Western CPE Blog
Breaking tax and accounting news and analysis from the experts at Western CPE.
Millionaire Audits, IRS Resources, Trump’s Taxes, OH MY
By: 1 Audit, 2 Audits, No Audits, Few Audits: During fiscal year (FY) 2022, few millionaires were audited compared to lower-income examinations, which continued to occupy most of the IRS’s audit resources. That’s according to statistics compiled by the Transaction Records Access Clearinghouse (TRAC) at Syracuse University. Shocker.The likelihood of a millionaire being audited by the IRS fell to 1.1% (7,710 agent-examined returns of 703,576 returns filed with total positive income (TPI) of $1 million or more.) In other words, barely over 1 out of every 100 millionaires were audited.These results are based on internal IRS management reports released each month …
IRS Announces January 23 Kick-Off Date for 2023 Filing Season
By: It’s funny how tax filing season always seems to arrive right when it feels like the last one is finally ending. Actually, that’s probably not funny at all. ON YOUR MARK, GET SET…GO: The IRS announced today that the 2023 tax filing season will kick off on January 23, 2023. In other words, on that date the agency will begin accepting and processing individual 2022 tax year returns. The filing and payment deadline this year is April 18. SAVE THE DATE: There are several important dates to keep in mind for this year’s filing season. January 13: IRS Free File opens. …
CALIFORNIA CORNER: IRS Announces Disaster Relief, Postponed Filing Deadlines
DISASTER RELIEF: The IRS announced today that California storm victims now have until May 15, 2023, to file various federal individual and business tax returns and make tax payments. The current list of eligible localities is available on the IRS’s disaster relief page.THE DETAILS: The IRS’s announcement provides the following tax relief: postpones various tax filing and payment deadlines that occurred starting on Jan. 8, 2023, which means affected individuals and businesses will have until May 15, 2023, to file returns and pay any taxes that were originally due during this period; postpones 2022 individual income tax returns due on April …
MFJ Payment Glitch Reminder
Considering final 2022 quarterly estimated tax payments are right around the corner, it seems like a good time to remind your clients of the IRS’s married filing jointly (MFJ) payment glitch. You know, the one where the “secondary” spouse makes a payment to the IRS, yet it doesn’t get credited to their joint account? GLITCHES GET STITCHES: The so-called “unwritten rule” requiring that taxpayers who file jointly must make all payments in the name and social of the “primary” taxpayer is again making headlines this week. Generally, because of the IRS’s MFJ payment glitch of sorts, if a spouse who is second on the …
IRS Updates 1099-K FAQs
Today, the IRS issued several new Frequently Asked Questions (FAQs) on Form 1099-K. As we informed you last week, the IRS announced in Notice 2023-10 that it is delaying for a year the implementation of the new, lower $600 reporting threshold for Form 1099-K. NEW FAQS, WHO DIS? As a relevant aside, note that the FAQs state that they have not been published in the Internal Revenue Bulletin, thus will not be relied upon or used by the IRS to resolve a case. In other words, while FAQs are certainly helpful, it’s important to remember the law surrounding taxpayers’ reliance on FAQs and subregulatory guidance in …
IRS Guidance Drop: Corporate Minimum Book Tax
In case you thought things were slowing down around the holidays at the IRS (or at Western CPE), slowing down they are not. GUIDANCE DROP: The IRS has released initial guidance on the new corporate alternative minimum tax (CAMT), including a safe harbor test for smaller businesses to more easily demonstrate they aren’t subject to the new tax. Notice 2023-7, released on December 27, provides interim guidance on issues regarding the application of the new CAMT just days before the new law takes effect. The IRS has stated proposed regulations will soon follow. BACKGROUND: The Inflation Reduction Act (IRA) (P.L. …
Exclusive: IRS Delays 1099-K New $600 Reporting Threshold
EXCLUSIVE: Happy Holidays, tax pros. The IRS in an email to Western CPE today confirmed that it is delaying for one year the new and controversial $600 reporting threshold for Form 1099-K. DETAILS: Third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the new, lower $600 threshold enacted under the American Rescue Plan Act of 2021 (P.L. 117-2). The 2022 calendar year will be a transition period for implementing the reduced threshold reporting for third-party settlement organizations (TPSOs), including Venmo, PayPal, and CashApp that would have produced Form 1099-Ks …
New “Mansion Tax” Soon to Impact L.A.
