In Case You Missed It: Clean Vehicle Credit Guidance, Irrevocable Trusts, and Disaster Relief
By: 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 …
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 …
Final Regs Delay Lowered Business E-Filing Threshold Until 2024
The IRS issued final regulations yesterday that delay until 2024 the lowered, mandatory business e-filing threshold of 10 returns – down from 250. Thus, the e-filing threshold for returns required to be filed in calendar years 2022 and 2023 remains at 250. The Taxpayer First Act of 2019 (P.L. 116-25) reduced the 250-return e-filing requirement to 100 for calendar year 2021 forms (to be filed in 2022) and down to 10 for calendar year 2022 forms and years thereafter. The final regs, T.D. 9972, scheduled to be published in the Federal Register on February 23, affect filers of partnership returns, corporate …
IRS Expands Digital Correspondence
Happy Friday, tax pros. The IRS has expanded your ability to electronically upload documents to resolve certain tax issues. Sounds like a win for everyone, as we can all agree that the less paper correspondence causing you headaches and adding to the agency’s backlog, the better. Digital Correspondence: The IRS developed its “Document Upload Tool” in 2021 and has since been testing the digital correspondence feature on a limited number of exam-related notices. The IRS announced yesterday that it is expanding the tool’s function to include several more CP notices, which will allow taxpayers to respond within 30 days by …
IRS Hits Phone Service Target in 2023
The IRS is killin’ it on the phones lately, have you heard? And by killin’ it, I mean answering calls at a level of 85 percent or higher — a goal set by Treasury Secretary Janet Yellen. Good News: Last week I had the honor of speaking at the American Bar Association Section of Taxation Midyear Meeting in San Diego, and with the opportunity came some good news from Treasury Assistant Secretary for Tax Policy Lily Batchelder. During her keynote address, Batchelder stated that because of the IRS’s recent funding boost under the Inflation Reduction Act (P.L. 117-169), it has …
IRS Guidance in the Works on Tax Treatment of State Payments
Are certain middle class tax relief refunds and payments issued by states in 2022 subject to taxation? California says no; the IRS says it’s not sure… also, don’t call. On the heels of a recent Procedurally Taxing post, the IRS released a statement noting that it is aware of taxpayer uncertainties involving special tax refunds or payments made by states during 2022 and is currently working with state tax officials to provide additional information on whether these payments are subject to federal tax. The IRS released the following statement: The IRS is aware of questions involving special tax refunds or …
CALIFORNIA CORNER: Forms 565, 568 Schedule K-1 Capital Account Change Delayed One Year
The California Franchise Tax Board (FTB) announced yesterday that the controversial Forms 565 and 568 Schedule K-1 capital account reporting change is now delayed for one year. Brief Background: Beginning for taxable year 2021, the FTB followed the changes made to the 2020 federal Schedule K-1 (Form 1065), and required an entity taxed as a partnership to report its partners’ or members’ capital accounts on the Schedule K-1 (565) and Schedule K-1 (568) using the same tax basis method as described in the 2021 Instructions for Form 1065 but calculated under California law. Prior FTB Notice 2022-1 postponed the effective …
IRS Launches New E-Filing Portal for Businesses’ Form 1099 Series
Happy opening week of the 2023 filing season, tax pros. The IRS announced yesterday that businesses can now file Form 1099 series information returns using a new, free online portal with the agency. WHAT IT IS: The new portal, known as the Information Returns Intake System (IRIS), is a free electronic filing service with no separate software requirements. While filing returns through the new portal, the IRS recommends listening to the song “Iris” from the band LIVE’s 1994 album Throwing Copper (it does not). Enrollment for IRIS is now available. The filing platform, not the song, to be clear. According to …
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 …
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 …
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
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 …