Groundhog Day and the IRS – Backlog Persists
By: 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 …
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 …
New Acting IRS Commissioner Outlines Agency’s Future
The new Acting IRS Commissioner set to take the reins this month discussed the future of the IRS this week at the AICPA National Tax Conference in Washington, D.C. The Biden administration announced on October 28 its appointment of Douglas O’Donnell to serve as Acting Commissioner once the current IRS Commissioner Charles “Chuck” Rettig’s term expires on November 12. After over 30 years of service with the IRS, O’Donnell currently serves as Deputy Commissioner for Services and Enforcement. Looking ahead, a new IRS Commissioner must be nominated by the Biden administration and confirmed by the Senate, which could take several …
Good News in Draft 2022 Partnership Instructions for Schedules K-2 and K-3
If you’ve had a chance to review the draft 2022 Partnership Instructions for Schedules K-2 and K-3 (Form 1065) the IRS dropped yesterday, you may have noticed it came bearing good news. Not in like an angel way or anything but in that special IRS-exception way. Domestic Filing Exception Scroll down to item 1 on page 3 of the draft instructions, and you’ll see a domestic filing exception for Schedules K-2 and K-3. The instructions state that a domestic partnership need not file the Schedules K-2 and K-3, or furnish to a partner the Schedule K-3 (except where requested by a …
IRS Announces Boost for Retirement Contributions in 2023
The IRS on October 21 issued Notice 2022-55, providing cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for the 2023 tax year. Highlights Notably, the IRS last Friday announced that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500 – up from $20,500 for 2022. Further, the limit on annual contributions to an IRA increased to $6,500 in 2023, up from $6,000. The IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000. And the catch-up contribution limit for …
Government Requests Rehearing on John Doe Summons Case
By: 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 …
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 …
Some States May Tax Forgiven Student Loan Debt
The Biden administration has announced its much-anticipated plan to forgive up to $20,000 in student loan debt, but some states may consider it taxable income. Biden’s Plan at a Glance Specifically, the Department of Education will provide up to $10,000 in debt cancellation for borrowers whose individual income is less than $125,000 ($250,000 for married couples). And up to $20,000 in debt cancellation will be provided for Pell Grant recipients with loans held by the Department of Education. To that end, the Biden administration, aiming to ensure a smooth transition, is extending the pause on federal student loan repayments “one …
IRS Provides Broad Penalty Relief for Certain 2019, 2020 Returns
Today, the IRS announced that it is providing broad penalty relief for certain 2019 and 2020 individual and business returns. Penalty Relief Under Notice 2022-26, released August 24, 2022, relief is provided for taxpayers from certain failure to file penalties and certain international information return (IIR) penalties with respect to taxable years 2019 and 2020 returns that are filed on or before September 30, 2022. Additionally, the IRS is providing relief from certain information return penalties for 2019 returns that were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were filed on …
Congress demands answers from Rettig on IRS backlog
Remember the unprecedented IRS backlog and the ensuing chaos it created for tax pros and taxpayers alike? Of course you do, and it’s not yet a thing of the past. Crush It, Crush It Real Good A bipartisan, bicameral group of over 90 lawmakers in an August 15 letter demanded answers from the IRS concerning the agency’s ongoing backlog, which Commissioner Rettig has promised would be “crushed” by year’s end. During an April Senate Finance Committee hearing, Rettig told lawmakers that the IRS would return to a “healthy state” by the end of 2022. According to a subsequent National Taxpayer Advocate …
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 …
Senate Approves Inflation Reduction Act with Significant Tax Law Changes, IRS Funding Boost
If you weren’t tuned into the 15 hours of Senate floor proceedings known as “vote-a-rama” over the weekend (good for you), you may have missed that the upper chamber on August 7 approved along party lines the Inflation Reduction Act (IRA) of 2022 (HR 5376). The sweeping climate and healthcare bill contains significant tax law changes and a steep IRS funding boost. Although the IRA (that acronym will likely always feel weird, am I right?) contains several provisions originally seen in the much larger House-passed Build Back Better Act, I suppose Sharon Kreider’s suggested title revision to Congress of Build …
Top Democratic Senators Reach Agreement on Corporate Tax Reform, Carried Interest
Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin III, D-W.Va., have reached an agreement on a corporate tax reform proposal that would impose a corporate minimum tax rate of 15 percent, narrow the carried interest tax break, and boost IRS funding. The Inflation Reduction Act of 2022 (HR 5376) is expected to reach the Senate floor for a vote in the upper chamber by next week. Corporate Tax Reform Under current law, the statutory corporate tax rate is 21 percent. Democrats’ corporate alternative minimum tax (AMT) proposal would impose a 15 percent minimum tax (also being called …
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 …
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 …
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 …
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 …