Top 10 tax topics of 2016 and what to expect in 2017
Monday, January 02, 2017
There weren't any major tax bills in 2016. That's going to change in some form in 2017 now that the Republicans control Congress and the White House.
But there still were plenty of tax-related matters that got attention last year. Below is my list of top 10 tax stories of 2016, starting with the one I saw as most important.
And as a bonus, I also pulled out my slightly cracked crystal ball -- really, who saw the presidential election turning out like it did? -- to forecast five tax issues that we're likely to see in 2017.
Top 10 Tax Topics of 2016
1. No Trump tax returns: President-Elect Donald J. Trump ignored shattered an almost 40-year election tax disclosure tradition by refusing to show the U.S. electorate his current tax return. Trump said it was because he was being audited by the Internal Revenue Service, but many, including some former IRS commissioners, said that wasn't a legitimate reason to keep his 1040 secret.
Trump's refusal also led to much speculation that he didn't pay any federal taxes for 18 years and that he's not as rich as he regularly proclaimed, as well as prompted federal and state legislation that would mandate future presidential candidate be more tax transparent.
In the end, it didn't seem to matter to voters. The tax world, however, still wants to know what's in the incoming 45th president's federal filings.
2. Tax identity theft and scams: Every tax season is tax scam season, but in 2016 tax schemes aimed at stealing filers' identities took on more urgency. The IRS agent impersonation scam, hailed in 2014 as the biggest criminal tax ID theft scheme ever, continued in 2016. I got more than half a dozen of the fake calls threatening me with legal action for not paying all my taxes.
But last October, an international law enforcement crackdown led to the closure of Indian call centers where the scheme apparently originated. U.S. officials subsequently obtained indictments of 61 people involved in the tax identity theft phone scam.
Meantime, the IRS and its Security Summit partners from the tax software and preparation industry, the tax professionals' community and the state tax world continued their efforts to fight tax ID theft through public education and tighter security controls over online information.
3. IRS Commissioner impeachment threat: IRS Commissioner John Koskinen has been at odds with Congressional Republicans almost from day one of his term. But things took a nastier turn in 2016. GOP House members repeatedly tried to impeach Koskinen, alleging that his high crimes and misdemeanors included lying to Congressional committees and hiding information about emails connected to targeting of Tea Party groups seeking 501(c)(4) tax-exempt status.
Koskinen was officially censured by the House Government Oversight Committee. A final attempt last December at full impeachment, however, failed when the House opted to send the matter back to the committee level for possible further consideration in 2017.
4. End of extenders: I've been following taxes professionally since the 1980s (yes, I was a child tax prodigy; that's my story and I'm sticking to it), and during that time one of the most predictable tax actions has been the periodic renewal of temporary tax laws known as extenders. That happened in December 2015, but that same year the Protecting Americans from Tax Hikes, or PATH, Act also made some popular provisions permanent.
Most tax watchers expected the laws that were extended only through 2016 to be renewed for another year or two, but when Trump won the White House, that plan was scuttled.
That left both individual filers -- those who rely on the college tuition and fees above-the-line tax deduction and some home-related tax breaks -- and businesses -- thoroughbred horse breeders, professional motorsports teams and film/TV/Broadway creators -- wondering and worrying whether they'll get their tax breaks back, either in a freestanding bill or as part of possible tax reform.
5. IRS looks to its future: In 2016, Uncle Sam's tax collection and enforcement agency faced yet another reduced budget and increasing number of taxpayers, along with the challenge of fighting tax identity theft threats and added tax law responsibilities such as Obamacare penalties. The IRS decided the best way to meet all these responsibilities is to transform itself into an agency that will rely on more automation and less personal interaction with taxpayers.
This so-called Future State probably is, to a large degree, inevitable even without the fiscal and physical problems faced by the IRS. But many filers, as well as National Taxpayer Advocate Nina Olson, were not thrilled with the IRS announcement that it is moving forward in the more taxpayer self-help direction.
