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IRS Issues Frequently Asked Questions Related To The Tax Treatment Of Work-Life Referral Services Provided To Employees

IRS Issues Frequently Asked Questions Related To The Tax Treatment Of Work-Life Referral Services Provided To Employees

The Internal Revenue Service issued frequently asked questions (FAQs) in Fact Sheet 2024-13 related to the tax treatment of work-life referral services provided to employees under an employer’s work-life referral program.

A work-life referral program is an employer-funded fringe benefit that provides work-life referral services to eligible employees.

Work-life referral services are restricted to informational and referral consultations that assist employees with identifying, contacting and negotiating with life-management resources for solutions to a personal, work or family challenge. For example, choosing a suitable child or dependent care program, connecting with a local retirement or financial planner or navigating eligibility for government benefits.

The FAQs released today clarify that, under certain circumstances, the value of work-life referral services provided to employees through a work-life referral program can be excluded from income and employment taxes as de minimis fringe benefits.

IRS-FAQ

IR-2024-110

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IRS: High-Income Filers Vulnerable To Illegal Tax Schemes

IRS: High-Income Filers Vulnerable To Illegal Tax Schemes

As part of the Dirty Dozen campaign, the Internal Revenue Service warned wealthy individuals about three tax traps designed for them by dishonest promoters and shady tax practitioners.

For those with high incomes, they can be tempting targets for a variety of schemes and aggressive tax strategies designed to reduce taxes. These can take many different forms, ranging from inflated art donation deductions to aggressive charitable remainder annuity trusts and detailed shelters that maneuver to delay paying gains on property.

“High-income taxpayers can be vulnerable to being pulled into these aggressive schemes and scams,” said IRS Commissioner Danny Werfel. “Taxpayers should be extra careful on tax maneuvers that seem too good to be true. Beware of advertisements for seemingly ideal tax structures that distort tax laws and leave victims with civil or criminal tax penalties.”

“There’s growing risk for taxpayers pulled into aggressive schemes as the IRS continues to accelerate and expand our compliance work involving high-income individuals,” Werfel added. “The IRS reminds taxpayers that relying on an independent tax or legal professional can help avoid problems with aggressive promoters.”

This marks the tenth day of the special Dirty Dozen series. The annual Dirty Dozen list comprises a list of scams and schemes that can put taxpayers and tax professionals at risk. The list is not a legal document nor a formal enforcement priority. The education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes.

Improper Art Donation Deductions

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IRS Selects 12 New IRSAC Members For 2024

IRS Selects 12 New IRSAC Members For 2024

WASHINGTON — The Internal Revenue Service announced the appointment of 12 new members to the Internal Revenue Service Advisory Council.

The IRSAC, established in 1953, is an organized public forum for IRS officials and representatives of the public to discuss a broad range of issues in tax administration. The Council provides the IRS and agency leaders with relevant feedback, observations and recommendations. It will submit its annual report to the agency at a public meeting in November 2024.

The IRS strives to appoint members to the IRSAC who represent the taxpaying public, the tax professional community, small and large businesses, tax exempt and government entities and information reporting interests.

The following individuals were appointed to serve three-year terms on the council beginning this month:

Robert Barr – vice president of business engineering, CGI Federal, Dallas, Texas. Barr has led digital transformations for both public and private sector organizations, including the South Carolina Department of Revenue, Intuit, Dell, Blockbuster and USAA. He also served as the Internal Revenue Service Assistant Commissioner for Electronic Tax Administration where he branded IRS e-file and the Electronic Federal Tax Payment System (EFTPS), established the National Accounts Program, enabled credit card payment of taxes and digital signing and other initiatives. Barr formerly served on the Commissioner’s Advisory Group, the Information Reporting Program Advisory Committee and the Electronic Tax Administration Advisory Committee.

Andrew Bloom – head of tax strategy, Golub Capital, based in Northern Virginia. Bloom advises on tax issues for investors, general partners, large partnerships, foreign corporations and business development companies as a Securities and Exchange Commission (SEC) registered investment advisor and international asset manager. He also manages substantive tax issues, including investment fund structuring, financial product planning, international tax planning, Fixed, Determinable, Annual, Periodical (FDAP) and Foreign Account Tax Compliance Act (FATCA) withholding and tax treaty planning and compliance. Previously, he was a partner at Dechert LLP in New York.

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IRS New Initiatives Using Inflation Reduction Act Funding To Ensure Complex Partnerships, Large Corporations Pay Taxes Owed

More than $482 million recovered from 1,600 millionaires who have not paid tax debts 
IRS ramps up new initiatives using Inflation Reduction Act funding to ensure complex partnerships, large corporations pay taxes owed, continues to close millionaire tax debt cases.
More than $482 million recovered from 1,600 millionaires who have not paid tax debts

WASHINGTON — The Internal Revenue Service announce continued progress to expand enforcement efforts related to high-income individuals, large corporations and complex partnerships as part of wider efforts to transform the agency.

