Appeal of Corporate Transparency Act Reaches the 11th Circuit

On March 5, 2024 we posted Federal Court Rules Corporate Transparency Act Unconstitutional - Do You Still Need to File BOI?  where we discussed that in National Small Business United v. Janet Yellen, a Northern District of Alabama Federal Judge ruled on March 1, 2024, that the CTA was unconstitutional. Citing privacy concerns, and a myriad of legal reasoning and precedent around the scope of Congress’s power.

Now during the week of Sept 23rd challengers of the Corporate Transparency Act's beneficial ownership information reporting requirements argued their position in the first case to reach a federal appellate court, however, it was unclear whether the 11th Circuit panel was receptive. (National Small Business United (NSBU) v. Yellen (No. 24-10736).)

NSBU, however, is not challenging the Corporate Transparency Act as applied in a particular circumstance, but rather has said the law "has no constitutional applications." Prevailing on a facial challenge requires clearing a "very high bar," the government has argued in its briefing and NSBU has failed to do so, said the government, because of the "many valid applications" of the statute as to "companies engaged in interstate commercial activity at the time they file reports."

NSBU has argued that facial challenges should be evaluated under a different standard when enumerated powers are at issue. "If Congress lacks constitutional power to enact a federal statute, then that statute is facially invalid and has no constitutional applications," it said in briefing.

The Treasury Department's Financial Crimes Enforcement Network made its interpretation of the ruling clear in a statement issued by FinCEN stated that the ruling applies (ONLY) to the plaintiffs in NSBU.

Choosing to file means potentially losing a filing fee and any cost incurred for taxpayers who decide to use an advisor. However, filing provides peace of mind, staying in CTA compliance means there's no chance of facing more stringent financial and criminal penalties for failure to file.

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IRS Released 2022 Projections Showing A Tax Gap of $696 Billion

The Internal Revenue Service released the tax gap projections for tax year 2022, a detailed analysis showing the nation’s projected gross tax gap at $696 billion. This reflects the difference between projected ‘true’ tax liability and the amount of tax that is actually paid on time. 

The new tax gap projections reflect an increase over the tax year 2014-2016 estimates and the tax year 2017-2019 projections. The 2022 projection is an increase of $200 billion over tax years 2014-2016. 

However, the IRS noted the increase for 2022 is similar to the 41 percent increase in the economy since the 2014-2016 time period as measured by the Gross Domestic Product. With the new study also showing the voluntary compliance rate among taxpayers remaining steady at 85%, the IRS noted the tax gap increase ultimately reflects growth in the economy and changes in the sources of income – not a change in taxpayer behavior involving filing or paying their taxes. 

In addition, the new tax gap projections reflect the time period before the IRS began increasing tax compliance work following passage of the Inflation Reduction Act (IRA) in August of 2022. Since then, the IRS has stepped up compliance activity in a variety of areas with the additional funding, including the agency collecting an initial $1.3 billion from high-income non-filers following IRA funding. 

“This is a critical study about the nation’s tax system, and the results underscore there remains a sizable tax gap between taxes that are legally owed but aren’t actually being paid,” said IRS Commissioner Danny Werfel. “

While the bottom line for the new tax gap numbers shows the increase basically reflects growth in the larger economy, the size of the gap also vividly illustrates the ongoing need for adequate funding for the IRS. 

We need to focus both on compliance efforts to enforce existing laws as well as improving service to help taxpayers with their tax obligations to help address the tax gap. The new projections are published in Tax Gap Projections for Tax Years 2021 and 2022 (IRS Publication 5869).  

Gross tax gap

The projected $696 billion gross tax gap is the difference between projected ‘true’ tax liability for a given period and the amount of tax that is paid on time. The gross tax gap covers three key areas – non-filing of taxes, underreporting of taxes and underpayment of taxes. 

• Non-filing, which means tax not paid on time by those who do not file on time:
• $63 billion in tax year 2022, representing 9% of the gross tax gap.
• Underreporting, which reflects tax understated on timely filed returns.
• $539 billion in tax year 2022, representing 77% of the gross tax gap.
• Underpayment, or tax that was reported on time, but not paid on time.
•  $94 billion in tax year 2022, representing 14% of the gross tax gap. 

Voluntary compliance rate remains unchanged

The tax year 2021 and 2022 tax gap projections translate to about 85% of taxes paid voluntarily and on time, which is consistent with recent levels. The projections are based largely upon the compliance behavior estimated from the most recent set of completed audits (from tax years 2014-2016). 

After IRS compliance efforts and other late payments are factored in, the projected share of taxes eventually paid is 86.9% for tax year 2022, down slightly from the 87% for tax years 2014-2016. 

Is Consistently Shows That Compliance Is Higher 
When There Is Third-Party Information Reporting,
And Even Higher When Also Subject To Withholding.

