Newsletters
The IRS has reminded taxpayers to report digital asset income on 2023 federal tax returns, with an updated question now on Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return...
For purposes of the new clean vehicle credit and the used clean vehicle credit, the IRS has extended the deadlines for submitting seller reports for vehicles placed in service in 2023 and ea...
For purposes of the low-income housing credit, the IRS concluded that additional housing credit dollar amounts (HCDAs) for 2021 and 2022 that are returned to a state housing agency may be realloca...
The IRS has underscored the vital importance of selecting a tax professional carefully to safeguard personal and financial information. Taxpayers bear legal responsibility for their income tax...
The Financial Crimes Enforcement Network (FinCEN) issued guidance on inflation adjustments to its civil monetary penalties as mandated by the Federal Civil Penalties Inflation AdjustmentÂ...
Effective April 1, 2024, the town of Eldridge increases certain local Alabama sales and use tax rates.Increased Tax RatesThe sales and use tax rates for the following increase from 2% to 3%:general it...
Alaska Gov. Mike Dunleavy announced he is sponsoring legislation that will create a corporation income tax credit for:employer-provided childcare or employer childcare expense reimbursements; andcontr...
Arizona has updated its conformity to the Internal Revenue Code (IRC) for income tax purposes. For tax years beginning after 2023, Arizona now conforms to the IRC as amended and in effect on January 1...
The Supreme Court of Arkansas held that Arkansas law required a nonresident taxpayer to apply a historic preservation tax credit it received to its total tax liability amount, not just the amount appo...
Subcomponents of a taxpayer's project may qualify as pilot models for research expense deduction purposes under California corporate tax law. Responding to the taxpayer's request for a ruling, the Chi...
Colorado amended its rule on the income tax credits allowed for purchasing or leasing an innovative motor vehicle or innovative truck. The amendments provide additional guidance and clarification rega...
For Connecticut property tax purposes, the Supreme Court upheld property tax assessments on two motor vehicles owned by the taxpayer because the motor vehicle property tax authorized by § 12-71 (f) i...
Delaware adopted rules that provide guidance on tax refund intercept requests from other states, including:access to information contained in a taxpayer's Delaware and federal personal income tax retu...
As businesses begin to comply with Initiative 82, which phases out the District of Columbia tipped minimum wage for servers, bartenders, and other tipped workers beginning May 1, 2023, the Office of T...
The Florida Senate approved a tax bill that changes the corporate income tax IRC conformity tie-in date. H.B. 7073, as approved by the Florida Senate on March 8, 2024...
The Georgia Department of Revenue has released a local sales and use tax rate chart for the quarter beginning April 1, 2024. Georgia Sales and Use Tax Rate Chart, Georgia Department of Revenue, March ...
The Hawaii House of Representatives and Senate approved identical, companion bills introduced in their own chambers that would update Hawaii’s Internal Revenue Code tie-in date for computing corpora...
The Idaho State Tax Commission has issued a release announcing that veterans with disabilities are eligible to have their property tax bill reduced by as much as $1,500 on their Idaho residence and up...
The tentative Lee County equalization factor (multiplier) for Illinois property tax purposes has been set for 2023 at 1.0000. The final 2022 multiplier was 1.0000. Release, Illinois Department of Reve...
Indiana has clarified how pass-through entity (PTE) tax payments are treated in certain circumstances. Under current law, a PTE that makes tax payments during the year has those payments credited as t...
The Iowa Department of Revenue adopted a new rule that establishes necessary processes for adjudication of contested case appeals before the Property Assessment Appeal Board (PAAB). The current rule i...
The Kansas Senate voted to approve by a wide margin a bill that includes a proposal for a flat personal income tax rate. It also amended the bill originally introduced on March 7, 2024 to:eliminate th...
The Kentucky Department of Revenue has released a document listing the 2023 state and local ad valorem property tax rates. Commonwealth of Kentucky Property Tax Rates 2023, Kentucky Department of Reve...
The Louisiana Department of Revenue has issued a revenue information bulletin providing guidance regarding the firearm safety device credit against Louisiana's individual income tax. Taxpayers may cla...
Maine has enacted legislation making the following changes to the state's income tax laws:The subtractions from individual income tax gross income for military retirement plan benefits, military annui...
For Maryland property tax purposes, the circuit court did not err in denying the tax sale certificate holder’s petitions for surplus proceeds because it did not qualify as a "person entitled" to the...
The interest rates on the underpayment and overpayment of Massachusetts taxes are unchanged for the period April 1, 2024, through June 30, 2024.The rate for overpayments is 7%.The rate for underpaymen...
The Michigan Department of Treasury has released additional information on the extensions of time to file state returns and remit tax, and waivers from penalty and interest, that it will grant in conf...
Minnesota has updated its guidance on the personal income tax obligations of military personnel to address residency, filing requirements, and the Military Spouses Residency Relief Act. Members of the...
The Mississippi Department of Revenue has updated the list of frequently asked questions and answers regarding Electing Pass-Through Entity Tax on its web site. Among other minor changes, the revised ...
