Curated by Daniel Xu
Nearly 940,000 taxpayers are owed over $1 billion total in unclaimed refunds for tax year 2020, and the deadline to submit a return is May 17. You’d think the IRS would want to quietly pocket the unclaimed refunds, but it has good reason to motivate all taxpayers to file.
The US tax system operates on a voluntary basis—each taxpayer must report their income and calculating tax liabilities without direct government involvement. The IRS may have some questions if their calculations on how much you owe differs from yours, but taxpayers are responsible for reporting and remitting in the main.
A critical aspect of this system is encouraging all taxpayers to file their tax returns, even if it means the IRS owes refunds in the short term.
The government benefits from maintaining the fidelity of tax return data and fostering universal compliance. Ensuring every taxpayer files an annual return is worth more to the administration of tax policy than the refund money.
Further, in an election year, there is a political incentive—encouraging individuals to file for refunds positively impacts the economy. The net effect is injecting a billion dollars into the market to stimulate market activity, without any of the hassle involved in passing a spending bill.
It makes sense for the IRS to encourage recalcitrant filers to get right with the government—filing tax returns keeps individuals engaged with the tax system and, as Oliver Wendell Holmes Jr. said, “taxes are what we pay for civilized society.”
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State Insights
Berkowitz Pollack Brant’s Luke Lucas examines upsides of state pass-through entity taxes, saying they can bring additional revenue while benefiting taxpayers.
Duane Morris’ Adam Beckerink and Dakota Newton review New York City’s affordable housing tax break, saying that it’s crucial to advise clients on compliance and economic impacts.
DLA Piper’s David Pope examines New York’s resident tax law, noting that the law is unclear about what qualifies as an “involuntary” domicile.
Federal Insights
Indiana University’s Vivian Fang assesses the potential impact of the crypto tax reporting draft form 1099-DA on taxpayers, the IRS, and the digital assets industry.
KPMG’s Timothy Nichols analyzes the Treasury Department’s stock-buyback tax proposal, saying a new rule raises the same concerns created by previous guidance on the tax.
McLaughlin & Stern’s John Barrie, Lauren Cramer, and Brett Gallaway discuss art charitable deductions, saying appraisals, invoices, and reports are among the many documents needed to prove deductible value.
Latitude Legal’s Alex Su considers Big Law’s early hiring trend and says hiring with fewer data points about candidates is likely to have repercussions.
MLA’s Ru Bhatt reflects on Big Law’s early hiring trend, saying first-year students risk locking in to a career that could be a poor fit.
Global Insights
Skadden’s David Farhat and Eman Cuyler say US multinationals should establish a robust, holistic transfer pricing policy as Pillar Two implementation progresses worldwide.
Columnist Corner
Revenue from cannabis and sports betting excise taxes “isn’t a financial boon states can use for whatever purposes they see fit,” Andrew Leahey writes in his Technically Speaking column.
Instead, using vice tax revenue to fund community development projects, education, job training, and public health initiatives would help states address the social harms such activities may cause over time, Andrew argues.
Career Moves
Zach Branson has joined Jones Walker as a partner in the tax practice group in the Atlanta office.
Todd Lowther has joined Clifford Chance as a partner in the tax practice in the Houston office.
Frederick Miller and Andrew Rubin have joined Nixon Peabody as partners in community development finance practice in the Washington, D.C., office.
Brad Ridlehoover will join Tuckahoe Holdings as its first tax director, effective May 28.
Alexa Collis and Lizzie Williams have been promoted to partnership at Harbottle & Lewis, effective June 1.
If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.
News Roundup
It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.
- The Treasury Department released guidance for sustainable aviation fuel tax credits, detailing how taxpayers will model emissions when seeking the credits and providing a safe harbor for certain climate-friendly agricultural processes.
- Business interests questioned the direction of a Multistate Tax Commission project for assigning taxes on the trucking industry, warning that “the road to hell” is paved with alternative state taxation models.
- Rich nations warned that a United Nations tax treaty would fragment global tax rules by clashing with the Organization for Economic Cooperation and Development’s two-pillar tax reform.
- The IRS is promising it will stay tough in the next few years on large companies, partnerships, and individuals who aren’t paying what they owe, ramping up its ongoing efforts to collect billions in unpaid taxes.
Tax Journals
Tax Management International Journal
Navigating the complexities of public country-by-country reporting requires an understanding of the nuances of employee data reporting and the ability to communicate this information effectively to stakeholders, KPMG’s Christine Deveney and John DerOhanesian say.
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