THE BACKSTORY: The midterm elections weren’t only about the control of the House of Representatives and the Senate. In the City of Los Angeles, homelessness was on the ballot. Overcome with the growing numbers of people living on the streets, Los Angeles City voters backed a measure to fund affordable housing and tenant assistance programs.WHY IT MATTERS: The new programs will be funded through an additional one-time tax on sales and transfers of real property exceeding certain thresholds.Starting April 1, 2023, the tax rate on such sales and transfers will be:4% of the consideration or value when the property transferred …
Bipartisan Retirement Package SECUREs a Ride with Omnibus
A bipartisan retirement package commonly (and now officially) known as SECURE 2.0 has secured a ride with the large, must-pass 2023 omnibus government appropriations bill. See what I did there? Hitchin’ a Ride The over 4,000-page omnibus released late last night will serve as the legislative vehicle for the much-anticipated SECURE 2.0 package, which consists of multiple retirement savings provisions. The SECURE 2.0 Act of 2022 provisions can be found hitchin’ a ride in Division T of the omnibus. Notably, a line-up of expired and expiring tax extenders including several business tax breaks and the enhanced child tax credit are not …
1099-K Problems and a Surprise Form Might be One
If you’re having tax problems I feel bad for you, son; we got 1099-K problems and a surprise might be one. 1099-K Problems Not exactly how the lyrics to 99 Problems go, but you catch my drift. Millions of taxpayers are expected to receive a surprise Form 1099-K by January 31, 2023. Tax pros are unhappy about this to say the least, and as it turns out the IRS isn’t too excited either. Under the American Rescue Plan Act of 2021 (P.L. 117-2), taxpayers with transactions that exceed $600 in a year (with no minimum transactions), effective for payments beginning …
IRS Outlines Reporting Procedures for Clean Vehicle Credits
The IRS has provided guidance on reporting procedures that manufacturers and sellers must follow for vehicles to become eligible for certain clean vehicle credits under the Inflation Reduction Act (IRA) (P.L. 117-169). The new guidance applies to clean vehicle credits under §30D, the credit for qualified commercial clean vehicles under §45W, and the credit for previously owned clean vehicles under §25E. So Fresh and So Clean While Outkast’s hook in So Fresh, So Clean might not have been the first thing to come to mind when reading about clean vehicle tax incentives, I’m not afraid to admit that it was for me. Maybe …
IRS Issues Final Regs on Centralized Partnership Audit Regime
The IRS hath gifted you this December 8 final rules governing the centralized partnership audit regime. Gifted might be a strong stance; let’s just say provided. Either way, Happy Holidays. Centralized Partnership Audit Regime Today, the IRS issued final regulations (T.D. 9969), which exclude certain partnership-related items from the centralized partnership audit regime while providing alternative rules that will apply to the examinations of such items. The final regs, effective December 9, 2022, adopt, with revisions, proposed regulations (REG-123652-18) published in November 2020. BBA As you likely recall, the centralized partnership audit regime was created under the Bipartisan Budget Act …
IRS Revises Schedules K-2 & K-3 Requirements
By: In case you thought you were all caught up on the IRS’s new Schedules K-2 and K-3 requirements, make sure you didn’t miss those revised December instructions that just dropped.Say what? That’s right, the IRS released the revised 2022 draft Partnership Instructions for Schedules K-2 and K-3 (Form 1065) and 2022 draft Partner’s Instructions for Schedule K-3 (Form 1065) on December 2. Likewise, it released the revised 2022 draft S Corporation Instructions for Schedules K-2 and K-3 (Form 1120-S) on December 5.The revised drafts expand the domestic filing exception (DFE), which was introduced in the prior version of instructions released last …
New Schedules K-2/K-3 Requirements