The following local Missouri sales and use tax rate changes take effect April 1, 2024. Also, new rates are listed for each county, city, and special district affected by the rate changes.County Change...
Montana issued a notice discussing common errors that taxpayers should try to avoid when filing Form PTE. For example, a pass-through entity making an election to pay pass-through entity tax (PTET) mu...
Nebraska issued guidance on:the corporate income and personal income tax credits for qualifying contributions to eligible child care programs; andthe personal income tax credit for parents and legal g...
In the 2024 general election, Nevada voters will decide if diapers will be exempt from all sales and use taxes effective January 1, 2025. If approved by the voters, the exemption would be in effect un...
New Hampshire has provided annual guidance for the credit for donations to scholarship organizations that may be claimed against the business profits tax and the business enterprise tax. The allowable...
The New Jersey petroleum products gross receipt tax rates on the following remain as indicated for the period April 1 through June 30, 2024:gasoline and LPG—31.8 cents per gallon;diesel—35.8 cents...
New Mexico enacted legislation making various changes to the state's personal and business income tax laws. These changes include:Changes effective in tax year 2024:Angel investor credit:Qualified inv...
For New York personal income tax purposes, a taxpayer’s petition challenging a notice of disallowance (notice) of a 2021 School Tax Relief (STAR) credit was dismissed because the petition was not fi...
A taxpayer’s petition challenging a North Carolina sales and use tax assessment was barred by the doctrine of sovereign immunity because the petition was untimely filed. In this matter, the taxpayer...
North Dakota issued a newsletter summarizing legislation enacted in 2023 affecting the corporate and personal income taxes. Among the topics covered are individual income tax rate reductions, deductio...
Ohio has released municipal net profit tax guidance to address legislative changes, including the:new extended tax return due date; andnew apportionment election for remote workers;Municipal Net Profi...
The Oklahoma House has passed bills that would reduce the personal income tax rate. Both bills would reduce the rate beginning in 2024 as follows:H.B. 2949 would replace the bracket system with a flat...
For Oregon property tax purposes, the taxpayer’s property did not qualify for exemption for the tax year 2023-24 because the taxpayer did not own the property as of July 1, 2023, and had not put the...
The Philadelphia Department of Revenue reminds taxpayers that March 31 is the last day to pay current Philadelphia real estate taxes. Payments may be made in-person at the Municipal Services Building,...
The Rhode Island Division of Taxation has issued guidance regarding electronic filing of the Rhode Island Form 1065 for tax year 2023 (RI-1065). This guidance states that for tax year 2023 only, singl...
Through June 30, 2024, the South Carolina interest rate on underpayments of taxes remains 8%. The refund rate for overpayments is 5%. Information Letter 24-2, South Carolina Department of Revenue, Mar...
South Dakota has increased the amount of education scholarship credits that can be claimed on annual premium tax returns. A taxpayer may claim up to $5 million (previously $3.5 million) in fiscal year...
For Tennessee property tax purposes, the trial court did not err in its determination that the city and county could proceed with the delinquent tax sale and enforce their statutory lien to recover pr...
The Texas Comptroller of Public Accounts has determined the average taxable price of crude oil for the reporting period January 2024 is $49.85 per barrel for the three-month period beginning on Octobe...
The Utah income tax rate will drop from 4.65% to 4.55% for tax years beginning on or after January 1, 2024. Gov. Spencer Cox has signed legislation enacting the tax rate cut. S.B. 69, Laws 2024, effec...
Vermont has revised a fact sheet providing information to individual taxpayers regarding the calculation, filing, and payment of use tax. Furthermore, the fact sheet provides examples regarding the ca...
Enacted Virginia legislation provides that in certain localities, in the event that the overall total assessed value of real property in the locality, excluding certain additional assessments, would r...
Legislative authorities may designate an exemption to Washington's Tourism Promotion Area lodging charge to any lodging business, lodging unit, or lodging guest. H.B. 2137, Laws 2024, effective 90 day...
The definition of "small arms," for purposes of the West Virginia consumers sales and service tax exemption applicable to the sale of small arms and small arms ammunition, is amended to include the re...
Wisconsin has adopted an emergency rule to clarify the commercial loan income exemption, which was enacted in 2023 as part of the biennial budget.The exemption was created for the income of a financia...
The Wyoming Department of Revenue has announced that beginning July 1, 2024, a vendor need not be physically located within a resort district in order to be subject to that tax. All retail sales made ...
Following what was described as a successful launch of beneficial ownership information reporting requirements, officials from the Department of the Treasury found themselves before the House Financial Services Committee defending the regulations.
Following what was described as a successful launch of beneficial ownership information reporting requirements, officials from the Department of the Treasury found themselves before the House Financial Services Committee defending the regulations.
"The beneficial ownership registry successfully launched on January 1 this year," Andrea Gacki, director of the Financial Crimes Enforcement Network, said during a February 14 oversight hearing of the committee. "In the first week alone, more than 100,000 companies successfully filed their beneficial ownership information. And I am pleased to report that today, so far, FinCEN has received more than half a million reports successfully filed."
Brian Nelson, Treasury undersecretary for Terrorism and Financial Intelligence, told the committee that there are 32 million companies that are expected to file a BOI report.
