IRS | TaxConnections

02 Mar 2021

IRS Form 8300: Understand How To Report Large Cash Transactions

Although many cash transactions are legitimate, the government can often trace illegal activities through payments reported on complete, accurate Forms 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business PDF. Here are facts on who must file the form, what they must report and how to report it.

Who Must File

Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file a Form 8300. By law, a “person” is an individual, company, corporation, partnership, association, trust or estate. For example, dealers in jewelry, furniture, boats, aircraft or automobiles; pawnbrokers; attorneys; real estate brokers; insurance companies and travel agencies are among those who typically need to file Form 8300.

Written by IRS | Posted in IRS Notice • Report Large Cash Transactions

26 Feb 2021

Looming Transfer Pricing Exams & IRS Preparedness Measures (Part 4 of Series): “TPEP Resolution Phase & Takeaways”

In this fourth article in our Looming Transfer Pricing Exams & IRS Preparedness Measures series, we briefly summarize the IRS’s Transfer Pricing Examination Process (TPEP) Resolution Phase, which is the final phase of the TPEP’s three phases, and we list extrajudicial taxpayer courses of action such as Appeals.

The goal of the Resolution Phase is to reach agreement on the tax treatment of each transfer pricing issue examined. Important parts of the Resolution Phase include the IRS’s presentation of the issue and its resolution, case closing, and when necessary, issuing a Revenue Agent Report with adjustments, penalties (if the taxpayer failed to timely provide documentation), and tax liability.

The TPEP instructs the issue team to provide the taxpayer an opportunity to agree or disagree with the findings for each transfer pricing issue developed during the examination. For a transfer pricing issue to be resolved, there must be an open discussion between the issue team and the taxpayer in three areas: 1) factual development, 2) the law(s) that applies to the facts, and 3) each party’s interpretation of the law(s). The issue team should meet with the taxpayer to discuss all issues and determine whether a “principled resolution” can be reached. If a field resolution is not reached, the issue team will finalize the Notice of Proposed Adjustment (“NOPA”) and Economist Report.

The TPEP discusses options that the taxpayer can pursue, including Appeals,^[1] and when a tax treaty country is involved, U.S. Competent Authority (CA) requests, Accelerated CA Procedures to cover subsequent taxable years, and Simultaneous Appeals Procedures whereby Appeals works jointly with the Advance Pricing and Mutual Agreement (APMA) Program and the taxpayer prior to APMA’s consultations with the foreign CA(s). Taxpayers may request CA assistance after receiving a NOPA and are not required to wait until the conclusion of an examination to file a CA request. If APMA accepts a CA request, it will assume jurisdiction over the transfer pricing issues. Otherwise, the case remains under the jurisdiction of the issue team.

We invite you to read our article Six Time-Tested TPEP Takeaways where we share pertinent insights that are even more important today than a few years ago when the TPEP was still hot off the press.

Stay tuned for the next blog post in this series, where we discuss the IRS’s April 2020 transfer pricing guidance, Transfer Pricing Documentation Frequently Asked Questions (FAQs).

If you have any questions or would like more information on the issues discussed in this article, please contact the authors:

Guy Sanschagrin, Principal in Charge of Transfer Pricing and Valuation Services, WTP Advisors (Minneapolis, MN, USA) guy.sanschagrin@wtpadvisors.com

Doug Schwerdt, Transfer Pricing and Valuation Specialist, WTP Advisors (Houston, TX, USA) doug.schwerdt@wtpadvisors.com

Read Blog Post Part 1 in this Series

Read Blog Post Part 2 in this Series

Read Blog Post Part 3 in this Series

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^[1] The TPEP reaffirms that the IRS requires 365 days to remain on the statute of limitations for taxpayers to request Appeals consideration.

Written by Guy Sanschagrin | Posted in Transfer Pricing • WTP Advisors

13 Jan 2021

Skating On Thin Ice: 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]

Written by Zachary Montgomery | Posted in 501(c)(3) Status • IRS

10 Dec 2020

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.

Written by Jason Freeman | Posted in IRS • Wire Fraud

10 Dec 2020

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.

Written by IRS | Posted in IRS

03 Dec 2020

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?

Written by Ryan Dean | Posted in IRS • PPP Fund Deductions

03 Dec 2020

IRS: 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.

Written by IRS | Posted in Retirement Plan Limits

02 Dec 2020

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.

Written by IRS | Posted in Sec. 965 Transition Tax

01 Dec 2020

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.

Written by IRS | Posted in National Tax Security Warnings

12 Nov 2020

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

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

Written by IRS | Posted in Tax Exempt Organization Search

23 Oct 2020

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.

Written by IRS | Posted in IRS Notice • Micro-Captive Insurance Schemes

16 Oct 2020

IRS Rules On Closing A Partnership

A 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.

Written by IRS | Posted in Closing A Partnership • IRS