Weekly Digest–June 28th 2024-School’s Out for the Summer Enjoy👍🏼👍🏼⛱️🩴🎆🥾
School may be out for the summer, but for me it feels like this is conference season. Since the beginning of June, I have attended several seminars or conferences each week and have plans for more through the end of August. Several of them are in person, which lately seems like a treat as I catch-up with some of my professional friends. Last night was a wonderful evening as many of my friends and I attended a networking event in honor of a friend Karen Tenenbaum who passed away in December 2023. Karen was so full of life and gave so much of herself to others and to many of us in local professional groups. I have so many great memories of the time we spent together even though those times were spent as panel participants or networking at local tax events. Karen loved to network and take pictures with friends and collogues. When I compared table assignments with some of my friends, I found that I was not seated at a table with them. Thus, my aha moment; it was intentional and an opportunity for me to meet and network with new people, and I did. So, thank you Karen, she would have loved attending last night but she was with me in sprit as I met and connected with some wonderful people and we took some selfies together…
It was also great to see some “old friends” and pose with them…
I have been taking longer beach walks👣 in the morning, which gives me the opportunity to look for dolphins 🐬, no I have not spotted any yet, but here are the photo ops from Monday…
Summer is here, most schools have closed and with July 4th falling on a Thursday many of us look forward to a weekend they may last a full week. I hope you have great plans for the week and for celebrating the 4th!
WEEKLY TAKE-AWAY
Given the “pull” of the nice weather and opportunity to get out on the beach, work on my garden and visit with friends it’s been a bit of a challenge to keep pre-summer hours. I don’t want to shirk my responsibilities as I still have client meetings, tax return extensions, quarterly estimates, tax plan accountability meetings and seminars to prepare for and attend especially given shorter work days and weeks. My solution is to try to manage my expectations for myself first then communicate fully with my staff and clients; I have found people understand and are willing to be patient when I explain who, what, where and why. I would rather take my time, focus and confirm that the project is correct rather than stick to unreasonable or unnecessary deadlines and time constraints and the beach calls…
TAX ISSUES/TAX PLANNING
IRS Rejecting Billions of Dollars of Pandemic-Era Tax Credit Claims
We on the tax and advisory side of accounting and law have learned the laws, conducted interviews and documented several businesses related covid related grants and loans to ensure our clients were following the eligibility and reporting rules. I reported about the expected abuses of the Employee Retention Tax Credit (ERTC) and again about the IRS Voluntary Disclosure Program (IRS ERC VD) offered earlier this year. See my blog posts from February 23rd and February 16th and last May 19th. The voluntary disclosure program has ended but if you are concerned about your ERTC eligibility you can contact our office for our recommendations and referral for legal counsel.
The VDP deadline has passed and the is sending out notices to those businesses that according to IRS Tax Commissioner Danny Werfel “have been misled and deluded into thinking they’re eligible for a big payday”.
As per IR 2024-169; the IRS news release of June 20th : “Highest-risk claims being denied, additional processing to begin on low-risk claims; heightened scrutiny and review continues as compliance work tops $2 billion; IRS will consult with Congress on potential legislative action before making decision on future of moratorium”
“Following a detailed review to protect taxpayers and small businesses, the Internal Revenue Service today announced plans to deny tens of thousands of improper high-risk Employee Retention Credit claims while starting a new round of processing lower-risk claims to help eligible taxpayers.
“The completion of this review provided the IRS with new insight into risky Employee Retention Credit activity and confirmed widespread concerns about a large number of improper claims,” said IRS Commissioner Danny Werfel. “We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims.”
The review involved months of digitizing information and analyzing data since last September to assess a group of more than 1 million Employee Retention Credit (ERC) claims representing more than $86 billion filed amid aggressive marketing last year.
During this process, the IRS identified between 10% and 20% of claims fall into what the agency has determined to be the highest-risk group, which show clear signs of being erroneous claims for the pandemic-era credit. Tens of thousands of these will be denied in the weeks ahead. This high-risk group includes filings with warning signals that clearly fall outside the guidelines established by Congress.