Gacki continued: "The now ongoing better collection of beneficial ownership information, paired with the forthcoming phased provision of access to the database by law enforcement and other authorized users will close what is long been identified as a gap in the United States anti-money laundering and countering the financing of terrorism regime."
Gacki and Nelson were put on the defensive during the hearing as committee members challenged them on the effect of the reporting requirements on small businesses.
She noted that FinCEN took steps to make sure the filing system is "workable for small businesses," including making it simple with the ability to complete in 20 minutes without the need to seek professional help that could end up costing a small business more money.
Nelson also emphasized that Treasury is using all available tools to spread the word of the filing requirements and offer guides on how to file.
"We recognize that a number of these small businesses have never heard of FinCEN, so there’s a big educational campaign," he said, adding that the agency is working on a solution for those unable to file BOI electronically, such as businesses in Amish communities.
Gacki also stressed that if there are issues related to filing, FinCEN is not looking to take action against those who are simply having trouble filing their BOI report.
"I want to stress that, when it comes to enforcement, the statute is clear," she said. "We can only take enforcement action for willful violations. We are not out to take ‘gotcha’ enforcement actions. We want to educate about the requirement."
AICPA Calls For Suspension Of BOI Reporting Requirement
Despite the efforts FinCEN and the broader Treasury department are making to educate the public on the BOI reporting requirements, the American Institute of CPAs is calling for the suspension of BOI reporting requirements.
In a February 13, 2024, letter to the leadership of the House Financial Services Committee and the Senate Banking Committee, AICPA stated the BOI reporting rule "should be suspended until the small business community is considered well-informed of their requirement to report BOI information to FinCEN and the outstanding questions by the financial professionals who serve this community have been answered."
AICPA stated that small businesses "should have a reasonable chance at compliance" in addition to a timeframe to gain awareness of the requirements. "To comply and provide the information necessary, small businesses need additional time to work through these and other questions that have not been answered in the six weeks this rule has been in effect. We urge you to suspend the rule and give small entities the time necessary to work through this requirement so we can best support the small business community."
By Gregory Twachtman, Washington News Editor
The IRS has issued a warning to small businesses regarding potential issues with Employee Retention Credit (ERC) claims as the March 22, 2024 deadline for the ERC Voluntary Disclosure Program approaches. Seven suspicious warning signs have been identified based on feedback from tax professionals and compliance personnel. These signs may indicate erroneous claims and could lead to IRS scrutiny.Â
The IRS has issued a warning to small businesses regarding potential issues with Employee Retention Credit (ERC) claims as the March 22, 2024 deadline for the ERC Voluntary Disclosure Program approaches. Seven suspicious warning signs have been identified based on feedback from tax professionals and compliance personnel. These signs may indicate erroneous claims and could lead to IRS scrutiny. The ERC Voluntary Disclosure Program allows businesses to rectify incorrect claims by repaying just 80% of the amount claimed. Taxpayers who realize their claims are ineligible are urged to quickly pursue the claim withdrawal process.
The IRS has highlighted seven suspicious signs indicating potential inaccuracies in ERC claims. These include:
- Too many quarters being claimed: Employers should ensure they meet eligibilitycriteria for each quarter claimed.
- Government orders that dont qualify: Employers should have clear documentation demonstrating how and when government orders related to COVID-19 impacted their operations.The frequently asked questions about ERC – Qualifying Government Orders section of IRS.gov has helpful examples. Also, employers should avoid a promoter that supplies a generic narrative about a government order.
- Too many employees and wrong calculations : Employers should accurately calculate the credit based on changes in the law and avoid overclaiming. For details about credit amounts, see the Employee Retention Credit - 2020 vs 2021 Comparison Chart.
- Business citing supply chain issues :Employers should carefully review the rules on supply chain issues and examples in the 2023 legal memo on supply chain disruptions.
- Business claiming ERC for too much of a tax period: Businesses should check their claim for overstated qualifying wages and should keep payroll records that support their claim.
- Business didn’t pay wages or didn’t exist during eligibility period: Employers can only claim ERC for tax periods when they paid wages to employees.
- Promoter says there’s nothing to lose: Businesses should be on high alert with any ERC promoter who urged them to claim ERC because they have nothing to lose.
The Employee Retention Credit (ERC) is available to eligible employers who paid qualified wages to some or all employees between March 12, 2020, and January 1, 2022. Eligibility varies based on the time period:
- For 2020 and the first two quarters of 2021: Eligibility is based on trade or business operations being fully or partially suspended due to a COVID-19-related government order or experiencing a decline in gross receipts.
- For the third quarter of 2021: Eligibility includes suspension of trade or business operations, a decline in gross receipts, or being classified as a recovery startup business.
- For the fourth quarter of 2021: Only recovery startup businesses are eligible.
The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2024 and the lease inclusion amounts for business vehicles first leased in 2024.
The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2024 and the lease inclusion amounts for business vehicles first leased in 2024.
