attracted investors, innovators, and evaders.”
One enthusiast was Frank Richard Ahlgren III. Ahlgren was an early adopter of Bitcoin—he began accumulating Bitcoin in 2011—who neglected to pay over $1 million in capital gains tax. His belief that cryptocurrency’s opacity could shield him from the IRS proved to be his downfall.
Ahlgren relied on the anonymity of cryptocurrency and the assumption that his digital movements would go unnoticed. Unfortunately for him, those assumptions appear to have been incorrect.
Advanced investigation methods, and those utilizing artificial intelligence coming on the horizon, can trace transactions across wallets, mixers, and borders. Governments and agencies like the IRS are rapidly adopting and adapting these technologies, closing the sophistication gap between evaders and regulators.
This month, Ahlgren was sentenced to 27 months in prison and required to pay restitution. In response, Acting Special Agent in Charge Lucy Tan of IRS-Criminal Investigation said, “Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable.” Tan added, “My team at IRS Criminal Investigation has the expertise and tools to track financial activity, whether it involves dollars, pesos, or cryptocurrency.”
Tax Filings And Deadlines
📅 February 3, 2025. Due date for individuals and businesses affected by Hurricanes Beryl and Debby (more info here (☆) and here (☆)), those in South Dakota affected by severe storms, straight-line winds and flooding that began on June 16, 2024, taxpayers in Puerto Rico affected by Tropical Storm Ernesto, and those individuals and businesses in Connecticut and New York affected by severe storms and flooding from torrential rainfalls that began on August 18, 2024.
📅 May 1, 2025. Due date for individuals and businesses in the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia affected by severe storms and flooding from Hurricane Helene (☆) and Hurricane Milton.
📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
Tax Conferences And Events
📅 February 19-25, 2025. ABA Tax Section 2025 Midyear Tax Meeting. JW Marriott Los Angeles L.A. Registration required.
📅 May 13-14, 2025. National Association of Enrolled Agents 2025 Capitol Hill Fly-In, Washington, DC. Registration required (NAEA members only).
📅 July 21-23, 2025. National Association of Tax Professionals Taxposium 2025, Caesars Palace, Las Vegas. Registration required.
Trivia
For years, government agencies continued to operate even when they weren’t funded. A 1980 legal opinion penned by then-Attorney General Benjamin Civiletti changed that, requiring government agencies without funding to shut down under an 1884 law called the Antideficiency Act. What was the first government agency to follow that directive beginning in 1980?
(A) Federal Aviation Agency
(B) Federal Trade Commission
(C) Internal Revenue Service
(D) Securities & Exchange Commission
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletin 2024-51.
The IRS has announced its 2025 standard mileage rates. Beginning January 1, 2025, the standard mileage rates for the use of a car, van, pickup, or panel truck will be 70 cents per mile driven for business use, 21 cents per mile driven for medical purposes, 21 cents per mile driven for moving purposes for qualified active-duty Armed Forces members, and 14 cents per mile driven in service of charitable organizations.
The IRS has released the Applicable Federal Rates for January 2025. Which rate to use depends on the period and length of the loan. Under section 1274(d)(1), use the federal short-term rate for debts under three years, the federal mid-term rate for debts over three years but not over nine years, and the federal long-term rate for debts over nine years. The AFRs are used for a number of transactions—including loans between family members. (☆) Intrafamily loans must charge the current AFR. If you don’t, the IRS could argue that you’re making a disguised gift to the borrower.
The Organisation for Economic Co-operation and Development (OECD) released a pricing tool and fact sheets to facilitate the understanding and operation of the simplified and streamlined approach to transfer pricing.
The American Bar Association Section of Tax has submitted comments to the IRS regarding the Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures for reporting foreign assets. In addition to suggestions focused on simplifying and clarifying the process, including preclearance, the Section recommended the Service make the Streamlined Procedures permanent.
Melanie Lauridsen, Vice President of Tax Policy & Advocacy for the American Institute of Certified Public Accounts (AICPA) released a statement of encouragement about the proposed continuing resolution relating to the beneficial ownership information reporting requirement. Lauridsen noted that, “For two years, the AICPA, together with our partners at the State CPA Societies, have advocated for a one-year delay of the implementation of the beneficial ownership information (BOI) reporting requirement by the Financial Crimes Enforcement Network (FinCEN); the draft CR contains language that effectively institutes a one-year delay for BOI reporting.” (As noted above, the draft CR was eventually tabled.)
FinCEN issued a warning about impersonation sites, including those focused on beneficial ownership information (BOI) reporting.
Noteworthy
EisnerAmper announced that Navin Sethi has joined the firm as a Tax Partner in its Financial Services Group. Sethi specializes in serving hedge, venture, and private equity funds. He has deep expertise in leading tax services for high-profile partnerships within the financial sector, with a specific emphasis on the cryptocurrency, digital assets, and cannabis industries.
The law firm of Baker McKenzie announced the election of 18 new partners, including four new tax partners: Subkae David Gong (Chicago), Christine Kim (Washington, DC), Lizette Tellez-De la Vega (Mexico City), and Elaine Wilkins (New York).
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In Case You Missed It
Here’s what readers clicked through most often last week:
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Trivia Answer
The answer is (B) Federal Trade Commission.
The Federal Trade Commission experienced a one-day shutdown on May 1, 1980, after lawmakers failed to pass a new authorization bill for the agency. The commission’s 1,600 employees were furloughed and spent the next day recovering from shutdown preparations. A Government Accountability Office study found that the maneuver cost $700,000 ($2.7 million in today’s money).
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