IRS Notice | TaxConnections

16 Aug 2023

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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Written by TaxConnections Admin | Posted in IRS Notice

10 Aug 2023

IRS Cautions Plan Sponsors To Be Alert To Compliance Issues Associated With ESOPs

As part of an expanded focus on ensuring high-income taxpayers pay what they owe, the Internal Revenue Service today warned businesses and tax professionals to be alert to a range of compliance issues that can be associated with Employee Stock Ownership Plans (ESOPs).

“The IRS is focusing on this transaction as part of the effort to ensure our tax laws are applied fairly and high-income filers pay the taxes they owe,” IRS Commissioner Danny Werfel said. “This means spotting aggressive tax claims as they emerge and warning taxpayers. Businesses and individual taxpayers should seek advice from an independent and trusted tax professional instead of promoters focused on marketing questionable transactions that could lead to bigger trouble.”

Werfel noted the IRS is working to ensure high-income filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers may use to hide their income and evade paying their share.

“The IRS is now taking swift and aggressive action to close this gap,” Werfel said. “Part of that includes alerting higher-income taxpayers and businesses to compliance issues and aggressive schemes involving complex or questionable transactions, including those involving ESOPs.”
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Written by TaxConnections Admin | Posted in ESOP • IRS Notice

16 Jun 2023

Treasury, IRS Issue Guidance For The Advanced Manufacturing Investment Credit

The Internal Revenue Service today issued proposed regulations that provide guidance regarding the implementation of the elective payment provisions of the Advanced Manufacturing Investment Credit, established by the Creating Helpful Incentives to Produce Semiconductors Act of 2022, commonly known as the CHIPS Act.

This credit will incentivize the manufacture of semiconductors and semiconductor manufacturing equipment within the United States. The credit is available to taxpayers that meet certain eligibility requirements, and taxpayers can choose to receive the credit as an elective payment. Today’s proposed regulations describe how an entity can choose to make an elective payment election, which will be treated as a payment against the tax liability that is equal to the amount of the credit. A partnership or S corporation can make an elective payment election to receive a payment instead of claiming the credit.

The advanced manufacturing investment credit for any taxable year is generally equal to 25% of an eligible taxpayer’s qualified investment in an advanced manufacturing facility. An eligible taxpayer’s qualified investment equals its basis in any qualified property placed in service during the taxable year. The qualified property must be integral to the operation of the advanced manufacturing facility. The credit is generally available for qualified property placed in service after Dec. 31, 2022.
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Written by TaxConnections Admin | Posted in IRS Notice

08 Jun 2023

IRS Reminds U.S. Taxpayers Living And Working Abroad To File Their 2022 Tax Return By June 15th

The Internal Revenue Service today reminded American taxpayers living and working outside the U.S. to file their 2022 federal income tax return by Thursday, June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

Qualifying For The June 15 Extension

A taxpayer qualifies for the June 15 filing deadline if:

Both their tax home and abode are outside the United States or Puerto Rico, or
They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.
Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File To Claim Benefits

Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2022. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents , and the instructions to Form 2441, Child and Dependent Care Expenses.
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Written by TaxConnections Admin | Posted in Expat Tax Expert • IRS Notice

12 Apr 2023

IRS: Early Filers Who Reported Certain State Tax Refunds As Taxable Should Consider Filing Amended Returns

The Internal Revenue Service said that taxpayers who filed their federal income taxes early in this year’s filing season and reported certain state 2022 tax refunds as taxable income should consider filing an amended return.

On Feb. 10, 2023, the IRS provided details clarifying the federal tax status involving special payments made to taxpayers by 21 states in 2022. During a review, the IRS determined that in the interest of sound tax administration and other factors, taxpayers in many states did not need to report these payments on their 2022 tax returns. Consequently, the IRS will not challenge the taxability of state payments related to general welfare and disaster relief.

This means people in the following states don’t need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but the determination applies only to the special supplemental Energy Relief Payment received.

Taxpayers can see a listing of individual states and the federal tax treatment of their special state refunds or rebates listed on this online chart.
In addition, many people in Georgia, Massachusetts, South Carolina, and Virginia will not include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit.
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Written by TaxConnections Admin | Posted in IRS Notice

15 Mar 2023

Internal Revenue Service Announces Changes To Bridge Phase Of Compliance Assurance Process (CAP) Program

WASHINGTON — The Internal Revenue Service announced changes to the Bridge phase of the Compliance Assurance Process (CAP) program. CAP is a cooperative pre-filing program for large corporate taxpayers.

The CAP program began in 2005 as a way to resolve tax issues through open, cooperative and transparent interactions between the IRS and taxpayers before the filing of a return.

The IRS made significant changes to the program in 2019 to improve its operation and to ensure the best use of limited government resources. One outcome of this change was the development of the Bridge phase in CAP, which is reserved for taxpayers whose risk of noncompliance does not support the continued use of IRS compliance resources.

During the Bridge phase, the IRS will not accept any disclosures, conduct any reviews or provide any assurances. In the three years since its inception, the IRS has received consistent feedback from taxpayers that participation in the Bridge phase deprives them of the most important aspect of CAP – the review by the IRS.