Luxury Passenger Car Depreciation Caps
The luxury car depreciation caps for a passenger car placed in service in 2024 limit annual depreciation deductions to:
- $12,400 for the first year without bonus depreciation
- $20,400 for the first year with bonus depreciation
- $19,800 for the second year
- $11,900 for the third year
- $7,160 for the fourth through sixth year
Depreciation Caps for SUVs, Trucks and Vans
The luxury car depreciation caps for a sport utility vehicle, truck, or van placed in service in 2024 are:
- $12,400 for the first year without bonus depreciation
- $20,400 for the first year with bonus depreciation
- $19,800 for the second year
- $11,900 for the third year
- $7,160 for the fourth through sixth year
Excess Depreciation on Luxury Vehicles
If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends.
The annual cap for this excess depreciation is:
- $7,160 for passenger cars and
- $7,160 for SUVS, trucks, and vans.
Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans
If a vehicle is first leased in 2024, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:
- $62,000 for a passenger car, or
- $64,000 for an SUV, truck or van.
The 2024 lease inclusion tables provide the lease inclusion amounts for each year of the lease.
The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.
Vehicles Exempt from Depreciation Caps and Lease Inclusion Amounts
The depreciation caps and lease inclusion amounts do not apply to:
- cars with an unloaded gross vehicle weight of more than 6,000 pounds; or
- SUVs, trucks and vans with a gross vehicle weight rating (GVWR) of more than 6,000 pounds.
So taxpayers who want to avoid these limits should "think big."
The Internal Revenue Service has reviewed, redesigned and deployed 31 notices for the 2024 tax filing season in an effort to simplify the notices and improve their clarity.
This is a part of a broader effort to simplify up to 90 percent of the notices the agency sends out to taxpayers on an annual basis.
The Internal Revenue Service has reviewed, redesigned and deployed 31 notices for the 2024 tax filing season in an effort to simplify the notices and improve their clarity.
This is a part of a broader effort to simplify up to 90 percent of the notices the agency sends out to taxpayers on an annual basis.
Included in the first wave of redesigned notices are notices to taxpayers who served in combat that may be eligible for tax deferment, notices that remind a taxpayer that they may have an unfiled return, and notices that remind a taxpayer about their balance due and where they can go for assistance.
"The IRS has a large number of these letters as well as other standard correspondence,"IRS Commissioner Daniel Werfel said during a January 23, 2024, teleconference with reporters."And as we’ve heard from tax professionals as well as taxpayers, these notices can be confusing. They cover complex topics. They can include a lot of legal language, and with our current systems and machines, the letters can be a mishmash of looks that do not always have a consistent familiar look you might get from a credit card company or a bank."
Werfel said that these issues made it clear the agency management that they need to redesign the notices to utilize clearer, plain language that a taxpayer can act upon without potentially needing to consult with a tax professional to help understand the information being sent and potentially requested. About 20 million of these 31 notices were sent to taxpayers in calendar year 2022, he said.
He highlighted the potential that the redesigned notices will have by discussing the pilot program that redesigned Notice 5071C, which asks questions about possible identity theft. The IRS made the language clearer and included a QR code to direct taxpayers to the appropriate web page to allow them to respond to the notice.
"In all, 60,000 taxpayers received this pilot letter compared to taxpayers who received the original letter,"Werfel said."There was a 16 percent reduction in taxpayers who called the IRS as their first action and a 6 percent increase in taxpayers who used the online option. The IRS will apply the lessons learned from this pilot to a larger redesign initiative."
By the 2025 tax filing season, Werfel said the IRS is hoping to have redesigned up to 200 notices, which make up about 90 percent of the notices sent out to individual taxpayers in 2022.
By Gregory Twachtman, Washington News Editor
The IRS, with its Criminal Investigation (CI) arm, has urged businesses to review eligibility for the Employee Retention Credit (ERC). To combat fraud, they intensified compliance efforts related to this pandemic-era credit. Businesses wrongly claiming the ERC are advised to consider applying for the Voluntary Disclosure Program before the March 22 deadline. A special withdrawal program is also available for those with eligibility concerns on pending claims.Â
The IRS, with its Criminal Investigation (CI) arm, has urged businesses to review eligibility for the Employee Retention Credit (ERC). To combat fraud, they intensified compliance efforts related to this pandemic-era credit. Businesses wrongly claiming the ERC are advised to consider applying for the Voluntary Disclosure Program before the March 22 deadline. A special withdrawal program is also available for those with eligibility concerns on pending claims. Both programs aimed to help employers to avoid penalties and interest on incorrect claims. CI special agents plan to conduct nationwide educational sessions in February for tax professionals, focusing on the ERC. These sessions, part of a broader initiative, will be held in at least 23 U.S. states and the District of Columbia. The IRS has implemented several initiatives to address inappropriate claims by businesses. Some key points are listed below.
ERC Voluntary Disclosure Program (Open until March 22, 2024):
- businesses with erroneous claims and received payments can participate;and
- the program runs until March 22, 2024.
Withdrawal Program for Pending ERC Claims:
- the IRS continues to accept and process requests to withdraw an employer's full ERC claim under a special withdrawal process.
