IRS Releases Much-Anticipated Digital Asset Reporting Guidance
The IRS dropped much-anticipated (some may even say late) guidance last Friday on digital asset reporting under Sec. 6045, which implements an expanded definition of brokers required to report sales and exchanges of digital assets to the IRS. The 282-page proposed regulations, REG-122793-19, were posted to the Federal Register on August 25 and cover a range of digital asset issues including further defining brokers and requiring proceeds to be reported to the IRS and taxpayers on a new Form 1099-DA. Crypto Industry Weighs In “The proposed broker regs are subjecting most decentralized exchange platforms to broker reporting in addition to centralized …
IRS Paperless Processing – Who Dis?
Sound the trumpets: the IRS has launched its “paperless processing initiative” with the goal of paperless processing for all tax returns by the 2025 tax filing season. And if that doesn’t sound exciting enough, the agency expects that taxpayers will be able to digitally submit all correspondence, including non-tax forms and responses to all notices by the 2024 tax filing season. As a result, the IRS estimates more than 94 percent of individual taxpayers (and their tax pros – aayy) will no longer need to send mail to the IRS. IRS Paperless Processing for the 2024 Tax Filing Season In …
Knock knock. Who’s there? Not the IRS.
By: The IRS states it will end most unannounced visits by revenue officers: In a major policy change, the IRS stated that it will end most unannounced visits by revenue officers. Instead of a surprise visit, taxpayers can now expect to receive an appointment letter, known as a 725-B, and schedule a follow-up meeting with the revenue officer.The move comes as part of the larger effort to transform operations under the new IRS Strategic Operating Plan. IRS Commissioner Daniel Werfel said, “We are taking a fresh look at how the IRS operates to better server taxpayers and the nation, and making …
IRS Continues to Send Erroneous Collection Notices
By: In case you haven’t heard (or opened the mail), the IRS continues to send erroneous collection notices to certain taxpayers affected by natural disasters even though they are eligible for a delayed tax return filing and payment deadline. Shocker.That’s right; many taxpayers are receiving CP14 balance due notices from the IRS telling them tax payments are currently due and that the IRS will begin to charge interest and penalties if the taxpayer doesn’t pay up months earlier than IRS guidance permits. You might recall (you don’t) that I mentioned this issue on Twitter last month with the help of funny …
Congress Receives NTA’s Mid-Year Report and Forecast on IRS Improvements
Last week, while the family and I were getting poison ivy camping in Maine, the National Taxpayer Advocate (NTA) Erin M. Collins released her statutorily mandated mid-year report to Congress. And by family, I don’t mean “The Family” as in the Mob. I’m not sure how much camping they do anyway, though I’m sure they do end up in the woods a fair amount. No, I mean my husband and our four wild, smart-mouth boys. Same thing, maybe. For background, the NTA is required by statute to submit two reports to Congress each year: an annual report issued in January …
IRS Drops Guidance on Transferring Clean Energy Credits
Happy Friday, tax pros. In case you missed the major guidance drop out of the IRS this week, temporary and proposed regulations as well as FAQs were issued on June 14 that address direct-pay elections and transferability of certain clean energy tax credits under the Inflation Reduction Act (IRA) (P.L. 117-169) and the CHIPS and Science Act of 2022 (P.L. 117-167). The package of guidance on the Inflation Reduction Act of 2022 (P.L. 117-169) and the CHIPS and Science Act of 2022 (P.L. 117-167) includes: Proposed regulations addressing applicable entities that earn certain clean energy credits and make an …
House GOP Revs Tax Talk Engine with Release of Individual, Business Tax Package
House Republicans have revved the engine on congressional tax talks this year by releasing a trio of bills for an individual and business tax package. The following three bills, released on June 9, make up the American Families and Jobs Act package and serve as the starting line for this year’s congressional tax negotiations: Tax Cuts for Working Families Act (H.R. 3936), Small Business Jobs Act (H.R. 3937), and Build It in America Act (H.R. 3938). A Look Under the Hood at the American Families and Jobs Act Package Generally, taking a quick look under the hood shows us that …
Congress Extends Debt Limit, Cuts IRS Funding
Congress has approved a bipartisan debt limit bill, which avoids a federal government default and takes a sizeable bite out of the IRS’s much-needed makeover funding. See what I did there? The Fiscal Responsibility Act of 2023 (H.R. 3746) now heads to President Biden’s desk where he is expected to sign it as early as today. The bipartisan bill cleared the Senate on June 1 by a 63-36 vote. The House approved the measure by a 314-117 vote on May 31. Notably, the bill will suspend the federal debt limit through January 1, 2025, and immediately rescind $1.4 billion of …
Supreme Court Backs IRS’s Summons Power Notice Exception
