Michael Gray, CPA's Blog

Tax and financial advice from the Silicon Valley expert.

Want to vote? Get a U.S. Passport

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  • mike   

President Trump issued an executive order on March 25, 2025 requiring proof of citizenship for voters in U.S. federal elections.

Here’s a link to the order. https://www.whitehouse.gov/presidential-actions/2025/03/preserving-and-protecting-the-integrity-of-american-elections/

“Documentary proof of United States citizenship” includes a copy of:

  • a United States passport;
  • an identification document compliant with the requirements of the REAL ID Act of 2005 that indicates the applicant is a citizen of the United States;
  • an official military identification card that indicates the applicant is a citizen of the United States; or
  • a valid Federal or State government-issued photo identification if such identification indicates that the applicant is a United States citizen or if such identification is otherwise by proof of Unites States citizenship.

This order is controversial and will probably be contested by the states in the courts. As I understand it, the states are supposed to determine how to qualify citizens for voting in federal elections.

Whether or not the executive order holds up, I highly recommend that U.S. citizens should get a U.S. passport. It’s not just for traveling. It is official proof of U.S. citizenship. You generally can apply for a U.S. passport at a U.S. Post Office.

Remember, U.S. passports expire and must be renewed.

A Real ID is a good substitute for a passport, but it doesn’t have the same weight for proof of citizenship. A U.S. passport can be used as proof of citizenship when applying for a Real ID.

The enforcement for Trump’s effort to deport illegal aliens seems to be largely based on racial profiling.

If I was a nonwhite U.S. citizen or English was my second language, I would carry my U.S. passport at all times in case identification is requested by an ICE agent. I would also get U.S. passports for minor children, and keep copies of the passports in a safe, but accessible, location, in case they are lost or stolen.

(U.S. permanent residents and other noncitizens should also carry their identification at all times to show legal alien status.)

It’s not pleasant to have to prove citizenship or legal status, but it can help avoid unpleasant situations, like being arrested and imprisoned or deported without due process.

“Just in case”, get a U.S. passport or check when yours expires.

FinCEN Cancels Requiring Business Ownership Information Reports for U.S. Owners Only

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  • mike   

After more than a year of controversy and confusion, the Financial Crimes Enforcement Network (FinCEN) is issuing an interim final rule cancelling the requirement to file Business Ownership Information Reports when an entity registered with a Secretary of State only has U.S. owners.

When an entity has foreign owners, only the ownership information for the foreign owners will have to be reported.

When the interim final rule is published in the Federal Register, these will be the due dates for foreign-owned entities:

  • For entities registered before the date of publication, 30 days after that date.
  • For entitles registered after the date of publication, an initial BOI report must be filed within 30 calendar days after receiving the notice their registration is effective.

Here is a link to FinCEN’s release announcing the change. https://www.fincen.gov/news/news-releases/fincen-removes-beneficial-ownership-reporting-requirements-us-companies-and-us

How IRS employees helped eliminate a $250,000 tax bill

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  • mike   

Here is the story of one of my biggest “taxpayer wins”. The names and amounts have been changed for confidentiality.

My client, Bob, was experiencing financial difficulties. His antiques store was experiencing losses.

He was embarrassed to come to me to have his income tax returns prepared, because it would be hard to pay me.

In 2010, he sold the building that housed his store for $1,000,000 and moved the business to rented space.

Based on an information report for the sale of the building that it received, the IRS prepared its own tax return for Bob. There were no deductions for the cost of the property or the selling expenses. It made “worst case” assumptions, prepared the return for a married person filing a separate return, and taxed the gain as ordinary income with no itemized deductions or personal exemption deductions. A ballpark of the bill was $250,000. California would also eventually assess tax based on the IRS report.

IRS Collections started garnishing funds from Bob’s bank accounts.

Finally, he came to me to help with his problem.

When I prepared his income tax returns, there was no tax due!

I applied to the IRS for audit reconsideration. Remember, they had already assessed the tax plus penalties and interest.