ERC Eligibility Information:
- special information is available to help businesses understand Employee Retention Tax Credit guidelines; and
- resources include ERC FAQs and the ERC Eligibility Checklist, offered as an interactive toolor a printable guide.
Increased IRS Compliance Activity:
- letters notifying taxpayers of disallowed ERC claims have been sent;
- letters related to claiming an erroneous or excessive credit are planned; and
- ongoing compliance efforts include Audits, Civil Investigations, and Criminal Investigations.
The Financial Crimes Enforcement Network (FinCEN) has published a Small Entity Compliance Guide (Guide) to provide an overview of the Beneficial Ownership Information Access and Safeguards Rule (Access Rule) requirements for small entities that obtain beneficial ownership information (BOI) from FinCEN.Â
The Financial Crimes Enforcement Network (FinCEN) has published a Small Entity Compliance Guide (Guide) to provide an overview of the Beneficial Ownership Information Access and Safeguards Rule (Access Rule) requirements for small entities that obtain beneficial ownership information (BOI) from FinCEN. Under the Access Rule, issued in December 2023, BOI reported to FinCEN is confidential, must be protected and may be disclosed only to certain authorized federal agencies; state, local, tribal and foreign governments; and financial institutions. The guide includes sections summarizing the Access Rule’s requirements that pertain to small financial institutions’ access to BOI.
Further, FinCEN intends to provide access to certain categories of financial institutions with obligations under the current Customer Due Diligence (CDD) Rule. Therefore, this Guide includes sections summarizing the Access Rule’s requirements that pertain to these small financial institutions only
The Department of the Treasury and the Internal Revenue Service have released new analysis that shows the additional funding provided to the IRS under the Inflation Reduction Act can increase revenues by"as much as" $561 billion.
The Department of the Treasury and the Internal Revenue Service have released new analysis that shows the additional funding provided to the IRS under the Inflation Reduction Act can increase revenues by"as much as" $561 billion.
"This analysis provides a more comprehensive assessment of the revenue effects of the transformational enforcement and modernization efforts enabled by the IRA" Greg Leiserson, Treasury deputy assistant secretary for tax analysis, said February 6, 2024, during a press teleconference."The IRS estimates that the IRA, as enacted, would increase revenue by as much as $561billion through fiscal year 2034, substantially more than earlier estimates. If IRA funding is renewed with it runs out, as the administration has proposed, estimated revenue would be as much as $851 billion."
A previous estimate had the IRA generating an additional $390 billion over the next 10 years based primarily on enforcement hires as the key revenue driver and assuming a diminished return over time.
Leiserson noted that previous estimates"were limited to revenues generated by direct enforcement activities resulting from higher enforcement staffing. This narrow focus does not consider the significant impact of the technology, data, and service improvements made possible by the IRA or any deterrent effect the greater enforcement capabilities and activities would have in order to better assess the revenue raised by this transformation."
The new analysis is broken down into five categories:
- Direct Revenue: payments received related to enforcement actions
- Revenue Protected: stopping illegitimate refund claims before the refund is issued
- Impact of Service on Compliance: making it easier for taxpayers to pay what they owe
- Compliance Assurance: increasing transparency and tax certainty for complex tax situations
- Efficiency Gains: including from IT investments and improvements to data analytics
The IRS has traditionally made estimates in the first two categories listed.
IRS Chief Data and Analytics Officer Melanie Krause during the call highlighted that in addition to the heightened compliance and enforcement efforts going on against the wealthy individuals that may not be paying taxes they legitimately owe, the improvements to things such as customer service and to improving access to Taxpayer Assistance Centers also helps.
"For example, whether we have the resources to serve taxpayers by being available to answer the phone"Â when they have question is important for voluntary compliance, she said, adding that the same is true for when people use TACs.
She noted that the analysis being published"is a pioneering step forward for developing a more exhaustive and accurate estimates of the return on investment for IRS funding, which will enrich our understanding of how these investments yield tangible outcomes,"she said.
Taking into consideration everything and not just enforcement gains "illustrate the bottom-line importance of investing in our nation’s tax system really can’t be overstated," Krause said."And the resulting changes will ripple out and create benefits for taxpayers and the nation in many ways."
By Gregory Twachtman, Washington News Editor
The American Institute of CPAs offered a series of guidance recommendations to the Department of the Treasury and the Internal Revenue Service to help provide clarity on a notice issued by the IRS on changes to the regulation for Roth IRA catch-up contributions made by SECURE 2.0.
The American Institute of CPAs offered a series of guidance recommendations to the Department of the Treasury and the Internal Revenue Service to help provide clarity on a notice issued by the IRS on changes to the regulation for Roth IRA catch-up contributions made by SECURE 2.0.
In a January 17, 2024, letter to the agencies, AICPA recommend that guidance be issued across areas.
First, the organization recommended that Treasury and the IRS "ssue guidance stated that federal income tax withholding with respect to a participant’s mandatory Roth IRAcatch-up contribution is not required before February 1 of the year in which the amount is contributed," the letter stated.
Second, AICPA called for guidance "allowing an elective deferral which is treated as a Roth catch-up contribution due to being recharacterized based on the failure of the ADP [actual deferral percentage] test, to be taxable to the participant in the year of recharacterization."
