Newsletters
The IRS has urged taxpayers to conduct an end-of-summer tax checkup to avoid unexpected tax bills in the upcoming year. The agency emphasized that many taxpayers, particularly those engaged in the gig...
The IRS has reminded businesses that starting in tax year 2023 changes under the SECURE 2.0 Act may affect the amounts they need to report on their Forms W-2. The provisions potentially affecting Form...
The IRS and the Security Summit concluded their eight-week summer awareness campaign by urging tax professionals to implement stronger security measures to protect themselves and their clients from es...
The IRS has reminded employers that educational assistance programs can be used to help employees pay off student loans until December 31, 2025. This option, available since March 27, 2020, allows fun...
The IRS has updated the applicable percentage table used to calculate an individual’s premium tax credit and required contribution percentage for plan years beginning in calendar year 2025. This per...
The District of Columbia has extended the tax filing and payment deadlines for affected individuals and businesses affected by Hurricane Helene until May 1, 2025.Any individual and households who resi...
Despite confusion as to whether Maryland taxpayers may claim the Foreign Earned Income Exclusion on personal income tax returns, the Maryland Tax Court could not decide the issue in this case because ...
Virginia has issued a bulletin providing information regarding the automatic extension to file individual and fiduciary income tax returns and payments for taxpayers affected by Hurricane Helene. The ...
The Corporate Transparency Act (“CTA”) was enacted January 1, 2021, as part of the National Defense Authorization Act, representing the most significant reformation of the Bank Secrecy Act and related anti–money laundering rules since the U.S. Patriot Act. The CTA is intended to address and guard against money laundering, terrorism financing, and other forms of illegal financing by mandating certain entities (primarily small and medium size businesses) to report “beneficial owner” information to the Financial Crimes Enforcement Network (“FinCEN”).
The Corporate Transparency Act (“CTA”) was enacted January 1, 2021, as part of the National Defense Authorization Act, representing the most significant reformation of the Bank Secrecy Act and related anti–money laundering rules since the U.S. Patriot Act. The CTA is intended to address and guard against money laundering, terrorism financing, and other forms of illegal financing by mandating certain entities (primarily small and medium size businesses) to report “beneficial owner” information to the Financial Crimes Enforcement Network (“FinCEN”). The CTA authorizes FinCEN, a bureau of the U.S. Treasury Department, to collect, protect, and disclose this information to authorized governmental authorities and to financial institutions in certain circumstances. Our firm is sending you this communication to provide you with some general information regarding the new reporting rules, as well as initial steps you should take to address the implications of the CTA to your organization. We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable. What entities are subject to the new CTA reporting requirements?Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State (“SOS”) or equivalent official. The CTA also applies to non-U.S. companies that register to do business in the U.S. through a filing with an SOS or equivalent official. Since the definition of a domestic entity under the CTA is extremely broad, additional entity types could be subject to CTA reporting requirements based on individual state law formation practices. There are a number of exceptions to who is required to file under the CTA. Many of the exceptions are entities already regulated by federal or state governments, and as such already disclose their beneficial ownership information to governmental authorities. Another notable exception is for “large operating companies” defined as companies that meet all the following requirements: · Employ at least 20 full-time employees in the U.S. · Gross revenue (or sales) over $5 million on the prior year’s tax return · An operating presence at a physical office in the U.S. Who is considered a “beneficial owner” of a Reporting Company?A beneficial owner is any individual who, directly or indirectly, exercises “substantial control” or owns or controls at least 25% of the company’s ownership interests. An individual exercises “substantial control” if the individual (i) serves as a senior officer of the company; (ii) has authority over the appointment or removal of any senior officer or a majority of the board; or (iii) directs, determines, or has substantial influence over important decisions made by the Reporting Company. Thus, senior officers and other individuals with control over the company are beneficial owners under the CTA, even if they have no equity interest in the company. In addition, individuals may exercise control directly or indirectly, through board representation, ownership, rights associated with financing arrangements, or control over intermediary entities that separately or collectively exercise substantial control. CTA regulations provide a much more expansive definition of “substantial control” than in the traditional tax sense, so many companies may need to seek legal guidance to ultimately determine who are deemed beneficial owners within their organization. Phase-in of reporting requirementsAs currently promulgated, the CTA’s reporting requirements will be phased-in in two stages: · All new Reporting Companies — those formed (or, in the case of non-U.S. companies, registered) on or