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Archive for Peter J. Scalise

The IRS Extends The Transition Period For Enhanced R&D Tax Credit Reporting Requirements

The IRS Extends The Transition Period For Enhanced R&D Tax Credit Reporting Requirements

On Friday, September 30th the Internal Revenue Service (the “Service”) set forth administrative guidance indicating that it is extending the transition period during which taxpayers are required to adhere to the much more arduous and onerous R&D Tax Credit reporting requirements in connection to amending tax returns within open statute years for R&D Tax Credit claims for refund. This new transition period has now been extended through January 10th of 2024 in which taxpayers are afforded a full 45 days to perfect a R&D Tax Credit claim for refund with reporting deficiencies prior to the Service’s final determination on the claim.

It should be duly recalled under previous administrative authority issued by the Service in 2021 that went into effect earlier this year on January 10th of 2022 taxpayers filing a valid R&D Tax Credit claim for refund under I.R.C. § 41 must provide, at a minimum, five essential pieces of contemporaneous documentation including:

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The IRS Issues Revised Audit Technique Guide For Cost Segregation Analysis

The IRS Issues Revised Audit Technique Guide For Cost Segregation Analysis

On June 9th, the Internal Revenue Service (hereinafter the “Service”) issued a revised Audit Technique Guide to assist examining agents in evaluating the validity of cost segregation studies submitted by taxpayers to substantiate accelerated depreciation deductions. These far reaching updates were needed due to the vast changes in the tax laws over recent years in connection to the Protecting Americans from Tax Hikes Act of 2015; the Tax Cuts and Jobs Act of 2017; the Coronavirus Aid, Relief, and Economic Security Act of 2020; the Consolidated Appropriations Act of 2020; and of course revised guidance based upon examining agents observations from recent cost segregation examinations on what is deemed acceptable qualitative and quantitative procedures in order to get to a tax return filing position per Circular 230.  Just some of the many sweeping updates are in connection to I.R.C. § 263A, Change of Accounting Method, I.R.C. § 179 Deduction, I.R.C. § 179D Deduction, Bonus Depreciation, and Qualified Improvement Property.

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Tax Research Methodology: A Guide To Tax Research Techniques

Peter J Scalsie - Tax Research Methodology

Introduction – Tax Research Methodology

In order to properly optimize your accounting firm’s overall efficiency, efficiency, effectiveness, and productivity in connection to researching and resolving a tax issue and determining the sustainability of the tax return filing position per Circular 230, the appropriate tax research processes must be meticulously designed, implemented, and executed. The subsequent comprehensive steps will guide you in establishing an all-inclusive tax research effort on behalf of your entire client base while properly ascertaining the likelihood of success should a tax position(s) taken on a tax return be challenged by the Internal Revenue Service (hereinafter the “Service”) upon examination.

Establish The Facts And Circumstances

The first step in the tax research process is to establish all the facts and circumstances provided by your client in order to determine which tax laws apply to your client’s fact pattern. At this initial stage, it is imperative not to omit nor overlook any of your client’s facts and circumstances whether appearing material or immaterial. Always be guided by the axiom that facts and circumstances appearing to be immaterial individually may, in fact, be material in the aggregate.

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Tax Research Methodology: A Practical Guide To Perfecting Your Tax Research Techniques

Tax Research Methodology: A Practical Guide To Perfecting Your Tax Research Techniques

Introduction – Tax Research Methodology

In order to properly optimize your accounting firm’s overall efficiency, effectiveness, and productivity in connection to researching and resolving a tax issue and determining the sustainability of the tax return filing position per Circular 230, the appropriate tax research processes must be meticulously designed, implemented, and executed. The subsequent comprehensive steps will guide you in establishing an all-inclusive tax research effort on behalf of your entire client base while properly ascertaining the likelihood of success should a tax position(s) taken on a tax return be challenged by the Internal Revenue Service (hereinafter the “Service”) upon examination.

Establish The Facts And Circumstances

The first step in the tax research process is to establish all the facts and circumstances provided by your client in order to determine which tax laws apply to your client’s fact pattern. At this initial stage, it is imperative not to omit nor overlook any of your client’s facts and circumstances whether appearing material or immaterial. Always be guided by the axiom that facts and circumstances appearing to be immaterial individually may, in fact, be material in the aggregate.