IRS Commissioner Danny Werfel noted Inflation Reduction Act resources continue to help in a variety of areas. In addition to earlier announcements focusing on further improving taxpayer service during the upcoming 2024 filing season, the IRS has focused IRA resources on strengthening enforcement to pursue complex partnerships, large corporations and high-income, high-wealth individuals who do not pay overdue tax bills.

The IRS shared today progress in its focus on people using partnerships to avoid paying self-employment taxes as well as new details on current enforcement priorities. The IRS is also continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt, with an additional $360 million collected on top of the $122 million reported in late October. The IRS has now collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with work continuing in this area.

“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act. We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” Werfel said. “At the same time, we are focused on improving our taxpayer service for hard-working taxpayers, offering them more in-person and online resources as part of our effort to deliver another successful tax season in 2024. The additional resources the IRS has received is making a difference for taxpayers, and we plan to build on these improvements in the months ahead.”

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IRS Expands Work On Aggressive Employee Retention Credit Claims; 20,000 Disallowance Letters Being Mailed

IRS Expands Work On Aggressive Employee Retention Credit Claims; 20,000 Disallowance Letters Being Mailed

IRS Expands Work On Aggressive Employee Retention Credit Claims; 20,000 Disallowance Letters Being Mailed, More Action And Voluntary Disclosure Program Coming

 As part of continuing efforts to combat dubious Employee Retention Credit (ERC) claims, the Internal Revenue Service is sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims. IRS is disallowing claims to entities that did not exist or did not have paid employees during the period of eligibility to prevent improper ERC payments from being made to ineligible entities.

The letters are being sent as the IRS continues increased scrutiny of ERC claims in response to misleading marketing campaigns that have targeted small businesses and other organizations. The IRS mailing is the latest in an expanded compliance effort that includes a special withdrawal program for those with pending claims who realize they may have filed an inaccurate tax return. Later this month, a separate voluntary disclosure program will be unveiled allowing those who received questionable payments to come in and avoid future IRS action.

After an initial review this fall, the IRS determined that a large block of taxpayers did not meet basic criteria for the credit. Starting this week, taxpayers who are ineligible for the credit will begin receiving copies of Letter 105 C, Claim Disallowed.

This group of letters will cover taxpayers ineligible for the ERC either because their entity did not exist or did not have employees for the time period when the credit was claimed.

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IRS Announces 2023 Form 1099-K Reporting Threshold Delay For Third Party Platform Payments

IRS Announces 2023 Form 1099-K Reporting Threshold Delay For Third Party Platform Payments 
IRS Announces 2023 Form 1099-K Reporting Threshold Delay For Third Party Platform Payments; Plans For A $5,000 Threshold In 2024 To Phase In Implementation

Following feedback from taxpayers, tax professionals, and payment processors and to reduce taxpayer confusion, the Internal Revenue Service delayed the new $600 Form 1099-K reporting threshold requirement for third party payment organizations for tax year 2023 and is planning a threshold of $5,000 for 2024 to phase in the new law.

Third party payment organizations include many popular payment apps and online marketplaces.

The agency is making 2023 another transition year to implement the new requirements under the American Rescue Plan that changed the Form 1099-K reporting threshold for payments taxpayers get selling goods or providing a service over $600. The previous reporting thresholds will remain in place for 2023.

What This Means

This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

This phased-in approach will allow the agency to review its operational processes to better address taxpayer and stakeholder concerns.

Taxpayers should be aware that while the reporting threshold remains over $20,000 and 200 transactions for 2023, companies could still issue the form for any amount.

It’s important to note that the higher threshold does not affect the actual tax law to report income on your tax return. All income, no matter the amount, is taxable unless it’s excluded by law whether a Form 1099-K is sent or not.

Who Gets The Form

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Commissioner Werfel Letter On Audit Disparity Issues In Areas Such As The Earned Income Tax Credit

Commissioner Werfel Letter On Audit Disparity Issues In Areas Such As The Earned Income Tax Credit

Text of the Sept. 18, 2023, letter IRS Commissioner Werfel shared with the members of Congress PDF updating them on agency enforcement efforts and efforts to address audit disparity issues in areas such as the Earned Income Tax Credit.

