December 27, 2022
IRS Delays Gig-Tax Filing Rule for Side Hustles of More Than $600 - Laura Saunders and Richard Rubin, Wall Street Journal:
The Internal Revenue Service on Friday delayed by one year a law requiring e-commerce platforms such as eBay, Etsy and Airbnb to give the tax agency information on users with more than $600 in revenue.
Now, platform sellers and the IRS won’t receive a blizzard of 1099-K tax forms early in 2023 for their 2022 sales. The move comes as a relief to taxpayers and tax preparers who had been bracing for a messy tax-filing season. The change also gives opponents of the $600 threshold more time to push for a change in the law next year.
IRS Delays $600 Reporting Threshold for Forms 1099-K - Lauren Loricchio, Tax Notes ($):
The existing reporting threshold of $20,000 in payments from over 200 transactions will remain in effect for 2022 filings, the IRS said.
“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” acting IRS Commissioner Douglas O’Donnell said in a news release (IR-2022-226). “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”
After Congress Fails To Act, IRS Delays Onerous New 1099-K Reporting For Payment Platforms - Amber Gray-Fenner, Forbes. "The delay is a welcome reprieve for tax professionals who were expecting enormous confusion during the upcoming tax-filing season among taxpayers who have been doing a small amount of online selling, but have never received this form in the past... The reporting delay does not change the obligation of those doing business through the sites to report any taxable income. But it does give taxpayers additional time to make themselves aware of this requirement and to educate themselves as to how to determine if the proceeds reported on the form are taxable income."
IRS delays 1099-K $600 threshold - Eide Bailly. "The details are provided in IRS Notice 2023-10. The new requirement is now scheduled to apply for transactions taking place in 2023, for reporting in 2024."
House Sends Omnibus Spending Bill to Biden’s Desk - Doug Sword, Tax Notes ($):
Earlier in the month, many observers thought there was a fair chance that the omnibus would contain a huge tax title amounting to hundreds of billions of dollars. But Republicans showed little interest in going along with Democrats’ push for renewal of an expanded child tax credit in exchange for rolling back research and development amortization and the tightening of net interest expensing, both of which went into effect this year, and extending bonus depreciation, which begins phasing out in 2023.
Not even the handful of traditional, smaller tax extenders made the bill, including a favorite of Senate Minority Leader Mitch McConnell, R-Ky., to allow the values of racehorses 2 years old and younger to be amortized over three years rather than seven. A late push fell short in the Senate to delay the vastly lower threshold for 1099-K reporting from going into effect in the coming tax season. However, the IRS announced December 23 that it would delay implementaion of the lower threshold.
Congress Sends $1.7T Spending Deal To Biden - James Arkin, Law360 Tax Authority ($):
The SAFE Banking Act, which would shield banks that work with cannabis entities from liability, was also left out of the final agreement.
Lawmakers added substantial retirement policy updates into the bill, with a package of reforms dubbed Secure 2.0. The name refers to how the package builds on the original Secure Act, passed in 2019, to expand access to employer-sponsored retirement plans and raise the required minimum distribution age for tax-favored individual retirement accounts. The new legislation would raise the RMD age over time from 72 to 73 beginning on Jan. 1 and to 75 in 2033.
New Retirement Law Would Bring Twists to Roth I.R.A.s and 401(k)s - Ron Lieber, New York Times. "For decades, some parents have avoided putting money into 529 college savings accounts because of one big concern: the possibility of having to pay taxes and a penalty if they someday no longer needed the funds for higher education expenses and wanted to withdraw the money. The scenario might arise if a child doesn’t go to college, for instance... The new bill solves for at least some parental angst. Many families with leftover 529 savings would be able to move it to a Roth I.R.A. starting in 2024. There is a $35,000 lifetime limit on these transfers per account beneficiary, plus a few other restrictions that aim to keep this from being too much of a wealth transfer extravaganza for affluent families."