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New Administrative Authority Governing Valid R&D Tax Credit Claims For Refunds Must Include Five Essential Pieces

New Administrative Authority Governing Valid R&D Tax Credit Claims For Refunds Must Include Five Essential Pieces

Federal Tax Alert: New Administrative Authority Governing Valid R&D Tax Credit Claims For Refunds Must Include Five Essential Pieces of Contemporaneous Documentation

On Monday, January 3rd of 2022 the Internal Revenue Service (hereinafter the “Service”) issued interim administrative authority in connection to R&D Tax Credit claims for refund. As set forth pursuant to this memorandum, effective January 10th of 2022 taxpayers filing a valid R&D Tax Credit claim for refund under I.R.C. § 41 must provide, at a minimum, five essential pieces of contemporaneous documentation including:

  • Identify all the business components that form the factual basis of the R&D tax credit claim for the claim year (i.e., Business Components as statutorily defined under I.R.C. § 41(d)(2)(B) must be identified);
  • All research activities performed by business component (i.e., this must include a description of what the taxpayer did, and how they did it, by business component. It does not need to describe the four-part test under IRC § 41(d)(1) in detail. Language that simply restates the requirements under the Code or Treasury Regulations is insufficient);
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The IRS Issues Revised R&D Tax Credit Instructions

The IRS Issues Revised R&D Tax Credit Instructions

On December 15th, the Internal Revenue Service issued an early release draft of instructions for IRS Form 6765 entitled “Credit for Increasing Research Activities”, to properly reflect legislation regarding the determination of qualified wages that impacts Lines 5 and 24 from the December of 2020 revision.

It should be duly recalled, pursuant to legislation enacted in December of 2020, wages for qualified services do not include:

  • Wages paid to or incurred for any employee after December 31, 2020 and before July 1, 2021, if the employer uses the same wages to claim the Employee Retention Credit (“ERC”) on an employment tax return such as IRS Form 941 entitled “Employer’s Quarterly Federal Tax Return”; and
  • Wages paid to or incurred for any employee generally after December 27, 2019 and before April 17, 2021, if the employer uses the same wages to claim the 2020 qualified disaster ERC on IRS Form 5884-A entitled “Employee Retention Credit for Employers Affected by Qualified Disasters”.

As a reminder, do not file draft forms and do not rely on draft forms, instructions, and / or publications for filing until finalized by the Service. The draft instructions for IRS Form 6765 can be reviewed at https://www.irs.gov/pub/irs-dft/i6765–dft.pdf The Service is also currently accepting comments in connection to the draft instructions at https://www.irs.gov/forms-pubs/comment-on-tax-forms-and-publications All tax filing forms and instructions are expected to be finalized by the Service before the end of January 2022.

Have a question on R&D Tax Credits? Contact Peter J Scalise.

An Industry Spotlight on Philanthropy: The Accounting Industry Leadership Council’s Journey To End Alzheimer’s Disease

Giving Tuesday

Every year, on the Tuesday after Thanksgiving, people take the time to celebrate the kick-off to the holiday season by giving back to their community and supporting philanthropy now fondly known as “Giving Tuesday” which falls this year on November 30th.

The Alzheimer’s Association Accounting Industry Leadership Council (hereinafter the “Council”) was established in January of 2020, immediately before the COVID-19 pandemic was about to unfold worldwide. Regardless of these daunting circumstances, the Council moved forward with its mission to bring the accounting profession together as one to end Alzheimer’s and all dementias.

As a philanthropist committed to giving back to my community and to my profession, I co-founded the Council with Rob Lucas, Director of Corporate Initiatives for the Alzheimer’s Association. While serving as the Chairman for the Alzheimer’s Association Manhattan Walk to End Alzheimer’s signature fundraising event at the historic South Street Seaport District, I recommended a strategy for bringing industry sectors together as one to raise significant funds collectively to make a greater impact to support the mission of the Alzheimer’s Association.

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A Legislative Update From Capitol Hill On The Federal-Level R&D Tax Credit Program

A Legislative Update From Capitol Hill On The Federal-Level R&D Tax Credit Program

On Friday, November 19th the House of Representatives narrowly passed the Build Back Better Act, H.R. 5376, by a vote of 220 to 213. The bill encompasses a wide range of budget and spending provisions in connection to significant tax law reform as well as funding for mitigating climate change, expanded health care, housing, education, childcare amongst many other provisions. As the Senate now prepares to negotiate a final deal on this legislation several leading Democrats indicated that a bilateral agreement on the reconciliation bill was likely to include a plan to continue for the full expensing treatment for R&D expenditures through December 31st of 2025 and to delay the amortization requirements of such expenditures until January 1st of 2026.