The following is the text of a letter sent to members of Congress on Sept. 18, 2023 by IRS Commissioner Danny Werfel updating them on agency enforcement efforts and efforts to address audit disparity issues in areas such as the Earned Income Tax Credit. Following the one-year anniversary of enactment of the Inflation Reduction Act (IRA) and my sixth months as Commissioner, I am writing to update you on our ongoing efforts to rebalance the IRS’ enforcement activities. The investment of resources under the IRA represents a generational opportunity for the IRS to refocus our energy on closing the tax gap by ensuring efficient and effective tax administration. This rebalancing effort centers around high-income and high-wealth individuals, complex partnerships, and large
corporations who are not paying the taxes they legally owe, as well as any bad actors who victimize taxpayers.This effort also recognizes that the vast majority of taxpayers want to comply with tax law.
We aim to make this simpler and easier to do, while allowing taxpayers to interact with the IRS in the ways that work best for them. For the first time, and thanks to the new resources provided by the IRA, the IRS will help taxpayers identify mistakes before filing, quickly fix errors that delay their refunds, and claim the credits and deductions they are eligible for. Helping taxpayers get it right at the time of filing will reduce the need for the IRS to contact taxpayers through notices, correspondence audits, and other enforcement activities. To that end, the changes we are making benefit all Americans by promoting fairness and accuracy and protecting all taxpayers from scams and schemes. Following a top-to-bottom review of enforcement and in line with our Strategic Operating
Plan, IRS has begun announcing sweeping efforts to overhaul compliance efforts to improve tax administration. For example, IRS is intensifying collections activities that focus on high-income taxpayers with more than $250,000 in recognized tax debt. This builds off earlier successes that collected $38 million from more than 175 high-income earners this past spring. In addition, IRS staff are closely examining potential non-compliance among large, complex partnerships, including 75 of the largest partnerships in the U.S. identified as higher risk for tax compliance with the help of new AI tools as well as hundreds of partnerships with over $10 million in assets and balance sheet discrepancies. In the near term, we will be sharing details regarding our stepped-up activities to address noncompliance among large corporations. These changes, which leverage the IRA’s investment in modernized technology, expanded data science, and right sizing of our
workforce, will significantly improve the IRS’s ability to address the tax gap, which was projected to be $540 billion per year for 2017-2019.

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IRS To Establish Special Pass-Through Organization To Help With High-Income Compliance Efforts

IRS To Establish Special Pass-Through Organization To Help With High-Income Compliance Efforts

WASHINGTON — As work continues to focus more attention onto high-income compliance issues, the Internal Revenue Service announced plans today to establish a special area to focus on large or complex pass-through entities.

The new work unit will be housed in the IRS Large Business and International (LB&I) division. In addition, the new pass-through area will include the people joining the IRS under the new IRS hiring initiative announced last week. As part of larger transformation work underway at the IRS, the Internal Revenue Service last week announced the opening of more than 3,700 positions nationwide to help with expanded enforcement work focusing on complex partnerships, large corporations, and high-income and high-wealth individuals.

“This is another part of our effort to ensure the IRS holds the nation’s wealthiest filers accountable to pay the full amount of what they owe,” said IRS Commissioner Danny Werfel. “We are honing-in on areas where we believe non-compliance among our wealthiest filers has proliferated over the last decade of IRS budget cuts, and pass-throughs are high on our list of concerns. This new unit will leverage Inflation Reduction Act funding to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe. These efforts are consistent with our broader commitment to use Inflation Reduction Act dollars to end the era of historically low error rates for wealthy and large entities, while making sure middle- and low-income filers continue to see no change in audit rates for years to come.”

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IRS Warns Taxpayers Of Improper Art Donation Deduction Promotions

IRS Warns Taxpayers Of Improper Art Donation Deduction Promotions

The Internal Revenue Service today warned taxpayers to watch for promotions involving exaggerated art donation deductions that can target high-income filers and offered special tips for people to use to avoid getting caught in a scheme.

There are ways for taxpayers to properly claim donations of art. But some unscrupulous promoters may use direct solicitation to promise values of art that are too good to be true. These promoters persuade taxpayers, usually high-income taxpayers, to purchase the art, wait to donate the art and then take an incorrect deduction for the art donated. As part of a larger effort to increase compliance work on high-income individuals and corporations, and protect taxpayers from scams, the IRS has active promoter investigations and taxpayer audits underway in this area.

“Creativity in art is a beautiful thing, but aggressive creativity in art donation deductions can paint a bad picture for people pulled into these schemes,” said IRS Commissioner Danny Werfel. “This is another example where people should be careful when it comes to aggressive marketing and promotions. There are legitimate ways to claim an art donation, but taxpayers should be careful to understand the rules and watch out for inflated values or questionable appraisals. Beauty is not always in the eye of the beholder when it comes to tax deductions of art.”

