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If you’re a big Netflix fan, chances are you’ve seen Rebel Ridge. The film, starring the swoony Aaron Pierre and everyone’s favorite fictional Miami cop, Don Johnson (in a very different role), was released on September 6, 2024, amassing 31.2 million views in its first three days and 38.6 million more the following week.
In the movie, former Marine Terry Richmond, played by Pierre, is on his way to bail his cousin out of jail when he is pulled over by a pair of police officers in the fictional small town of Shelby Springs. The officers who stop him seize the cash he’s carrying, a process known as civil forfeiture.
It sounds like pure fiction. While writer-director Jeremy Saulnier told Netflix that the film wasn’t based on a true story—but added “elements of it could certainly happen”—a real-life version really happened to Stephen Lara. (☆)
Lara, also a retired Marine, didn’t expect any surprises when he set out on a drive to see his daughters. But on February 19, 2021, after he was pulled over on I-80 near Sparks, Nevada—about an hour away from Reno—the Nevada Highway Patrol (NHP) seized Lara’s life savings.
When the officer asked whether he had large amounts of cash, Lara answered honestly, “Yes.” He later clarified that it was “a lot,” explaining that he didn’t trust banks. Traveling with cash within the U.S. is not a crime—no matter the amount—a fact that the officer acknowledged at the scene. Still, the government seized Lara’s money through civil forfeiture. It took months to get his cash returned. Now, Lara is fighting back through the courts to stop the practice.
Also fighting back this week? The tax pro community. Last month, Intuit launched an extensive “break-up” ad campaign pitching the “TurboTax Full Service plan” that features a human tax preparer, who customers work with online or in person. The campaign included ads and short videos advising “how to break-up via voicemail” with their tax pro and warned consumers to “Skip the red flags 🚩 Glow-up and make the switch to a #TurboTax Expert today!”
Tax pros were livid (☆) over the unflattering portrayal and worried about the reputational hit. One tax pro group described it as “doubly insulting” that Intuit would use such a cutting ad strategy against its own customers. If that last bit is a head-scratcher, you may not know that Intuit doesn’t just own TurboTax—it’s a multibillion-dollar financial technology platform. Included in Intuit’s offerings are professional software programs, as well as QuickBooks and Mailchimp—services that are relied upon by some tax pros, as well as recommended by some to their clients.
This week, Intuit walked the campaign back. In a statement issued to Forbes, the company said in part: “While our current TurboTax campaign is intended to encourage tax filers to file their taxes with a [TurboTax] tax expert, we will evolve the creative to ensure it has the intended impact so the benefit of filing with a tax preparer is crystal clear. And most importantly, we will continue with our and tax preparers’ shared goal of delivering financial benefits and complete confidence to tax filers by demonstrating the extraordinary value of assisted tax preparation, all at a competitive price.”
As for red flags? As Intuit’s campaign suggested, red flags in relationships can be problematic. Those same red flags can also be raised in estate planning. While often dismissed as harmless, these remarks can hint at deeper problems that could create significant challenges down the line. Ignoring them might not only lead to confusion and miscommunication but can also cause financial, legal, and emotional turmoil for loved ones when it matters most. Tops on the list? “Why Can’t We Just Keep Things Simple And Drama-Free?”
Speaking of drama, baseball has been chock-full of it lately. Now, the drama includes a little tax, too. Los Angeles Dodger Shohei Ohtani has been in the headlines for months–from a criminal case targeting Ippei Mizuhara, Ohtani’s former interpreter who pleaded guilty to felony bank fraud and tax fraud charges (☆) to the star’s massive $700 million player contract with its clever tax angles (the contract landed him in the top 25 on Forbes’ Highest Paid Athletes list, the only baseball player to rank so high in 2024).
