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Key Takeaways
- 2024 could be a big tax year.
- ERCs keep coming
- BOI regs
- DAFs Sound Off
- Court updates
- Dodging $18 mil fine
- SALT gets worse
- Happy Presidents Day!
5 IRS developments to watch this tax season - Courtney Hoff Dockerty, Accounting Today:
As we move through 2024, there are new tax developments to watch including technology updates, pending tax regulations and the recognition of cryptocurrency on some tax forms…
New IRS systems encounter technical difficulties...
IRS resumes automated collection activity...
Direct File rollout begins...
IRS interest in digital assets comes to the fore...
Potential tax law changes loom over tax season...
Speaking of potential changes to tax law:
Jason Smith has had a busy 2024. He’s not done yet – Laura Weiss, Punchbowl News ($). Smith is from Missouri and is Chairman of the House Ways and Means Committee. He co-authored the tax bill that is making its way through Congress and expects the bill to become law. But who knows when:
“The overwhelming positivity and support that’s coming – it’s going to become law,” Smith said. “How does that happen, or the timeframe? I’m not in that chamber, I don’t know that. But I do know talking to the members, they want to accomplish this.”
He is just getting started when it comes to tax policy in 2024.
The Missouri Republican said in the coming months he’ll work on repealing and limiting clean energy tax credits from Democrats’ 2022 Inflation Reduction Act, an area that Republicans have hit on to varying levels of success. Of note, dashing the climate credits equals savings, so this can be an offset to pay for other policies.
Smith also said upcoming projects include legislation to crack down on tax-exempt nonprofits getting involved in politics and expanding 529 education savings plans, which have had bipartisan support.
ERC, BOI and other Tidbits
IRS Chief Says Employee Retention Credit Claims Keep Coming - Chris Cioffi and Erin Slowey, Bloomberg ($):
The IRS is still receiving thousands of employee retention tax credit claims, even after an agency moratorium on the pandemic-era program that’s been beset by fraud and pending legislation that would disrupt the deadline for making claims.
IRS Commissioner Danny Werfel told House Ways and Means lawmakers Thursday the tax legislation would help the IRS manage a mountain of claims it’s been struggling to sort through. The agency paused the processing of new claims in September to catch up on unprocessed claims and laser in on fraudulent promoters.
The IRS received about 17,000 to 20,000 claims just last week, Werfel said.
No ‘gotcha’ enforcement of BOI regulations, FinCEN chief vows - Martha Waggoner, The Tax Adviser:
The Financial Crimes Enforcement Network (FinCEN) will not use "gotcha enforcement actions" against small businesses when it finds errors in reports of beneficial ownership information (BOI), the network's director told a congressional committee on Wednesday.
"The statute is very clear that we can only take enforcement action against willful violations," FinCEN Director Andrea Gacki told the House Committee on Financial Services. "This is not about punishing small businesses but looking for those actors that are willfully evading the requirements."
Voices: The role of accountants in BOI reporting - Tom Wheelwright, Accounting Today:
Reporting requirements under the CTA took effect Jan. 1, 2024, and include determining whether the entity is a "reporting company" under the act.
The government is targeting small businesses with this legislation. Entities that are already under significant government regulation — such as public companies, banks, public accounting firms registered under Section 102 of the Sarbanes-Oxley Act of 2002, public utilities, certain tax-exempt entities such as those granted exemption under Section 501(c) of the Tax Code, and many others — are exempt, as are those with more than 20 full-time employees and previous tax filings above $5 million in gross receipts.
That leaves the smallest businesses, single-member LLCs, and family partnerships primarily to comply. And chances are good that most of your clients meet this threshold. FinCEN estimates that 32 million entities will be required to report new information this year and keep it current or face penalties. It expects 5 million more to report in each of the next nine years.
Charity Groups Balk at IRS Proposal for Donor-Advised Funds - Erin Schilling, Bloomberg ($):
A chief concern is that the rules require personal investment advisers be classified as donor advisers…
[T]he proposed guidance would classify those personal advisers as donor advisers, which would trigger an excise tax on their fees. The Treasury Department and IRS see this as a way to prevent conflicts of interest. The rules don’t affect investment advisers contracted by the organization sponsoring the DAF.
IRS Expands Testing of Free E-File Tool to Partnering States - Erin Slowey, Bloomberg ($):
The IRS now has about 1,200 taxpayers taking part in the testing phase of its free agency-run e-filing pilot, and those who already filed as part of the pilot have begun receiving refunds, the agency said.