With the help of Inflation Reduction Act resources, the IRS is taking a variety of steps to help improve voluntary compliance by improving taxpayer services and offering new technology tools to work in concert with additional compliance work. In fiscal year 2023, the latest year for which data is available, the IRS collected more than $4.6 trillion in taxes, penalties, interest and user fees. 

The voluntary compliance rate of the U.S. tax system is vitally important for the nation. A one-percentage-point increase in voluntary compliance would bring in about $46 billion in additional tax receipts. 

Have an IRS Tax Problem?

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or Toll Free at 888 8TAXAID (888-882-9243)

 

FinCEN Announced That Victims of Hurricane Milton have until May 1, 2025 to File Their 2023 FBARs

FinCEN announced on October 11, 2024 that victims of Hurricane Milton have until May 1, 2025 to file Reports of Foreign Bank and Financial Accounts (FBARs) for the 2023 calendar year.  

FBAR filings for calendar year 2023 would otherwise be due on or before October 15, 2024. FinCEN is offering this expanded relief to any area that is designated both by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance and by the Internal Revenue Services (IRS) as eligible for tax filing relief, as a result of Hurricane Milton.  

If, after the date of this announcement, the IRS designates other areas affected by this natural disaster as eligible for tax filing relief, the areas will receive FBAR relief from FinCEN automatically.  

Deadlines for FBAR filings will be the same as those set forth in IRS designations.  Information on actions that the IRS has taken in response to Hurricane Milton can be found at: 

https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

 In addition, FinCEN will work with any FBAR filer who lives outside the disaster areas but who must consult records located in the affected areas to meet the deadline.  

FBAR filers who live outside the affected areas and who are seeking assistance in meeting their filing obligations (including workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization) should contact the FinCEN Regulatory Support Section at 800-767-2825 or electronically at frc@fincen.gov. 

FBAR relief is part of a coordinated federal response to the damage caused by natural disasters and is based on local damage assessments by FEMA.  

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

TIGTA Issues Report That The IRS Has Expended $6.9 Billion (11.9 percent) of its $57.8 Billion IRA Funding.

TIGTA Issued Report Number 2024-IE-R020 on September 30, 2024 entitled the IRS’s Inflation Reduction Act Spending Through June 30, 2024. It provides quarterly and cumulative reporting on the IRS’s use of IRA funding to implement its Strategic Operating Plan and is inclusive of all IRA expenditures through June 30, 2024.  

As Of June 30, 2024, The IRS Expended Approximately $6.9 Billion (11.9 Percent)
of its $57.8 Billion IRA Funding.

In addition to the expended amounts shown on the graphic, the IRS expended approximately $11.6 million in Fiscal Year (FY) 2023 for the direct  e-file tax return system, which is included in the total amount expended. 

The IRA supplemental funding is available to the IRS through September 30, 2031, and is intended to help the IRS transform tax administration and improve the services provided to taxpayers.  Like the funding the IRS receives as part of its annual appropriation, the IRA supplemental funding includes caps for the four primary budget activities, as follows: 

•  Enforcement -- $24 billion.
• The IRA originally provided $45.6 billion for the Enforcement funding activity.  The subsequent Acts reduced the amount to $24 billion.
• Operations Support -- $25.3 billion. 
• BSM -- $4.8 billion.
• Taxpayer Services -- $3.2 billion. 

In addition, the supplemental funding provided by the IRA also included $500 million for the necessary expenses relating to the implementation of the Energy Security provisions and $15 million to study the feasibility of implementing a direct e-file tax return system. 

The IRS has used supplemental IRA funding to fund operations as its annual appropriations were not enough to cover its general operating expenses.  

The IRS received the same annual appropriation amount for FY 2024 that it received in FY 2023 with no adjustments for inflation.9  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.  

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
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or Toll Free at 888 8TAXAID (888-882-9243)

 

IRS Provides Hurricane Milton Relief; May 1, 2025 Deadline Now Applies To Individuals And Businesses In All Of Florida

In IR-2024-264 Dated Oct. 11, 2024 the Internal Revenue Service announced relief for individuals and businesses in 51 counties in Florida due to Hurricane Milton, 

Individuals and businesses in six counties that previously did not qualify for relief under either Hurricane Debby or Hurricane Helene will receive disaster tax relief beginning Oct. 5, 2024, and concluding on May 1, 2025. They are Broward, Indian River, Martin, Miami-Dade, Palm Beach and St. Lucie.

In addition, individuals and businesses in 20 counties previously receiving relief under Debby, but not Helene will receive disaster tax relief under Hurricane Milton, from Aug. 1, 2024, thru May 1, 2025. They are Baker, Brevard, Clay, DeSoto, Duval, Flagler, Glades, Hardee, Hendry, Highlands, Lake, Nassau, Okeechobee, Orange, Osceola, Polk, Putnam, Seminole, St. Johns and Volusia counties.