Third, it was recommended that future guidance issued in relation to Section V.3 of the Notice 2023-62"clarifies that for purposes of determining if an employee’s participating wages exceeds $145,000 (as adjusted0, only wages from the employee’s specific common law employer in the previous year are included, and only if it is a participating employer in the plan."
Finally, AICPA recommends the agencies "issueguidance stating that an individual who had deferrals characterized as Roth contributions as a result of not contributing deferrals equal to the regular limit be permitted to have them designated as regular deferrals."
The organization characterized these guidance recommendations as helping to bring more simplicity to the tax system.
"Due to the mandate in SECURE 2.0 requiring certain catch-up contributions be made on a Roth IRA basis, the IRS issued notice 2023-62 to help implement the provision," Kristin Esposito, AICPA director of tax policy and advocacy, said in a statement. "AICPA want to highlight certain administrability issues noticed in the guidance that we believe will make for a smoother transition."
By Gregory Twachtman, Washington News Editor
As part of the ongoing efforts to improve tax compliance in high income categories, the IRS will begin dozens of audits on business aircraft involving personal use.Â
As part of the ongoing efforts to improve tax compliance in high income categories, the IRS will begin dozens of audits on business aircraft involving personal use. The audits will be focused on large corporations, large partnerships and other high income taxpayers, and will scrutinize whether the use of jets is being properly allocated between business and personal reasons. "During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law," said IRS Commissioner Danny Werfel, "These aircraftaudits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities."
These audits of corporate jet usage is part of the IRS Large Business and International division’s "campaign" program and includes issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance. "The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act," Werfel said. In addition to the work on corporate jets,the IRS has a variety of efforts underway to improve tax compliance in complex, overlooked high-dollar areas where the agency did not have adequate resources prior to Inflation Reduction Act funding.
A return or a payment that is mailed to the IRS is timely filed or paid if it is delivered on or before its due date. A return with a U.S. postmark, which is delivered after its due date, is timely filed if the date of the postmark is no later than the due date, the return was properly addressed, and the return had proper postage. The timely mailing/timely filing rule also applies when a taxpayer receives a filing extension. If an envelope has a post office postmark and a non-post office postmark, the latter is disregarded and the post office postmark determines the filing date.
A return or a payment that is mailed to the IRS is timely filed or paid if it is delivered on or before its due date. A return with a U.S. postmark, which is delivered after its due date, is timely filed if the date of the postmark is no later than the due date, the return was properly addressed, and the return had proper postage. The timely mailing/timely filing rule also applies when a taxpayer receives a filing extension. If an envelope has a post office postmark and a non-post office postmark, the latter is disregarded and the post office postmark determines the filing date.
     Comment. The timely filing, timely mailing rule requires that the return be postmarked within the prescribed filing period. Thus, an individual return postmarked April 16 and received on April 20 is considered filed on April 20.
Private carriers. A return delivered by a designated private carrier is timely if the carrier marks or records the return no later than the due date of the return. However, a return delivered by means other than the U.S. mail or a designated private carrier must be delivered to the appropriate IRS office on or before its due date to be timely.
The IRS can designate a private carrier if the carrier: is available to the general public; is as timely and reliable as U.S. first class mail; records the date on which the package was given to it for delivery; and satisfies other conditions. The IRS has identified DHL Express, Federal Express, and United Parcel Service as designated carriers.
No postmarks; other postmarks. If there is no postmark, the taxpayer may establish the mailing date by extrinsic evidence. A return in an envelope with a foreign postmark or private meter machine postmark is timely filed if the postmark is on or before the due date of the return and the return is received no later than if it had been postmarked by the postal service on the last day for filing the return.
Registered, certified. A receipt showing that a return was sent by registered or certified mail is proof that the return was delivered to the place that it was addressed. Returns sent by registered mail are deemed to be postmarked on the date of registration. Returns sent by certified mail are deemed to be postmarked on the date stamped on the receipt, under the timely mailed, timely filed rule. However, if a taxpayer mails a return certified but does not obtain a certified receipt, the postmark on the envelope determines the filing date.
     Comment. A taxpayer mailing a return on or near its due date should use registered or certified mail with a postmarked receipt. Documents sent in this manner are automatically timely filed.
Electronic. An electronically-filed return with a timely electronic postmark is timely filed, provided that the return is filed in the manner prescribed for electronic returns. An electronic postmark is a record of the date and time, in the taxpayer's time zone, that an authorized electronic return transmitter receives the e-filed document on its host system.
An LLC (limited liability company) is not a federal tax entity. LLCs are organized under state law. LLCs are not specifically mentioned in the Tax Code, and there are no special IRS regulations governing the taxation of LLCs comparable to the regulations for C corporations, S corporations, and partnerships. Instead, LLCs make an election to be taxed as a particular entity (or to be disregarded for tax purposes) by following the check-the-box business entity classification regulations. The election is filed on Form 8832, Entity Classification Election. The IRS will assign an entity classification by default if no election is made. A taxpayer who doesn't mind the IRS default entity classification does not necessarily need to file Form 8832.