“Internal testing continues, with additional testing underway to ensure Direct File is successfully integrated with state systems,” Bridget Roberts, chief of Direct File, said in a statement Friday.
Court Side
Conspirators In $3M IRS Refund Check Theft Get Prison Terms – Peter McGuire, Law360 Tax Authority ($):
Two men will serve lengthy prison terms for their role in conspiring to steal and cash a Houston couple's tax refund check worth nearly $3 million, according to sentencing orders filed in Texas federal court.
Benjamin Thomas, 38, was handed a 7½-year prison sentence, and Kuljinder Singh Hunjan, 38, was given 3½ years for their involvement in a "complex and sophisticated" fraud scheme that dates back to 2022, the U.S. Attorney's Office for the Southern District of Texas said in a Thursday press release.
Trump Owes $355M For Fraud That 'Shocks The Conscience' – Frank Runyeon, Law360 Tax Authority ($). “A New York state judge on Friday found Donald Trump, his adult sons, his companies and longtime executives liable for a decadelong valuation fraud conspiracy, ordering the defendants to disgorge $364 million in ill-gotten gains to the state, plus interest, with the former president on the hook for the lion's share.”
More from the article:
Friday's decision amounts to a total victory for [Attorney General Letitia] James after years of investigation by her office and the Manhattan district attorney into Trump's finances.
The inquiry led to then-District Attorney Cyrus Vance's U.S. Supreme Court fight for Trump's tax records and culminated in James' 200-page complaint when a potential criminal case was dropped by Vance's successor, Alvin Bragg.
International Tax
OECD Sets Out Global Transfer Pricing Rules in New Report - Lauren Vella, Bloomberg ($):
A new OECD report breaks down rules to simplify transfer pricing methods for certain transactions under part of the 2021 global tax deal known as Amount B.
The rules seek to simplify transfer pricing methods for baseline marketing and distribution transactions. Transfer pricing refers to the way in which companies value their transactions between related entities.
Texaco Heiress’ Estate Avoids $18 Million Bill in FBAR Penalties - Bernie Pazanowski, Bloomberg ($):
The US government didn’t prove that Texaco heiress Lavern N. Gaynor willfully failed to file FBAR forms with the Treasury Department, and her estate therefore isn’t liable for over $18 million in penalties, a Florida jury concluded.
The government said that Gaynor maintained multiple bank accounts in Switzerland and was therefore obligated by federal law to file FBAR forms for 2009, 2010, and 2011.
After a three-day trial, the jury decided on Feb. 14 that the government didn’t establish by a preponderance of the evidence that Gaynor willfully failed to timely file the FBAR forms for the three years.
Extending Digital-Tax Pact Solves One Problem, but Another Looms - Michael Rapoport, Bloomberg ($):
The US and five European nations said Thursday they would extend their agreement allowing the five countries to keep using DSTs for now. The levies are countries’ attempts to tax digital companies like Google and Facebook with many users in a given country but no physical property or earnings subject to a traditional tax. The extension averted potential complications, because a replacement plan to tax digital companies, known as Amount A, isn’t yet ready.
But another agreement to avoid DST challenges hasn’t been extended.
Countries part of the OECD’s 2021 global tax pact had agreed to hold off on imposing new DSTs pending implementation of Amount A. But that freeze expired at the end of 2023, because finalizing Amount A is taking longer than expected. Canada, for one, is pushing ahead with a new DST.
From the “Bad News Gets Worse” file
Jason Smith gets real on SALT – Laura Weiss, Punchbowl News ($):
Smith delivered a hard truth for blue-state Republicans about next year when the GOP-crafted, $10,000 cap is scheduled to expire along with much of the 2017 Republican tax law:
“Republicans and Democrats aren’t going to support the complete elimination because that only helps the wealthy of the wealthiest when you eliminate that cap altogether.”
Smith added the cap also brought in hundreds of billions of dollars “that was used to lower tax rates for everyone.” Keeping the cap in place could bring in more than $900 billion over a decade.
Not only did the House block legislation upping the SALT-cap its the leading tax-writer also says the cap will likely be extended beyond its 2025 expiration date to pay for other tax breaks.
What Day Is It?
It’s Presidents Day! If that isn’t your thing, it also National Chocolate Mint Day!