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Archive for IRS

IRS Announces Taxpayers May Qualify For Significant Tax Benefit: Earned Income Tax Credit

Earned Income Tax Credit(EITC)

The Internal Revenue Service and its partners nationwide remind taxpayers about the Earned Income Tax Credit on January 31, “EITC Awareness Day.” This is the 14th year of the EITC awareness campaign that alerts millions of workers to this significant tax credit.

“The EITC is a vital tax credit that helps millions of hard-working working families around the nation,” said IRS Commissioner Chuck Rettig. “It’s critical that people review the credit to see if they qualify. Increasing awareness about the EITC is important, and the IRS is proud to support the ongoing efforts by partner groups across the country for sharing this critical information with taxpayers.”

There are outreach events and activities scheduled to promote EITC awareness around the country. The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. It can give taxpayers a refund even if they owe no tax.
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IRS Relief To Financial Institutions Affected By Tax Law Change Raising Age For Required Minimum Distributions

IRS Law On Required Distributions

The Internal Revenue Service has provided relief to financial institutions that were expected to provide required minimum distribution (RMD) statements to IRA owners by January 31, 2020.

Notice 2020-6 (PDF) clarifies that if an RMD statement is provided for 2020 to an IRA owner who will turn age 70½ in 2020, the IRS will not consider the statement to be incorrect, but only if the financial institution notifies the IRA owner no later than April 15, 2020, that no RMD is due for 2020.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the age for which an RMD is first required from age 70½ to 72. Under prior law, financial institutions would have needed to notify IRA owners who attained age 70½ in 2020 about their 2020 RMDs by January 31, 2020.

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IRS And Treasury Issue Guidance For Students With Discharged Student Loans And Their Creditors

IRS And Discharged Student Loans

The Internal Revenue Service and Department of the Treasury issued Revenue Procedure 2020-11 (PDF) that establishes a safe harbor extending relief to additional taxpayers who took out federal or private student loans to finance attendance at a nonprofit or for-profit school.

Relief is also extended to any creditor that would otherwise be required to file information returns and furnish payee statements for the discharge of any indebtedness within the scope of this revenue procedure.

The Treasury Department and the IRS have determined that it is appropriate to extend the relief provided in Rev. Proc. 2015-57Rev. Proc. 2017-24 and Rev. Proc. 2018-39 to taxpayers who took out federal and private student loans to finance attendance at nonprofit or other for-profit schools not owned by Corinthian College, Inc. or American Career Institutes, Inc.

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IRS Willing To Consider Requests For Relief From Double Taxation Related To Repatriation

Double Taxation Related To Repatriation

The IRS announced that the agency has become aware of limited circumstances in which it may be appropriate to provide relief from double taxation resulting from application of the repatriation tax under section 965, as amended by the Tax Cuts and Jobs Act (TCJA).

The IRS has determined that in unique circumstances, such as where a corporation paid an unusual dividend for business reasons, not because of the enactment of TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result.

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IRS And Treasury Issue Guidance For Students With Discharged Student Loans And Their Creditors

IRS On Discharged Student Loans

The Internal Revenue Service and Department of the Treasury issued Revenue Procedure 2020-11 (PDF) that establishes a safe harbor extending relief to additional taxpayers who took out federal or private student loans to finance attendance at a nonprofit or for-profit school.

Relief is also extended to any creditor that would otherwise be required to file information returns and furnish payee statements for the discharge of any indebtedness within the scope of this revenue procedure.

The Treasury Department and the IRS have determined that it is appropriate to extend the relief provided in Rev. Proc. 2015-57Rev. Proc. 2017-24 and Rev. Proc. 2018-39 to taxpayers who took out federal and private student loans to finance attendance at nonprofit or other for-profit schools not owned by Corinthian College, Inc. or American Career Institutes, Inc.

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Foreign Account Tax Compliance Act (FATCA) Intergovernmental Agreements

IRS - FATCA Intergovernmental Agreements

FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. FFIs are encouraged to either directly register with the IRS to comply with the FATCA regulations (and FFI agreement, if applicable) or comply with the FATCA Intergovernmental Agreements (IGA) treated as in effect in their jurisdictions.

For access to the FATCA regulations and administrative guidance related to FATCA and to learn about taxpayer obligations please visit the Internal Revenue Service FATCA Page.

In order to see the list of countries who have “in force” agreements with the United States IRS, you can view the list here.