On September 19, Ohtani made even more history by reaching 50 home runs and stealing 50 bases, all in a single season. Two Florida men, Chris Belanski and Max Matus, both attempted to catch Ohtani’s 50/50 ball, but only Belanski walked away with the ball in his mitt. Matus filed a lawsuit, alleging that he had been the first to catch Ohtani’s homer and that it was forcibly stolen out of his hands by Belanski. Then, a third fan, Joseph Davidov, stepped into the picture, alleging that he was the original guy who grabbed the ball. Unless they settle, the court gets to decide who is the legal owner. But once it sells, how will they be taxed? It’s the kind of thing that keeps tax nerds like me up at night.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Taxes From A To Z: U Is For Unused Sick Leave
If you have paid sick leave at your company, you’re in the minority: There are no federal legal requirements for paid sick leave. However, some workers—those at companies subject to the Family and Medical Leave Act (FMLA)—are entitled to unpaid sick leave. Additionally, many states have mandatory paid sick leave laws, including Arizona, California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Nevada, New York, Oregon, Rhode Island, Vermont, Washington, and Washington, D.C.
Typically, paid sick leave is taxable as regular income and is subject to withholding. In most cases, if you receive sick pay from your employer on an “as you get sick” basis, your sick pay isn’t distinguishable from your regular wages and is subject to withholding at your normal rate.
Since federal law does not require sick leave, if you exit your job before using all your sick leave, your employer is not necessarily obligated to pay you for that time–however, state law or company policy may result in a payout. If you do have a plan that allows you to cash out unused sick leave, you must include those payments in gross income—they are taxable.
Some companies allow employees to donate unused sick leave to fellow employees as part of a “leave bank.” Typically, the unused sick leave is still considered taxable to the employee who earned the benefit, and the donation isn’t considered tax-deductible (remember, generally, only donations to qualifying charitable organizations are deductible). However, donations to a bona fide employer-sponsored leave-sharing arrangement under Rev. Rul. 90-29 will not be included in the income of the employee so long as they are used for a medical emergency. For sick leave donation purposes, a medical emergency is considered a major illness or other medical condition that requires a prolonged absence from work (this includes intermittent absences related to the same illness or condition).
Notice 2006-59 also makes clear that leave-sharing plans that permit employees to donate leave for use by other employees who have been adversely affected by a major disaster will not be included in income. For purposes of the plan, an employee is considered to be adversely affected by a major disaster if the disaster has caused severe hardship to the employee or a family member that requires the employee to be absent from work.
(The donation must be to a pool, not for transfer to a specific leave recipient.)
Exceptions may also exist for leave-based donation programs where employees can elect to donate leave in exchange for cash payments that the employer makes to charitable organizations. These exceptions have typically been linked to disaster relief, including hurricane relief.
If you’re not sure what your sick leave options might be–and the resulting tax consequences—ask your human resources (HR) representative.
Questions
This week, a taxpayer asks:
I’m still paying monthly on a balance from 2015. In April 2025 it will be the ten year mark on when the tax year was accessed. Do I just call the IRS to say sorry you’re out of time? Also, why should I even keep paying if this is true?
This is a great question. It’s true that the IRS typically has ten years to collect assessed taxes. The IRS typically can’t extend this deadline unless you agree or if there’s a court judgment that allows the IRS to continue to collect. You can find your collection statute expiration date (CSED) on your tax transcript.
That being said, sometimes taxpayers unintentionally toll the collections time period (that’s the legal term for pausing or extending the time). That can include the time it takes the IRS to review your installment agreement request, Offer in Compromise application, innocent spouse relief petition, or collection due process hearing request. It can also include a bankruptcy stay, and time when you were out of the country, including serving in a military zone.
If you’re not sure what your CSED might be, I would recommend calling the IRS to ask.
As for whether you should keep paying, unless you’re 100% sure that you’ve reached the end of your payments, I would continue to make those payments. Defaulting on an installment agreement so close to the finish line could be more expensive–and result in a headache. As for the opposite? While it’s true that the IRS shouldn’t continue to collect beyond that time, sometimes it does happen–I know a taxpayer who recently got a small (!) refund for such an overpayment. Good luck!
