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Archive for William Byrnes

Biden Administration Moving To Modify Tax Systems

Biden Administration Moving To Modify Tax Systems

(Tax Increase Alert Reposted)

Biden Administration Moving Full Steam Ahead To Modify The United States And International Tax Systems

The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ after-tax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns? 

Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021

President Biden’s tax proposals contain two major tax surprises.

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New IRS Guidance Nixes Tax-Free Exchange Treatment For Cryptocurrency Swaps

New IRS Guidance Nixes Tax-Free Exchange Treatment for Cryptocurrency Swaps

New IRS guidance has confirmed that pre-2018 exchanges of Bitcoin, Ether and Litecoin do not qualify for Section 1031 exchange treatment.  Prior to 2018, taxpayers were permitted to defer capital gains taxes under Section 1031 for certain exchanges of personal property (1031 is now limited only to exchanges of real property).  The IRS’s rationale is that these were not exchanges of like-kind property and so were taxable even prior to tax reform. The IRS found that Bitcoin and Ether each had special roles in cryptocurrency trading because if taxpayers wanted to trade in other types of virtual currency, they had to first exchange the other currency into or from Bitcoin or Ether.  Therefore, exchanges between Litecoin and Bitcoin/Ether did not qualify as “like kind”.

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Biden Administration Moving Full Steam Ahead To Modify The United States And International Tax Systems

Biden Administration Moving Full Steam Ahead To Modify The United States And International Tax Systems

The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ after-tax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns? 

Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021

President Biden’s tax proposals contain two major tax surprises.

First, Biden’s tax plans would make any capital gains tax hike retroactive to April 28, 2020. That means clients who have engaged in tax planning strategies to avoid higher rates might wind up subject to the higher rates regardless if this provision makes its way into the final proposal.

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International Information Return (IRR) And Assessment Of Penalties

National Taxpayer Advocate Discusses International Information Return (IRR) And Assessment Of Penalties

The National Taxpayer Advocate in her Fiscal Year 2022 report to Congress[13] recognized the importance of international information return (IIR) penalties in fostering voluntary tax compliance. However, the IRS’ systemic assessment of these penalties often produces excessively large penalties disproportionate to any underlying income tax liability. The IRS assesses IIR penalties on returns it considers to be filed late, but more than 55 percent of systemically assessed IRC §§ 6038 and 6038A penalties are abated because the returns were timely because reasonable cause relief was granted, or in situations where the failure-to-file penalty on the related Form 1120 or Form 1065 filing is abated under the First Time Abatement (FTA) provisions or the return has no tax due. Taxpayers and the IRS expend significant time, energy, and money addressing penalties that the IRS should not have assessed. Thus, these systemic assessments are ineffective in promoting taxpayer compliance and do not promote equity and fairness.

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Biden Administration And OECD Moving Full Steam Ahead Modifying The U.S. And International Tax Systems

Biden Administration And OECD Moving Full Steam Ahead Modifying The U.S. And International Tax Systems

The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ aftertax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns?

Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021

President Biden’s tax proposals contain two major tax surprises. First, Biden’s tax plans would make any capital gains tax hike retroactive to April 28, 2020. That means clients who have engaged in tax planning strategies to avoid higher rates might wind up subject to the higher rates regardless if this provision makes its way into the final proposal. Second, not only would the stepped-up basis rules be repealed, but taxpayers who inherit property would be required to recognize gain at the time of death—even if the individual doesn’t immediately sell the inherited property. In other words, the property could be immediately subject to both the estate tax and income or capital gains tax. Life insurance proceeds that will remain tax-free under the current proposals will be more valuable than ever in order to cover the tax payments.

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Maximizing Post-Pandemic Health Savings Accounts (HSA) Benefits

William Byrnes - Health Savings Accounts

HSAs and other tax-preferred health benefits have taken on a whole new meaning in the wake of the pandemic. It’s important that clients fully understand the rules so that they aren’t leaving valuable benefits on the table. In 2022, annual HSA contribution limits will rise to $3,650 for self-only coverage or $7,300 for family HDHP coverage. (HDHPs are health insurance plans that have a minimum annual deductible of $1,400 for self-only coverage ($2,800 for family coverage).

Taxpayers aged 55 and up can contribute an extra $1,000 per year. Taxpayers don’t have to fund an employer-sponsored HSA. Even if the client has been laid off or furloughed, clients with HDHP coverage can open an HSA at their bank and fund the account independently. Additionally, clients who have lost their jobs continue to have access to the funds in their old HSA, and can even transfer that HSA to a new provider. In other words, as long as the client remains covered by a HDHP, there is no “use it or lose it” rule. The funds simply roll over from year to year and continue to grow tax-free.

