TaxConnections

 
 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search

Tag Archive for IRS

Skating On Thin Ice: IRS Does Not Recognize Organization’s 501(c)(3) Status

IRS Does Not Recognize Organization’s 501(c)(3) Status

Various 501(c)(3) organizations may pursue charitable activities or operate to pursue altruistic purposes. However, what if such activities or purposes do not fall within the Internal Revenue Code’s requirements for charitable organizations? Besides jeopardizing the ability of donor taxpayers to deduct contributions, the organizations may find that they are taxable and have certain filing requirements other than annual Form 990 filings. In a recent Private Letter Ruling, the Internal Revenue Service highlighted that “charitable” organizations, such as hockey organizations, that ultimately take care of their own members may not be so charitable for tax purposes.

501(c)(3) Organizations, Generally

Generally, charitable organizations must meet certain requirements to be exempt for federal tax purposes.[1] First, the organization must operate for limited purposes (e.g., religious, charitable, scientific, testing for public safety, literary, or educational purposes). Second, individuals must not privately benefit from the net earnings of the organization. Finally, the organization must not engage in substantial propaganda or lobbying activities, and the organization must not participate in (or intervene in) any political campaign for or against a political candidate.[2]

Read more

Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

A jury recently convicted Marcin Stanislaw Garbacz, a Roman Catholic priest, of 50 counts of wire fraud, nine counts of money laundering, one count of interstate transportation of stolen money and five counts of making and subscribing a false tax return.  For the tax return years 2013 through 2017, the defendant had unreported income totaling $235,818 and income tax due totaling $46,008.  As a result, the district court ordered tax-based restitution to the IRS of $46,008 under the Mandatory Victims Restitution Act.  United States v. Garbacz.

The recent case of United States v. Garbacz reinforces the fact that the federal government often prosecutes tax violations, even violations involving relatively small amount of unpaid tax such as that involved in the case—some $46,008 over the course of five years.  The case also illustrates the restitution provisions at when federal convictions involve amounts owed to the IRS.

Read more

IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF).

Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.

To correct a 2018 self-certification as a QOF, these taxpayers should file an amended return or an administrative adjustment request (AAR). If an entity that receives the letter fails to take action to self-certify as a QOF, the IRS may refer its tax account for examination. Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to examination for an invalid election.

Read more

Treasury Warns Against Taking Deductions Related To PPP Funds

Treasury Warns Against Taking Deductions Related To PPP Funds

As many practitioners and taxpayers know, the Paycheck Protection Program was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which Congress enacted in March. The PPP program provides loans that can be forgiven tax free if portions of the proceeds are spent on items such as payroll.

However, immediately after Congress passed the CARES Act, questions arose whether expenses funded with PPP loans would be deductible if the loans were forgiven. Soon after, the IRS issued Notice 2020-32, 2020-21 IRB 837, which stated that expenses funded with the forgiven PPP loans would not be deductible—avoiding a double tax benefit to businesses.  But that Notice still did not answer the question that many practitioners raised: would expenses funded with a PPP loan be deductible if the loan was not forgivable until a subsequent year?

Read more

IRS: Limits On Retirement Plans Differ Depending On Plan

Limits On Retirement Plans Differ Depending On Plan

A contribution is the amount an employer and employees (including self-employed individuals) pay into a retirement plan.

Limits On Contributions And Benefits

There are limits to how much employers and employees can contribute to a plan (or IRA) each year. The plan must specifically state that contributions or benefits cannot exceed certain limits. The limits differ depending on the type of plan.

Read more

IRS Alerts Taxpayers On Section 965 Transition Tax

IRS Alerts Taxpayers On Section 965 Transition Tax

Communication

IRS is working to alert potentially impacted taxpayers about new tax filing and tax payment obligations arising under recently revised Internal Revenue Code section 965.[1] An overview of section 965 is discussed below.

What is section 965?

Section 965 requires United States shareholders (as defined under section 951(b)) to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States. Very generally, a specified foreign corporation means either a controlled foreign corporation, as defined under section 957 (“CFC”), or a foreign corporation (other than a passive foreign investment company, as defined under section 1297, that is not also a CFC) that has a United States shareholder that is a domestic corporation. Section 965 allows U.S. shareholders to reduce the amount of the income inclusion based on deficits in earnings and profits with respect to other specified foreign corporations. The effective tax rates applicable to income inclusions are adjusted by way of a participation deduction set out in section 965(c). A reduced foreign tax credit applies to the inclusion under section 965(g). Taxpayers may elect to pay the transition tax in installments over an eight-year period.

Read more

IRS Warns Taxpayers And Tax Professionals: National Tax Security Awareness Week

IRS Warns Taxpayers And Tax Professionals: National Tax Security Awareness Week

The Internal Revenue Service and the Security Summit partners  issued warnings to all taxpayers and tax professionals to beware of scams and identity theft schemes by criminals taking advantage of the combination of holiday shopping, the approaching tax season and coronavirus concerns.

The IRS, state tax agencies and the tax industry opened the National Tax Security Awareness Week to coincide with Cyber Monday, the traditional start of the online holiday shopping season. But the holiday shopping season combined with the impending tax season and an increased trend toward working remotely make online security an absolute necessity.

Read more

Tax Exempt Organization Search Helps You Find Information About Tax-Exempt Organizations Federal Tax Status And Filings

Tax Exempt Organization Search

Tax Exempt Organization Search helps users find information about a tax-exempt organization’s federal tax status and filings. You can find:

  • Organizations eligible to receive tax-deductible charitable contributions (Pub 78 data).
    • Users may rely on this list in determining deductibility of their contributions. (Users may also download a complete list.) Data posting date: 08-11-2020
    • Be aware of the following when searching for organizations that can receive tax-deductible contributions:
      1. Certain eligible donees (i.e., churches, group ruling subordinates, and governmental units) may not be listed. See Other Eligible Donees for more information.
      2. “Doing business as” (also known as DBA) names of organizations are not listed. See Search Tips for additional guidance.
  • Automatically revoked organizations
    Read more

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.

Read more

IRS Rules On Closing A Partnership

IRS Rules On Closing A Partnership

partnership is a relationship between two or more partners to do a trade or business. Each person contributes money, property, labor or skill and shares in the profits and losses of the business.

Partners who want to close their partnership must take certain actions whether they’ve been in business a few months or many years. They must file final forms and schedules. Here’s information on typical final forms and schedules that a partnership needs to file when ceasing operations.

Read more

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 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.

Read more