The IRS agreed to reopen the case and audit Bob’s tax return. They accepted the tax return I prepared as filed and reduced his tax to zero.

For some reason, they didn’t eliminate the penalties for failure to file and underpayment of tax.

After some correspondence back and forth, I applied for help from the Taxpayer’s Advocacy Office at the IRS. One of the purposes of that office is to help taxpayers resolve problems dealing with the IRS. The Taxpayer’s Advocacy Office eliminated the penalties for Bob’s tax return, and he was able to recover all of the money that was garnished by the IRS.

(Needless to say, my fee for doing this was more than ten times what the tax return preparation fee would have been if Bob just had me prepare his tax returns in the first place.)

Yes, what I did for Bob was impressive.

But I couldn’t have done it without having competent and cooperative people at the IRS to work with.

Have you ever had to call the IRS with a problem or a question? It can be a frustrating experience, having to wait a long time on hold or hoping to be available when you are called back. What if there were even fewer people available to answer taxpayer calls?

The latest blow to the IRS is in the Continuing Resolution budget legislation passed by Congress and signed by President Trump on March 15, 2025 to keep the U.S. government open. The Continuing Resolution eliminates $20 billion of IRS funding previously approved by Congress in the Inflation Reduction Act of 2022.

The original appropriation was $80 billion. $20 billion was previously eliminated by Congress in other budget legislation, so only $40 billion is left. The appropriation was to be allocated over a 10-year period and was to be used by the IRS to modernize its operations, rebuild its declining workforce, and improve taxpayer compliance. As of September 30, 2024, the IRS spent about $9 billion of the funding, including about $3.7 billion for employee compensation.

Now all modernization activities have stopped and DOGE is initiating at least a 20% reduction in the IRS’s workforce after April 15 and by May 15, 2025.

430 of about 1,900 employees at the Taxpayer Advocate Service are slated to be cut, in addition to 90 employees who have already accepted the voluntary buyout offer.

With a dramatic decrease in the number of people working at the IRS, we can expect a big decline in tax audits and compliance with the tax laws and a big decline in the guidance and taxpayer support services provided by the IRS. According to Biden administration officials, the agency will conduct about 400 fewer audits of U.S. businesses and 1,200 fewer audits of high income individuals each year, which could add $140 billion to the national debt over the next decade.

After the Trump Administration guts the IRS, there will be fewer people available to help taxpayers resolve their problems. In many cases, they will remain unresolved and they might have to pay additional income taxes, interest, and penalties, or pay attorneys to litigate unnecessary disputes.

Having lost its funding for modernization, the IRS will have to continue operating with antique computer systems.

That doesn’t seem like “Government Efficiency” to me.

How do you feel about this? Let your representatives in Congress know. Remind them that, when you can’t get help from the IRS, you’ll be reaching out to them for help with IRS problems.

Consequences

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  • mike   

Parents teach their children that their actions have consequences.

In physics class, we learned an action generally is associated with a reaction. These actions and reactions are described as physical laws. Among other things, we rely on them to fly airplanes and orbit space stations.

Economics describes the consequences of actions in the marketplace. Although President Trump says he doesn’t “believe in” the “laws” of economics, he can’t escape them or intimidate his way out of them.

President Trump and his team have conducted a series of actions in the very brief time of his second presidency, including imposing tariffs, closing down USAID, proposing to close the Department of Education, and severely reducing personnel in other departments, including the IRS and Veteran’s Affairs. Congress is working on a budget that would severely reduce Medicaid and food assistance programs.

We are seeing natural consequences of these actions that are isolating the United States and hurting U.S. businesses and residents.

The response of Canada, Mexico and China to U.S. tariffs is to impose retaliatory tariffs. China is imposing a 15% tariff on U.S. agricultural products. During President Trump’s first term, U.S. agriculture suffered billions in losses, requiring a bailout by the federal government. It’s likely to happen again. China also has suspended U.S. lumber imports and blacklisted 15 U.S. companies.