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Statistics
Earlier this week marked the anniversary of the day in 1931 (October 17) when Al Capone was found guilty of tax evasion. The gangster, who had reportedly boasted, “They can’t collect legal taxes from illegal money,” was sentenced to 11 years in prison for failing to file tax returns. (☆)
Two important events led to the conviction. First, on May 16, 1927, the U.S. Supreme Court ruled in U.S. v. Sullivan that “[g]ains from illicit traffic in liquor are subject to the income tax would be taxable.” It was just the ruling the feds needed since despite hauling in a reported $60 million annually in the mid-1920s, Capone had never filed a federal income tax return, claiming he had no taxable income.
The following year, Secretary of the Treasury Andrew W. Mellon summoned Elmer Irey, the first chief of the Internal Revenue Service (IRS) Enforcement Branch, now referred to as the IRS Criminal Investigation Division, or IRS-CI, and told him to simply “get Capone.” Irey is said to have replied, on behalf of the IRS-CI, “We’ll get right on it.” The work of the “T-Men” (not to be confused with the FBI’s “G-Men”) led to Capone’s conviction.
The article marking the date prompted a question on LinkedIn about whether other major criminal targets are still being charged with tax crimes. The answer is yes.
In the chart above, you’ll see a look, by category, at how IRS-Criminal Investigation spent its time in 2023. For clarity, tax crimes include corporate fraud, public corruption, cybercrimes, international, general tax fraud, abusive tax schemes, employment tax, identity theft and refund fraud. Non-tax crimes include general fraud and money laundering, and narcotics crimes refer to time tied to the Organized Crime Drug Enforcement Tax Force. You can read more in IRS Pub 3583.
A Deeper Dive
Every U.S. person with a financial interest in, or signature or other authority over, one or more foreign financial accounts with an aggregate value of more than $10,000 must annually report the account to the Treasury Department. You do this by filing Form 114, Report of Foreign Bank and Financial Accounts—commonly known as an FBAR. (☆)
Failure to report can result in a penalty, depending on whether the failure was willful or non-willful. The penalties can be draconian, but typically, the penalty for a non-willful violation is $10,000. However, thanks to a 2023 Supreme Court case (☆), the penalty for a non-willful violation is per return, and not per account.
Two court cases could further shake up the FBAR regime.
One case is Toth v. the United States, initially decided in the First Circuit. The First Circuit agreed with the lower court, holding that FBAR penalties are not subject to the constitutional protection against excessive fines. The penalty is not considered a fine because it has a compensatory element.
On August 30, 2024, the Eleventh Circuit delivered its opinion in Schwarzbaum, reaching a contradictory decision. The Eleventh Circuit rejected the First Circuit’s reasoning in Toth. We now have a split among circuits on whether FBAR penalties are subject to constitutional protection against excessive fines. Expect to see more on those decisions–likely landing in the Supreme Court.
Fun fact: The Supreme Court declined to hear Toth in 2023, with Justice Gorsuch dissenting, writing, “For all these reasons, taking up this case would have been well worth our time. As things stand, one can only hope that other lower courts will not repeat its mistakes.”
Tax Filings And Deadlines
📅 February 3, 2025. Due date for individuals and businesses affected by Hurricanes Beryl and Debby (more info here (☆) and here (☆)), those in South Dakota affected by severe storms, straight-line winds and flooding that began on June 16, 2024, taxpayers in Puerto Rico affected by Tropical Storm Ernesto, and those individuals and businesses in Connecticut and New York affected by severe storms and flooding from torrential rainfalls that began on August 18, 2024.
📅 May 1, 2025. Due date for individuals and businesses in the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia affected by severe storms and flooding from Hurricane Helene (☆) and Hurricane Milton.
📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
Tax Conferences And Events
📅 November 5-8, 2024. NATP Tax Con. Virtual, CPE available. Registration required. (If you tune in, I’m speaking on November 8, 2024.)
