November 30, 2021
IRS Proposes Permanently Extending Deadlines for Furnishing ACA Statements to Individuals - Thomson Reuters Tax & Accounting:
The proposed regulations would permanently extend the deadline for furnishing a given year’s Forms 1095-B and 1095-C to individuals until 30 days after January 31 of the immediately following year (or the next business day, if the 30th day falls on a Saturday, Sunday, or legal holiday). The proposed extension generally aligns with extensions that have been granted for each year since the reporting requirements took effect (see our Checkpoint article on Notice 2020-76). It would replace both the 30-day extension that currently may be requested for good cause, and the IRS’s ability to provide blanket automatic extensions.
The effective date provisions are important:
Revisions in the proposal would apply for calendar years beginning after December 31, 2021, but reporting entities and ALEs may choose to apply the changes for calendar years beginning after December 31, 2020.
That means an extra 30 days for 2021 statements. The article notes: "This guidance is somewhat surprising, given the IRS’s previous signal that there would be no more extensions. In any event, those responsible for furnishing statements to individuals will no doubt welcome the relief and appreciate the option to apply it for 2021—particularly since the IRS still has not issued final instructions for the 2021 Forms 1094/1095."
Tax Community Continues Push for Quick Guidance on ERC Sunset - Caitlin Mullaney, Tax Notes:
The American Institute of CPAs warned before enactment of the infrastructure bill that bringing an early end to the ERC would sow confusion among business owners and tax advisers.
On November 24 the IRS instructed employers that are no longer eligible for the ERC and have already reduced their employment tax deposits in anticipation of claiming the ERC for the fourth quarter to monitor guidance issued by the agency.
The IRS noted that employers that received an advance fourth-quarter payment of the ERC and that are no longer eligible should still include that advance payment in their employment tax return. For balances due because of the new law, the agency again said employers should watch for guidance.
Related: What’s in the $1.2 Trillion Infrastructure Bill?
December has (almost) arrived - Bernie Becker, Politico:
THIS YEAR OR BUST? All of which raises the question — what if Democrats can’t get the social spending package across the finish line this year?
Senate Majority Leader Chuck Schumer keeps insisting they can, and there’s no doubt that most Democrats do not want this to bleed into 2022 — a midterm election year.
And yet: At the very least, Sen. Joe Manchin (D-W.Va.) doesn’t sound in much of a hurry when it comes to passing the Democrats-only package.
Also worth noting: It’s not as if Democrats can’t pass something next year. (They passed Obamacare during the midterm election year of 2010, which was also the last time they had full control in Washington.)
Too much good information in the article to excerpt, including a discussion of the problems that arise from postponing the bill to 2022.
Dems Face Intraparty Fight Over Tax Incentive Cutoffs - Alan Ota, Law360 Tax Authority ($):
Several senior Democrats said negotiators would need to reach an agreement on measures to ensure high-income taxpayers aren't eligible for the expanded child tax credit and other incentives. The additional restrictions could be added to the House-passed Build Back Better Act, H.R. 5376, in the Senate, but any changes would need to win final approval from House lawmakers.
Is there a path to passage? Some senior Democrats say there is:
Despite concerns raised by Republicans about the measure's cost and the scope of individual tax breaks, [Senate Finance member Ben} Cardin [D-Md] and Rep. Dan Kildee, D-Mich., a member of the Ways and Means Committee and a chief deputy whip, said they believed negotiators would cut a deal to expedite final action.
Cardin said he expected the Senate to pass an amended version of the bill in December, and Kildee said there would be pressure on House Democrats to clear the legislation whether they agree with Senate amendments or not.
Whether anything passes before 2022 is uncertain, adding additional complication.
Sanders, Menendez Disagree on SALT Threshold - Doug Sword, Tax Notes ($):
Senate Budget Committee Chair Bernie Sanders, I-Vt., says “a couple hundred billion dollars” in new revenue could be reaped if the Build Back Better Act (H.R. 5376) included a provision to repeal the state and local tax deduction cap for those making less than $400,000.
That sets Sanders at odds with Senate Finance Committee member Robert Menendez, D-N.J., who wants a $550,000 threshold.
The version passed by the House raises the cap on the SALT deduction from $10,000 to $80,000, with no income cap. This has led to criticism of the provision as a giveaway to the wealthy. The higher cap was added at the insistence of House members from high-tax New Jersey and New York. With narrow majorities in both the House and Senate, it will be tricky to find a compromise.
Proponents Hope Pot Banking Can Hitch Ride on Defense Bill - Wesley Elmore, Tax Notes ($):
The House passed H.R. 4350 in September, after approving the Secure and Fair Enforcement (SAFE) Banking Act of 2021 (H.R. 1996) as an amendment. The SAFE Banking Act would allow access to banking services for cannabis businesses operating in states where marijuana sales are legal by exempting financial institutions from federal investigation or prosecution for providing those services.
