Month: July 2023

With the Internal Revenue Service making substantial progress in the ongoing effort related to the Employee Retention Credit (ERC) claims, Commissioner Danny Werfel said the agency has entered a new phase of increasing scrutiny on dubious submissions while renewing consumer warnings against aggressive marketing.

Speaking Tuesday at a special roundtable session of tax professionals in Atlanta, Werfel noted the IRS has shifted efforts after successfully clearing the backlog of valid Employee Retention Credits (ERC) claims. Now, the agency is intensifying compliance work and putting in place additional procedures to deal with fraud in the program.

Werfel told a group of tax professionals dealing with fall-out from aggressive ERC claims that the IRS has increased audit and criminal investigation work on these claims, both on the promoters as well as those businesses filing dubious claims.

“The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining,” Werfel told attendees at the IRS Nationwide Tax Forum in Atlanta. “Instead, we continue to see more and more questionable claims coming in following the onslaught of misleading marketing from promoters pushing businesses to apply. To address this, the IRS continues to intensify our compliance work in this area.”

The Employee Retention Credit, also sometimes called the Employee Retention Tax Credit or ERTC, is a tax credit enacted to help businesses during the pandemic that was subsequently amended three times by Congress. Many businesses legitimately apply for the credit, but aggressive marketing has overshadowed the program. The period of eligibility for the credit for affected businesses is very limited, covering only between March 13, 2020, and Dec. 31, 2021.

“Under the current law, businesses can typically continue to file claims for the credit until April 15, 2025. That raises future concerns,” Werfel said.

“The amount of misleading marketing around this credit is staggering, and it is creating an array of problems for tax professionals and the IRS while adding risk for businesses improperly claiming the credit,” Werfel said. “A terrible scenario is unfolding that hurts everyone involved — except the promoters.”

“This was not how the law was meant to work, and Congress can help with this situation,” Werfel added. “We will work with Treasury to explore legislative solutions we can share with Congress to help address fraud and error, including potentially putting an earlier ending date for businesses to claim the credit and increase IRS oversight of return preparers.”

The IRS continues to urge businesses, tax-exempt organizations and others considering applying for this credit to carefully review the official requirements for this limited program before applying. In the meantime, the IRS continues to intensify compliance activities involving ERC claims.

GDP, the sum of all goods and services activity, increased at a 2.4% annualized rate for the April-through-June period. Consumer spending powered the solid quarter, aided by increases in nonresidential fixed investment, government spending and inventory growth.

Consumer spending, as gauged by the department’s personal consumption expenditures index, increased 1.6% and accounted for 68% of all economic activity during the quarter. That did market a pullback from the 4.2% increase in the first quarter but still showed resiliency amid higher interest rates and persistent inflation.

Gross private domestic investment increased by 5.7% after tumbling 11.9% in the first quarter. A 10.8% surge in equipment and a 9.7% increase in structures helped power that gain.

Still, signs of trouble persist.

Markets have been betting on a recession, pushing the 2-year Treasury yield well above that for the 10-year note. That phenomenon, called an inverted yield curve, has a near-perfect record for indicating a recession in the next 12 months.

Similarly, the inversion of the 3-month and 10-year curve is pointing to a 67% chance of contraction as of the end of June, according to a New York Fed gauge.

The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday and Fed Chair Jerome Powell said the economy still needed to slow and the labor market to weaken for inflation to “credibly” return to the U.S. central bank’s 2% target.

The hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.50% range, a level last seen just prior to the 2007 housing market crash and which has not been consistently exceeded for about 22 years.

“The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy,” the Fed said in language that was little changed from its June 14 statement and which left the central bank’s policy options open as it searches for a stopping point to the current tightening cycle.

Powell made no promises either way, with a September meeting eight weeks from now considered “live” for another rate increase, though a continued slowing of inflation and weaker economic data may also prompt policymakers to pause.