after January 1, 2024 — must report required information within 901 days after their formation or registration. · All existing Reporting Companies — those formed or registered before January 1, 2024 — must report required information no later than January 1, 2025. How to prepare for the CTAWith the CTA introducing a new and expansive reporting regime, now is the time to assess the new rules’ implications on your organization. Some questions and comments for your company to consider now, although not meant to be all-inclusive, include: · Is your company subject to the CTA, or do you qualify for any of the exemptions? · If your company is not exempt, how should you calculate percentages of “ownership interests” to determine whether any owners meet the 25%-ownership threshold? In many companies with simple capital structures, the answer will be obvious. It may be much less obvious, however, for companies with complicated capital structures (given the expansive definition of “ownership interest”), or companies in which some ownership interests are held indirectly — for example, through upper-tier investment entities, holding companies, or trusts. · How do you assess and determine each person who exercises “substantial control” over the company? There may well be multiple people who qualify, given the expansiveness (and vagueness) of the “substantial control” definition. 1 FinCEN issued a final rule on November 29, 2023, extending the deadline for companies created or registered in 2024 to file initial beneficial ownership information (BOI) reports to 90 calendar days after their formation or registration (was originally 30 days). · What new processes and procedures should the company put in place to monitor future changes in its beneficial owners and reportable changes on existing beneficial owners that will require timely updated reports to FinCEN? Note that the types of information that must be provided to FinCEN (and kept current) for these beneficial owners include the owner’s legal name, residential address, date of birth, and unique identifier number from a non-expired passport, driver’s license, or state identification card (including an image of the unique-identifier documentation). A word of caution, this is going to be a trap for Reporting Companies, as you will need to rely on beneficial owners to timely update you on reportable changes to their information (e.g., ownership changes, moves, marriages, divorces, etc.). As a result, a company’s operative documents may need to be revised to include provisions related to the CTA such as representations, covenants, indemnifications, and consent clauses. For example, the operating agreement may require: · A representation by each shareholder, member or partner, as applicable, that it will be in compliance with or exempt from the CTA; · A covenant by each shareholder, member or partner, as applicable, requiring continued compliance with and disclosure under the CTA or to provide evidence of exemption from its requirements; · An indemnification by each shareholder, member or partner, as applicable, to the company and its other shareholders, members or partners, as applicable, for its failure to comply with the CTA or for providing false information; and · A consent by each disclosing party for the company to disclose identifying information to FinCEN, to the extent required by law. Take immediate action now!As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, may necessitate the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership. Since the filing of the Beneficial Ownership Report is a legal matter, we will not provide services in the area. We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable.
Note that penalties for willfully violating the CTA’s reporting requirements include (1) civil penalties of up to $5912 per day that a violation is not remedied, (2) a criminal fine of up to $10,000, and/or (3) imprisonment of up to two years.
2 The penalties for BOI reporting violations have been inflation adjusted and are increased to $591 a day from $500, effective January 25, 2024.
For additional information regarding the beneficial ownership reporting requirements under the CTA, refer to FinCEN’s Frequently Asked Questions document at https://www.fincen.gov/boi-faqs.
Sincerely, Bishop, Farmer & Co., LLP |
The IRS has released the 2024-2025 special per diem rates. Taxpayers use the per diem rates to substantiate certain expenses incurred while traveling away from home. These special per diem rates include:
The IRS has released the 2024-2025 special per diem rates. Taxpayers use the per diem rates to substantiate certain expenses incurred while traveling away from home. These special per diem rates include:
- the special transportation industry meal and incidental expenses (M&IE) rates,
- the rate for the incidental expenses only deduction,
- and the rates and list of high-cost localities for purposes of the high-low substantiation method.
Transportation Industry Special Per Diem Rates
The special M&IE rates for taxpayers in the transportation industry are:
- $80 for any locality of travel in the continental United States (CONUS), and
- $86 for any locality of travel outside the continental United States (OCONUS).
Incidental Expenses Only Rate
The rate is $5 per day for any CONUS or OCONUS travel for the incidental expenses only deduction.
High-Low Substantiation Method
For purposes of the high-low substantiation method, the 2024-2025 special per diem rates are:
- $319 for travel to any high-cost locality, and
- $225 for travel to any other locality within CONUS.
The amount treated as paid for meals is:
- $86 for travel to any high-cost locality, and
- $74 for travel to any other locality within CONUS.
