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Archive for IRS Notice

IRS Offers New Stricter Settlement For Micro-Captive Insurance Schemes; Offer Letters Being Mailed To Groups Under Audit

IRS Offers New Stricter Settlement For Micro-Captive Insurance Schemes; Offer Letters Being Mailed To Groups Under Audit

The Internal Revenue Service announced today a second time-limited settlement initiative for certain taxpayers under audit who participated in abusive micro-captive insurance transactions.

In the coming days, the IRS will begin sending settlement offers with terms that are stricter than the IRS’s first time-limited initiative started last year. This announcement occurs after the IRS recently deployed its 12 newly formed micro-captive examination teams to substantially increase the examinations of abusive micro-captive insurance transactions.

The IRS has decided to offer to resolve certain cases by requiring substantial concession of the income tax benefits claimed by the taxpayer together with penalties that can be partly mitigated if the taxpayer can demonstrate good faith, reasonable reliance on an independent, competent tax advisor and if the taxpayer can demonstrate it did not participate in any other reportable transactions.

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IRS Provides Guidance On Base Erosion And Anti-Abuse Tax

IRS On Base Erosion And Anti-Abuse Tax

The Internal Revenue Service issued final regulations  PDF providing additional guidance on the base erosion and anti-abuse tax (BEAT).

To limit profit-shifting, the Tax Cuts and Jobs Act (TCJA) added a new tax, the BEAT. The BEAT focuses on large U.S. corporations that make deductible payments to related foreign parties.

The final regulations provide detailed guidance regarding how to compute certain BEAT calculations for groups of related taxpayers. The final regulations also contain rules permitting taxpayers to waive deductions for purposes of the BEAT, and additional guidance regarding partnerships and anti-abuse rules.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

IR-2020-200

IRS Extends Economic Impact Payment Registration Deadline For Non-Filers To Nov. 21

IRS Extends Economic Impact Payment Registration Deadline For Non-Filers To Nov. 21

The deadline to register for an Economic Impact Payment using the Non-Filers tool is extended to November 21, 2020.

The IRS urges people who don’t typically file a tax return – and haven’t received an Economic Impact Payment – to register as quickly as possible using the Non-Filers: Enter Info Here tool on IRS.gov. The tool will not be available after November 21.

This additional time is solely for those who haven’t registered or received their EIP and don’t normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline is Thursday, October 15.

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IRS Issues Final Regulations For Achieving A Better Life Experience Accounts

IRS Issues Final Regulations For Achieving A Better Life Experience Accounts

The Internal Revenue Service posted to IRS.gov final regulations today for Achieving a Better Life Experience (ABLE) accounts.

The regulations issued today finalize two previously issued proposed regulations. The first proposed regulation was published in 2015 after the enactment of the ABLE Act. The second proposed regulation was published in 2019 in response to the Tax Cuts and Jobs Act, which made significant changes to ABLE accounts. 

Eligible individuals may now put more money into their ABLE account and roll money from their qualified tuition programs (529 plans) into their ABLE accounts. Also, certain contributions made to ABLE accounts by low- and moderate-income workers may now qualify for the Saver’s Credit.

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IRS Expands Enforcement Focus On Abusive Micro-Captive Insurance Schemes; Taxpayers Urged To Consult Tax Advisor

IRS Expands Enforcement Focus On Abusive Micro-Captive Insurance Schemes; Taxpayers Urged To Consult Tax Advisor

With the Oct. 15 deadline quickly approaching, the Internal Revenue Service  encouraged taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction.

The IRS encourages any taxpayer who has continued to engage in an abusive micro-captive insurance transaction to not anticipate being able to settle its transaction with the IRS or Chief Counsel on terms more favorable than previously announced settlement offers and that any potential future settlement initiative that the IRS may consider will require additional concessions by the taxpayer.

With this in mind, the IRS encourages taxpayers to consult an independent tax advisor if they participated in a micro-captive insurance transaction. These taxpayers should seriously consider exiting the transaction and not reporting deductions associated with abusive micro-captive insurance transactions, like many other taxpayers did who were contacted by the IRS in March and July 2020.  For those taxpayers that do not exit the transaction and continue taking such deductions, the IRS will disallow tax benefits from transactions that are determined to be abusive and may also require domestic captives to include premium payments in income and assert a withholding liability for foreign captives.  The IRS will also assert penalties, as appropriate, including the strict liability penalty that applies to transactions that lack economic substance.  The IRS Office of Chief Counsel is well prepared to defend these positions in Tax Court. 