In a press conference following the Fed’s latest policy move, the Fed chief said the central bank was very much looking at “the totality” of incoming data, and particularly studying it for signs that the economy is heading for a period of “below-trend” growth that Powell thinks is necessary for inflation to fall.

Key price measures are still increasing at more than double the Fed’s target. While inflation has been easing, that has so far happened with little apparent cost to the labor market, where the unemployment rate remains at a low 3.6%.

State lawmakers left Madison for the summer without agreeing to a funding deal to fix the home of the Brewers, in return for the team promising to stay in Milwaukee.

Governor Tony Evers proposed using $290 million from the state’s surplus to pay for renovations and maintenance at American Family Field.

Republicans want to look at using sales tax revenue instead and potentially require more buy-in from local taxpayers.

“So somewhere between the governor’s proposal and the legislature identifying there’s $25 million of tax revenue coming from the economic impact of baseball – somewhere between first base and third base there’s a deal to be made,” said Tim Sheehy, the president of the Metropolitan Milwaukee Association of Commerce.

Some Milwaukee County Board and council members oppose the idea of using taxpayer money.

The governor told WISN 12 News he believes his plan is best, but he is open to negotiations.

Yesterday, the Department of Workforce Development (DWD)  released the U.S. Bureau of Labor Statistics (BLS) job totals for the month of June 2023, which showed Wisconsin’s total nonfarm jobs reached a record high of 3,006,900. This is 52,900 more jobs than a year ago and an increase of 6,900 over the previous month.

Preliminary employment estimates for June 2023 showed Wisconsin’s seasonally adjusted unemployment rate was 2.5%. The total labor force grew by 14,000 and employment increased by 10,700 over the month of June. Additionally, the state’s total labor force participation rate increased to 65.3%. Nationwide for the month of June, the U.S. unemployment rate was 3.6%, 1.1 percentage points above Wisconsin’s rate, and the national labor force participation rate of 62.6%.

A new shipping facility for agricultural products — expected to generate $63 million in statewide economic impact each year — officially opened in Port Milwaukee Tuesday.

The $40 million Agricultural Maritime Export Facility is one of the first facilities in the Great Lakes-St. Lawrence Seaway to move bulk agricultural exports through intermodal transportation. Instead of sending products down the Mississippi River, Wisconsin farmers and businesses can now send their products by truck or rail directly to the facility where they will be loaded onto international shipping vessels.

The DeLong Co. helped develop the new facility, which began construction in 2021 on Jones Island. The public-private partnership is the largest one-time investment in Port Milwaukee since the 1950s. The project was funded by a federal grant from the U.S. Department of Transportation, private funds from The DeLong Company, grants from the Wisconsin Department of Transportation and funds from Port Milwaukee.

The facility will primarily handle dried distillers grains and other grains and feedstuffs from across the state and the Midwest. It can store 30,000 metric tons of dried distillers grains, or 45,000 metric tons of soybeans. Dried distillers grains are a major coproduct from the production of ethanol from grain, according to the United States Department of Agriculture. They’re typically used as animal feed.

The DeLong Company moves about $1 billion worth of agricultural exports annually and will now be able to do that directly from Wisconsin, while reaching new markets in Europe and northern Africa.

Wisconsin, along with the Federal Trade Commission (FTC) and other law enforcement partners nationwide, including attorneys general from all 50 states and the District of Columbia, announced a new crackdown on illegal telemarketing targeting operations responsible for billions of calls to U.S. consumers.

The joint state and federal “Operation Stop Scam Calls” initiative builds on the efforts of Wisconsin and other state and federal partners to combat the scourge of illegal telemarketing, including robocalls. This initiative targets telemarketers, the companies that hire them, and lead generators, who deceptively collect and provide consumers’ telephone numbers to robocallers and falsely represent those consumers have consented to receive calls. It also targets Voice over Internet Protocol (VoIP) service providers who facilitate tens of billions of illegal robocalls every year, which often originate overseas.

