November 30, 2022

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 …

November 28, 2022

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 …

November 17, 2022

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 …

November 15, 2022

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 …

November 11, 2022

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 …

November 10, 2022

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 …

November 8, 2022

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 …

November 7, 2022

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 …

November 2, 2022

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 …

October 26, 2022

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 …

October 25, 2022

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 …

October 12, 2022

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 …

August 29, 2022

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 …

August 26, 2022

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 …

August 24, 2022

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 …

August 16, 2022

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 …

August 15, 2022

How New Tax Law Changes Affect Tax Professionals

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 …

August 8, 2022

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 …

July 29, 2022

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 …

July 21, 2022

SSARS 25: 10 USEFUL PRO-TIPS

The AICPA Accounting and Review Services Committee recently issued Statement on Standards for Accounting and Review Services (SSARS) 25, Materiality in a Review of Financial Statements and Adverse Conclusions, effective for engagements performed in accordance with SSARS for periods ending on or after December 15, 2021. Early adoption was permitted.Let’s start with a summary of the revisions and conclude with some pro-tips to assist with your Review Engagements.  Summary The revisions include:The revision of the definitions of the following terms in AR-C section 60 to be consistent with the definitions in Statements on Auditing Standards: financial statements, designated accounting standard-setter, general purpose …