S corporations: Trusts Are Trickier Than You Might Imagine
By: Among the many foot faults with S corporations are the myriad of seemingly disconnected rules when trusts become shareholders. There are only a select few types of trust that are eligible to hold shares in S corporations:Grantor trusts during the grantor’s lifetime and for two years thereafter.Deemed grantor trusts, during the beneficiary’s lifetime and for two years thereafter.Testamentary trusts, for two years after funding.Qualified Subchapter S Trusts (QSST requires election).Electing Small Business Trusts (ESBT requires election).Voting trusts. QSST and ESBT Seem to Have the Most Hazards Of these trusts, the QSST and the ESBT seem to have the most hazards. …
S corporations: Trusts Are Trickier Than You Might Imagine Read More »
Biden Administration Spotlights Tax Priorities in FY 2024 Budget Proposal
By: For those of us in the tax world residing in the D.C. area, the last several days have been a non-stop party. The theme? The Biden Administration’s fiscal year 2024 budget proposal, which would increase taxes by over $4.5 trillion over the next decade. If you’re not on Capitol Hill or a tax pro elsewhere who also gets a little amped up about these things, I’ll tell you a bit about what you’ve missed. Don’t worry, getting excited isn’t mandatory; professional interest will suffice. Tax Policy Proposals Tend to Stick Around a While Before we take a first look, it’s …
Biden Administration Spotlights Tax Priorities in FY 2024 Budget Proposal Read More »
California Storm Relief Update: Deadlines Pushed to October 16
By: California is conforming with IRS disaster relief. California residents in 51 counties now have until October 16, 2023, to file various federal and California individual and business tax returns and make tax payments.The IRS has released a notice (IR-2023-33) which extends the tax filing and payment deadlines for tax year 2022 for residents and businesses in specific California counties identified in IRS notices CA-2023-01 and CA-2023-02. These notices were issued on January 10th and 24th respectively. The original notices had granted an automatic postponement for various tax filing and payment deadlines from January 8, 2023, to May 15, 2023, for …
California Storm Relief Update: Deadlines Pushed to October 16 Read More »
IRS Throws Relief Rope for Postponed Returns’ Trap for the Unwary
The IRS has thrown a rope of relief to those affected by a so-called trap for the unwary related to postponed return filing deadlines during the pandemic. The IRS issued Notice 2023-21 this week, which grants taxpayer relief for determining the lookback period for claims for credit or refund associated with return filing postponements under Notice 2020-23 and Notice 2021-21.In other words, most taxpayers now have more time to file tax refund and credit claims for returns with postponed due dates during the pandemic. Background: Notices and Postponements Related to the COVID-19 Pandemic Notice 2020-23 (which amplified Notice 2020-18 and …
IRS Throws Relief Rope for Postponed Returns’ Trap for the Unwary Read More »
Practitioner Perspective: IRS Commissioner Nominee Daniel Werfel
By: Daniel Werfel testified before the Senate Finance Committee on Feb. 15, 2023, in a hearing considering his nomination to become the next IRS commissioner through November 2027. If Werfel is confirmed, (which is likely), what can tax practitioners expect to see? Background On Daniel Werfel Werfel began his civil servant career in the late 1990s as a rank-and-file policy analyst, rising to becoming appointed Office of Management and Budget (OMB) Controller in 2009. He has worked for the Office of Information and Regulatory Affairs, Department of Justice Civil Rights Division, OMB, and as Acting IRS Commissioner when appointed by President …
Practitioner Perspective: IRS Commissioner Nominee Daniel Werfel Read More »
Now is the Time for IRS to Enhance Digital Services
This article by Jessica L. Jeane, J.D. originally appeared in Procedurally Taxing.It likely comes as no surprise to readers that the IRS isn’t winning any awards in the digital services realm. A few old adages come to mind when thinking about the long-awaited improvement needed for the IRS’s digital communications or more formally digital tax administration services. Maybe something along the lines of: there’s no time like the present, seize the day, or even in the words of Elvis Presley, “it’s now or never.”Okay, the last one is probably a little dramatic, but the overarching point here is that now is the time for …
Now is the Time for IRS to Enhance Digital Services Read More »
IRS TAX RELIEF ANNOUNCED: California Storm Relief
IRS notices CA-2023-01 and IR-2023-03, issued January 10th and 11th, announced California residents of counties identified by FEMA as “federally declared disaster areas” due to the recent storms now have until May 15, 2023, to file various federal individual and business tax returns and make tax payments.This tax relief postpones several tax filing and payment deadlines that occurred starting on January 8, 2023. As a result, affected individuals and businesses will have until May 15, 2023, to file returns and pay any taxes that were originally due during this period. See the exception below for payroll tax returns and Form …
IRS TAX RELIEF ANNOUNCED: California Storm Relief Read More »
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 …
Millionaire Audits, IRS Resources, Trump’s Taxes, OH MY Read More »
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 …
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 …
Tax Court Hands IRS Major Defeat In Conservation Easement Battle
By: 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 …
Tax Court Hands IRS Major Defeat In Conservation Easement Battle Read More »
Family Members of Covered Employee May Be Eligible for PTC