After the first Trump administration imposed tariffs on China’s goods, China shifted its trade partnerships to buy most of its soybeans from Brazil and Argentina instead of the U.S and reduce its exports to the U.S.

When USAID was shut down, millions of dollars of shipments from U.S. farms that were in the process of being shipped were left to rot, leaving U.S. farmers “holding the bag.” USAID annually buys about $2 billion in food aid from U.S. farmers. If farmers can’t depend on being paid, they won’t plan crops for USAID.

Canada has been sending about 75% and Mexico about 80% of their imports to the United States. Now both countries are seeking alternative trading partners. Canada is considering joining the European Union and selling crude oil to Europe and Japan.

President Trump’s imposing and then pausing tariffs has created confusion and uncertainty for investors. On Monday, March 10, 2025, the Standard & Poors 500 index fell 2.7%, 9% below a record set during February and erasing all the gains it made since Election Day.

Live Congressional Town Hall meetings are being scaled back or converted to “virtual” meetings after angry constituents mobbed the meetings because people are unhappy about the power given to Elon Musk as the (unelected and unapproved by Congress) head of the Department of Governmental Efficiency. They are also afraid the tariffs imposed by President Trump will lead to higher prices and that government benefits and services are being cut and will be cut further.

President Trump is insulated from these consequences, but representatives in Congress aren’t. The mid-term elections will take place in 2026. During his first term, the Republicans lost control of the House of Representatives during the 2018 mid-term elections.

If we’re still allowed to vote (President Trump has asserted control of the Federal Election Commission), unhappy constituents could seek to stop “slash and burn” government reform and isolationist foreign policies by voting Republicans out of office.

“We shall never surrender …”

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  • mike   

When President Trump and Vice President Vance “bushwhacked” Volodymyr Zelenskyy last Friday, February 28, they evidently thought Zelensky’s goal was “peace”.

Their arguments were Ukraine is outmanned and outgunned by Putin, so Ukraine should accept Putin’s terms for a cease fire.

Zelensky’s goal is actually for Putin to stop his aggression against Ukraine, which he could do today.

Putin’s goal is to get more territory in Ukraine, or occupation of Ukraine, which it appears Trump and Vance are willing to give him to “stop the killing.”

The resolve of Zelensky and Ukraine to resist Putin’s aggression reminds me of this speech by Winston Churchill on June 4, 1940, shortly before the fall of France.

“We shall go on to the end, we shall fight in France.

“We shall fight on the seas and oceans.

“We shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be,

“We shall fight on the beaches.

“We shall fight on the landing grounds.

“We shall fight in the fields and in the streets.

“We shall fight in the hills.

“We shall never surrender, and even if, which I do not for a moment believe, this island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on in the struggle, until, in God’s good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old.”

Sadly, it appears countries who have been our allies can no longer rely on the commitments of the United States to defend them unconditionally. President Trump appears to be aligning with Putin.

ARGH! FinCEN extends BOI deadline AGAIN! (3/1/2025)

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  • mike   

I blinked and FinCEN issued another media release on February 27, 2025 stating it will not take enforcement actions for companies failing to file or update beneficial ownership information (BOI) reports until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.

FinCEN intends to issue an interim final rule extending BOI reporting deadlines no later than March 21, 2025.

Watch for developments at fincen.gov/boi.

This has been the most frustrating law to follow that I can remember.

Business Ownership Information Reports deadline is March 21, 2025

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  • mike   

On February 18, 2025, the U.S. District Court for the Eastern District of Texas lifted the injunction for the filing requirement for Business Ownership Information (BOI) reports in Samantha Smith and Robert Means v. U.S. Department of the Treasury.  FinCEN has announced a 30-day extension of the filing date to March 21, 2025. 

Note the extension doesn’t apply for new businesses formed after December 31, 2023.

Businesses that have other extensions for disaster relief can still rely on those extended due dates.

Plaintiffs in National Small Business United v. Yellen, No. 5:22-cv01448 (N.D. Ala.)—namely, Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN at this time.

