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New “Mansion Tax” Soon to Impact L.A.
By: 
& 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 …
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 …