Key Takeaways
- IRS HR personnel are here to field your tax questions.
- How an IRS Online Account can smooth your tax filing.
- Private school tax credits trigger federal-state power struggle.
- ACA enhanced credit talks collapse.
- Senators probe FFA links with China.
- Financing a new car the wrong way.
- Western Monarch Day.
'Setting this agency up for failure': Amid staffing crunch, IRS taps employees with no relevant experience to assist during filing season - Eric Katz, Government Executive (my emphasis):
The reassigned workers, who are being detailed out on an involuntary basis, are coming from the IRS human resources and, potentially, the IT departments. Some employees reported that supervisors first asked for anyone who had experience in the front-line fields to consider the roles, but they ultimately chose many individuals with no prior experience working directly on tax issues.
The details come as IRS has dramatically slashed its workforce, cutting more than 20,000 employees—or more than 20% of total staff—in the last year. The divisions seeking internal staffing support have seen similarly significant losses to their workforces and have struggled to rebuild in time for filing season, according to a new report from the IRS inspector general.
This story has lessons for dealing with your return this season. The primary one is that it is worth going out of your way to avoid anything in your tax filing that requires human intervention. The intervening humans may well be people with no tax training who have been dragged out of their HR jobs to try to process returns and answer questions. So:
- E-file. Let the electrons process the return.
- Be sure you have all of your information returns - W-2, 1099, 1098, K-1, etc. - before you file.
- Double check your numbers, especially W-2 numbers, 1099 items, and your estimated tax payments. If your numbers don't match what the computers have, a human may have to fix it.
- If you have college students who you want to claim as dependents, make sure they haven't filed on their own as non-dependents. This is a common cause of e-file rejections for parents.
An IRS Online Account Can Help Avoid Human Intervention
Create an IRS Individual Online Account today for security and convenience - IRS:
With the same convenience as online banking, taxpayers can use the IRS Individual Online Account to:
-View key tax return information, such as their adjusted gross income.
-Request an identity protection PIN and access it throughout the year.
-Check the status of their refund.
-Confirm the status of their amended return.
-Get account transcripts, including wage and income records.
-Approve power of attorney and tax information authorization requests.
-Edit language preferences and request alternative media.
-Receive and view over 200 IRS digital notices.
-Make and cancel payments.
-Set up or modify payment plans and check their balance.
You can also check on information returns, including Forms W-2, 1095-A, 1099-NEC, 1099-DIV, 1099-INT, and 1099-MISC. Most importantly, you can double-check what you have paid in estimated tax payments and prevent one of the most common return errors from delaying your refund.
Federal School Choice Tax Credit Power Struggle
New Tax Break for Private-School Scholarships Sets Off Power Struggle - Richard Rubin, Wall Street Journal:
In states that opt into the national program, scholarship groups will provide money to students whose families have incomes up to three times their area’s median. The program is projected to generate more than $3 billion annually, which isn’t much compared with total education spending. But it is a significant shift in how the federal government participates in K-12 education. And for many families, the scholarships could be large enough to change enrollment decisions.
As the Treasury Department writes rules, the federal money is prompting a lobbying battle over how much control states should have. The fight pits advocates focused on public schools against the school-choice movement that has won support in the Trump administration and among Republicans such as Sen. Ted Cruz of Texas.
Congress: ACA Enhanced Credit Push Collapses; Renewable Revival?
Negotiators Say Talks to Restore ACA Subsidies Likely Dead - Siobhan Hughes and Anvee Bhutani, Wall Street Journal:
Talks had centered on a proposal from Sens. Bernie Moreno (R., Ohio) and Susan Collins (R., Maine) to extend a version of the enlarged Affordable Care Act subsidies for at least two years, while cutting off higher-income people from participating and eventually giving enrollees the option of putting money into health savings accounts. It also would eliminate zero-dollar premium plans. But lawmakers from both parties now say the chances of a deal have all but evaporated.
“It’s effectively over,” Moreno said Wednesday. Sen. Bill Cassidy (R., La.)—the architect of an adjacent plan—agreed. While Collins declined to be as definitive, she did say that it was “certainly difficult.”
Republican working on new clean energy tax push - Kelsey Brugger, Politico:
Rep. Brian Fitzpatrick of Pennsylvania is preparing to introduce legislation that would reinstate solar and wind incentives that Republicans last year eviscerated, an action he maintains was “nonsensical.”
...
Now, Fitzpatrick, a member of the tax-writing Ways and Means Committee, sees an opening to restart the debate, even in a political environment dominated by a president who has called the “green tax credits” a “SCAM” and renewable energy projects “JUNK.”
But Fitzpatrick says he’s not worried about President Donald Trump’s open hostility toward clean energy. “We need to change that position,” he said. “Because I think he’s getting bad advice on this.”
Related: Eide Bailly Energy Incentives Services.
The Trump Lawsuit
Senators Question Role of IRS and Treasury in Trump Lawsuit - Tyrah Burris, Tax Notes ($):
Senate Finance Committee ranking member Ron Wyden, D-Ore., and member Elizabeth Warren, D-Mass., in a February 3 letter asked Treasury Secretary Scott Bessent and Attorney General Pam Bondi if they or any Treasury, IRS, or Justice Department employees had discussions with Trump or his representatives regarding the lawsuit or a potential settlement.
Trump Vows to Donate Any Proceeds From $10 Billion IRS Lawsuit - Erik Larson and Hadriana Lowenkron, Bloomberg ($):
The president suggested he could exert pressure over Attorney General Pam Bondi and Treasury Secretary Scott Bessent in the case, acknowledging there had “never been anything like it.”
“What I would do? Tell them to pay me, but I’ll give 100% of the money to charity,” Trump said, floating the American Cancer Society as a potential beneficiary.