The House of Representatives unanimously passed H.R. 736, Protect Small Businesses From Excessive Paperwork Act of 2025 on February 10, 2025, which would extend the deadline to January 1, 2025.  The Senate has referred the proposal to a committee.  Until the Senate passes it, the March 21, 2025 date remains effective. Considering the timeline, it seems unlikely the Senate will pass the extension before the deadline.

    For updates, watch the FinCEN web page, https://www.fincen.gov/boi.

    House bill takes from the poor; gives to the rich

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    • mike   

    On February 25, 2025, the U.S. House of Representatives passed its Budget Reconciliation proposal, 217-215.

    The Senate previously passed its reconciliation proposal 52-48 on February 18, 2025. The Senate proposal is limited to increased spending over the next decade of $175 million for immigration enforcement and $150 billion for defense, while cutting other federal programs. They planned on passing additional guidelines for revenue and other cuts later.

    The House proposal fulfills President Trump’s requirement for a “big, beautiful bill” by providing the expected guidelines for federal revenue and spending for the next 10 years. It seems likely the Senate will also approve the House proposal and send it to President Trump for signature.

    The House proposal includes extending about $4.5 trillion in tax cuts adopted in the Tax Cuts and Jobs Act of 2017 that are expiring.

    It also lists increased spending of up to $110 billion for the Judiciary Committee, $100 billion for the Armed Services Committee and $90 billion for the Homeland Security Committee (immigration enforcement.)

    To reduce the resulting increase in the national debt, the proposal includes cuts of at least $880 billion by the Energy and Commerce Committee, $330 billion by the Education and Workforce Committee, $230 billion by the Agriculture Committee and other smaller cuts, leaving a net deficit of about $3.5 trillion, or $4 billion, including interest.

    The proposal consists of broad guidelines and not specific details, but it appears the largest cuts would come from Medicaid and food assistance programs, like food stamps and school lunches.

    Although President Trump has said “there will be no Medicaid cuts”, the House blueprint instructs the Energy and Commerce Committee, which oversees Medicaid, to come up with at least $880 billion in cuts, accounting for more than half of the reduction in the budget outline. There is no other item big enough for $880 billion in cuts.

    Medicaid pays medical bills for more than 70 million low-income Americans. Medicaid covers nearly half of all births in the U.S., and about two-thirds of nursing home stays.

    Adding a work requirement to the program would only save about $100 billion.

    Note interest expense is one of the largest items in the deficit, about $ 1/2 trillion. Interest continues to grow with higher interest rates and the ballooning federal debt.

    Since low-income taxpayers pay very little income taxes, the overwhelming beneficiaries of $4.5 trillion in tax cuts are high-income taxpayers, so Congress is financing their tax cuts by taking benefits from the poor and adding the rest to the national debt, which sucks up more funds to pay interest expense and leaves payment to future generations.

    These medical and food assistance cuts will hit voters hard in many “red” states. Moderate Republicans have expressed concerns about how their constituents will be affected.

    “The devil is in the details.” Congress will still have to work through the details of the tax cuts and the expenses outlined in the proposal.

    President Trump has also requested additional tax cuts, including exempting tips, Social Security benefits and overtime pay from income taxes, creating an itemized deduction for auto loan interest, and reducing the maximum corporate income tax rate from 21% to 15%. Adopting these changes would further increase the deficit.

    I expect Congress will be arguing about these matters for the rest of the year.

    President for a year

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    • mike   

    Hosni Mubarak served as the autocratic president of Egypt for 30 years, succeeding the assassinated Anwar Sadat.

    When Mubarak said he intended that his son, Gamel, would be his successor, massive protests, facilitated by communication using Facebook and Twitter, exploded throughout Egypt during January and February, 2011. Egypt’s military forced him to transfer power to the Supreme Council of the Armed Forces and to resign during February, 2011.

