IRS Reaches Data-Sharing Deal with DHS
The IRS and Department of Homeland Security (DHS) have finalized an agreement that will provide sensitive taxpayer information to immigration authorities. Under the memorandum of understanding, the IRS will provide DHS with information about undocumented immigrants who are already facing deportation orders and are under federal criminal investigation.
According to the terms of the agreement, U.S. Immigration and Customs Enforcement (ICE) would provide the IRS with the names and addresses of taxpayers it believes have violated federal immigration law. The IRS would then check the information against its existing taxpayer data and confirm its accuracy.
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DOGE Denied Access to Treasury Records
A federal judge has barred the Treasury Department and other federal agencies from disclosing personally identifiable information (PII) with the Department of Government Efficiency (DOGE). The preliminary injunction was issued by a Maryland federal court judge after a group of national labor unions, nonprofit organizations and individuals claimed Treasury Department, the Office of Personnel Management and Department of Education were sharing PII in violation of the Privacy Act of 1974 and other federal laws.
The plaintiffs in the case, American Federation of Teachers v. Bessent, sought the injunction after Treasury Secretary Scott Bessent gave two individuals affiliated with DOGE access to Treasury and other systems with payment records for millions of Americans. The records include Social Security numbers, names, addresses and banking details. The government claimed it was not required to obtain the plaintiff’s consent before releasing the PII information to DOGE. It maintained that it fell under the so-called “need-to-know” exception to the Privacy Act of 1974. However, the judge found the need-to-know exception only applies to intra-agency disclosures and DOGE had not shown it needed the records to perform its duties. The government immediately appealed the decision.
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Failure to File/Pay Penalties for Individual Income Tax Returns:
There are two late penalties for individual income tax returns (Form 1040): Failure to File & Failure to Pay.
Failure to file penalty:
The failure to file penalty is imposed under Section 6651(a)(1) of the Internal Revenue Code (IRC). The penalty is 5% of the tax owed for each month or part of a month that the return is late, up to a maximum of 25% of the tax due.
Example Calculation:
Assume a taxpayer was required to file a return showing a tax liability of $1,000 but failed to do so for 6 months. The penalty would be: $250.00
Failure to Pay:
The failure to pay penalty is imposed under Section 6651(a)(2) of the Internal Revenue Code (IRC). The penalty is ½ of a percent of the amount of tax owed for each month or part of the month after the due date, up to a maximum of 25% of the unpaid tax amount.
Interactions between the penalties:
If both the failure to file penalty and the failure to pay penalty are applied to the same time frame, the amount of the failure to file penalty is reduced by the amount of the failure to pay. The combination of the two penalties does not exceed 5% per month up to a maximum of 25%.
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The Department of Government Efficiency (DOGE) terminated the leases for 61 IRS offices nationwide, according to a list of terminated leases under the Real Estate heading on the department’s website. The lease terminations follow reports that the IRS will close more than 100 taxpayer assistance centers across the country as part of DOGE’s efforts to cut government waste.
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The IRS employs roughly 90,000 people nationwide, not including the 7,000 probationary employees laid off in February. A U.S. Office of Management and Budget memo sent to federal agencies in February said agency heads must prepare to initiate large-scale reductions in force no later than March 13.
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With the March 21 BOI reporting deadline fast approaching, the Treasury Department announced it will not enforce penalties or fines related to the beneficial ownership information (BOI) reporting rule. In addition, the Treasury Department plans to issue new regulations that will not enforce any penalties or fines against U.S. citizens, other domestic reporting companies, or their U.S.-based owners. The proposed rule changes are expected to target foreign reporting companies, not domestic companies.
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BOI reporting back on for March 21, 2025
On Feb. 18, a Texas district court lifted the last remaining nationwide block against enforcing the Corporate Transparency Act (CTA), restoring beneficial ownership information (BOI) reporting requirements.
To allow businesses additional time to comply, FinCEN has extended the BOI filing deadline by 30 days for most companies. The new filing deadline is March 21, 2025, unless a later date applies to businesses in a federally declared disaster area. FinCEN is also considering further modifications to reporting requirements and deadlines, particularly for lower-risk small businesses.
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The Annual gift exclusion allows you and your spouse to each gift up to $18,000.00 per person per year (For calendar year 2025, the amount has been raised to $19,000.00) without using any of your federal estate and gift tax exemptions. Payments may also be made for tuition and medical expenses directly to providers on someone's behalf without relying on the annual exclusion or lifetime exemption.