All right, then.
On the Fifth Circuit L.P. Self-Employment Tax Ruling
5 Takeaways From 5th Circ.'s Limited Partner Tax Decision - Kat Lucero, Law360 Tax Authority ($):
The majority rejected the Internal Revenue Service's and the U.S. Tax Court's positions that limited partners with substantive roles in a business beyond their "limited" label do not qualify for the SECA tax exclusion under Internal Revenue Code Section 1402(a)(13).
...
While the Sirius opinion applies to businesses in Louisiana, Mississippi and Texas — the region covered by the Fifth Circuit — partnerships elsewhere may still be bound by the functional analysis test in the Tax Court under a 1970 rule that court set in Golsen v. Commissioner.
Related: Eide Bailly Passthrough Entity Consulting Services.
Future Farmers - A Communist Front?
Farming Nonprofit’s Ties With China Tech Group Triggers Inquiry - Kelsey Brooks, Tax Notes ($):
The National FFA Organization was also asked for documents regarding its reported diversity, equity, and inclusion initiatives and Syngenta’s possible role in influencing those initiatives, according to a February 3 letter from House Ways and Means Committee Chair Jason Smith, R-Mo.; Oversight Committee Chair David Schweikert, R-Ariz.; and Rep. Tracey Mann, R-Kan., who co-chairs the Congressional FFA Caucus.
“Working with our nation’s foreign adversaries and prioritizing woke policies over our mission raises serious concerns regarding whether the National FFA is complying with the requirements to maintain tax-exempt status,” wrote the lawmakers.
Related: Eide Bailly Exempt Organization Tax Services.
Ex-IRS Commissioner Discusses the Costs of Fraud Prevention
Minnesota Probes Reveal That Fraud Prevention Requires Tradeoffs - Danny Werfel, Bloomberg ($):
Those reactions are often justified. But they glide past an important reality: Preventing fraud and error requires tradeoffs that affect everyone, not just bad actors.
...
We’ve made this choice before with notable results. The American Recovery and Reinvestment Act—a nearly $800 billion emergency stimulus program enacted in 2009—had comparatively low levels of fraud and error. This wasn’t by accident; the law required, as a central feature, extensive and frequent reporting by recipients that gave federal officials and auditors the information they needed to spot problems early.
Left unmentioned by the former Commissioner are the fraud-ridden Paycheck Protection Program and Employee Retention Credit, where the emphasis was on writing checks quickly rather than fraud prevention.
Related: Eide Bailly Fraud and Forensic Advisory Services.
International Taxes Shifts to Digital
Tax News & Views International Weekly: Pivoting to Digital - Alex Parker, Eide Bailly:
When the Organization for Economic Cooperation and Development was first tasked by the G-7 with tackling this issue nearly a decade ago, it grew into a two-pronged effort to capture both untaxed online transactions and low-taxed intangible profits. While the latter project turned into Pillar Two, the first project—Pillar One—dwindled and died on the vine. The OECD produced a multilateral convention to implement a new regime to tax a portion of all transactions in a market—whether they be online or in-person—the mega-treaty was never approved by the United States and never reached full consensus.
In the absence of a resolution, countries have gone ahead with DSTs—typically, taxes on revenue from certain online transactions such as e-retail, social media and data collection. The U.S. has strongly opposed these levies, claiming they are targeting the American tech industry. In his first term, President Trump initiated the process to enact retaliatory tariffs against countries with DSTs, but that was suspended while they sought an agreement at the OECD. Poland is the latest country to propose a DST, sparking more threats of retaliation.
Related: Eide Bailly International Tax Services.
Blogs and Bits
3 tax moves to make in February - Kay Bell, Don't Mess With Taxes. "1. Keep an eye out for tax statements. Jan. 31 is the day that W-2 and various other earnings statements are supposed to be delivered to workers. Guess what? That date usually slips."
Should You Take The Standard Deduction Or Itemize On Your 2025 Taxes? - Kelly Phillips Erb, Forbes. "You generally choose the standard deduction if the total amount of your allowed itemized deductions exceeds the standard deduction, or if you don’t qualify for the standard deduction."
College Properly Reported Settlement Payment to Former Student on Form 1099 - Parker Tax Pro Library. "A district court held that a college and a law firm that represented it in a lawsuit brought by a former student who was dismissed from the college's nursing school, properly reported a $56,744 settlement payment to the former student in settlement of her lawsuit on Form 1099-MISC after finding that no provision excluded the funds from her gross income."
That's One Way to Finance a New Car
Tennessee man sentenced to five years for wire fraud, money laundering, and making a false claim to the IRS - IRS (Defendant name omitted, emphasis added):
A federal grand jury indicted Defendant on April 30, 2024. He subsequently was found guilty of all charges after a two-day jury trial in September 2025.
According to the evidence presented at trial, in November 2020, Defendant electronically filed a tax return on behalf of a trust in his name in which he falsely claimed on the return that his trust had paid over $7 million in taxes to the IRS in 2019. Defendant claimed on the tax return that he needed a $4.1 million refund from the IRS. Despite Defendant’s claim, IRS records show Defendant’s trust has never paid any federal taxes. Before the IRS realized that Defendant’s claim was untrue, however, the agency issued a $4.1 million refund. Defendant immediately spent the money, purchasing four residential properties and a luxury automobile. He also invested some of the money in brokerage accounts.
This might be a good example of the sort of trade-off between fast payments and fraud prevention that Danny Werfel notes in the story linked above. Sometimes this sort of thing works, until suddenly it doesn't.
What day is it?
It's Western Monarch Day, celebrating the royalty of butterflies and the promise of warmer weather.
Make a habit of sustained success.
