Key Takeaways
- December 31 is the IRA/qualified plan minimum distribution deadline.
- If you were born before 1951, heads up!
- SECURE 2.0 guidance for qualified plans.
- Cost guidance for the potentially-valuable clean commercial vehicle credit.
- IRS to use ID.Me for its free-file system.
- A guide to the 179D energy-efficient building break.
- Most complicated tax country simplifies.
- $4 million Tax Court petition fails for choice of wrong level of service at Fed-Ex.
- Solstice and unmade beds.
The Internal Revenue Service today reminded people born before 1951 of the year-end deadlines to take required minimum distributions (RMDs) from funds held in individual retirement arrangements (IRAs) and other retirement plans, and noted new requirements under the law beginning in 2023.
Required minimum distributions, or RMDs, are amounts that many retirement plan and IRA account owners must withdraw each year. RMDs are taxable income and may be subject to penalties if not timely taken. For individuals born before 1951, RMDs from IRAs and retirement plans should, for the most part, already have begun and are required for 2023.
New for 2023: The Secure 2.0 Act raised the age that account owners must begin taking RMDs. For 2023, the age at which account owners must start taking required minimum distributions goes up from age 72 to age 73, so individuals born in 1951 must receive their first required minimum distribution by April 1, 2025.
See Retirement plan and IRA required minimum distributions FAQs for more detailed information regarding the new provisions in the law.
The FAQ notes that the penalty for not withdrawing the minimum required amount is a 50% excise tax on the required amount that is not withdrawn.
Secure 2.0 Guidance Answers Key Questions Needed in New Year - Caitlin Mullaney, Tax Notes ($):
In Notice 2024-2, 2024-2 IRB 1, released December 20, the IRS addressed 12 high-priority provisions in SECURE 2.0 — enacted as part of the Consolidated Appropriations Act, 2023 — to assist taxpayers in implementing those provisions.
The guidance, presented as a series of Q&As, clarifies SECURE 2.0 provisions, including automatic enrollment expansion, modification of the credit for small employer pension plan startup costs, the exception to the additional tax for early distributions for taxpayers with a terminal illness, and the safe harbor for employee elective deferral failures corrections.
Related: Omnibus Bill Brings Expanded Changes for Retirement Savings.
IRS Maintains Cost Guidance for Claiming Clean Vehicle Credit - Mary Katherine Browne, Tax Notes ($):
The IRS has extended the safe harbor allowing taxpayers to rely on the Department of Energy’s analysis of incremental costs for some clean vehicles when claiming the commercial clean vehicle credit.
According to Notice 2024-5, 2024-2 IRB 1, issued December 20, the IRS will accept a taxpayer’s use of the DOE’s modeled incremental cost to calculate a qualifying vehicle’s section 45W credit amount if it is placed into service during calendar year 2024.
The Inflation Reduction Act added the commercial clean vehicle credit to the IRC. Under section 45W, businesses and tax-exempt organizations can claim a tax credit for purchasing qualifying commercial clean vehicles. The credit is equal to the lesser of (1) 15 percent of the basis in the vehicle or (2) the incremental cost of the vehicle. The credit is capped at $7,500 for qualifying vehicles with weight ratings of under 14,000 pounds and $40,000 for all other vehicles.
The commercial clean vehicle credit is a different credit than the more well-known electric vehicle credit - and potentially more valuable to taxpayers who qualify. Unlike the EV credit, the 45W credit has no income limit and fewer sourcing restrictions. The IRS maintains a list of qualified manufacturers whose products may qualify.
Related: Electric Vehicle Tax Credit for Dealerships: Common Questions, Answered.
IRS Direct File Pilot to Verify Users’ Identity With ID.me - Erin Slowey, Bloomberg:
Taxpayers who are eligible to use the free online tax filing pilot run by the IRS this filing season will be required to authenticate their identity using ID.me, the agency said in a column from the “direct file team” Wednesday.
Taxpayers may choose to verify their identity via live chat from the outset, bypassing automated biometric collection, the column said.
Somewhat related: Report: ID.me Lied to the IRS About Wait Times for Its Identity Verification Service
Navigating the Energy-Efficient Tax Landscape: A Comprehensive Guide to Section 179D Deductions - Joe Sawatske, Eide Bailly:
179D allows for a deduction of up to $1.88 per square foot for properties placed in service before 1/1/2023 and up to $5.00 per square foot for projects placed in service between January 1, 2023, and December 31, 2032. This deduction is indexed to inflation, so projects completed in 2023 can earn up to $5.36 per square foot, or $5.65 for projects completed in 2024.
...
The “designer” of government-owned EECBP is eligible for the 179D tax deduction. Generally, a designer creates the technical specifications for the installation of EECBP, and the designer could include architects, engineers, general contractors, and subcontractors. However, a person who installs, repairs, or maintains EECBP is not a designer.
Belgian Appeals Court Voids Ban On FATCA Data Transfers - Natalie Olivo, Law360 Tax Authority ($). "A Belgian appeals court on Wednesday annulled a decision from the country's data protection authority, which had restricted the transfer of financial information about certain Americans to U.S. tax authorities under the Foreign Account Tax Compliance Act."
The World’s Most Complicated Tax System Just Got Easier - Samantha Pearson, Wall Street Journal (talking about Brazil here):
The constitutional amendment passed by Congress, which consolidates five levies into a single value-added tax, comes after years of failed attempts to streamline what the World Bank has ranked as the world’s most complicated tax system. It takes a company on average more than 1,500 hours a year to comply with the national tax code, five times Latin America’s average and more than in any of the 190 countries tracked.