The IRS has released new 2022 instructions for Form 1065 and 1120-S, Schedules K-2 & K-3. The Schedules K-2 and K-3 new for 2021 tax returns, are intended to provide partners and shareholders with information necessary to complete their tax returns with respect to Form 1116 or Form 1118 and other international tax provisions of the Internal Revenue Code. Domestic Filing Exception The 2022 instructions provide a new exemption from filing Schedules K-2 and K-3 for partnerships and S corporations with little or no foreign activity. The new Domestic Filing Exception is available for partnerships and S corporations with $300 …
Biden Announces Extension of Student Loan Repayment Pause
The Biden administration announced last week that it is yet again extending the pause on federal student loan repayments to allow for the U.S. Supreme Court to rule on its controversial student debt relief program. Eighth Time’s a Charm? Last August, we discussed the roll out of Biden’s student loan forgiveness plan and how it’s worthwhile to keep an eye on how the states would treat such forgiveness. At the time, the Biden administration announced it was extending the pause on repayments “one final time” to ensure a smooth transition with the program. This most recent extension is the eighth …
Donor-Advised Funds Show Historic Growth in New Report
Are your clients thinking about Donor-Advised Funds (DAFs)? An interesting report dropped this week showing that grants from DAFs to qualified charities increased more than 60% in the past two years and over 400% in the last decade. National Philanthropic Trust published its 2022 Donor-Advised Fund Report on November 15, which examines data from 995 charitable organizations that sponsor DAFS – one type of charitable giving vehicle. Those DAF-sponsored charitable organizations make up less than 0.07 percent of the estimated 1.43 million registered public charities in the U.S. under §501(c)(3). The total number of individual DAF accounts in 2021 rose by 28 …
Groundhog Day and the IRS – Backlog Persists
Does the craziness of the last two filing seasons coupled with the distinct possibility that the chaos at the IRS will continue in 2023 ever make you feel like you’re in Groundhog Day? You know, the movie where Bill Murray is stuck in the time loop, doomed to repeat each day over and over? Pretty reasonable feeling, if so, and you’re not alone. “It’s gonna be cold, it’s gonna be grey, and it’s gonna last you for the rest of your life.” – Phil Connors Ok, so hopefully the future isn’t quite as dreary as Connors forecasted that winter in Groundhog Day. But …
Tax Court Hands IRS Major Defeat In Conservation Easement Battle
As originally appearing in Procedurally Taxing.Last week in Green Valley Investors v Commissioner, a reviewed opinion, the Tax Court held the IRS violated the APA when it issued Notice 2017-10 without complying with the notice and comment provisions of the APA or otherwise establishing that it was not required to subject the rule to the APA’s notice and comment procedures. The opinion is a major defeat for the IRS and is an important decision applying administrative law principles to IRS guidance.The opinion follows up on recent cases like Mann Construction (blogged here) where other federal courts have held that the IRS’s …
Biden Announces Pick for New IRS Commissioner
Today, President Biden announced Daniel “Danny” Werfel as his pick to serve as the next IRS Commissioner. A Word About Werfel Werfel has provided over 15 years of government service, having served under both President Barack Obama and President George W. Bush to lead some of the governments’ most complex management challenges as Acting IRS Commissioner and Office of Management and Budget (OMB) Controller, according to the White House. “In the wake of an Inspector General report alleging various forms of mismanagement and bias in the determination of tax-exempt status for non-profit organizations, President Obama appointed Werfel to serve as …
IRS Expands Approval Program for Certain Retirement Plans
The IRS announced today that it is expanding its approval program for certain retirement plans. The Service will now allow 403(b) retirement plans to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans. Details of this expansion can be found in Revenue Procedure 2022-40, which also includes other changes affecting individually designed retirement plans. Noteworthy highlights of the new Rev. Proc. are as follows: Beginning June 1, 2023, 403(b) retirement plan sponsors may submit determination letter applications for all initial individually designed retirement plans based on the sponsor’s Employer Identification Numbers. Beginning June …