Many cannabis businesses are unbanked, operating on a cash-only basis and paying federal and state taxes in cash and only at designated offices where the tax authorities can accept it — roadblocks that most other legal businesses don’t face. Proponents argue that increased access to banks would lead to less reliance on cash, improving public safety and increasing tax compliance for those businesses.
Related: Will Marijuana-Related Businesses Be Allowed More Access to Financial Services?
Underlying Entity Type, Not Exempt vs. Taxable Status, Determines if an Organization is an Eligible Partner for Partnership Election Out of BBA Audit Regime - Ed Zollars, Current Federal Tax Developments. "The IRS clarified, in emailed counsel advice, that it does not matter if a partner is a for profit or exempt organization to determine if that partner will bar the partnership from electing out of the regime under IRC §6221(b)."
The "BBA Audit Regime" is the set of rules that allows the IRS to assess taxes on adjustments to partnership income directly to a partnership, rather than to the partners. Many states have adopted similar rules. The IRS plans to increase audits of partnerships, including LLCs filing 1065s, so this is becoming a real issue.
Selected Tax Provisions of House Bill No. 5376 – and Economic Implications - Roger McEowen, Agricultural Law and Taxation Blog. "The massive bill contains numerous tax-related provisions. Fortunately, it contains neither the proposed reduction to the federal estate and gift tax exemption nor the modification to the current 'stepped-up' basis rule at death."
How IRS Taxes Lawsuit Settlements - Robert Wood, Forbes. "Many plaintiffs win or settle a lawsuit only to be surprised that they have to pay taxes. Some don't realize it until tax time the following year when IRS Forms 1099 arrive in the mail. A little tax planning, especially before you settle, can go a long way. It's even more important now with higher taxes on litigation settlements since 2018. Some plaintiffs are taxed on their attorney fees too, even if their lawyer takes 40% off the top."
Opportunity Zone Investment Fraud - Sometimes It's Better To Just Pay The Taxes - Peter Reilly, Forbes. "For the victims, though, the lesson is embodied in Reilly's Second Law of Tax Planning - Sometimes it's better to just pay the taxes."
Inflation adjustments for 2022 taxes that apply to Americans living and working abroad - Kay Bell, Don't Mess With Taxes. "The most notable tax break for U.S. taxpayers working abroad is the foreign earned income exclusion, or FEIE. This allows those who meet certain requirements to legally avoid paying U.S. tax on some of their foreign wages. For the 2022 tax year, that earnings amount is $112,000. That's a nice bump up from 2021's FEIE of $108,700."
Related: Global Mobility Services
Passthrough Entity SALT Cap Workaround is Messy! - Annette Nellen, 21st Century Taxation. "The elective PTE regime in about 19 states has led to a lot of compliance challenges because the PTE taxes are different among the states as to how to elect and pay, whether any owners can opt out or are not eligible, what income is covered, whether the tax applies against the owner's state tentative minimum tax, the rate, and more."
IRS Blesses Entity-level Tax Deduction used as SALT Cap Workaround.
Taxpayer alert as holidays, tax season approach: Watch out for scams, protect financial information - IRS. The IRS offers a number of tips to protect your data, including:
Don't forget to use security software for computers, tablets and mobile phones – and keep it updated. Protect electronic devices of family members, especially teens and young children.
Make sure anti-virus software for computers has a feature to stop malware, and there is a firewall enabled that can prevent intrusions.
Phishing scams – like imposter emails, calls and texts -- are the No. 1 way thieves steal personal data. Don't open links or attachments on suspicious emails. This year, fraud scams related to COVID-19, Economic Impact Payments and other tax law changes are common.
Use strong and unique passwords for online accounts. Use a phrase or series of words that can be easily remembered or use a password manager.
Use multi-factor authentication whenever possible. Many email providers and social media sites offer this feature. It helps prevent thieves from easily hacking accounts.
Shop at sites where the web address begins with "https" – the "s" is for secure communications over the computer network. Also, look for the "padlock" icon in the browser window.
Don't shop on unsecured public Wi-Fi in places like a mall. Remember, thieves can eavesdrop.
I would add: Don't send confidential information - especially social security numbers or tax notices - as unsecured pdf attachments to e-mail messages. Use a secure portal, such as my.eidebailly.com, to send confidential items.
Eide Bailly merges in PWB - Michael Cohn, Accounting Today. "The deal will add two offices to Eide Bailly’s presence in the Twin Cities, one in Bloomington and the other in Plymouth, Minnesota. PWB, short for Peterson Whitaker & Bjork, offers a variety of audit, accounting, tax, consulting and outsourced bookkeeping services."
Be generous, but not to thieves. Today is both Giving Tuesday and National Computer Security Day. It's also National Mason Jar Day, if you are less technically inclined.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.