IRS Sending Settlement Offer Letters in Regard to Syndicated Conservation Easement Transactions
As per IR 2024-174; the IRS news release of June 26th : “The Internal Revenue Service today announced the mailing of a time-limited settlement offer for certain taxpayers who participated in Syndicated Conservation Easements (SCE) and substantially similar transactions that are under audit in the IRS’s Large Business & International and Small Business and Self-Employed divisions.
The IRS will notify eligible taxpayers by letter with the applicable terms and timelines to respond. The settlement offer requires substantial concession of the income tax benefits and the application of penalties. Taxpayers under examination who receive a letter but opt not to participate, will continue to face IRS enforcement actions, including potential full disallowance of charitable contributions associated with the SCE and the imposition of all applicable penalties.
Taxpayers who don’t receive a letter are not eligible for this resolution, and the IRS will continue enforcement-related actions. Taxpayers with cases pending in the United States Tax Court are not eligible for this settlement offer. “
ECONOMY
Why Americans Hate Inflation — and its Cure
As reported in this recent article by Vox.com: “The main way countries deal with inflation is to increase interest rates, making it more expensive to take out loans and reducing the rate of housing construction, business spending, etc. But if Americans are unusually vulnerable to interest rate hikes because of the debt-heavy way we’ve constructed our economic life, then the cure could be nearly as unappetizing as the disease.
Fewer Small Businesses Seeking Federal Contracts Due to Reporting Requirements
As reported in these articles by Smallbiztrends.com and Inc.com: “A decreasing number of small businesses are seeking and receiving government contracts. And part of the reason for this decline may be the strict reporting and compliance requirements. ”
“The good news is that small businesses are receiving a higher amount of government contracting dollars than before, about 28 percent. However, the amount of small businesses receiving contracts decreased from 62,670 to 61,298, a 2.2 percent decline over the past year. So basically, fewer small businesses are receiving contracts, but those contracts are larger than before.”
US Business Activity Inches Up in June; Price Pressures Abating
As reported in this article by Reuters.com: “U.S. business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained. S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, nudged up to 54.6 this month.
U.S. Business Cycle Barometer: Recession Risk Remains Above Historical Norm
The key takeaways from this article in SPGlobal.com:
- “The probability of a U.S. recession within the next 12 months has remained unchanged since the beginning of this year, but at 25%-30% it remains elevated relative to our baseline comparison since World War II.
- We continue to expect below-trend growth in the coming quarters, given a mixed bag of leading indicators and restrictive monetary policy. Any further short-run cyclical boost to spending growth is limited by the economy’s underlying growth potential. The manufacturing sector shows green buds of cyclical rebound, but not without conflicting signals.
- Key risks include conflicts in the Middle East and a potential resurgence in inflation that would threaten the Federal Reserve’s expected monetary easing.”
Can the Dollar Stay on Top?
As reported in TheWeek.com: “Political dysfunction could undermine the world’s reserve currency. But not yet. The dollar is the world’s reserve currency, the backbone of the globalized economy. Would that remain the case if political instability throws the United States off-balance? Maybe.” “The United States is merrily chipping away at the pillars” that make the dollar so dependable, Paritosh Bansal said at Reuters. Growing attacks on the rule of law in the wake of Donald Trump’s criminal conviction are just one sign that America is “effectively daring the rest of the world to find an alternative” to the dollar. So far, though, no real alternative is emerging.”
“The “dominance of America’s currency is harder than ever to overturn,” Eswar Prasad said at Foreign Affairs. Other countries don’t like that financial power, “which exposes their economies and financial systems to the vagaries of U.S. policies.” And America’s economy is “no longer the colossus it once was,” undermined by high debt and “erratic” political decision-making. That should make the dollar weaker. Instead, the “gap between it and any putative rival has only grown and shows no signs of stopping.”
GENERAL RESOURCES
- News about the Child Tax Credit
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- Our prior blog posts, videos and prior weekly newsletters
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- The New York Times has an online newsletter on K-12 and higher education
- The Wall Street Journal has a collection of articles on education
- The Louvre has digitized 482,000 artworks from its collection
- How to create a strong password