Instead of the meal and incidental expenses only substantiation method, taxpayers may use:
- $86 for travel to any high-cost locality, and
- $74 for travel to any other locality within CONUS.
Taxpayers using the high-low method must comply with Rev. Proc. 2019-48, I.R.B. 2019-51, 1392. That procedure provides the rules for using a per diem rate to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.
Notice 2023-68, I.R.B. 2023-41 is superseded.
The U.S. Department of the Treasury announced it has recovered $172 million from 21,000 wealthy taxpayers who have not filed returns since 2017.
The U.S. Department of the Treasury announced it has recovered $172 million from 21,000 wealthy taxpayers who have not filed returns since 2017.
The Internal Revenue Service began pursuing 125,000 high-wealth, high-income taxpayers who have not filed taxes since 2017 in February 2024 based on Form W-2 and Form 1099 information showing these individuals received more than $400,000 in income but failed to file taxes.
"The IRS had not had the resources to pursue these wealthy non-filers," Treasury Secretary Janet Yellen said in prepared remarks for a speech in Austin, Texas. Now it does [with the supplemental funding provided by the Inflation Reduction Act], and we’re making significant progress. … This is just the first milestone, and we look forward to more progress ahead.
This builds on a separate initiative that began in the fall of 2023 that targeted about 1,600 high-wealth, high-income individuals who failed to pay a recognized debt, with the agency reporting that nearly 80 percent of those with a delinquent tax debt have made a payment and leading to more than $1.1 billion recovered, including $100 million since July 2024.
By Gregory Twachtman, Washington News Editor
The Internal Revenue Service has made limited progress in developing a methodology that would help the agency meet the directive not to increase audit rates for those making less than $400,000 per year, the Treasury Inspector General for Tax Administration reported.
The Internal Revenue Service has made limited progress in developing a methodology that would help the agency meet the directive not to increase audit rates for those making less than $400,000 per year, the Treasury Inspector General for Tax Administration reported.
In an August 26, 2024, report, TIGTA stated that while the IRS has stated it will use 2018 as the base year to compare audit rates against, the agency "has yet to calculate the audit coverage for Tax Year 2018 because it has not finalized its methodology for the audit coverage calculation."
The Treasury Department watchdog added that while the agency "routinely calculates audit coverage rates, the IRS and the Treasury Department have been exploring a range of options to develop a different methodology for purposes of determining compliance with the Directive" to not increase audit rates for those making less than $400,000, which was announced in a memorandum issued in August 2022.
The Directive followed the passage of the Inflation Reduction Act, which provided supplemental funding to the IRS that, in part, would be used for compliance activities primarily targeted toward high wealth individuals and corporations. Of the now nearly $60 billion in supplemental funding, $24 billion will be directed towards compliance activities.
TIGTA reported that the IRS initially proposed to exclude certain types of examinations from the coverage rate as well "waive" audits from the calculation when it was determined that there was an intentional exclusion of income so that the taxpayer to not exceed the $400,000 threshold.
The watchdog reported that it had expressed concerns that the waiver criteria "had not been clearly articulated and that such a broad authority may erode trust in the IRS’s compliance with the Directive."
It was also reported that the IRS is not currently considering the impact of the marriage penalty as part of determining the audit rates of those making less than $400,000.
"When asked if this would be unfair to those married taxpayers, the IRS stated that the 2022 Treasury Directive made no distinction between married filing jointly and single households, so neither will the IRS," TIGTA reported.
By Gregory Twachtman, Washington News Editor
National Taxpayer Advocate Erin Collins is working to address deficiencies highlighted by the Treasury Inspector General for Tax Administration regarding the speed of service offered by the Taxpayer Advocate Service.
National Taxpayer Advocate Erin Collins is working to address deficiencies highlighted by the Treasury Inspector General for Tax Administration regarding the speed of service offered by the Taxpayer Advocate Service.
Collins noted in a September 19, 2024, blog post that TAS, as highlighted by the TIGTA audit, is “not starting to work cases and we are not returning telephone calls as quickly as we would like.”
She noted that while overall satisfaction with TAS is high, Collins is hearing "more complaints than I would like of unreturned phone calls, delays in providing updates, and delays in resolving cases." She identified three core challenges in case advocacy:
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The increasing number of cases;
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An increase in new hires that need proper training before they can effectively assist taxpayers; and
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A case management system that is more than two decades old that causes inefficiencies and delays.