As a result, affected taxpayers in all of Florida now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments, including 2024 individual and business returns normally due during March and April 2025 and 2023 individual and corporate returns with valid extensions and quarterly estimated tax payments.

Hurricane Milton-related tax relief postpones various tax filing and payment deadlines that occurred beginning on Oct. 5, 2024, and ending on May 1, 2025 (postponement period). 

As a result, affected individuals and businesses will have until May 1, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the May 1, 2025, deadline now applies to:

• Any individual or business that has a 2024 return normally due during March or April 2025.
• Any individual, C corporation or tax-exempt organization that has a valid extension to file their calendar-year 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the hurricane occurred.

• 2024 quarterly estimated tax payments normally due on Jan. 15, 2025, and 2025 estimated tax payments normally due on April 15, 2025.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2024, Jan. 31, 2025, and April 30, 2025.

In addition, for localities affected by Hurricane Milton, penalties for failing to make payroll and excise tax deposits due on or after Oct. 5, 2024, and before Oct. 21, 2024, will be abated, as long as the deposits are made by Oct. 21, 2024. Localities eligible for this relief are: Alachua, Baker, Bradford, Brevard, Broward, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Flagler, Gilchrist, Glades, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Indian River, Lafayette, Lake, Lee, Levy, Madison, Manatee, Marion, Martin, Miami-Dade, Monroe, Nassau, Okeechobee, Orange, Osceola, Palm Beach, Pasco, Pinellas, Polk, Putman, Sarasota, Seminole, St. Johns, St. Lucie, Sumter, Suwannee, Taylor, Union and Volusia counties.

The IRS Automatically Provides Filing And Penalty Relief
To Any Taxpayer With An IRS Address Of Record
Located In The Disaster Area. These Taxpayers Do Not
Need To Contact The Agency To Get This Relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief efforts who are affiliated with a recognized government or philanthropic organization. Disaster area tax preparers with clients located outside the disaster area can choose to use the Bulk requests from practitioners for disaster relief option, described on IRS.gov.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

Scotus Won't Hear FBAR Constitutional Challenge By "Pro Se" Taxpayer

According to Law360, The U.S. Supreme Court let stand on October Seventh 2024 a Seventh Circuit decision dismissing a man's challenge to the constitutionality of the Bank Secrecy Act's requirement to report his foreign bank accounts, effectively ending the man's claim that the filings were an invasion of privacy.

In an order, the high court denied the petition of George Gaio Mano, a U.S. citizen living in Japan, who had petitioned the court in July to overturn a requirement that he file a Report of Foreign Bank and Financial Accounts, or FBAR, for 2022.

While a federal district court had denied Mano's claims on the merits, the Seventh Circuit in May upheld the dismissal on additional grounds that the case had become moot. After filing his appeal, Mano chose to file an FBAR for 2022, the appellate court said in its ruling.

He didn't choose to file an FBAR, he said. Rather, he was "coerced" into making the report after the Seventh Circuit twice rejected his motion for a temporary injunction, he said.

Mano, who represented him self "Pro se," said that the "Petitioner's choice was either file FBAR or break the law."

Mano had argued that the reporting requirements stemming from the Bank Secrecy Act were disconnected from the law's purpose and served primarily "to intimidate and control U.S. citizens who have committed no crimes," according to his petition.

He claimed the government was wrongly allowed to create a "mass collection of private banking data" that violated several amendments to the Constitution, including the right to privacy.

Rather than report his Japanese account for 2022, which Mano was required to do because his bank balance exceeded $10,000, he sued U.S. Treasury Secretary Janet Yellen, the Treasury Department and the Internal Revenue Service. The reporting requirement violated the Fourth Amendment because it was an unreasonable search and seizure, he claimed. It also violated the due process rights under the Fifth Amendment, Mano's right to privacy under the Ninth and Tenth amendments and the Fifth Amendment's privilege against self-incrimination, he argued.

A federal district court disagreed. Prior cases such as California Bankers Assn. v. Shultz  have held that the filing requirement is not an unreasonable search or seizure, it said. It also ruled Mano did not adequately develop his due process argument, and failed to allege any violation of the privilege against self-incrimination. It also concluded that the Ninth and Tenth amendments did not afford Mano a right to privacy.

On appeal, the Seventh Circuit ruled that the Bank Secrecy Act does not create a privately enforceable claim. The Constitution also does not have an automatic cause of action allowing private enforcement in courts, the appellate court said.

However, after bringing suit, Mano went ahead and reported his bank account, which left him with no cause of action, the court said. Any harm from having to file another report is speculative, it said, noting that Mano regularly withdraws enough money from the account to keep the balance under $10,000.

In August, the federal government waived its right to respond to Mano's petition.

Have an IRS Tax Problem?

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Marini & Associates, P.A. 

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