Retirement Industry Celebrates Passage of ‘Momentous’ SECURE 2.0 - Austin Ramsey, Bloomberg ($). "Under SECURE 2.0, businesses can help younger workers start saving for retirement by making retirement account contributions that match student loan payments or providing small financial incentives to deferred worker contributions. Part-time employees who remain loyal to the same employer can enroll in their company retirement plans under the legislation, even if their limited hours would have otherwise prevented participation."
Year-End Spending Bill Includes Retirement Plan, Conservation Easement Changes - Parker Tax Pro Library. "Saver's Match: New Code Sec. 6433 provides a matching contribution paid by the government to certain individuals who make qualified retirement savings contributions. The amount of the matching contribution is generally 50 percent of up to $2,000 of the contributions made by the individual for the tax year and would be subject to phaseouts based on the taxpayer's modified adjusted gross income. For joint filers the phaseout range would be $41,000 to $71,000; for heads of household, $30,750 to $53,250; and for single filers and married filing separately, $20,500 to $35,500."
Retirement savings plans see big changes, tax and administrative implications with SECURE Act 2.0 - Mark Friedlich, Wolters Kluwer Tax & Accounting. "Under current law, employees with at least 1,000 hours of service in a 12-month period or 500 service hours in a three-consecutive-year period must be eligible to participate in the employer’s qualified retirement plan. SECURE 2.0 reduces that three-year rule to two years for plan years beginning after December 31, 2024."
TIGTA: IRS Isn’t Expected to Clear Return Backlog This Year - Lauren Loricchio, Tax Notes ($):
In November acting IRS Commissioner Douglas O’Donnell reiterated outgoing Commissioner Charles Rettig’s pledge of reducing the paper backlog to healthy levels — or pre-pandemic inventory levels — by the end of the year. “That is our goal. We have stated it; that’s what we’re aiming for,” O’Donnell said at the American Institute of CPAs National Tax Conference.
TIGTA explained that the backlog will likely continue into the 2023 filing season because of challenges with hiring the workers needed to clear those inventories.
Link to report: Backlogs of Tax Returns and Other Account Work Will Continue Into the 2023 Filing Season
SPAC Boom Ends in Frenzy of Liquidation - Amrith Ramkumar, Wall Street Journal. "A 1% federal tax on share repurchases that is part of new climate, health and spending legislation has accelerated liquidations. Winding down a SPAC and returning cash to the investors could be considered a repurchase of the company’s existing shares, which would face the buyback tax beginning next year."
IRS Clarifies Rule For Clean Commercial Building Deduction - Theresa Schliep, Law360 Tax Authority. "The updated standard from the American Society of Heating, Refrigerating, and Air Conditioning Engineers — known as Reference Standard 90.1-2019 — applies to property constructed after 2022 and placed in service starting in 2027 for the deduction under Internal Revenue Code Section 179D, the IRS said in an announcement."
Related: Energy Efficiency Incentives and the Inflation Reduction Act.
IRS Releases Fact Sheet on Two Clean Energy Tax Credits - Lauren Loricchio, Tax Notes ($). "The IRS has released a fact sheet to help explain the mechanics of changes to credits for energy-efficient home improvements and residential energy property in the Inflation Reduction Act (P.L. 117-169)."
Link: Frequently asked questions about energy efficient home improvements and residential clean energy property credits
Massachusetts High Court Rules for Retailer in Cookie Nexus Case - Andrea Muse, Tax Notes ($):
In its December 22 ruling in U.S. Auto Parts Network Inc. v. Commissioner, the court ruled that the Massachusetts Appellate Tax Board reasonably concluded that cookies and apps stored on a customer’s device and the use of third-party content distribution networks (CDNs) did not constitute physical presence.
The court declined to apply South Dakota v. Wayfair Inc. retroactively, finding that the applicable commissioner’s regulation incorporates the physical presence standard in Quill Corp. v. North Dakota.
Related: A Sales Tax Reform Game Changer: How Wayfair Changed the Sales Tax Reform Landscape.