Collins noted that there has been an 18 percent increase in cases in fiscal year 2024 and advocates have inventories of more than 100 cases at a time. According to the blog post, in each of FY 2022 and 2023, there were about 220,000 cases. TAS is on track to receive nearly 260,000 in FY 2024.
"Our case advocates are doing their best to advocate for you," Collins wrote in the blog. "But when we experience a year like this in which case receipts have jumped by 18 percent, something must give. Since we don’t turn away taxpayers who are eligible for our assistance, the tradeoff is that we’re taking longer to assign new cases to be worked, longer to return telephone calls, and sometimes longer to resolve cases even after we’ve begun to work them."
Collins added that while the employment ranks continue to rise, about 30 percent of the case advocates "have less than one year of experience, and about 50 percent have less than two years of experience," meaning "nearly one-third of our case advocate workforce is still receiving training and working limited caseloads or have no caseloads yet, and half are likely to require extra support for complex cases."
She said TAS is revieing its training protocols, including focusing new hires on high volume cases so "they can begin to work those cases more quickly, while continuing to receive comprehensive training that will enable them to become effective all-around advocates over time."
TAS is also deploying a new case management system next year that will better integrate with the Internal Revenue Service’s electronic data offerings.
"My commitment is to continue to be transparent about our progress as we work toward becoming a more effective and responsive organization, and I ask for your understanding and patience as our case advocates work to resolve your issues with the IRS," Collins said.
By Gregory Twachtman, Washington News Editor
The IRS has highlighted important tax guidelines for taxpayers who are involved in making contributions and receiving distributions from online crowdfunding. The crowdfunding website or its payment processor may be required to report distributions of money raised, if the amount distributed meets certain reporting thresholds, by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.
The IRS has highlighted important tax guidelines for taxpayers who are involved in making contributions and receiving distributions from online crowdfunding. The crowdfunding website or its payment processor may be required to report distributions of money raised, if the amount distributed meets certain reporting thresholds, by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.
The reporting thresholds for a crowdfunding website or payment processor to file and furnish Form 1099-K are:
- Calendar years 2023 and prior – Form 1099-K is required if the total of all payments distributed to a person exceeded $20,000 and resulted from more than 200 transactions; and
- Calendar year 2024 – The IRS announced a plan for the threshold to be reduced to $5,000 as a phase-in for the lower threshold provided under the ARPA.
Alternatively, if non-taxable distributions are reported on Form 1099-K and the recipient does not report the transaction on their tax return, the IRS may contact the recipient for more information.
If crowdfunding contributions are made as a result of the contributor’s detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized. Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee’s gross income. If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer’s gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized. More information is available to help taxpayers determine what their tax obligations are in connection with their Form 1099-K at Understanding Your Form 1099-K.
The IRS has significantly improved its online tools, using funding from the Inflation Reduction Act (IRA), to facilitate taxpayers in accessing clean energy tax credits. These modernized tools are designed to streamline processes, improve compliance, and mitigate fraud. A key development is the IRS Energy Credits Online (ECO) platform, a free, secure, and user-friendly service available to businesses of all sizes. It allows taxpayers to register, submit necessary information, and file for clean energy tax credits without requiring any specialized software. The platform also features validation checks and real-time monitoring to detect potential fraud and enhance customer service.
The IRS has significantly improved its online tools, using funding from the Inflation Reduction Act (IRA), to facilitate taxpayers in accessing clean energy tax credits. These modernized tools are designed to streamline processes, improve compliance, and mitigate fraud. A key development is the IRS Energy Credits Online (ECO) platform, a free, secure, and user-friendly service available to businesses of all sizes. It allows taxpayers to register, submit necessary information, and file for clean energy tax credits without requiring any specialized software. The platform also features validation checks and real-time monitoring to detect potential fraud and enhance customer service.
In November 2023, the IRS announced a significant enhancement to the ECO platform. Qualified manufacturers could submit clean vehicle identification numbers (VINs), while sellers and dealers were enabled to file time-of-sale reports completely online. Additionally, the platform facilitates advance payments to sellers and dealers within 72 hours of the clean vehicle credit transfer, significantly reducing processing time and enhancing the overall user experience.
In December 2023, the IRS expanded the ECO platform’s capabilities to accommodate qualifying businesses, tax-exempt organizations, and entities such as state, local, and tribal governments. These entities can now take advantage of elective payments or transfer their clean energy credits through the ECO system. This feature allows taxpayers who may not have sufficient tax liabilities to offset to still benefit from the available tax credits under the IRA and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act.