An LLC (limited liability company) is not a federal tax entity. LLCs are organized under state law. LLCs are not specifically mentioned in the Tax Code, and there are no special IRS regulations governing the taxation of LLCs comparable to the regulations for C corporations, S corporations, and partnerships. Instead, LLCs make an election to be taxed as a particular entity (or to be disregarded for tax purposes) by following the check-the-box business entity classification regulations. The election is filed on Form 8832, Entity Classification Election. The IRS will assign an entity classification by default if no election is made. A taxpayer who doesn't mind the IRS default entity classification does not necessarily need to file Form 8832.
"Check-the-Box" Election
An LLC with more than one member can elect tax status as:
- Partnership
- Corporation
- S corporation (accomplished by electing to be taxed as a corporation, then filing an S corporation election)
An LLC with only one member can elect tax status as:
- Disregarded entity
- Corporation
- S corporation (accomplished by electing to be taxed as a corporation, then filing an S corporation election)
The IRS will assign the following classifications if no entity election is filed for an LLC (the default rules):
- any business entity that is not a corporation is classified as a partnership
- any entity that is wholly-owned by a single person will be disregarded as an entity separate from its owner (taxed as a sole proprietorship).
Typically, an LLC with more than one member will elect to be taxed as a partnership, whereas a single-member LLC will elect to be disregarded and taxed as a sole proprietorship.
If you have any questions relating to LLCs, their benefits, drawbacks, or their treatment under the Tax Code, please contact our offices.
One morning you reach into your mailbox or bin to find the dreaded letter from the IRS announcing that you owe unpaid taxes. As if that wasn't enough to induce panic, you may discover there are add-on charges for interest and penalties. Penalties for what, you may ask?
One morning you reach into your mailbox or bin to find the dreaded letter from the IRS announcing that you owe unpaid taxes. As if that wasn't enough to induce panic, you may discover there are add-on charges for interest and penalties. Penalties for what, you may ask?
If you violate the Tax Code, the IRS may impose civil and/or criminal penalties, depending on the type of infraction committed. Civil penalties are commonly imposed for a failure to pay taxes when due, failure to report the correct amount of tax owed, a failure to deposit federal tax deposits, filing late, or even failing to pay because of a bounced check. There are more than 100 kinds of civil penalties in the Tax Code, ranging in severity. For example, a penalty for failure to file (separate and apart from a failure to pay) carries a minimum $100 fine, while a penalty for valuation overstatement can result in a 30 percent penalty on the amount of tax owed as a result. Criminal penalties can be even more severe, and may include terms of imprisonment as well as fines.
Taxpayers, return preparers, and third parties with some connection to the tax return in question may all become subject to penalties. Common civil penalties include failure to file tax returns, failure to pay taxes due, underpaying tax due to negligence, and valuation misstatements that result in inaccurate reporting of income (and therefore an incorrect amount of tax owed).
Criminal penalties are imposed for violations of federal Tax Code and Criminal Code, which include the willful (or intentional) attempt to evade or defeat any federal tax, the failure to collect or truthfully account for and pay any federal tax as required, or the failure to keep required records, supply required information or make required returns. Generally the IRS Criminal Investigations Division will conduct investigations into allegations of criminal tax violations, and if it recommends that the government prosecuted, the case could be referred to the IRS Office of Chief Counsel, the Department of Justice, the U.S. Attorney's Office, or some combination of the three.
Hopefully you will never receive a letter from the IRS about either civil or criminal penalties. But if you do, please call our offices with any questions.
When starting a business or changing an existing one there are several types of business entities to choose from, each of which offers its own advantages and disadvantages. Depending on the size of your business, one form may be more suitable than another. For example, a software firm consisting of one principal founder and several part time contractors and employees would be more suited to a sole proprietorship than a corporate or partnership form. But where there are multiple business members, the decision can become more complicated. One form of business that has become increasingly popular is called a limited liability company, or LLC.
When starting a business or changing an existing one there are several types of business entities to choose from, each of which offers its own advantages and disadvantages. Depending on the size of your business, one form may be more suitable than another. For example, a software firm consisting of one principal founder and several part time contractors and employees would be more suited to a sole proprietorship than a corporate or partnership form. But where there are multiple business members, the decision can become more complicated. One form of business that has become increasingly popular is called a limited liability company, or LLC.
The LLC combines several favorable characteristics of a traditional partnership, in which all members are entitled to participate in the management and operation of the business, with those of a corporation, in which the owners, directors, and shareholders are generally shielded from liability for the corporation's debts. The means that in an LLC, just as in a corporation, the personal assets of the business owners' would generally be protected if the business failed, lost a lawsuit, or faced some other catastrophe. Members are only liable to the extent of their capital contribution to the business. In addition, members can fully participate in the management of the business without endangering their limited liability status.
When filing season begins, the profits (or losses) from the LLC pass through to its members, who pay tax on any income when filing their individual returns. In other words, income from the LLC is taxed at the individual tax rates. Income from corporations, on the other hand is taxed twice, once at the corporate entity level and again when distributed to shareholders. Because of this, more tax savings often results if a business formed as an LLC rather than a corporation.