    Mubarak’s ouster enabled the Muslim Brotherhood to participate openly in Egyptian politics, forming the Freedom and Justice Party. During April, 2012, the Freedom and Justice Party selected Mohamed Morsi as its candidate for president of Egypt. Morsi was elected President of Egypt in a runoff election on July 16 and 17, and sworn in on June 30.

    When his term as President began, Morsi was subordinate to the interim military government of the Supreme Council of the Armed Forces. He worked at establishing his authority, including revoking a constitutional declaration by the Armed Forces of June 17. He declared his authority as president would not be subject to any form of judicial oversight until a permanent constitution was in effect. The decree also removed the courts’ power to dissolve the Constituent Assembly, a 100-member body responsible for drafting a new constitution.

    Mass demonstrations were held against what was viewed as a seizure of dictatorial powers.

    On November 30, the Constituent Assembly approved a draft constitution written without the input of boycotting Christian and secular members. The draft constitution was approved by voters and became effective late December, 2012.

    Morsi rescinded parts of his constitutional decree but retained the article preventing the courts from dissolving the Constituent Assembly.

    Morsi declared martial law on December 9.

    Declining economic conditions, deteriorating public services, and a string of sectarian incidents intensified political polarization and strengthened opposition to Morsi’s rule. Clashes between Morsi’s supporters and critics in late June, 2013 culminated in massive anti-Morsi protests on June 30, 2013.

    On July 1, the head of the Egyptian Armed Forces, General Abdel Fattah al-Sisi, issued an ultimatum, declaring the military was ready to intervene to prevent chaos in the country. Morsi offered to negotiate with the opposition, but refused to step down.

    On July 3, the military suspended the constitution and removed Morsi from the presidency, about a year after he assumed the position.

    The Muslim Brotherhood was formally outlawed in September, 2013.

    Abdel Fattah al-Sisi, resigned from the military and was elected president of Egypt during 2014.

    Morsi faced trials for several offenses, including inciting Muslim Brotherhood supporters to kill demonstrators who participated in an anti-Morsi protest in 2012 and having colluded with foreign groups, including Hamas, Hezbollah and Iran’s Revolutionary Guards. Morsi refused to recognize the legitimacy of the proceedings against him and insisted he remained the president of Egypt. He died in prison on June 17, 2019 while his trials were being appealed.

    The military has much more political power in Egypt than in the United States. It’s highly unlikely we could see a military removal of a President of the United States. President Trump has fired high-ranking military officers who aren’t loyal to him.

    Our impeachment and trial process to remove a President has never been successfully used.

    The 25th Amendment to the U.S. Constitution provides the procedures for replacing the President or Vice President of the United States in case of death, removal, resignation or incapacitation. That amendment has only been invoked to replace the Vice President when Spiro Agnew resigned as Vice President, then to name Gerald Ford’s replacement as Vice President when Richard Nixon resigned, and occasionally for the Vice President to assume presidential duties when a President was indisposed, such as being anesthetized for surgery.

    In order for Congress to successfully declare a president “disabled,” two-thirds of the representatives in each chamber must conclude that he “is unable” to perform the duties of the office. Doing this seems highly unlikely with the current Republican majorities in Congress.

    “No” is a powerful word, especially when groups of people say it together. In the United States, we have a tradition of protest to initiate social change, such as Dr. Martin Luther King’s March on Washington, demonstrations for womens’ rights and the protests against the Viet Nam war. Participating in such protests and communicating to promote them using social media is a way to communicate your disagreement with current policies, possibly leading to change.

    Even when fascist powers overtook Europe during World War II, people found ways to resist, often at great personal risk.

    One of the reasons President Trump is taking such quick action is he doesn’t have much time to assert power. The mid-term election will take place in 2026. If U.S. citizens still have the power to vote, it’s possible they will send a strong “no” message and flip Congress. Remember the majority in the House of Representatives was “flipped” to Democrats in the 2018 midterm election.

    Michael Gray, CPA's Blog

    Tax and financial advice from the Silicon Valley expert.