Olson concerns, which she shared with Congress, are that the IRS is underestimating the number of taxpayers who are not equipped to use IRS online resources. Many don't have internet access or can't complete the increasingly complex (thanks, ID thieves) authentication process.
Others don't trust the IRS systems' security. And then there are those folks who simply want to talk to a human.
6. International corporate taxes: One of the few tax matters that got attention during the 2016 presidential campaign was corporate tax inversions. The recent rush by U.S. companies to change their corporate tax headquarters, at least on paper, to lower-taxed foreign countries was one of the few issues on which there was bipartisan consensus: it's not good for U.S. workers and the economy. But exactly what the United States will do about such corporate tax maneuvers remains unclear, even with the GOP in control in Washington, D.C.
Meanwhile, European tax officials weren't happy with the international tax deals offered to American firms either. The most notable was Apple’s tax war with the European Union.
7. States go after remote sales taxes: Congress has been fiddling with proposals to establish a nationwide system that allows states to collect sales taxes from remote sellers, but still hasn't been able to come up with an acceptable measure. States in 2016 got tired of waiting.
A growing number of states adopted creative nexus standards challenging the existing Quill Corporation v. North Dakota U.S. Supreme Court ruling in 1992 that a seller must have a physical presence, or nexus, before it has to collect a state's sales taxes. Explosive internet commerce, argue state tax officials, has undermined that standard. And even online retail giant Amazon seems to agree, deciding to start collecting sales taxes in 2017 in several states where it has no physical operations.
It's possible that the High Court ultimately could decide to end the nexus requirement in a wonderfully tax ironic way. Challenges to South Dakota's new internet tax collection law could possibly reverse neighboring North Dakota's long-standing remote sales physical location standard.
8. Sharing/gig economy taxes: Despite Uber's problems with local officials across the country, the sharing or gig economy is expected to keep growing. In 2016, the IRS finally acknowledged this by providing guidance to taxpayers who earn money from such enterprises at the new Sharing Economy Tax Center. The IRS also made it clear that it will keep a close eye on taxpayers who, intentionally or unintentionally, pay more or especially less tax then they should from their patchwork careers.
9. Tax haven crackdown continued: The cousin to corporate tax inversions is individual taxpayer use, or abuse, of international tax havens. Some names and financial institutions that enable such alleged tax evasion were revealed last May with the release of the Panama Papers. For the United States, the biggest revelation in the more than 11 million documents leaked from the Panama-based law firm Mossack Fonseca was not names of Americans stashing cash away globally, but the inclusion of Nevada and Wyoming as tax havens for other worldwide taxpayers.
But the IRS didn't need more names. It already had the identities of and tax payments from individuals who participated in its ongoing global tax amnesty Offshore Voluntary Disclosure Program, or OVDP. The agency announced last October that since its initiation of the tax haven crackdown effort in 2009, it has collected $10 billion in taxes and had 100,000 taxpayers return to full federal tax compliance.
10. Olympics champions' tax break: As predictable as the "USA!" chants every time the Olympics rolled around were Congressional efforts to offer tax relief to Americans who won medals. It finally came to be in 2016. Thanks, Michael Phelps and Simone Biles!
The Olympians and Paralympians Act was signed into law by President Obama and now some Olympics champions won't have to count the money they get from the U.S. Olympics Committee as taxable income. The value of the Gold, Silver and Bronze medals themselves also is now tax-free. But this only applies to Olympians whose adjusted gross income is $1 million or less. Sorry, Michael Phelps and Simone Biles!
OK, that's a lot of tax stuff for a year that really wasn't so tax focused. Now comes the question of what will 2017 bring us tax-wise? Below are five issues that could be of particular interest. I'll admit up front that these aren't especially bold predictions, but as I noted earlier, my crystal ball was damaged.
Tax Issues to Look (and Look Out) for in 2017
1. Refund delays will anger taxpayers: Nobody needs a prophecy orb to see this coming. When taxpayers who file early in 2017 expecting to have their refunds in hand by the end of the month discover that they'll have to wait at least a couple more weeks, you'll hear the complaining nationwide.
