Tax News & Views Cuffing Grandma Roundup

October 28, 2023

Key Takeaways

  • Perp walk for Granny is not on IRS agenda
  • Unless she's rich and runs a pass-thru
  • Process change for partnerships
  • 1099 guidance coming
  • Hey employers, E-file!
  • Energy tax-credits-cash swaps heating up
  • The SALT mind
  • IRA retirement rules ‘complicated’
  • Halloweeners’ choice!

IRS Not Sending 87K Armed Agents After Grandma, Chief Says – Craig Clough, Law360 Tax Authority ($):

Internal Revenue Service Commissioner Danny Werfel told the 39th Annual UCLA Tax Controversy Conference audience on Thursday that the Inflation Reduction Act is creating a more efficient and robust agency, but that rumors of "87,000 armed agents kicking in the door of your grandma" is "not on the agenda."

Werfel appeared as a keynote speaker in a packed ballroom full of tax attorneys and tax professionals at the Beverly Hills Hotel in Beverly Hills, California, and spent most of his 35-minute speech touting the Inflation Reduction Act's impact on his agency, while also making several references to the debunked conspiracy theory that the agency is adding tens of thousands of armed agents.

But what if Grandma is a tax cheat and has it coming?

Granny better not be rich:

IRS Tripling Size of Its Global High-Wealth Group – Wesley Elmore, Tax Notes ($):

The IRS is looking to triple the size of its global high-wealth program to improve its efforts in complex cases, according to an agency official.

The global high-wealth program will go from having three regional offices to six, Eric Cirelli of the IRS Large Business and International Division said October 26 at the UCLA Tax Controversy Institute.

The expansion is part of the IRS’s effort to increase enforcement of high-income and high-wealth individuals, as described in the strategic operating plan released in April. It’s needed because the group isn’t getting to enough of the “enterprise-type” cases that involve multiple individuals and entities, Cirelli said, noting that more than half of the global high-wealth group’s exams involve passthroughs.


IRS Looks to Ease Partnership Tax Return Adjustment Process - Erin Slowey, Bloomberg ($):

The IRS is working to change the process partnerships use to request an administrative adjustment on their tax returns, an official said Thursday.

Partnerships, as a result of the 2015 Bipartisan Budget Act, must file an administrative adjustment request instead of an amended return to correct any issues in what has been described as an onerous process.

The IRS will adjust that process after receiving numerous comment letters on how to simplify it, Cliff Scherwinski, director of pass-through entities in the Large Business and International Division of the IRS, said at the UCLA Tax Controversy conference. He said he couldn’t comment further on what changes will be made and the timeline.

Tax Court Slashes Ga. Partnership's $9M Easement Deduction – Anna Scott Farrell, Law360 Tax Authority ($):

The U.S. Tax Court slashed a nearly $9 million charitable deduction claimed by a Georgia partnership for its donation of a conservation easement, saying Thursday that the partnership was limited by its basis in the donated property to a deduction of around $418,000.

Because the land was held by one of the partners in Mill Road 36 Henry LLC immediately before it was donated to the partnership, which eventually donated it to a conservation group, the deduction is limited to the partnership's adjusted basis in the property, the court ruled.


IRS Chief Teases Upcoming 1099-K Guidance Ahead of Filing Season - Erin Slowey, Bloomberg ($):

Freelancers and gig workers can expect more guidance in the coming weeks for their transactions on e-commerce platforms, IRS Commissioner Danny Werfel said Thursday.

E-commerce platforms, like Venmo, eBay, and Paypal, are required to send 1099-K forms to taxpayers that fall within a certain threshold. The 2021 Covid relief bill cut the threshold to $600 from $20,000, which was originally supposed to start for tax year 2022. But the IRS created a transition period pushing the date to the 2023 tax year.

“If you are splitting a check at dinner, the law is not intended to cover you,” Werfel said to reporters. “I think there has been a lot of confusion but if you are selling a good or service for a profit, then the law is intended to apply to you.”