The IRS is using a variety of compliance tools to combat abusive art donations through audits of tax returns and civil penalty investigations. The IRS reminds taxpayers, including high-income filers that may be targets of these schemes, to watch out for aggressive promotions. In addition, following Inflation Reduction Act funding, the IRS is focused on increasing compliance efforts on high-income and high-wealth individuals to ensure filers pay the right amount of tax owed.

How The Scheme Works

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IRS Focused On On High-Income, Partnerships, Corporations And Promoters Abusing Tax Rules On The Books

IRS Focused On On High-Income, Partnerships, Corporations And Promoters Abusing Tax Rules On The Books

IRS announces sweeping effort to restore fairness to tax system with Inflation Reduction Act funding; new compliance efforts focused on increasing scrutiny on high-income, partnerships, corporations and promoters abusing tax rules on the books.

Agency focus will shift attention to wealthy from working-class taxpayers; key changes coming to reduce burden on average taxpayers while using Artificial Intelligence and improved technology to identify sophisticated schemes to avoid taxes.
WASHINGTON — Capitalizing on Inflation Reduction Act funding and following a top-to-bottom review of enforcement efforts, the Internal Revenue Service announced today the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation’s tax laws.

The effort, building off work following last August’s IRA funding, will center on adding more attention on wealthy, partnerships and other high earners that have seen sharp drops in audit rates for these taxpayer segments during the past decade. The changes will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating, identify emerging compliance threats and improve case selection tools to avoid burdening taxpayers with needless “no-change” audits.

As part of the effort, the IRS will also ensure audit rates do not increase for those earning less than $400,000 a year as well as adding new fairness safeguards for those claiming the Earned Income Tax Credit. The EITC was designed to help workers with modest incomes. Audit rates of those receiving the EITC remain at high levels in recent years while rates dropped precipitously for those with higher income, partnerships and others with more complex tax situations. The IRS will also be working to ensure unscrupulous tax preparers do not exploit people claiming these important tax credits.
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IRS Reminder: Make Sure To Understand Recent Changes When Buying A Clean Vehicle

IRS Reminder: Make Sure To Understand Recent Changes When Buying A Clean Vehicle

The Internal Revenue Service reminded consumers considering an automobile purchase to be sure to understand several recent changes to the new Clean Vehicle Credit for qualified plug-in electric drive vehicles, including qualified manufacturers and tax rules.

The Inflation Reduction Act of 2022 (IRA) made several changes to the new Clean Vehicle Credit for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles. The IRA also added a new credit for previously owned and commercial clean vehicles.

Before taxpayers purchase a clean vehicle they should be sure that the vehicle was made by a qualified manufacturer. Taxpayers must also meet other requirements such as the modified adjusted gross income limits.

To be a qualified manufacturer, the manufacturer must enter into an approved agreement with the Internal Revenue Service and supply the IRS with valid vehicle identification numbers (VINs) that can later be matched at the time of filing to the VIN reported on the return.

When purchasing a new or used clean vehicle, purchasers should check if the make and model are eligible. In addition, for a new or used clean vehicle to be eligible for a Clean Vehicle Credit, the seller must provide the buyer with a seller report verifying that the vehicle purchased will qualify for the credit, which will include the make, model, and VIN.

Also, the clean vehicles tax credits are non-refundable, meaning that they can increase a refund or reduce the amount of tax owed, they cannot be used to create a tax refund.

The amount of tax owed will determine if the full amount or only a portion of the credit can be claimed.

For more information on these credits and other clean energy credits related to the Inflation Reduction Act, check Credits and Deductions Under the Inflation Reduction Act of 2022.

IR-2023-160

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IRS Reminds Tax Pros To Plan, Protect, Defend Against Identity Theft

IRS Reminds Tax Pros To Plan, Protect, Defend Against Identity Theft

Wrapping up a special awareness series, the Internal Revenue Service and the Security Summit partners urged tax pros to maintain robust security measures and take important steps to protect themselves and their taxpayer clients against identity theft.

Tax-related identity theft scams continue targeting tax professionals with a regular bombardment of scams and schemes that seek to gain access to sensitive taxpayer information. These schemes continue to evolve and ensnare victims, threatening both tax professionals and the clients they serve.

In today’s conclusion of the special five-part “Protect Your Client; Protect Yourself” series, the IRS and Summit partners urge tax professionals to take critical steps to protect their information, including taking extra care with how they handle data and security at their business and at home.

“Tax professionals form a central part of the tax community’s defense against identity thieves and cyberattacks,” said IRS Commissioner Danny Werfel. “Ensuring strong security at a tax practice – regardless of its size – will help protect not just the business, but also help safeguard individual taxpayers as well as state and federal tax agencies from fraud. The IRS and the Security Summit partners continue to urge tax professionals to take important steps to protect their clients and themselves from identity thieves.”
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