Due to this feedback, the IRS has developed a new pilot phase called “Bridge Plus.” Taxpayers will be required to provide book-to-tax reconciliations, credit utilization and other supporting documentation shortly after their audited financial statement is finalized. An IRS team will risk-assess the documents to determine if the taxpayer is suitable for the Bridge Plus phase.
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Written by TaxConnections Admin | Posted in Compliance Assurance Process (CAP) • IRS Notice

09 Mar 2023

IRS Expands Secure Digital Correspondence For Taxpayers

The Internal Revenue Service is applying technology to provide a more efficient way for taxpayers or their tax professional to submit requested documentation online instead of mailing it to the IRS.

To help people understand this new feature, the IRS is providing additional details about this important new time-saving initiative.

The IRS Document Upload Tool enables digital correspondence with the taxpayer by providing a URL and a time-limited unique access code to a specific taxpayer so they can upload their documents to the IRS. Access originates with the IRS, and it isn’t available for certain documents, such as those requiring physical signatures.

Nine Notices Added To Project, More To Come…

In early 2023, the IRS began including online correspondence as an option on nine of the CP series notices, potentially affecting more than 500,000 taxpayers each year. Taxpayers who receive one of the following notices with the link and access code can choose to upload their documents:
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Written by TaxConnections Admin | Posted in IRS Digital Correspondence • IRS Notice

08 Mar 2023

IRS Issues Renewed Warning On Employee Retention Credit

IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly…

The Internal Revenue Service today issued a renewed warning urging people to carefully review the Employee Retention Credit (ERC) guidelines before trying to claim the credit as promoters continue pushing ineligible people to file.

The IRS and tax professionals continue to see third parties aggressively promoting these ERC schemes on radio and online. These promoters charge large upfront fees or a fee that is contingent on the amount of the refund. And the promoters may not inform taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.

“While this is a legitimate credit that has provided a financial lifeline to millions of businesses, there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits,” said Acting IRS Commissioner Doug O’Donnell. “Anyone who is considering claiming this credit needs to carefully review the guidelines. If the tax professional they’re using raises questions about the accuracy of the Employee Retention Credit claim, people should listen to their advice. The IRS is actively auditing and conducting criminal investigations related to these false claims. People need to think twice before claiming this.”

The IRS has been warning about this scheme since last fall, but there continue to be attempts to claim the ERC during the 2023 tax filing season. Tax professionals note they continue to be pressured by people wanting to claim credits improperly. The IRS Office of Professional Responsibility is working on additional guidance for the tax professional community that will be available in the near future.
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Written by TaxConnections Admin | Posted in Employee Retention Tax Credit • IRS Notice

28 Feb 2023

IRS Announces New Pilot Phase For Compliance Assurance Process Program

The Internal Revenue Service announced changes to the Bridge phase of the Compliance Assurance Process (CAP) program. CAP is a cooperative pre-filing program for large corporate taxpayers.

The CAP program began in 2005 as a way to resolve tax issues through open, cooperative and transparent interactions between the IRS and taxpayers before the filing of a return.

Written by TaxConnections Admin | Posted in IRS Notice

09 Nov 2022

IRS-CI Releases FY2022 Annual Report Highlighting More Than 2,550 Investigations

In fiscal year 2022, IRS Criminal Investigation initiated more than 2,550 criminal investigations, identified over $31 billion from tax and financial crimes, and obtained a 90.6% conviction rate on cases accepted for prosecution. The IRS-CI FY22 Annual Report PDF, released Thursday, details these statistics, as well as important partnerships and significant criminal enforcement actions from the past fiscal year, which began October 1, 2021, and ended September 30, 2022.

“The cases the IRS-CI team investigated over the past fiscal year touch multiple continents and require cooperation with partners around the globe. This is why IRS-CI continues to cement itself as the preeminent law enforcement agency investigating financial crimes on a global scale,” said IRS Commissioner Chuck Rettig.

Written by TaxConnections Admin | Posted in IRS Notice

16 Nov 2021

IRS Online Tool Helps U.S. Withholding Agents Validate 1042-S Data Prior To Filing

The Internal Revenue Service launched a new online tool designed to help U.S. withholding agents comply with their reporting and withholding responsibilities with respect to IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.

The tool performs a quality review of data before submission to the IRS. Use of the tool does not change a withholding agent’s obligations to file Forms 1042-S with the IRS and furnish a copy of the Form 1042-S to the payee.

“U.S. withholding agents play an important role in helping the IRS administer the tax code so we are delighted to be able to provide this tool free of charge to assist agents in meeting their filing requirement,” said Nikole Flax, IRS Large Business and International division commissioner.

Written by TaxConnections Admin | Posted in IRS Notice

03 Nov 2021

IRS Delivers 15 Billion In Child Tax Credit Payments In 4th Quarter As Part Of Their Child Tax Credit Program

In October, the IRS delivered a fourth monthly round of approximately 36 million Child Tax Credit payments totaling $15 billion. As part of the continuing process of building out the advance CTC program, which has included outreach to bring in previous non-filers and the launch of the CTC Update Portal that has allowed millions of taxpayers to choose options for their payments, the IRS has also identified certain payees who appear to have mistakenly received advance CTC payments. These payments were made in July, August, and September for children who are too old to qualify for payments or, in some cases, for children who were claimed on multiple tax returns. Fewer than 1% of advance monthly payments fall into these categories. Starting with the October payments, the individuals who received those payments (approximately 220, 000 people) will stop receiving payments.

Written by TaxConnections Admin | Posted in IRS Notice