Tax News & Views Go Golf Roundup

The IRS spent about $6.9 billion of its additional funding from the 2022 tax-and-climate law through the third quarter, the agency watchdog said in a report Thursday.

Almost 12% of the nearly $58 billion the agency received from the so-called Inflation Reduction Act was expended as of June 30, the Treasury Inspector General for Tax Administration said.

About 2.8 million taxpayers withdrew $12.9 billion early from retirement accounts, but most failed to pay the 10 percent tax penalty or claim an exception, according to an agency watchdog.

In a report dated September 30 and released October 3, the Treasury Inspector General for Tax Administration found that taxpayers could be subject to nearly $1.29 billion in additional taxes for the 10 percent tax that applies to early distributions under section 72. Any distribution made before the age of 59-1/2 from a qualified retirement plan is assessed 10 percent additional tax, except under certain circumstances.

The explosion of sports betting has meant billions of dollars in revenue for gaming operators, but the IRS is leaving big money on the table, a government watchdog found.

A Treasury Inspector General for Tax Administration review of roughly 43 million forms during tax years 2018 through 2020, totaling about $156 billion issued to taxpayers, found about 150,000 individuals who won over $15,000 but didn’t file a tax return on those earnings, a new Thursday report said. In response to the review, the IRS determined it could potentially increase tax revenue by about $1.4 billion by addressing some of those individual nonfilers’ winnings.

The Internal Revenue Service announced today that Direct File will be available for the 2025 tax filing season in double the number of states than last year’s pilot, and it will cover a wider range of tax situations, greatly expanding the number of taxpayers eligible to use the free e-filing service.

State and eligibility expansion
For the 2025 tax filing season, eligible taxpayers in 24 states will be able to use Direct File: 12 states that were part of the pilot last year, plus 12 new states where Direct File will be available in the upcoming filing season.

During the pilot last year, Direct File was available in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State and Wyoming. For the 2025 tax filing season, Direct File will also be available in Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania and Wisconsin.

In 2025, more than 30 million taxpayers in those 24 states will be eligible to use Direct File. Additional states could still join Direct File in 2025, and several states have expressed interest or announced that they will participate in Direct File in 2026.

In addition to doubling the number of states where Direct File will be available, the service will also cover a wider range of tax situations for the 2025 filing season. During the pilot last year, Direct File covered limited tax situations, including wage income reported on a W-2 form, Social Security income, unemployment compensation and certain credits and deductions. For the 2025 filing season, Direct File will support 1099’s for interest income greater than $1,500, retirement income and the 1099 for Alaska residents reporting the Alaska Permanent Fund dividend.

The Department of the Treasury and the Internal Revenue Service today issued guidance addressing long-term, part-time employees in 403(b) retirement plans under the SECURE 2.0 Act, which applies to 403(b) plans beginning in 2025. These plans are similar to 401(k) plans but are generally for employees of charities and public schools.

Notice 2024-73 PDF includes a question-and-answer section on the application of the nondiscrimination rules for 403(b) plans with respect to long-term, part-time employees, including application of the rules to permitted exclusions from participation for part-time employees and student employees. The notice informs the public that the Treasury Department and the IRS plan to issue additional guidance with respect to section 125 of the SECURE 2.0 Act, including proposed regulations with respect to the rules in today’s notice.

The notice also announces that the final regulation the Treasury Department and the IRS plan to issue for 401(k) plans on long-term, part-time employees will apply no earlier than to plan years beginning on or after Jan. 1, 2026. A proposed regulation related to the rules for long-term, part-time employees in 401(k) plans was issued on Nov. 27, 2023.

Long-term part-time (LTPT) employees can be excluded from some nondiscrimination testing under tax-exempt employers’ retirement plans starting in 2025.
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In Notice 2024-73, 2024-43 IRB 1, released October 3, the IRS addressed nondiscrimination rules under section 403(b)(12) for Employee Retirement Income Security Act LTPT employees in plans for tax-exempt organizations. The IRS mandates nondiscrimination testing to verify that employee benefit plans are fair and accessible to eligible employees. Employers who don’t comply may incur IRS penalties or be required to pay taxes on the benefits.

WASHINGTON — The Internal Revenue Service today announced disaster tax relief for individuals and businesses in the Confederated Tribes and Bands of the Yakama Nation in Washington state affected by wildfires that began on June 22, 2024.

Affected taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS and Treasury should state that the general principles for research and development amortization apply to projects involving artificial intelligence and machine learning, according to the Tax Executives Institute.
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“AI and machine learning efforts involve more modeling than writing code, but the distinction can sometimes be murky. However, for purposes of the analysis under section 174, the distinction should not matter,” the letter said.