More IRS Guidance on 1099-K Reporting Coming Soon, Werfel Says – Wesley Elmore, Tax Notes ($). “Speaking to reporters October 26 after his keynote address at the UCLA Tax Controversy Institute, Werfel wouldn’t say what the coming guidance might look like or whether it would delay the reporting requirements further. But he said the agency is focused on finding the “simplest possible path” for payment processors and taxpayers to comply with the requirements.”


Crypto Exchange Kraken to Release User Data to IRS – Jonathan Curry, Tax Notes ($):

One of the largest cryptocurrency exchanges has informed its customers that, following a district court loss earlier this summer, it is supplying the IRS with several years’ worth of data on its users and their transactions.

In late June the U.S. District Court for the Northern District of California ordered Payward Ventures Inc., the parent company of cryptocurrency exchange Kraken, to produce information on its users’ digital asset transactions between 2016 and 2020 in response to a 2021 John Doe summons from the IRS. However, the judge substantially limited the scope of information Kraken would have to provide to the IRS.

Now, four months later, Kraken has told its customers that it’s handing over the data.


IRS encourages employers to electronically file payroll tax returns – IRS:

The Internal Revenue Service today reminded employers that the best way to file their next quarterly payroll tax return by the Oct. 31, 2023, due date is electronically.

While paper filing is available, the IRS strongly encourages e-filing. E-filing is the most secure, accurate method to file returns, and saves time.


Clean Energy Tax Credit Transfers Gather Steam — Slowly – Keith Goldberg, Law360 Tax Authority ($):

Federal-tax-credit-for-cash swaps between clean energy developers and others are ramping up in the wake of federal guidance issued earlier this year, but attorneys say there are still deal-making kinks to be ironed out before transfer activity really takes off.

There have been several deals publicly announced since the U.S. Department of Treasury and IRS issued guidance in June on the Inflation Reduction Act's so-called transferability provisions, which cover 11 new or expanded energy tax credits.


SALT Talks Pick Up in House as Clock Ticks for Broader Pact – Samantha Handler, Bloomberg ($):

House Republicans hope to overcome another hurdle that’s been stalling legislative action—the state and local tax deduction cap.

Newly elected House Speaker Mike Johnson (R-La.) is set to convene a meeting to hear from advocates of tweaking the deduction in the next few weeks, Rep. Anthony D’Esposito (R-N.Y.) told Bloomberg Tax. There, Johnson and Ways and Means Chair Jason Smith (R-Mo.) will get a pitch from some members pushing for an increase to the $10,000 state-and-local tax deduction cap to be included in the House Republicans’ tax package, D’Esposito said.

The GOP tax bill hit snags when blue state Republicans demanded a tweak to the cap, but now some members see some momentum for a compromise.

Let's hope that Speaker Johnson has been briefed on the SALT discussions that took place prior to him running the House. 

Capitol Hill Recap: SALT Helps Reopen The House – Jay Heflin, Eide Bailly:

Johnson is new to House leadership and might not know that anti-SALT-cap Republicans were already offered a $20,000 increase in the SALT cap, making the cap $30,000. The anti-cappers turned it down, according to lawmakers on the tax-writing House Ways and Means Committee. They wanted the cap increased to $100,000, which these lawmakers said was not possible.

Johnson also might not know that congressional tax writers want to extend the SALT cap to help pay for continuing other tax provisions in the 2017 tax reform bill that are set to expire at the end of 2025. 199A tops the list on what tax-writers want to extend, which benefits owners of pass-thru entities – i.e., employers, some of whom that rely on the tax savings from 199A to make payroll.


Retirement account withdrawal rules are ‘so complicated’ for inherited IRAs, expert says. What to know – Kate Dore, CNBC:

Inheriting an individual retirement account can be a welcome surprise. But the gift comes with mandatory withdrawals for heirs and following the rules can be difficult, experts say.

