Key Takeaways
- IRS calling
- Tax agency applies the brakes on lower 1099 reporting thresholds
- Update on transactions between related persons and partnerships
- The future for filing returns
- FinCEN ERC fraud alert
- The Big Three hit the big time
- Retirement savings
- Cyber Monday!
Tax pros: The IRS may be calling you – Jeff Stimpson, Accounting Today:
The Internal Revenue Service may randomly phone tax professionals for a survey between Nov. 27 and Jan 19, 2024.
"This is not a scam. Please don't hang up," the agency said in an announcement about the survey. "Responses will help the IRS improve services to the tax pro community and the taxpayers they serve."
Practitioners will be contacted Monday through Friday, 8:30 a.m. to 6:30 p.m. local time. Caller ID will show a Kansas City area code (816).
‘This is not a scam’ is probably the first thing a scammer would say.
IRS guidelines on phoning you:
Is that the IRS contacting you – or is it a scam? – IRS:
Here are several tips to help you avoid being scammed. IRS employees will not:
- Call demanding an immediate payment.
- Call you without first sending a bill in the mail.
- Demand you pay your taxes in a specific way.
- Ask for credit or debit card numbers over the phone.
- Threaten to have you arrested.
- Threaten legal action.
Following feedback from taxpayers, tax professionals, and payment processors and to reduce taxpayer confusion, the Internal Revenue Service delayed the new $600 Form 1099-K reporting threshold requirement for third party payment organizations for tax year 2023 and is planning a threshold of $5,000 for 2024 to phase in the new law…
‘But what does this mean?' you ask?
This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.
However:
Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount.
IRS delays $600 1099-K threshold for another year – Michael Cohn, Accounting Today:
The IRS said it would continue to work to implement the new law and will treat 2023 as another transition year. It hopes to reduce the potential confusion caused by the distribution of the estimated 44 million forms sent to many taxpayers who wouldn't anticipate one and may not have a tax obligation. That means reporting won't be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
In the meantime, to give taxpayers more time to get accustomed to the change, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold.
If you feel like you’ve read this news before, you have:
IRS Delays Tax Rule for Online Sellers—Again – Ashlea Ebeling and Richard Rubin, Wall Street Journal ($):
The Internal Revenue Service offered a surprise paperwork reprieve to millions of Americans as tax-filing season nears, delaying a new requirement affecting people who sell stuff on eBay, resell concert tickets, and use payment processors such as Venmo.
For the second straight year, the IRS postponed enforcement of a law that requires those e-commerce and payment platforms to send the agency information about many users who receive more than $600 in revenue a year.
Somewhat related:
IRS Delays Tax Deadlines Set by Congress. It Could Cost $8 Billion – Richard Rubin, Wall Street Journal ($). “Congress set strict enforcement deadlines when it created new tax requirements for e-commerce platforms, older 401(k) savers and cryptocurrency brokers. The Internal Revenue Service has now postponed them all for two years—which could cost the Treasury more than $8 billion.”
Another way to say that these delays will “cost” Treasury $8 billion is that it will SAVE taxpayers $8 billion.
IRS Updates Rules for Related-Person Transactions With Partnerships – Brett Ferguson, Tax Notes ($):
The IRS is proposing regulations to update how transactions between related persons and partnerships should be treated.
The proposed regulations (REG-131756-11) apply to sections 267 and 707 dealing with related-person transactions that result in gain or loss, or result in a difference in the time at which income and deductions are recognized because of the parties’ different accounting methods.
The changes are intended to address concerns that existing rules don’t conform to Congress’s intention that partnerships should be viewed as entities, rather than as an aggregate of its partners, the IRS said.
The document is here.
IRS Issues Rules for Long-Term Part-Time Worker Retirement Plans - Lauren Vella, Bloomberg ($):
The IRS on Friday issues proposed rules to provide definitions under part of the US tax code that deal with retirement plans that include cash or deferred arrangements for long-term, part-time employees.
The proposes rules (RIN 1545-BQ70) would amend regulations under Sec. 401(k) following the passage of the SECURE and SECURE 2.0 legislation, which was passed in 2019 and 2022 respectively. Each of these pieces of legislation included specific work-hour thresholds for long-term, part-time employees to attain to be eligible for retirement plans.
The document is here.
Benefits Industry Hopes to Secure Catch-Up Contribution Guidance – Caitlin Mullaney, Tax Notes ($):
The two-year transition period for the new Roth catch-up contribution requirement for high-income earners may not be enough to ensure proper compliance, according to tax professionals in the benefits industry.
The administrative transition period provided by the IRS was invaluable, “but the next step of issuing actual guidance on the rules and implementation is equally important. There are lots of open issues in addition to the ones the IRS flagged” in Notice 2023-62, 2023-37 IRB 817, Elizabeth Thomas Dold of Groom Law Group said.
More retirement stuff below.
Energy Bonus Credits' Labor Rules Set Bar Too High, IRS Told – Kat Lucero, Law360 Tax Authority ($):
Complying with proposed IRS labor rules that are critical in claiming the 2022 climate law's bonus tax credits will be challenging for project owners, stakeholders told the agency Tuesday, citing hurdles such as daunting record-keeping requirements and unclear construction start dates.
There is considerable agreement that the August proposed rules will not achieve their aim of nudging project developers to offer high-paying jobs, former congressman Earl Pomeroy said at a hearing on the rules, held in Washington, D.C., and online. The proposal would implement the prevailing wage and apprenticeship requirements for several clean energy tax incentives restructured under the Inflation Reduction Act , enacted more than a year ago.
The returns you'll be filing more (and less) of in 2023 – Accounting Today:
The Internal Revenue Service received more than 260 million paper and electronic returns in fiscal year 2022, and it expects to receive even more this year.
