Week in Insights: Watch Out for Tax Season, It’s a Doozy!

We are expecting more ice in the mid-Atlantic region this weekend, so it looks like Punxsutawney Phil was right after all—at least in the short term. Pennsylvania’s most famous groundhog (yes, there’s a second most-famous groundhog) predicted six more weeks of winter after making his annual appearance at Gobbler’s Knob in Punxsutawney, PA, on Feb. 2.

The legend of Punxsutawney first made news in 1886—the year that Groundhog Day appeared in the local newspaper, Punxsutawney Spirit. The following year, the day was celebrated with a picnic, and Groundhog’s Day at Gobbler’s Knob became an annual tradition.

Punxsutawney Phil, the weather-forecasting groundhog.

Photographer: Archie Carpenter via Getty Images

The celebration remained somewhat regional until the release of Harold Ramis’s film, “Groundhog Day.” Today, tens of thousands of people make the trek to Gobbler’s Knob, making it a bona fide tourist attraction.

In the film, Bill Murray plays Phil, a bored and disillusioned Pennsylvania weatherman sent to cover the annual weather prediction. He gets stuck reliving the same day over and over. But while the sequence of events around him stays the same, Phil changes. Early on, he tries to take advantage of “seeing” the future in the repetition, then becoming angry and disillusioned before eventually finding happiness. Along the way, he decides to try new things and learn new skills in an effort to become a better version of himself.

I think that’s a feeling that many of us in the tax world can relate to, especially over the past few years. We’ve all felt “stuck” from time to time. And we’ve all experienced the roller coaster of emotions that can accompany sameness—from being comfortable with its predictable nature, to growing tired of not being able to change.

But we’ve also had the chance to learn new skills over the past few years, not unlike Phil. We’ve learned how to maneuver with ease on Zoom and Teams, grown more comfortable on video, and honed our texting and email techniques. We’ve learned how to work smarter and use our time more efficiently—relying on the existing technology and platforms to do the heavy lifting so that we can focus on the most important part of our jobs: people. And like Phil, we’ve learned that while some things may stay the same, the real joy comes from working to make each day meaningful.

At Bloomberg Tax, as always, our experts have the latest federal, state, and international tax analysis to help you work smarter—and hopefully, put a little time back in your day to try something different. Bing!

The Exchange… It’s where great ideas intersect.

—Kelly Phillips Erb

Quick Numbers Trivia

What percentage of time has the iconic Punxsutawney Phil accurately predicted the arrival of spring over the years?
Answer at the bottom.

Our Roundup

This week, our experts touched on a wide range of topics, from tax organizers to VAT. For a look at what’s making news, here’s our roundup—with a few lessons learned from Groundhog Day:

Just because something stays the same, doesn’t mean it’s a good thing. In VAT Rates—How Important Are They? Rob Janering of Crowe discusses the recent arguments for changing VAT rates to nudge behavioral change and help achieve policy objectives, and he considers how governments may embrace these new opportunities in their tax policies.

Doing something over and over doesn’t mean you’re doing it right. A huge part of tax preparation during tax season for taxpayers is completing a tax organizer. Many taxpayers find it confusing, frustrating tax professionals who work with them. In A Guide to Completing Your Organizer This Tax Season, Jody Padar of April walks taxpayers through the process and offers a look at what tax preparers need to get the job done—and why.

Having a plan forward can help you move ahead without getting stuck. In From India at 75 to India at 100—Budget 2022 Lays the Path, Rakesh Nangia and Neha Malhotra of Nangia Andersen India review the measures in India’s Union Budget 2022 and discuss how they provide a blueprint for the economy over the next 25 years.

Change can come when you least expect it. A federal corporate tax is finally coming to the United Arab Emirates. Once implemented in 2023, say Clarence Ellis of Taxnomics and tax attorney Virginia La Torre Jeker in It’s Here! The UAE’s Much-Awaited Federal Corporate Tax, the UAE will join other countries in the Gulf Cooperation Council that collect corporate taxes on commercial enterprises.

The choices you make have consequences. That’s true when it comes to business, too—the choice of entity and attention to your formation documents can have a significant impact on your company’s future, write James T. (Tim) Shearin and Timothy G. Ronan of Pullman & Comley in Early-Stage Corporate Decisions Create Later-Stage Consequences. A recent Connecticut case illustrates this point.

When contemplating change, you need to look at the big picture. Andrew Bailey and James Hourigan from BDO explain in Rethinking Tax—The Future of Employee Global Mobility that an increasingly mobile workforce can inadvertently trigger employer tax and regulatory obligations in overseas jurisdictions and why there is an increased need to track cross-border employee movements to avoid potentially costly financial penalties and sanctions.

Change can be meaningful—even if it happens in just one area of the world. In Massachusetts State and Local Tax Update: Winter 2021, Philip Olsen of Davis Malm summarizes recent tax developments in Massachusetts, including efforts to tax online sales and manufacturing tax benefits available to computer software developers.