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IRS Provides Final Regulations On Income Tax Withholding On Certain Periodic Retirement And Annuity Payments

IRS Provides Final Regulations On Income Tax Withholding On Certain Periodic Retirement And Annuity Payments

The U.S. Department of the Treasury and the Internal Revenue Service issued final regulations updating the federal income tax withholding rules for certain periodic retirement and annuity payments made after Dec. 31, 2020.   

Prior to the Tax Cuts and Jobs Act (TCJA), if no withholding certificate was in effect for a taxpayer’s periodic payments, the amount to be withheld from the payments was determined by treating the taxpayer as a married individual claiming three withholding exemptions. 

The TCJA amended this rule to provide that the rate of withholding on periodic payments when no withholding certificate is in effect (the default rate of withholding) would instead be determined under rules prescribed by the Secretary of the Treasury.

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IRS Finalizes Regulations For 100 Percent Bonus Depreciation

IRS Finalizes Regulations For 100 Percent Bonus Depreciation

The Treasury Department and the Internal Revenue Service today released the last set of final regulations PDF implementing the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service by the business.

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property (including used property) acquired and placed in service after September 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.

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IRS Reminds Taxpayers Of The Home Office Deduction Rules

IRS Reminds Taxpayers Of The Home Office Deduction Rules

During Small Business Week, September 22-24, the Internal Revenue Service wants individuals to consider taking the home office deduction if they qualify. The benefit may allow taxpayers working from home to deduct certain expenses on their tax return.

The home office deduction is available to qualifying self-employed taxpayers, independent contractors and those working in the gig economy. However, the Tax Cuts and Jobs Act suspended the business use of home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.

Qualifying For A Deduction

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IRS Finalizes Regulations For 100 percent Bonus Depreciation

IRS Finalizes Regulations For 100 percent Bonus Depreciation

The Treasury Department and the Internal Revenue Service released the last set of final regulations implementing the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service by the business.

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property (including used property) acquired and placed in service after Sept. 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.

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IRS Reminds Taxpayers And Practitioners Of Expedited Letter Ruling Procedures

IRS Reminds Taxpayers And Practitioners Of Expedited Letter Ruling Procedures

The Internal Revenue Service continues to look for ways to assist taxpayers affected by the COVID-19 pandemic.  As part of that effort, the IRS reminds taxpayers and tax practitioners of the procedures for requesting expedited handling of requests for letter rulings under Rev. Proc. 2020-1, 2020-1 I.R.B. 1 (Jan. 2, 2020).

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received.  A taxpayer with a compelling need to have a request processed more quickly may request expedited handling.  The request for expedited handling must be made in writing, preferably in a separate letter submitted with the letter ruling request.  Requests for expedited handling are granted at the discretion of the IRS and typically involve a factor outside of the taxpayer’s control that creates a real business need to obtain a letter ruling before a certain date in order to avoid serious business consequences.  Requests for expedited handling should be submitted as promptly as possible after the taxpayer has become aware of the deadline or compelling business need. 

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IRS Updates LB&I Examination Directive On Credit For Increasing Research Activities

IRS Updates LB&I Examination Directive On Credit For Increasing Research Activities

The IRS has revised guidance for examiners in the Large Business & International division (LB&I) reviewing the amounts claimed for the tax credit for increasing research activities.

The guidance to auditors issued today modifies a directive issued in 2017. The credit for increasing research activities (Internal Revenue Code § 41) enables taxpayers to receive a tax credit for qualified research activities (QREs).

Independently determining the correct amount of this research credit claimed by large corporate taxpayers can be resource intensive for those taxpayers and IRS examiners. This revised directive provides an efficient methodology for determining QREs for these taxpayers that meet the requirements of the updated directive.

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Final Regulations On Business Interest Expense Deduction Limitation Published In The Federal Register

Final Regulations On Business Interest Expense Deduction Limitation Published In The Federal Register

The final regulations for the business interest expense deduction limitation published in the Federal Register today. The final regulations vary slightly from the document released on IRS.gov on July 28, 2020.

The Treasury Department and the IRS released a version of the final regulations on the business interest expense deduction limitation on IRS.gov on July 28, 2020. The version released on IRS.gov contains a disclaimer that the document had been submitted to the Office of the Federal Register for publication, and notes that the version of the final regulations may vary slightly from the document published in the Federal Register.

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