 

IRS Issues New Revenue Ruling On Tax Treatment Of Cryptocurrency Events Called Hard Forks And Airdrops

Darlene Hart

Please note, the IRS released an early draft Form 1040 for the 2019 tax year which contains a new item – 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income. The checkbox at the top of Schedule 1 asks taxpayers about their interests in virtual currency. Specifically, it states, “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

The virtual currency issue is a pet project of the IRS, and they are taking steps to identify those with such accounts. If you have virtual currency, make sure to read the instructions and correctly complete this checkbox. If you had any virtual currency transactions, you need to file Schedule 1 and check the ‘Yes’ box even if you have no other reason to file Schedule 1.

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IRS Position On Qualified Business Income Deduction

Qualified Business Income Deduction

Many owners of sole proprietorships, partnerships, S corporations and some trusts and estates may be eligible for a qualified business income (QBI) deduction – also called Section 199A – for tax years beginning after December 31, 2017. The deduction allows eligible taxpayers to deduct up to 20 percent of their qualified business income (QBI), plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction. For more information on what qualifies as a trade or business, see Determining your qualified trades or businesses in Publication 535 (PDF).

The deduction is available, regardless of whether taxpayers itemize deductions on Schedule A or take the standard deduction.  Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file in 2019.

The deduction has two components.

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The Benefits Of Currently Not Collectible Status

Venar Ayar

Currently Not Collectible (CNC) is a temporary agreement from the IRS to stop attempting to collect your past due taxes. It can provide financial and mental relief from the constant pressure of owing the IRS money.

CNC status isn’t the right choice for every situation, but it does offer the following benefits:

No IRS Levies

IRS levies are one of the biggest concerns for people who owe back taxes. The IRS has the ability to seize many types of assets and income, including:

  • A portion of your wages from every paycheck.
  • The full amount of any bonuses or commissions you receive.
  • A portion of certain Social Security benefits payments.
  • The money in your bank account.
  • The money in your retirement account.
  • Your business assets.

As long as your account remains in CNC status, the IRS won’t issue any of these levies.   However, they may keep your tax refunds and apply them to your outstanding balance.

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Can The IRS Take Your Passport?

Venar Ayar, Tax Lawyer

The IRS can’t seize your passport, but they can let the State Department know if you have seriously delinquent tax debt. Once this happens, the State Department can deny your passport renewal or revoke your current passport.

Before this happens, you’ll have several opportunities to resolve your tax problems and keep your right to carry a valid passport.

IRS Collections And Notices

Your tax debt can’t be certified to the State Department until it is “seriously delinquent”, which requires an outstanding balance of over $52,000. Before you reach this amount of tax debt, the IRS will likely send you several bills and notices asking you to submit payment.

You may also receive a notice informing you that the IRS is filing a tax lien in the public records or issuing a levy against your bank account, wages, or other assets. At this point, you should know the IRS means business and contact a tax attorney for assistance.

If you still don’t work out a deal with the IRS and your balance exceeds $52,000, the IRS then has the ability to certify your tax debt to the U.S. State Department.

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IRS Formally Announces It Will No Longer Challenge Foreign Tax Credits On Two French Social Services Contributions

French Flag 2

The U.S. Internal Revenue Service said on Wednesday that it “will not challenge” the claiming of foreign tax credits against certain controversial payments that potentially thousands of American expatriates resident in France have been paying for years, and noted that taxpayers who wish to file a claim for refund of U.S. tax with respect to a foreign tax credit have 10 years after the “due date for filing the return” in question in which to do so.

The IRS statment, which was only two paragraphs long, came less than two weeks after the tax authority admitted in a U.S. Tax Court that it had wrongly collected millions of dollars of tax from France-resident American citizens in connection with their payment of the French “Contribution Sociale Generalisee” (CSG) and “Contribution au Remboursement de la Dette Sociate” (CRDS) taxes.

As reported, that statement was seen as capping a years-long legal saga, and was expected to potentially launch millions of dollars worth of tax refund claims by U.S. expats who have lived in, and been filing tax returns from, France.

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IRS Large Examination Audits – Best Practices Working With Remote IRS Employees

IRS- Large Examination Audits - Best Practices Working With Remote IRS Employees

Executive Summary

Expanding the use of “remote work” for IRS examinations and projects offers many benefits to both the IRS and taxpayers.  The IRS has for many years used remote work concepts for deploying its international and engineering specialists on large examinations as an adjunct to a larger onsite examination.  In 2006, the IRS expanded the use of remote/offsite examinations as an alternative to the full scope examination for a limited number of pre-identified significant issues.  Targeted use of remote work concepts helps to better deploy IRS resources, especially for special projects requiring the use of limited resources. Read more