Significant change doesn’t happen overnight. In Impact of Proposed Changes to Article 9 of OECD Model Tax Convention, Omojo Okwa and Akaoma Osele of KPMG explain the proposed changes to the commentary on Article 9 of the OECD Model Tax Convention and analyze the potential implications for multinational enterprises, as well as how international tax authorities may react.

Learning from mistakes can make you better. The leak of the Pandora Papers has led to new calls for more transparency in global finance. That, writes Leslie Bailey of LexisNexis Risk Solutions in Shining a Light: What the Pandora Papers Mean for Tax Pros, is particularly relevant in the world of tax.

Punxsutawney Phil and his handler greet the crowd at the Feb. 2, 2018 Groundhog Day ceremonies.

Photographer: Brett Carlsen via Getty Images

Opinion & Commentary

Covid relief bills, including one passed without any Republican support, are giving Republicans an opportunity to slash taxes in states where they dominate, writes Jonathan Bernstein. But, he counsels in Using Stimulus Funds for Tax Cuts? It’s Fine, Democrats shouldn’t be too upset, policy-wise, that Republican states have the cash to fund regressive tax cuts.

Verifying your identity used to be so simple: You’d show a picture on your driver’s license or passport. But soon, ID.me will be scanning the faces of U.S. citizens who want to manage their taxes online with the IRS. Parmy Olson warns you to Watch Out for the Facial Recognition Overlords.

Columnists & Contributors

Tax season can be overwhelming for small businesses. But a lot of the stress can be avoided by taking some simple steps in the beginning to understand their legal entity and tax classification. If small business owners cannot properly identify the tax form that they’re responsible for filing each year, something has gone terribly wrong. Here’s a quick look at what taxpayers need to know about small-business tax forms, filing requirements, and deadlines.

Listen In

Tax season really does feel like Groundhog Day. The tax filing season that just kicked off is the third affected by the coronavirus pandemic. On this week’s episode of Talking Tax, Bloomberg Audio Producer David Schultz asked me to talk about what filers and tax pros can expect in the coming weeks and about why, this year, it may not necessarily be a good idea to file early.

Stop me if you’ve heard this before: Everything is expensive. The economy may be rebounding, but many families are concerned about inflation and soaring prices. Tax professionals have to think about costs, too, and the impact that it has on the practice—including billing and client selection. On this week’s episode of the Taxgirl podcast, I’m joined by Tony Novak to talk about the impact of inflation and cost pressures on the tax profession.

A pensive Punxsutawney Phil, pictured with his handler Ron Ploucha, after seeing his shadow--thus predicting six more weeks of winter--on Feb. 2, 2012 in Punxsutawney, PA.

Photographer: Jeff Swensen via Getty Images

Get Caught Up

It’s been a busy week in tax news from state capitals to D.C. Here are some of the stories you might have missed from our Bloomberg Tax news team:

• The IRS has about 80 fraud cases “teed up” as part of its enforcement efforts against abusive syndicated conservation easement deals.
• The IRS will soon issue regulations on extending the age at which retirement plan beneficiaries must start taking distributions.
• Getting to grips with crypto on your annual tax bill is already a tough nut to crack, but the U.K. tax authorities are about to make it even harder.
• Billionaire Robert Brockman is still moving assets among offshore tax havens and transferring property to family members to avoid paying his $1.4 billion tax bill, according to U.S. officials seeking a judge’s authorization for an immediate government levy.
• Five states have joined a data sharing agreement to fight back against the loss of corporate taxes linked to how companies value transactions between their related business units.
• Through dozens of new laws, Wyoming hopes to become America’s blockchain headquarters, attracting businesses from across the crypto sector. Whether they show up though, is yet to be determined.

*Note: Your Bloomberg Tax login will be required to access Tax News.

Spotlight

Our Spotlight series highlights the careers and lives of tax professionals across the globe. This week’s Spotlight is on Joseph Bellinghieri, a tax attorney who represents individuals and businesses with a variety of estate, tax, real estate, and business issues at MacElree Harvey in West Chester, PA.

Be Noticed

At Bloomberg Law, we’re proud of our continuing efforts to highlight the next generation of leaders in the legal profession.

In Sept. 2020, Bloomberg launched our series, “They’ve Got Next,” to spotlight young lawyers who are raising the bar in practice groups ranging from labor & employment to banking and finance. Now, Bloomberg Law Executive Editor Lisa Helem takes a look back at the ten installments we’ve published so far.

Check back this month for a new installment in consumer litigation, and in March, a focus on white collar.

Also coming up? Our 40 Under 40. We’re thrilled to announce our call for 2022 nominations for “They’ve Got Next: The 40 Under 40,” Bloomberg Law’s special report recognizing the accomplishments of sterling young lawyers nationwide. You’ll find nomination criteria and submission instructions here.

Quick Numbers Answer

Since 1887, Phil has predicted more winter 104 times and called for 20 early springs, according to Stormfax Almanac—no records exist for nine years. Live Science analyzed the data and concluded Phil’s six-week predictions have been correct just 39% of the time.

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What Did You Think?

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