In case you missed it, Treasury and the IRS recently published final regulations, which aim to fix the so-called “family glitch” under the premium tax credit. Glitches Gonna Glitch The final regulations (TD 9968) under §36b of the Affordable Care Act published last month largely adopt with some amendments the proposed regs released last April (REG-114339-21). Most notably, the final regs revise the affordability test for family members of an employee with health insurance received through their employer. Previously, if the employee’s share of the cost of self-only insurance was less than 9.5% of household income (9.12% for 2023), family …
Family Members of Covered Employee May Be Eligible for PTC Read More »
Government Requests Rehearing on John Doe Summons Case
Leslie Book, Professor of Law, Villanova University School of Law, Principal Author, Saltzman and Book, IRS Practice and Procedure As originally appearing in Procedurally Taxing on October 11, 2022. In a recent Western CPE eTax Alert, I discussed the government’s loss in Harper v Rettig. In Harper, the taxpayer sought a court order directing the IRS to expunge financial information related to virtual currency transactions allegedly obtained through a John Doe summons. In reversing the district court, the First Circuit held that the Anti-Injunction Act (AIA) was not a jurisdictional bar to a taxpayer’s suit challenging the summons.Last week the government filed a petition for …
Government Requests Rehearing on John Doe Summons Case Read More »
Circuit Court Allows Challenge to IRS John Doe Summons Directed at Virtual Currency Transactions
Leslie Book, Professor of Law, Villanova University School of Law, Principal Author, Saltzman and Book, IRS Practice and Procedure As originally appearing in Procedurally Taxing on August 19, 2022. In a major decision that considers the implications of last year’s CIC Services opinion, the First Circuit in Harper v Rettig has held that the Anti-Injunction Act (AIA) does not bar a constitutional challenge to the IRS’s use of its John Doe Summons authority that allowed it to obtain information about a taxpayer’s virtual currency transactions. The IRS has been actively using its John Doe summons powers to get taxpayer information …
How New Tax Law Changes Affect Tax Professionals
By: Congress has enacted a reconciliation package containing several significant tax law changes, many of which will likely impact your clients. President Biden is expected to sign the legislation into law on Tuesday, August 16, 2022. Inflation Reduction Act The climate, healthcare, and tax reconciliation package (HR 5376) was previously named the Inflation Reduction Act (IRA) of 2022. However, during consideration on the Senate floor, the name “Inflation Reduction Act of 2022” was removed because the inclusion of the name violated the budget reconciliation rules being used to drive the bill through the Senate. The measure is now formally named “An …
How New Tax Law Changes Affect Tax Professionals Read More »
OECD Tax Project Could Affect Government Credits From R&D to Low-Income Housing
By: Alex M. Parker
Most of the discussion surrounding the Organization for Economic Cooperation and Development’s (OECD) five-year-old international tax project has focused on difficulties with taxation in the digital economy, as well as tax avoidance by corporations in the tech sphere through valuable intangible assets. But increasingly, it is clear that the 15% global minimum tax which is a large part of its final agreement, signed onto by nearly 140 countries, will also have profound implications on how every government uses incentives and tax credits to boost their economy. The final plan, should it be implemented, won’t just affect how much countries spend …
OECD Tax Project Could Affect Government Credits From R&D to Low-Income Housing Read More »
California Passthrough Entities Should Consider Making PTET Payments
California passthrough entities such as partnerships, LLCs, and S-corporations can make an election to pay a passthrough entity elective tax (PTET) equal to 9.3% of its qualified net income. This state tax payment is a deduction on the federal tax return and passed through to the owners on Form K1. This bypasses the Schedule A $10,000 State and Local Tax deduction limit. The California K1 will be reporting the entire income. PTET Election If clients do not elect… For 2022, the entity will need to make a payment by June 15, 2022 in order to make this election. The payment …
California Passthrough Entities Should Consider Making PTET Payments Read More »
IRS Releases 2023 Inflation Adjusted Amounts for HSAs
On April 29, 2022, in Revenue Procedure 2022-24, the IRS announced the 2023 inflation-adjusted amounts for Health Savings Accounts (HSAs). The contribution limits are $3,850 for individuals for self-only coverage and $7,750 for individuals with family coverage starting on January 1, 2023. The Numbers This is a substantial increase over the 2021 limits: $200 from 2021 to 2022, whereas it was a $50 increase from 2020 to 2021 for self-only coverage; $450 from 2021 to 2022 whereas it was a $100 increase from 2020 to 2021 for family coverage; and Contribution limits are $3,650 for self-only coverage and $7,300 for …
IRS Releases 2023 Inflation Adjusted Amounts for HSAs Read More »
Corps Hope Safe Harbor Could Ease Compliance Hassle With New Global Minimum Tax
By: Alex M. Parker
More than 130 countries and jurisdictions last year agreed to a global minimum tax framework, ensuring that companies pay at least 15% in taxes on excess profits in all jurisdictions they operate in. It could be a tough requirement for global multinational corporations. But a safe harbor could ensure that taxpayers face minimal compliance requirements in most countries that have tax rates significantly above the 15% threshold, or who pass special domestic taxes matching the new international standard. According to several companies, tax practitioners and business groups who submitted comments to the OECD on April 13, a safe harbor could …
Corps Hope Safe Harbor Could Ease Compliance Hassle With New Global Minimum Tax Read More »