North Carolina Supreme Court: Wisconsin-Based Printer Must Pay Sales Tax - Christopher Jardine, Tax Notes ($). "At issue in the case were printed materials sold by Quad Graphics Inc. — a commercial printer of books, magazines, catalogs, and direct mail items, headquartered in Sussex, Wisconsin — to customers in North Carolina from September 2009 through December 2011. The company also sold printed materials to customers who delivered them to third-party recipients in North Carolina. The materials were produced out-of-state and delivered via the U.S. Postal Service or other common carriers to sites located outside North Carolina. The total value of the orders was about $20 million."
Big Nonprofit Hospitals Expand in Wealthier Areas, Shun Poorer Ones - Melanie Evans, Max Rust, and Tom McGinty, Wall Street Journal. "As nonprofits, these regional and national giants reap $8.8 billion from tax breaks annually, by one Johns Hopkins University researcher’s estimate. Among their obligations, they are expected to provide free medical care to those least able to afford it."
Digital Asset Reporting Will Not Be Required Until Regulations are Issued - Ed Zollars, Current Federal Tax Developments. "The IRS announced in Announcement 2023-2 that the agency will not require reporting on digital assets by brokers as required by the Infrastructure Investment and Jobs Act until regulations are issued implementing Section 80603 of the Act modifying IRC §§6045 and 6045A."
8 year-end tax moves you can't afford to miss - Kay Bell, Don't Mess With Taxes. "1. Take your required minimum distribution... Once you get on the RMD track, you must take it annually by Dec. 31 — or the end of the business year (the aforementioned Friday, Dec. 30, this year) so that your account manager can ensure it meets the deadline. Don't ignore the RMD requirement or you'll face a hefty tax penalty."
IRS Versus Dubious Conservation Easements In 2022 - Mixed Results - Peter Reilly, Forbes. "The grounds for disallowance illustrates Reilly's Fourth Law of Tax Planning - Execution isn't everything, but it's a lot. It is indicative of the IRS preference for attacking based on procedural flaws that might also trap legitimate easements."
Rough Justice, Soft Application--the OECD's Amount B and the Future of Taxation - Alex Parker, Things of Caesar. "One of the most important parts of the Organization for Economic Cooperation and Development’s Two-Pillar global tax overhaul is also one of the least-discussed. I’m talking about the plan to introduce simplified formulas for routine distributing and marketing activities, called 'Amount B' of the project’s Pillar One. The organization released a consultation paper on the topic earlier this month, its first in-depth look into the proposal."
We've Learned The IRS Was Slow To Audit Trump’s Tax Returns. We Need To Know Why - Howard Gleckman, TaxVox. "The IRS’s first instinct often is to refuse to explain its internal decisions. That is a serious mistake, as the agency should have learned 10 years ago during the kerfuffle over the way it handled applications for tax-exempt status from political organizations."
Taxes in Everything: Die Hard Edition - Alex Muresianu, Tax Policy Blog. "Now, is it a plot hole in Die Hard (a movie from 1988) that the Nakatomi Corporation still has hundreds of millions of dollars in bearer bonds, even though TEFRA was passed in 1982? Not necessarily. While new issuances of bearer bonds effectively ended following TEFRA, making them a 'disappearing breed,' as The New York Times observed in 1984, securities issued before 1982 would have still been in use. Additionally, bearer bonds still exist in some foreign markets."
Texas tax preparer sent to prison for preparing false tax returns - IRS (Defendant name omitted).
Today, U.S. District Judge Micaela Alvarez ordered Lopez to serve the statutory maximum of 36 months in federal prison to be immediately followed by one year of supervised release. Judge Alvarez noted that she was imposing the maximum sentence allowed under the statute because of the lengthy duration of the tax fraud scheme Defendant perpetrated through her tax preparation business.
At the time of her plea, Defendant admitted that she prepared a federal tax return for a taxpayer that included multiple instances of false and fraudulent information, including false employee business expenses and false residential energy credit qualifying expenses."
I suspect her clients have a high audit rate. The biggest refund doesn't necessarily indicate the best preparer.
Roar! It's Visit the Zoo Day!
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.