According to the Secure Act of 2019, certain heirs now have less time to deplete inherited accounts due to a change in so-called “required minimum distributions.” Before 2020, heirs were allowed to “stretch” withdrawals over their lifetime.

“It is so complicated,” said IRA expert and certified public accountant Ed Slott. “It’s almost unfair that it’s so hard to get money out of an IRA by going through this quagmire of rules.”


ERC Adviser Spends Over Half a Million Lobbying Congress – Lauren Loricchio, Tax Notes ($):

Employee retention credit advisory firm Innovation Refunds LLC has spent over half a million dollars so far this year on lobbying in relation to the ERC and other incentives for businesses.

Innovation Refunds’ business model is designed to help small- to medium-size companies tap into incentives from the government, and now the firm appears to be paying lobbyists so lawmakers will create more incentives.

This article makes it appear like lobbying is a bad thing. It’s not. Trust me.


H&R Block, Intuit Queried by Lawmakers on Customer Data Privacy - Airielle Lowe, Bloomberg ($). “A group of US lawmakers including Massachusetts Senator Elizabeth Warren and House Democrat Katie Porter write tax preparation companies H&R Block, TaxAct, TaxSlayer, Ramsey Solutions, and Intuit to ask whether they are complying with rules on customer data privacy following recent notices of penalty offenses from the Federal Trade Commission.”


Look for PTEP Proposed Regs in Early 2024, IRS Official Says – Chandra Wallace, Tax Notes ($):

Long-awaited guidance on previously taxed earnings and profits (PTEP) is slated for publication in early 2024, according to an IRS official.

The package of proposed regulations on PTEP is still under construction but is a top priority, Chadwick Rowland of the IRS Office of Associate Chief Counsel (International) said October 26 at a Practising Law Institute conference in New York.


OECD Details Withholding Tax Treatment In Profits Plan – Dylan Moroses, Law360 Tax Authority ($):

OECD officials indicated Thursday that the profit reallocation plan known as Amount A would treat withholding taxes differently for purposes of eliminating double taxation and determining safe harbor treatment, offering detail on an issue that negotiating countries have continued to debate.

Withholding taxes in Amount A calculations will be accounted for in different ways depending on context and will result in various adjustments under a multilateral convention, said Eric Robert, a project manager for the Organization for Economic Cooperation and Development's Pillar One project. Pillar One includes Amount A and a routine pricing plan known as Amount B. Robert and other OECD officials spoke during a technical webinar explaining the Amount A treaty.


Pillar Two, Foreign Tax Credit Guidance May Go to Second Package - Michael Rapoport, Bloomberg ($):

The IRS may issue additional guidance on how the US foreign tax credit and the pending global minimum tax will work together, even after the initial guidance on the issue that’s already expected by the end of this year, an IRS attorney said Thursday.

“It wouldn’t surprise me if this isn’t the end of the story,” said David Berke, a special counsel in the IRS Office of the Associate Chief Counsel (International), speaking at a Practising Law Institute event.


From the “That’s A Lot Of Comments” file:

Proposed Crypto Broker Rules Garner 13,000 Comments to IRS - Caleb Harshberger, Bloomberg ($):

The IRS and Treasury Department have been inundated by a flood of more than 13,000 comments on proposed digital asset broker reporting requirements rules, with still weeks left before the comment window shuts.

Julie Foerster, project director of the IRS Digital Assets Initiative, disclosed the staggering total at the Council for Electronic Revenue Communication Advancement conference Wednesday.

Government website still was catching up and surpassed 10,000 comments as of Thursday morning—up by more than 1,000 from the day before.


Halloweeners’ choice: Is it National Black Cat Day or National Frankenstein Friday? Halloweeners could also go rogue and choose National Breadstick Day and pair it with National American Beer Day. Not a bad choice among them!   

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