📅 November 11-13, 2024. AICPA-CIMA 2024 Women’s Global Leadership Summit, Hyatt Regency Bellevue, Bellevue, WA. Virtual. Registration required.
📅 November 18, 2024, 1 p.m. to 2:30 p.m. ET. IRS webinar to help large business taxpayers understand the Compliance Assurance Process (CAP, which helps large corporate taxpayers improve federal tax compliance through real-time issue resolution tools). Free. Registration required, space is limited to the first 1,000 registrants.
📅 December 12-14, 2024. ABA Section of Tax, 2024 Criminal Tax Fraud and Tax Controversy Conference, Las Vegas, NV. CLE available. Registration required. (Maybe I’ll see you there?)
📅 December 16-17, 2024. NYU 43rd Institute on State and Local Taxation, Westin New York at Times Square, New York, NY. CLE and CPE available. Registration required, virtual option available.
Trivia
Civil forfeiture laws in the U.S. today date back to when the English used to seize what?
A) Castles
B) Churches
C) Debtors
D) Ships
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has expanded the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) to include over-the-counter oral contraceptives (including emergency contraceptives) and male condoms. Notice 2024-75 also clarifies that breast cancer screening for individuals who have not been diagnosed with breast cancer and continuous glucose monitors for those diagnosed with diabetes are generally treated as preventive care. Finally, the Notice states that the safe harbor for the absence of a deductible for certain insulin products applies without regard to whether prescribed to treat diabetes or the development of a secondary condition.
In related guidance, Notice 2024-71, issued on the same day, provides a safe harbor under section 213 for amounts paid for condoms. Amounts treated as expenses for medical care under section 213(d) are eligible to be paid or reimbursed under a health flexible spending arrangement (health FSA), Archer medical savings account (Archer MSA), health reimbursement arrangement (HRA), or health savings account (HSA). However, if an amount is paid or reimbursed under a health FSA, Archer MSA, HRA, HSA, or any other health plan, it is not a deductible expense under section 213.
Noteworthy
AICPA & CIMA, together as the Association of International Certified Professional Accountants, have appointed Mark Koziel, CPA, CGMA, as the organization’s next CEO. Koziel will succeed Barry Melancon, CPA, CGMA, who will retire at the end of 2024.
IFS, a provider of enterprise cloud and Industrial AI software, and Sovos, a tax compliance company, announced a strategic technology partnership to integrate an indirect tax suite within IFS Cloud, enabling enterprises to streamline, optimize and automate complex tax compliance obligations using real-time data from across the organization.
Bond, Schoeneck & King has announced that Amy L. Earing has joined the firm as a member (partner) in the trust and estate practice group.
Holland & Knight has named Joshua Husbands executive partner of the firm’s Portland office. Husbands will oversee the day-to-day management of the office while continuing to manage his practice, which focuses on private wealth services and tax counsel for private companies and their owners.
The IRS announced the launch of the 2024 Nationwide Tax Forum Online, providing tax professionals access to 18 seminars recorded at this year’s IRS Nationwide Tax Forum.
Forbes is compiling its first-ever list of best-in-state CPAs, and nominations are now open. You can find all the details and submit a nomination here.
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In Case You Missed It
Here’s what readers clicked through most often last week:
You can find the entire newsletter here.
Trivia Answer
The answer is (D) Ships.
Civil forfeiture laws in the U.S. date back to English admiralty law. Civil forfeiture was used, among other things, to seize ships to pay customs duties and fight piracy on the high seas.
Since the ship owners were usually outside of the country, it was difficult to prosecute them. So, instead, the ships were seized under the legal fiction that they were “guilty” property. As a result, civil forfeiture is in rem—Latin for “against a thing”—which means cases are filed against the property, not the property owner. If you see a case name like State of Oklahoma v. $53,234 Cash or State of New Jersey v. One 1990 Ford Thunderbird, it’s likely a civil forfeiture case (both cases were litigated by the IJ).
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