Taxpayers should note, however, that Congress recently increased the top marginal individual income tax rate to 39.6 percent, has placed a .09 percent additional Medicare tax on wages over $200,000 (single taxpayers), and has imposed a 3.8 percent net investment income tax on higher-income taxpayers. At the same time, there is strong talk among members of both political parties of lowering the corporate rate from the current 35 percent to something around 28 or 25 percent to make the United States more competitive with foreign nations. If this happens, many highly profitable LLC businesses may need to rethink their situation and consider switching to a corporate form.
Forming an LLC involves many requirements, but the benefits can be substantial. Please call our offices if you have any questions.
The IRS has announced a new optional safe harbor method, effective for tax years beginning on or after January 1, 2013, for individuals to determine the amount of their deductible home office expenses (IR-2013-5, Rev. Proc. 2013-13). Being hailed by many as a long-overdue simplification option, taxpayers may now elect to determine their home office deduction by simply multiplying a prescribed rate by the square footage of the portion of the taxpayer's residence used for business purposes.
The IRS has announced a new optional safe harbor method, effective for tax years beginning on or after January 1, 2013, for individuals to determine the amount of their deductible home office expenses (IR-2013-5, Rev. Proc. 2013-13). Being hailed by many as a long-overdue simplification option, taxpayers may now elect to determine their home office deduction by simply multiplying a prescribed rate by the square footage of the portion of the taxpayer's residence used for business purposes.
The IRS cites that over three million taxpayers in recent tax years have claimed deductions for business use of a home, which normally requires the taxpayer to fill out the 43-line Form 8829. Under the new procedure, a significantly simplified form is used. The new method is expected to reduce paperwork and recordkeeping for small businesses by an estimated 1.6 million hours annually, according to the IRS. The new optional deduction is limited to $1,500 per year, based on $5 per square foot for up to 300 square feet.
The simplified method is not effective for 2012 tax year returns being filed during the current 2013 filing season, but it will become effective for 2013 tax year returns filed in 2014. Taxpayers may want to investigate now whether they could benefit from the election for the 2013 tax year. Acting IRS Commissioner Steven Miller advised upon announcement of the safe harbor that "The IRS … encourages people to look at this option as they consider tax planning in 2013." A final decision on the election need not be made until 2014, when 2013 returns are filed.
Basic home office deduction rule
Under Code 280A, which governs the home office deduction rules on the simplified method election, a taxpayer may deduct expenses that are allocable to a portion of the dwelling unit that is exclusively used on a regular basis. This generally means usage as:
- The taxpayer's principal place of business for any trade or business
- A place to meet with the taxpayer's patients, clients, or customers in the normal course of the taxpayer's trade or business, or
- In the case of a separate structure that is not attached to the dwelling unit, in connection with the taxpayer's trade or business.
The new simplified method does not remove the requirement to keep records that prove exclusive use, on a regular basis, for one of the three designated uses listed above. It does help, however, in other ways.
Simplified safe harbor
Using the new simplified safe harbor method, a taxpayer determines the amount of deductible expenses for qualified business use of the home for the tax year by multiplying the allowable square footage by the prescribed rate. The allowable square footage is the portion of a home used in a qualified business use of the home, but not to exceed 300 square feet. The prescribed rate is $5.00 per square foot.
Taxpayers who itemize their returns and use the safe harbor method may also deduct, to the extent allowed by the Tax Code and regs, any expense related to the home that is deductible without regard to whether there is a qualified business use of the home for that tax year, the IRS explained. As a result, they will be able to claim allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A of Form 1040. These deductions do not need to be allocated between personal and business use, as is required under the regular method.
Depreciation
Taxpayers using the safe harbor cannot deduct any depreciation for the portion of the home that is used in a qualified business use of the home for that tax year. For many taxpayers, depreciation is the largest component of the home office deduction under the regular method that must be sacrificed if the new safe harbor method is used. Depending upon the value of your home and the space devoted to an office at home, using the regular method may prove to be the far better choice than electing the simplified method.
Election
Taxpayers may elect from tax year to tax year whether to use the safe harbor method or actual expense method. Once made, an election for the tax year is irrevocable. The IRS has provided rules for calculating the depreciation deduction if a taxpayer uses the safe harbor for one year and actual expenses for a subsequent year. The deduction of expenses that are not related to the home, such as wages and supplies, is unaffected and those deductions are still available to those using the new method.
Limitations
The IRS set various limits on the safe harbor, including:
- Taxpayers with more than one qualified business use of the same home for a tax year and who elect the safe harbor must use the safe harbor for each qualified business use of the home.
- Taxpayers with qualified business uses of more than one home for a tax year may use the safe harbor for only one home for that tax year.
- A taxpayer who has a qualified business use of a home and a rental use of the same home cannot use the safe harbor for the rental use.
If you are currently claiming a home office deduction, or if you have considered taking the deduction in the past but were discouraged by all of the paperwork and calculations required, you should consider whether the new, simplified safe harbor method is right for you. Please feel free to contact this office for further details.