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Does the SALT tax deduction cap penalize women?

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A key provision in next year’s looming debate over the possible extension of the Tax Cuts and Jobs Act highlights one of many examples of gender bias in taxes, according to experts.

The current SALT deduction limit of $10,000 for state and local taxes saves taxpayers between $79 billion and $118 billion per year in lower expenditures. It will play a pivotal role in the discussion about TCJA provisions set to expire after 2025 because it’s one of only a handful that lower the price of extensions projected to cost $4.6 trillion

Critics have referred to the limitation as a “marriage penalty” and called for raising that ceiling or eliminating it. Others reject that idea on the grounds that the deduction primarily benefits wealthy households in high-tax states such as New York and California.

READ MORE: The 12 firms with the largest percentage of women advisors

One of the “presumably unintended further consequences” of the limit has been discouraging the so-called second earners in a couple, who are often women, from working due to the higher potential taxes on combined income and restrictions on the deduction for state and local duties, said Jennifer Bird-Pollan, a law professor and the Alan S. Schenk Chair in Taxation at Wayne State University. She gave a presentation on the gender implications of the curb on the deduction this past fall at the American Tax Policy Institute‘s Gender and Tax Symposium

While the tax policy isn’t likely motivating people’s decisions about whether to get married or “dramatically impacting” a spouse’s decision not to get a job as the lower-earning member of the household, the restraint on the deduction amounts to “a further thumb on the scale in the same direction, without any conversation on whether it was appropriate or not,” Bird-Pollan said. The taxes enter the equation alongside other potential costs such as childcare, commuting, dry cleaning and food preparation, she pointed out in an interview.

“Those are all costs you incur if you decide to work outside the home. The salary has to be high enough so that you’re not actually worse off,” Bird-Pollan said. “The tax bill is just going to be that much higher if they’re not allowed to deduct their state taxes.”

Other areas reflecting gender bias in taxes play out in the form of “tampon taxes,” classifying menstrual products as luxury items subject to sales duties; differences in the value of Social Security benefits for women, who tend to be paid lower wages and live longer than men, as well as the rules for getting the maximum spousal payments; the treatment of paid surrogacy; and the disparate impacts of the child tax credit, the earned income tax credit and savings from capital gains, according to Bridget Crawford, the organizer of the conference as the vice president of the institute and a law professor at Pace University’s Elisabeth Haub School of Law.

READ MORE: 10 big trends in SALT for 2024 

The conference in Washington, D.C., drew about 110 attendees in person and virtually among academics, policy experts and government officials, she noted in an interview. It followed the institute’s conference two years ago about racial disparities in taxes and came before another one this March on tax law, the environment and climate change. The organization welcomes more participation and collaboration from across the tax and wealth professions, Crawford said.

“The tax system is a lens for analyzing our society’s values and choices,” she said. “It’s an excellent starting point for very important conversations that we have had and need to have and will continue to have around all sorts of justice-related concerns.”

In terms of the cap on the deduction for state and local taxes, policymakers could alter the existing policy by imposing the limit on property duties alone or simply boosting the allowable amount for married couples, Bird-Pollan said. Tweaking it or getting rid of it will likely prove difficult, though. 

Democrats don’t often push for “tax cuts for higher-income people,” and they’re in the minority in the House and the Senate anyways, she pointed out. President Donald Trump and his Republican party have the trifecta in Congress and the White House, but they will be facing a complicated challenge from the budgetary effect of extending the Tax Cuts and Jobs Act.

“It gave them some revenue, and it only hurt people in blue states, because those are the states that have those taxes,” Bird-Pollan said. “The Democrats have a little bit of a hard time arguing this. If it changes, it’s going to be because of Republican legislators from high-tax jurisdictions.”

READ MORE: Why is the pay gap for women financial advisors so wide?

She credited Crawford’s work with encouraging many states to end sales taxes on feminine hygiene products and noted that financial advisors and tax professionals can read forthcoming research from the conference in legal journals. Exploring the gender bias in taxes can often begin “when we acknowledge things like women are still paid less than men,” Bird-Pollan said.

“If that’s true, then let’s think a little bit about whether that’s a fact that we’re comfortable with or whether particular changes are making that worse or easing that a little bit,” she said. “We just need to think about where these costs fall and whether, as a society, we’re comfortable with where they fall and whether we’d like to see that changed.”

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House passes tax administration bills

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The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all endorsed this week by the American Institute of CPAs, and passed two others as well.

  • H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
  • H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
  • H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
  • H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.

“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”

The bills were also included in a recent Senate discussion draft aimed at improving tax administration at the IRS that are strongly supported by the AICPA.

The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter. 

  • H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
  • H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS. 

House  Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.

“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”

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Accounting

In the blogs: Many hats

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Teaching fraud; easement settlement offers; new blog on the block; and other highlights from our favorite tax bloggers.

Many hats

  • Taxbuzz (https://www.taxbuzz.com/blog): There’s sure an “I” in this “teamwork:” What to know about potential IRS and ICE collaboration.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): How IRS data would likely be unhelpful validating SNAP eligibility.
  • Yeo & Yeo (https://www.yeoandyeo.com/resources): How financial benchmarking (including involving taxes) can help business clients see trends, pinpoint areas for improvement and forecast future performance.
  • Integritas3 (https://www.integritas3.com/blog): One way to take a bite out of crime, according to this instructor blogger: Teach grad students how to detect, investigate and prevent financial fraud.
  • HBK (https://hbkcpa.com/insights/): Verifying income, fairly distributing property, digging the soon-to-be-ex’s assets out of the back of the dark, dark closet: How forensic accounting has emerged as a crucial element in divorces.

Standing out

Genuine intelligence

  • AICPA & CIMA Insights (https://www.aicpa-cima.com/blog): How artificial intelligence and other tech is “Reshaping Finance,” according to this podcast. Didem Un Ates, CEO of a U.K.-based company offering AI advisory services, tackles the topic.
  • Taxjar (https:/www.taxjar.com/resources/blog): How AI and automation can help even the knottiest sales tax obligations and problems.
  • Dean Dorton (https://deandorton.com/insights/): Favorite opening of the week: “The madness doesn’t just happen on college basketball courts — it also happens when your finance team is stuck using a legacy on-premises accounting system.”
  • Canopy (https://www.getcanopy.com/blog): Top client portals for accounting firms in 2025.
  • Mauled Again (https://mauledagain.blogspot.com/): Despite what Facebook claims, dependents have to be human.

New to us

  • Berkowitz Pollack Brant (https://www.bpbcpa.com/articles-press-releases/): This Florida firm offers a variety of services to many industries and has a good, wide-ranging blog. Recent topics include the BE-10, nexus and state and local tax obligations, IRS cuts and what to know about the possible bonus depreciation phase out. Welcome!

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Accounting

Is gen AI really a SOX gamechanger?

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By streamlining tasks such as risk assessment, control testing, and reporting, gen AI has the potential to increase efficiency across the entire SOX lifecycle.

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