Of the 21 different types of return, the majority will see an increase in volume between FY 2022 and FY 2023. Five types of return are projected to increase in volume by more than 45% in FY 2023 over the previous year's actual total.
FinCEN Alert on COVID-19 Employee Retention Credit Fraud – FinCEN:
[T]he Financial Crimes Enforcement Network (FinCEN), in close coordination with the Internal Revenue Service Criminal Investigation (CI), issued an alert to financial institutions on fraud schemes related to the COVID-19 Employee Retention Credit (ERC). The alert provides an overview of typologies associated with ERC fraud and scams, highlights select red flags to assist financial institutions in identifying and reporting suspicious activity and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA).
“It is unfortunate that while the COVID-19 pandemic is behind us, fraud related to COVID-19 relief programs, like the ERC, continues to occur at a concerning scale,” said FinCEN Director Andrea Gacki. “We are issuing this alert in partnership with CI to remind financial institutions that it is critical that they remain vigilant in identifying and reporting related suspicious activity and to protect businesses from being taken advantage of by fraudsters.”
“Tax credits like employee retention credits were meant to provide assistance to struggling business owners during the COVID-19 pandemic, but fraudsters, unfortunately, used the credits to line their own pockets,” said CI Chief Jim Lee. “We hope this alert will help financial institutions recognize financial patterns that indicate fraud and help us recover funds stolen from U.S. taxpayers.”
The alert is here.
Business Giants Go Big on Billboards, TV in Last-Ditch Tax Plea - Samantha Handler and Chris Cioffi, Bloomberg ($):
Business groups and their allies have been taking to the airwaves in recent weeks, funding last-chance campaigns in a bid to spur congressional tax writers into action on a deal restoring valuable tax breaks…
The ask is a revival of full research and development expensing, a more robust interest expense deduction, and full bonus depreciation before Jan. 1. Some say not having a deal past that date would make retroactively reinstating them too difficult.
Lawmakers have been trying to address these tax issues (called the Big Three) for roughly two years. The issue was that some lawmakers wanted to include an expansion of the Child Tax Credit while other lawmakers opposed the idea. Now, there is apparently an agreement on the Child Tax Credit. The current problem is that these tax measures should be attached to another piece of legislation and there isn’t a good bill for these measures to hitch a ride.
Here’s the problem: Lawmakers aren’t focused on tax legislation. Their focus is on getting agreements on spending issues and leaving Washington before Christmas.
What to watch in the December legislating rush - John Bresnahan, Andrew Desiderio and Jake Sherman, Punchbowl News ($):
For the first time in years, there won’t be a year-end government funding showdown this month. That will come in mid-January. It’s a Christmas miracle!
Instead, over the next few weeks, congressional leaders will focus on Israel, Ukraine, the annual defense authorization bill, FISA and other issues. These are some very difficult topics with no guarantee that lawmakers will find consensus.
This tax-smart charitable donation strategy is like ‘hitting two birds with one stone,’ advisor says – Kate Dore, CNBC:
If you’re retired and giving to charity this season, there’s a planning move that can reduce your 2023 taxes while donating to a worthy cause, experts say.
The strategy, known as qualified charitable distributions, or QCDs, allows retirees to transfer money from an individual retirement account to an eligible nonprofit organization.
“It’s like hitting two birds with one stone,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services. “You can donate up to $100,000 directly from your IRA to your favorite charity, and it doesn’t even count as taxable income.”
The OECD’s latest edition of Corporate Tax Statistics and a new accompanying working paper, provide new data on global low-taxed profit, a key issue for determining the impact of the global minimum tax. According to the new analysis, jurisdictions with high tax rates account for more than half of the low-taxed profits reported globally by multinational enterprises (MNEs).
The new data and estimates on taxation of large MNE profits show how tax incentives and other concessions in jurisdictions with high statutory and average tax rates enable some firms to pay low effective tax rates (ETRs). The findings highlight how the introduction of a global minimum tax rate on the profits of large MNEs agreed by the OECD/G20 Inclusive Framework would create new opportunities for domestic resource mobilisation for high-tax and low-jurisdictions alike.
Taxpayers Mull Options After IRS Tax Penalty Court Ruling - James Munson, Bloomberg ($):
Taxpayers facing IRS penalties for failing to report their foreign holdings are being advised to either ignore or pay the penalties depending on their circumstances, pending the outcome of a court case.
US Tax Court Judge Paige Marvel invalidated in an April ruling the IRS practice of automatically assessing penalties against taxpayers who don’t report ownership stakes overseas. The ruling, which the IRS appealed to the DC Circuit of the US Court of Appeals in July, could affect a vast swathe of tax policy if it’s upheld, lawyers said.
From the “Every Little Bit Helps” file:
Saver’s Credit can help low- and moderate-income taxpayers to save more in 2024 – IRS:
The Internal Revenue Service reminds low- and moderate-income taxpayers that they can save for retirement now and possibly earn a special tax credit in 2024 and years ahead.
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs. The credit also helps any eligible person with a disability who is the designated beneficiary of an Achieving a Better Life Experience (ABLE) account and makes a contribution to that account. For more information about ABLE accounts, see Publication 907, Tax Highlights for Persons With Disabilities.
The maximum Saver’s Credit is $1,000 ($2,000 for married couples). The credit can increase a taxpayer’s refund or reduce the tax owed but is affected by other deductions and credits. Distributions from a retirement plan or ABLE account reduce the contribution amount used to figure the credit.
Happy Cyber Monday! For those old enough to remember, Cyber Monday used to be more fun because employees thought they could shop online while at work and the boss wouldn’t know better. We were soooo naïve.
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