As part of Operation Stop Scam Calls, Wisconsin announced Attorney General Josh Kaul sued Michael D. Lansky, LLC, which does business under the name Avid Telecom, its owner Michael Lansky, and its vice president Stacey S. Reeves, for allegedly initiating and facilitating billions of illegal robocalls to millions of people and violating the Telephone Consumer Protection Act, the Telemarketing Sales Rule, and other federal and state telemarketing and consumer laws. Wisconsin also announced that DATCP has given 152 presentations in the last year that educated consumers on the use of robocalls to perpetrate scams and fraud.

Wisconsin’s actions build on the work of its state and federal partners including the FTC, which announced five new cases against companies and individuals responsible for distributing or assisting in the distribution of billions of illegal telemarketing calls to consumers nationwide. Other contributing law enforcers include the U.S. Department of Justice, Social Security Administration Office of the Inspector General, U.S. Postal Inspection Service, and the Federal Communications Commission.

Retail sales rose 0.2% in June from the previous month, lower than Wall Street’s estimates for 0.5% growth. Sales excluding auto and gas increased 0.3%, in line with estimates from economists surveyed by Bloomberg. Meanwhile, May’s sales were revised up to 0.5% from 0.3%.

Seven of the 13 categories highlighted in the release saw increases from a month ago. Furniture and home furniture stores increased 1.4% while electronics and appliance stores gained 1.1%. Growth at nonstore retailers, which includes online sales, helped keep total sales higher than the month prior with a 1.9% increase from May.

Department stores saw sales decline 2.4%. Meanwhile, gasoline stations declined by the most of any major category, falling 1.4% from the month prior. Sales at grocery stores fell 0.7%. The monthly retail sales report does not adjust statistics for inflation.

The details are fairly encouraging overall, but we still remain of the view that the consumer is slowing down,” Jefferies US Economist Thomas Simons wrote on Thursday. “Were it not for the Social Security-fueled jump in January, the first half of this year would look fairly subdued. Consumers are facing tougher choices when it comes to spending, now that they have their biggest incentive to rebuild and increase their savings in decades.”

If you live in the north suburbs of Milwaukee — including Germantown, Grafton, Menomonee Falls and Mequon — you may have a special election on Tuesday.

Voters in parts of Ozaukee, Washington and Waukesha counties will head to the polls to elect Republican Paul Melotik or Democrat Bob Tatterson to the state Assembly. The seat became vacant when Republican Dan Knodl won a special election for a seat in the state Senate this spring.

Melotik has co-owned and operated several businesses, including Fire Ridge Golf Club in Grafton. He has served on the Ozaukee County Board for 11 years and the Grafton Town Board for six years. He describes himself as a “fiscal conservative” and is interested in working on budgetary issues if elected to the Assembly. His other priorities include education and conservation, and he supports school choice and 2nd Amendment rights.

Tatterson is a retired engineer and now invests in and advises start-up companies. He is also active in community volunteering and was formerly a volunteer firefighter. He describes himself as a “moderate Democrat.” His priorities include public education, including building a skilled workforce through higher education. He supports abortion access and wants to see “common sense gun safety laws” like red flag laws.

Both candidates said they support fully funding law enforcement and working to address EMS staffing challenges in their district.

The government’s producer price index — which measures inflation before it reaches consumers — rose just 0.1% last month from June 2022, the smallest such increase since August 2020. And from May to June, prices rose an identical 0.1% after having fallen 0.4% from April to May.

The index that the Labor Department issued Thursday reflects prices charged by manufacturers, farmers and wholesalers.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, noted that wholesale price increases are already coming in below the 2% year-over-year inflation rate that the Fed wants to see.

“On the consumer side,’’ she cautioned in a research note,“ progress has been slower,” though she expects consumer prices to decelerate further this year and into 2024.

Farooqi said she didn’t expect the June inflation numbers to “to change the outcome of the upcoming (Fed) meeting’’ at which she, like most economists, expects a quarter-point hike in the central bank’s benchmark rate. That rate affects many consumer and business loans throughout the economy.