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Transfer Pricing And State Aid: The Unintended Consequences of Advance Pricing Agreements

Transfer Pricing And State Aid

An advance pricing agreement (APA) is a formal arrangement between a tax authority and a multinational enterprise (MNE) in which the parties jointly agree on the MNE’s transfer pricing methodology, estimated taxable income, and tax payments for a fixed period, thus reducing the likelihood of an income tax dispute. We argue that APAs, which were developed by governments to solve MNE-state problems in one realm (international taxation of related party transactions), have had unintended consequences for both parties due to the spillover impacts of APAs into other policy realms. We explore this argument in the European Union state aid cases where, in the context of competition policy, APAs can be viewed as hidden, discretionary policies that can be misused by lower-tier governments to attract or retain inward foreign direct investment by offering individual MNEs preferential tax treatment. Our paper contributes to this literature by analyzing the unintended consequences of APAs and recommending policy changes to reduce these negative spillovers.

Written By William Byrnes and Lorraine Eden, Texas A&M

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Affordable Care Act Likely To Withstand Latest Challenge

Affordable Care Act Likely To Withstand Latest Challenge

The U.S. Supreme Court recently heard oral arguments that will be instrumental in determining the fate of the Affordable Care Act.  Since the 2017 tax reform legislation reduced the individual mandate to $0, many challenged whether the ACA was constitutional–in other words, whether it could be considered a valid exercise of Congress’ power to tax.  Confirmation of new Supreme Court justice Amy Barrett created the real possibility that the ACA could be overturned.  However, after hearing oral arguments, two conservative justices–Roberts and Kavanaugh–indicated their support for severance.  If that happens, the individual mandate portion of the ACA would be severed from the remainder of the law.

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SBA Issues PPP Loan Necessity Questionnaires To PPP Loan Recipients

SBA Issues PPP Loan Necessity Questionnaires to PPP Loan Recipients

In a surprise move, the SBA has begun asking paycheck protection program (PPP) lenders to issue loan necessity questionnaires to recipients of loans of at least $2 million.  The questionnaires are detailed and request significant information, and were issued without warning or fanfare.  It’s expected that these information requests might be used in enforcement of PPP loan requirements or in determining eligibility for forgiveness.

According to the SBA, the forms will be used to evaluate whether a recipient’s loan was made necessary by economic uncertainty.  Information provided in the forms must be certified under threat of criminal action for false statements.  The questions essentially ask borrowers to certify actual detrimental economic impact.  Borrowers will also have to provide information about local Covid-19 shutdown orders, other CARES Act aid, financial information and compensation to highly compensated owners and employees.  Upon receipt, the borrower has only 10 days to complete the questionnaire and submit supporting documents.  For more information on the PPP loan program, visit Tax Facts Online.  Read More

Streamlined PPP Loan Forgiveness For Small Loans

WILLIAM BYRNES

Many small businesses that received Paycheck Protection Program (PPP) loans are now near or past the end of their “covered period”–meaning that it’s time to apply for loan forgiveness.  Determining eligibility for loan forgiveness is much more complex than expected.  The Small Business Administration (SBA) has released a streamlined application that can be used by business owners who borrowed $50,000 or less.

What do small business clients need to know about obtaining loan forgiveness under the paycheck protection program?

PPP loan forgiveness is determined based on how the small business client spent the loan proceeds. Importantly, at least 60 percent of the loan must be used for payroll costs (note that this 60 percent threshold was reduced from 75 percent under the CARES Act by the Paycheck Protection Program Flexibility Act (PPPFA), passed in early June 2020).

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Final Business Interest Regs Relax Definition of “Business Interest”

Final Business Interest Regs Relax Definition of “Business Interest”

The IRS has released final regulations and a new set of proposed regulations on the deduction for business interest, which was modified by the 2017 tax reform legislation.  The new proposed IRS regulations on the business interest expense implement many of the new CARES Act provisions designed to help small business owners in 2020 and future years. While the final regulations largely mirror earlier proposed rules, one significant change relaxes the previous definition of “business interest”.

Under the proposed regulations, interest included commitment fees, debt issuance costs, guaranteed payments and other “substitute” interest costs.  Under the final rules, commitment fees and debt issuance costs are excluded from the definition of interest.

Is business interest deductible when the business is a corporation?

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IRS Reminder On Tax Treatment of Unemployment Compensation

IRS Reminder On Tax Treatment of Unemployment Compensation

In response to the fact that an unprecedented number of Americans are currently claiming unemployment benefits, the IRS has issued a reminder that these benefits are fully taxable. However, the IRS reminds taxpayers that withholding is completely optional. Taxpayers can elect to have a flat 10% withheld from their unemployment compensation and paid over automatically to the IRS. For more information on the rules for making estimated payments, visit Tax Facts Online.

Must a taxpayer make estimated tax payments and what is the penalty for failure to make a required installment payment?

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