No Notice, No Problem The U.S. Supreme Court has backed the IRS on a third-party notice exception to its summons power of financial records. Last week, the high Court unanimously held in Polselli v. IRS, No. 21-1599 (S. Ct. May 18, 2023), that the IRS in efforts to collect an assessed tax liability has authority to summon banking and other records under Internal Revenue Code § 7609(c)(2)(D(i) without issuing notice to third parties.In other words, the IRS can issue a summons to gain access to sensitive third-party financial information without notice to the account holder, and yes, even when the IRS …
CALIFORNIA CORNER: Newsom Signs Retroactive Student Tax Relief Bill
California Governor Gavin Newsom has signed a retroactive tax relief bill for current and former students impacted by economic hardships during the COVID-19 pandemic. A.B. 111, signed by Newsom on May 15, makes certain student loan debt relief and other pandemic relief provided to students through postsecondary education institutions tax free at the state level. Specifically, the temporary provisions will: exclude from an individual’s gross income student loan discharges for taxable years beginning on or after January 1, 2021, and before January 1, 2026, in conformity with the federal exclusion under the American Rescue Plan Act; exclude from an individual’s …
Capitol Hill Connection: Werfel in Hot Seat Before Senate Finance Committee
Happy first Friday after Tax Day, tax pros. You made it. And if you don’t read this because you refused to check your email today, I can’t blame you. But there was a noteworthy development on Capitol Hill this week, and as your “boots on the ground” here in Washington, D.C., let me fill you in. Werfel Sits in Congressional Hot Seat IRS Commissioner Danny Werfel felt the heat from lawmakers this week during an April 19 Senate Finance Committee (SFC) hearing examining the IRS’s budget and 2023 tax filing season. This was Werfel’s first time testifying before Congress since …
IRS: Taxpayers Who Reported Certain 2022 State Refunds as Taxable Should Consider Filing Amended Return
The IRS announced today that taxpayers who filed their federal income taxes earlier in this year’s filing season AND reported certain state 2022 tax refunds as taxable income should consider filing an amended return. To Tax or Not to Tax: That WAS The Question You might recall that on the heels of a February Procedurally Taxing post, the IRS released a statement noting that it was aware of taxpayer uncertainties involving special tax refunds or payments made by states during 2022 and was working to determine whether those payments are subject to federal tax. On February 3, the IRS recommended against …
In Case You Missed It: Clean Vehicle Credit Guidance, Irrevocable Trusts, and Disaster Relief
Happy Friday, tax pros. Once again, we’re wrapping up the week by getting some of the most noteworthy tax-related developments on your radar in case, you know, you missed it. March 31: Clean Vehicle Credit guidance – critical mineral and battery component requirements. The IRS has issued much anticipated proposed regulations (REG-120080-22) related to certain requirements that must be met for critical minerals and battery components for the new clean vehicle credit under the Inflation Reduction Act (IRA). As the IRS notes in IR-2023-64: The critical mineral and battery component requirements will apply to vehicles placed in service on or …
California Corner: Revised Instructions for 2022, 2023 Pass-Through Entity Form 3893
The California Franchise Tax Board (FTB) in an e-file news release today is aiming to clarify its revised instructions for the 2022 and 2023 Form 3893 (Pass-Through Entity Elective Tax Payment Voucher) released on March 23. Revised 2022, 2023 Form 3893 Instructions: “PTEs must make all elective tax payments either by using the free Web Pay application accessed through the FTB’s website or by using form FTB 3893,” the revised instructions state. “This includes elective tax payments made with the entity’s return. The elective tax payment cannot be combined with the entity’s other tax payments.”According to the FTB:The 2022 and …
NFTs, Form 1099-K Updates, and More
Happy Friday, tax & accounting pros. In an effort not to blow up your inbox during busy season, we’ve been lyin’ low lately. But we’ll send you off to your weekend (you’ll probably still be working) by getting a few noteworthy developments that occurred this week on your radar in case you missed them.March 24: FinCEN provides beneficial ownership information reporting guidance. Today, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published its first set of guidance materials to aid the public in understanding recently issued final regulations, effective January 1, 2024, that require many corporations, limited liability companies, and …
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. …
Biden Administration Spotlights Tax Priorities in FY 2024 Budget Proposal
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 …
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 …
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 …
SCOTUS Holds FBAR Penalties Apply Per Report, Not Account
The U.S. Supreme Court in a 5-4 decision has held that non-willful Foreign Bank Account Report (FBAR) penalties apply per report, not account. Today’s news is being hailed as a surprising and significant win for non-willful FBAR non-filers. The FBAR is an annual report due on April 15 following the calendar year reported and is filed electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System. Generally, any U.S. person, corporation, partnership, limited liability company, trust, and estate must file an FBAR to report a financial interest in, signature, or authority over at least one financial account located outside of …