The IRS has been working since last summer to get the word out that a provision in the previously mentioned PATH Act requires the agency to hold some refunds until at least Feb. 15. This will happen on filings where the Earned Income and additional child tax credits are claimed.
As I noted in yesterday's January tax moves post, the rationale for the delay is that it will give the IRS more time to ensure that these refundable tax credit claims are legit. That's probably true.
But it's also true that it will piss off honest filers who claim one or both of these tax breaks and who depend on their soon-as-possible tax refunds to make ends meet.
Plus, I see a whole new category of tax scams arising from folks preying on filers who want to get their refunds sooner than mid-February.
2. Debt collector problems will return: Despite years of evidence to the contrary, Congress is once again forcing the IRS to use private debt collectors. The good news is that the tax cases that will be turned over to the bill collectors is limited. The bad news is that bill collectors will be involved at all.
Sure, they are statutorily required to follow the Fair Debt Collection Practices Act , which means they can berate or abuse you when calling about a bill or call your friends or family or employer or a whole long list of other consumer protections. Big whoop.
Too many unscrupulous debt collectors ignore the debt collection rules when it comes to bills they currently collect. I suspect we'll get reports of the same happening in connection with old tax bills.
And, as in the refund delay case, tax criminals will likely be posing at private debt collectors to con individuals into handing over their personal information and money.
3. Tax reform will happen: With Republicans in control of the White House and Capitol Hill, there will be some sort of individual and corporate tax reform. But that's as far as I'm going. How much and how soon is still too iffy to predict even with one party in ostensible charge.
Howard Gleckman nails the situation in his recent post at TaxVox, the blog for the Washington, D.C.-based Tax Policy Center:
"Trump aides and Hill leaders boldly predict that Congress will pass not one, but two, major tax bills by April. But making tax policy is notoriously complex and time-consuming. In addition, lawmakers and their staffs could well spend much of February and March bogged down in controversial Trump nominations and the Affordable Care Act repeal."
4. Obamacare sticks around: As with tax reform, untangling all the threads of the Affordable Care Act, aka Obamacare, won't be easy. Sure the Republicans who have hated the law since it was enacted in 2010 without a single vote from anyone in their party will vote to repeal it. And they'll loudly tout the end of the many taxes associated with the health care law.
But the effective date for the actual end of the law and taxes will be in the future as they try to figure out how to placate voters who hate the law but like the insurance that it provides. Plus, even the incoming president has said some provisions of Obamacare should be retained.
5. IRS continues to catch Congressional heat: While Koskinen ultimately might escape impeachment and serve out his term, which ends in November, the agency itself will continue to be in Congressional cross-hairs.
Now that Republicans have control in D.C., they need an easy foe they can use to make their political points. Enter the IRS.
Uncle Sam's tax agency is perfect for attacks from GOP Representatives and Senators. It's made plenty of mistakes -- conference cost overruns, questionable videos, bad email system decision -- in recent years that its detractors can easily pick from to use as bludgeons.
Plus, it's a government agency and the current GOP in general and its Tea Party faction in particular don't believe that any part of government has a positive role to play in people's lives.
Finally, voters in general detest paying taxes, even when they know they are necessary to provide services they like.
So look for Congress to continue to hammer away at the IRS and its leader, both in Capitol Hill hearings and by again trimming the agency's budget.
What do you think? Did I cover all the big tax issues of 2016 and 2017? If not, let me know in the comments what you think I overlooked. And if you agree or want to elaborate on those I chose for my past review and future outlook, please share that, too.
Nice summary to read up upon.
So far, not much changes in mid-2017 which isn't surprising as Congress refuses to do anything serious with tax reform unless it's forced to.
No presidential candidate is required by any laws to disclose their tax return information. Those that are looking for a fight are the ones that makes it an issue for their political, selfish and egotistical purposes.
Posted by: MrMojo | Thursday, September 21, 2017 at 09:33 AM
Great article. Probably the most interesting that I've read in a long time. Thank you!
Posted by: Karen Graves | Friday, June 09, 2017 at 08:35 AM