Things are going to get worse before they get better, tax experts said. The law will be phased in over eight years starting in 2026, with some changes scheduled to take 50 years to fully take effect. By 2033, companies should see at least a 50% reduction in the number of hours they have to spend paying taxes, said Marcus Vinícius Gonçalves, head of tax at KPMG in Brazil.
Nearly 5 million taxpayers to get $1 billion in IRS penalty relief due to COVID-paused tax notices - Kay Bell, Don't Mess With Taxes. "The IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills starting in February 2022. And although these reminder notices were suspended, the failure-to-pay penalty continued to accrue for the taxpayers who did not fully pay their bills in response to the initial balance due notice."
Supreme Court Moore Case - Conservatives Dismiss Founding Era Opinion - Peter Reilly, Forbes. "Amy Howe of SCOTUSblog in Oral argument suggests narrow ruling to uphold disputed tax indicates a general feeling among those who listened to the oral arguments that the justices are unlikely to make a really earth shaking decision one way or the other. I spoke with Sandy Christopher, a partner in the private client and tax team of Withers who agreed that the oral arguments seemed to be leaning toward a narrow ruling."
The Latest on the Global Tax Agreement - Daniel Bunn and Sean Bray, Tax Policy Blog. "The structure of the rules means adoption in the 27 EU countries, Japan, Korea, the United Kingdom, and a number of other significant jurisdictions will dramatically impact multinationals across the globe. It also creates pressure for other countries to adopt some version of the rules or make other changes to their tax codes."
Related: Eide Bailly International Tax Structuring.
Return preparer and former owner of national tax preparation franchise sentenced to prison for evading his own taxes - IRS (defendant name omitted):
A Georgia man was sentenced today to two years in prison for evading his personal federal income taxes.
According to court documents and statements made in court, from 1999 to 2021, Defendant, of Statesboro, was a tax return preparer at a national return preparation business. In 2015, Defendant purchased a franchise of the business in Claxton, Georgia. As the owner, he hired, trained and supervised tax preparers, while continuing to prepare returns for customers. Defendant nevertheless evaded his own income taxes by, among other things, filing false returns for 2015 through 2017 that omitted over $1.28 million in income – including almost $1.18 million from his business, S&W Amusements, a company that placed coin-operated amusement machines in convenience stores and gas stations. In total, Defendant caused a tax loss to the IRS of approximately $550,000.
Not everyone gets to blame their tax problems on a hired preparer.
Cheaper Shipping Sinks Untimely Tax Court Petition - Chandra Wallace, Tax Notes ($). "In a December 20 memorandum opinion in Nguyen v. Commissioner, Judge Albert G. Lauber dismissed the 998-page petition submitted by Dzuy Nguyen and Jessica Thai — which arrived one day after the filing deadline prescribed by section 6213(a) — as outside the Tax Court’s statutory jurisdiction."
998 pages of work down the drain. By comparison, one edition of "War and Peace" weighs in at 855 pages. Still, with over $2.5 million in deficiencies and nearly $2 million more in penalties at stake, the fight was worth some effort. Why did the filing fail? It has to do with the rules for using "authorized private delivery services" for tax filings.
The tax law "mailbox rule" treats a document as timely-filed if it has a post office postmark on or before the due date. That is why tax pros recommend the use of certified mail, so the filer has proof of filing if the IRS loses the postmark.
The IRS over the years has extended the mailbox rule to filings with certain private delivery services - but only certain ones. That's where the taxpayers foot-faulted. Tax Court Judge Lauber explains (citations omitted, emphasis added):
Petitioners did not send their Petition to the Court by U.S. mail, but rather used FedEx, a private delivery service...
The IRS has published a list of all private delivery services that have been designated by the Secretary for purposes of section 7502. This list includes certain forms of delivery made available by FedEx, but not FedEx Ground, the delivery service petitioners used. Notice 2016-30, 2016-18 I.R.B. at 676, specifically states that “FedEx . . . [is] not designated with respect to any type of delivery service not enumerated in this list.” Because petitioners did not use a “designated delivery service” as defined by section 7502, they are unable to avail themselves of the “timely mailed, timely filed” rule.
Petitioners do not dispute that their Petition was filed after the 90-day period specified in section 6213(a), nor do they dispute that FedEx Ground is not on the list of private delivery services that have been “designated by the Secretary.” Rather, they contend that FedEx Ground is “substantially identical” to “FedEx 2-Day,” a delivery service that has been designated by the Secretary for purposes of section 7502. On the basis of this asserted similarity between the two delivery services, petitioners contend that the “timely mailed, timely filed” rule should be available to them.
Unfortunately we must disagree. FedEx Ground may well be substantially similar to the FedEx 2-Day delivery service. But this Court may not rely on general equitable principles to expand the statutorily prescribed time for filing a petition
Not a good result. But we can take some lessons from this.
1. If you can e-file, do so. You get almost instant verification of your filing and you don't have to carry a bunch of paper to the post office or the Fed-Ex Store.
2. If you absolutely have to paper file, the first choice is the USPS Certified Mail, Return Receipt requested. For under $10, you can walk away with a postmark showing timely-filing and you then get a postcard showing that the mailing was received.
3. If you are so last-minute that the post office is closed when you are ready to ship on the deadline, use a private delivery service - but make sure you buy a service level one on the IRS list. Send it to the proper street address, as private delivery services cannot drop off at IRS post office boxes. And save your shipping documents.
Since it's a short day, you don't miss much if you stay in bed all day, and you won't have to make it. Today marks the Winter Solstice, the day of the year with the least sunlight in the Northern Hemisphere. It is also, coincidentally, Don't Make Your Bed Day.
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