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New Administrative Authority Issued Governing Requirements For Valid R&D Tax Credit Claims

New Administrative Authority Issued Governing Requirements For Valid R&D Tax Credit Claims

On October 15th, the Internal Revenue Service (hereinafter the “Service”) has set forth additional information that taxpayers will be required to include for a R&D tax credit claim for refund to be considered valid. It should be duly noted that while the statutory authority under I.R.C. § 41 and its corresponding treasury regulations already outline the required statutory and administrative authority to get to a tax return filing position under Circular 230 for a R&D Tax Credit refund claim to be valid, the Service decided that additional administrative authority is warranted to improve the tax administration procedures with clearer instructions for eligible taxpayers to claim the R&D tax credit while reducing the number of disputes over such claims.

Successful tax administration entails ensuring taxpayers truly understand what is required to support the claim for the R&D tax credit. Each year, the Service receives tens of thousands of R&D tax credit claims for credits in the aggregate totaling hundreds of millions of dollars from business entities and individual taxpayers. The Service is currently examining a substantial number of R&D tax credit cases which consume considerable resources from both the Service and our judicial system as many disputes are settled in District Court or Tax Court.

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Tax Aspects Of The Further Consolidated Appropriations Act Of 2020

PETER J SCALISE - Consolidated Appropriations Act of 2020

Introduction

On Friday, December 20th of 2019, President Donald J. Trump signed into law:

  • H. R. 1158, entitled the “Consolidated Appropriations Act, 2020,” which divisions A through D of the enrolled bill provides full-year funding through September 30, 2020, for projects and activities of certain agencies of the Federal Government; and
  • H. R. 1865, entitled the “Further Consolidated Appropriations Act, 2020,” which Divisions A through H of the enrolled bill provides full-year funding through September 30, 2020, for projects and activities of the remaining agencies of the Federal Government.

Both H.R. 1158 and H.R. 1865 (hereinafter “the new Act”) averted a government shutdown that would have commenced on December 21, 2019 without this sweeping $ 1.4 trillion spending package being passed into law. Most of the new Act outlines how the government will appropriate the federal budget funding across numerous departments and programs including, but not limited to, the Department of Defense; Department of Transportation; Department of Labor; Department of the Interior; and of course, the Department of Treasury.

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A Practical Guide To Perfecting Your Tax Research Techniques

PeterJScalise

Tax Research Methodology: A Practical Guide to Perfecting Your Tax Research Techniques and Achieving Sustainable Tax Return Filing Positions for the Upcoming 2020 Tax Season and Beyond!

Introduction

In order to properly optimize your accounting firm’s overall efficiency, effectiveness, and productivity in connection to researching and resolving a tax issue and determining the sustainability of a tax return filing position per Circular 230, the appropriate tax research processes must be meticulously designed, implemented, and executed.

The subsequent five practical steps will guide you in establishing and sharpening your 20/20 vision as it relates to reviewing your tax research methodology through an all-inclusive lens in time for the 2020 tax season while properly ascertaining the likelihood of success should a tax position taken on a tax return be challenged by the Internal Revenue Service (hereinafter the “Service”) upon examination.

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Breaking News! IRS Issues New Administrative Authority Governing The Tax Treatment Of Depreciation

Peter J Scalise - Tax Treatment on Depreciation

On December 21st of 2018, the Internal Revenue Service (hereinafter the “Service”) issued new administrative guidance in the form of Rev. Proc. 2019-08 governing expense deductions and depreciation measures in connection to real property as enacted by the 2017 Tax Cuts and Jobs Act, Pub. L. No. 115-97, (hereinafter the “TCJA”’). It should be duly recalled, the TCJA enacted the subsequent tax law amendments including, but not limited to:

  • I. R.C. § 179 by modifying the definition of “Qualified Real Property” that may be eligible as I.R.C. § 179 property pursuant to I.R.C. § 179(d)(1);
  • I. R.C. § 168 by requiring certain property held by an electing real property trade or business and reducing the recovery period under the Alternative Depreciation System (hereinafter “ADS”) from 40 years to 30 years for commercial residential real estate property; and
  • I. R.C. § 168 by requiring certain property held by an electing farming business to be depreciated under the ADS.

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