The IRS’s move towards digital transformation also led to the creation of an online application portal for the Qualifying Advanced Energy Project Credit and Wind and Solar Low-Income Communities Bonus Credit programs in partnership with the Department of Energy. The portal, which launched in June 2023, simplifies the submission and review processes for clean energy projects, lowering barriers for taxpayers to participate in these incentives.
These advancements reflect the IRS’s commitment to modernizing taxpayer services, focusing on efficiency, and enhancing the overall user experience. Looking ahead, the IRS is poised to continue leveraging technology to further improve processes and support taxpayers in utilizing clean energy tax incentives.
Final regulations on consistent basis reporting have been issued under Code Secs. 1014 and 6035.
Final regulations on consistent basis reporting have been issued under Code Secs. 1014 and 6035.
Consistent Basis Requirement
The general rule is that a taxpayer's initial basis in certain property acquired from a decedent cannot exceed the property's final value for estate tax purposes or, if no final value has been determined, the basis is the property's reported value for federal estate tax purposes. The consistent basis requirement applies until the entire property is sold, exchanged, or otherwise disposed of in a recognition transaction for income tax purposes or the property becomes includible in another gross estate.
"Final value" is defined as: (1) the value reported on the federal estate tax return once the period of limitations on assessment has expired without that value being adjusted by the IRS; (2) the value determined by the IRS once that value can no longer be contested by the estate; (3) the value determined in an agreement binding on all parties; or (4) the value determined by a court once the court’s determination is final.
Property subject to the consistent basis requirement is property the inclusion of which in the gross estate increases the federal estate tax payable by the decedent’s estate. Property excepted from this requirement is identified in Reg. §1.1014-10(c)(2). The zero-basis rule applicable to unreported property described in the proposed regulations was not adopted. The consistent basis requirement is clarified to apply only to "included property."
Required Information Returns and Statements
An executor of an estate who is required to file an estate tax return under Code Sec. 6018, which is filed after July 31, 2015, is subject to the reporting requirements of Code Sec. 6035. Executors who file estate tax returns to make a generation-skipping transfer tax exemption or allocation, a portability election, or a protective election to avoid a penalty are not subject to the reporting requirements. An executor is required to file Form 8971 (the Information Return) and all required Statements. In general, the Information Return and Statements are due to the IRS and beneficiaries on or before the earlier of 30 days after the due date of the estate tax return or the date that is 30 days after the date on which the estate tax return is filed with the IRS. If a beneficiary acquires property after the due date of the estate tax return, the Statement must be furnished to the beneficiary by January 31 of the year following the acquisition of that property. Also, by January 31, the executor must attach a copy of the Statement to a supplement to the Information Return. An executor has the option of furnishing a Statement before the acquisition of property by a beneficiary.
Executors have a duty to supplement the Information Return or Statements upon the receipt, discovery, or acquisition of information that causes the information to be incorrect or incomplete. Reg. §1.6035-1(d)(2) provides a nonexhaustive list of changes that require supplemental reporting. The duty to supplement applies until the later of a beneficiary's acquisition of the property or the determination of the final value of the property under Reg. §1.1014-10(b)(1). With the exception of property identified for limited reporting in Reg. §1.6035-1(f), the property subject to reporting is included property and property the basis of which is determined, wholly or partially, by reference to the basis of the included property.
Penalties
Penalties may be imposed under Reg. §301.6721-1(h)(2)(xii) for filing an incorrect Information Return, and Reg. §301.6722-1(e)(2)(xxxv) for filing incorrect Statements. In addition, an accuracy-related penalty can be imposed under Reg. §1.6662-9 on the portion of the underpayment of tax relating to property subject to the consistent basis requirement that is attributable to an inconsistent basis.
Applicability Dates
Reg. §1.1014-10 applies to property described in Reg. §1.1014-10(c)(1) that is acquired from a decedent or by reason of the death of a decedent if the decedent's estate tax return is filed after September 17, 2024. Reg. §1.6035-1 applies to executors of the estate of a decedent who are required to file a federal estate tax return under Code Sec. 6018 if that return is filed after September 17, 2024, and to trustees receiving certain property included in the gross estate of such a decedent. Reg. §1.6662-9 applies to property described in Reg. §1.1014-10(c)(1) that is reported on an estate tax return required under Code Sec. 6018 if that return is filed after September 17, 2024.