IRS Audits
Subscribe to IRS Audits's Posts

Weekly IRS Roundup February 3 – 7, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 3 – 7, 2020.

February 3, 2020:  The IRS and the Departments of Labor and Health and Human Services jointly announced frequently asked questions about the implementation of the Affordable Care Act. The agencies noted that they are tasked with developing standards for use by a group health plan and a health insurance issuer offering group or individual health insurance coverage in compiling a summary of benefits and coverage (SBC). The 2021 iterations of the SBC template, instructions, coverage example guide and narratives—all of which have been recently released—must be used beginning with the first day of the first open enrollment period for any plan year beginning on or after January 1, 2021.

February 4, 2020:  The IRS issued an issue snapshot regarding self-dealing under IRC section 4941(d), focusing largely on the furnishing of goods, services or facilities between a private foundation and a disqualified person. The IRS provided resources and guidance that delineate exceptions to the excise tax that typically applies to any direct or indirect act of self-dealing under IRC section 4941. The IRS also provided issue indicators and audit tips on the subject.

February 5, 2020:  The IRS published final regulations regarding special valuation rules for employers and employees to use in determining the amount to include in an employee’s gross income for personal use of an employer-provided vehicle. These regulations incorporate changes made by the Tax Cuts and Jobs Act. The regulations became effective upon publication.

February 6, 2020:  The IRS published final regulations correcting Treasury Decision 9884, which addressed the effect of recent legislative changes to the basic exclusion amount allowable in computing federal gift and estate taxes. These regulations affect donors of gifts made after 2017 and the estates of decedents dying after 2017. The regulations became effective upon publication.

February 6, 2020:  The IRS released draft Instructions to Form 1118, Foreign Tax Credit for Corporations, to reflect the recently published final regulations. The Instructions note a change in the manner in which foreign source exchange losses are reported on Schedule A. They also note that since most domestic partnerships and S corporations are no longer required to include amounts under IRC section 951A, most domestic corporations will only need to complete one line in Schedule D.

February 7, 2020:  The IRS issued a notice releasing the 2018 and 2019 inflation adjustment factors used to determine the availability of the Indian coal production credit under IRC section 45. The 2020 Further Consolidated Appropriations Act extended the credit period for Indian coal production.

February 7, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.

 




Weekly IRS Roundup January 27 – 31, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 27 – 31, 2020.

January 27, 2020: The Joint Committee on Taxation released a report regarding an overview of selected provisions and options relating to funding and financing infrastructure investments. The report addresses the use of private activity bonds, new markets tax credits, and the opportunity zones incentive to fund infrastructure projects. The House Ways and Means Committee has scheduled a hearing entitled “Paving the Way for Funding and Financing Infrastructure Investments” on January 29, 2020.

January 29, 2020: The IRS issued a notice stating that the health coverage tax credit (HCTC) has been extended for all coverage months beginning in 2020. The IRS explained that eligible individuals can receive a tax credit to offset the cost of their monthly health insurance premiums so long as they have qualified health coverage. This notice supersedes the October 2019 letter from the IRS advising participants in the HCTC program to seek alternative insurance options due to the expiration of the HCTC law in December 2019.

January 30, 2020: The IRS issued final regulations that update the due dates and available extensions of time to file certain tax returns and information returns. The dates are updated to reflect the statutory requirements set by section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 and section 201 of the Protecting Americans from Tax Hikes Act of 2015. The regulations also remove a provision for electing large partnerships that was obsoleted by section 1101(b)(1) of the Bipartisan Budget Act of 2015.

January 31, 2020: The IRS issued a news release announcing that nearly 80% of the taxpayers that received a settlement offer letter while under audit for their participation in abusive micro-captive insurance transactions have elected to accept the IRS’ settlement terms. The IRS also announced that it is establishing 12 new examination teams that are expected to open thousands of audits in the coming months. Abusive micro-captives have been a recurring feature on the IRS “Dirty Dozen” list of tax scams since 2014.

January 31, 2020: The IRS issued a revenue procedure detailing its revision of Form 1023, Application for Recognition of Exemption under Section 501(c)(3), announcing that the Form must be filed electronically beginning January 31, 2020, subject to a 90-day grace period during which the IRS will continue to receive paper forms. The IRS also revised the Instructions to Form 1023.

January 31, 2020: The IRS revised Form 8996, Qualified Opportunity Fund (QOF), to reflect final regulations on the subject. Form 8996 allows corporations and partnerships to certify that they are organized to invest in qualified opportunity zone (QOZ) property and to report that the QOF meets the 90% investment standard that section 1400Z-2 imposes. The IRS also revised the Instructions to Form 8966.

January 31, 2020: The IRS released its weekly list of written determinations (e.g., Private [...]

Continue Reading




Weekly IRS Roundup January 20 – 24, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 20 – 24, 2020.

January 20, 2020: The IRS released new Instructions to IRS Form 1120-S, US Income Tax Return for an S Corporation. These changes conform to the new regulations, which changed the qualified business income deduction, addressed qualified opportunity fund investments, and removed the AMT refundable credit. In conjunction with these changes, the IRS also released updated Instructions to Form 1065, Partner’s Share of Income, Deductions, Credits, etc., so that it complied with the new rules regarding the qualified business income deduction.

January 21, 2020: The IRS issued a notice updating both the corporate bond weighted average interest rates and the permissible range of interest rates used to calculate pension plan minimum funding for plan years beginning in January 2020. The IRS updated various projections, including the yield curve, 24-month segment rates, 30-year Treasury securities interest rates, and the minimum present value segment rates.

January 22, 2020: The IRS issued interim guidance to its appeals employees regarding employer shared responsibility payment (ESRP) cases under IRC section 4980H, which requires applicable large employers to provide minimum essential coverage to a certain percentage of their employees. The guidance affects IRM 8.7.21 and is effective immediately.

January 22, 2020: The IRS released a Large Business and International Concept Practice Unit addressing payments of Fixed Determinable Annual Periodic (FDAP) income. The Unit focuses on the statistical sampling and projection procedures that IRS agents utilize when auditing a US withholding agent, focusing especially one that has a large number of Forms 1042-S (regarding a foreign person’s US source income subject to withholding) or FDAP payments, whether or not those payments had been reported. 

January 23, 2020: The IRS issued a news release announcing that various global tax chiefs undertook a multi-country day of action dedicated to investigating the facilitation of offshore tax evasion. The day of action involved evidence and intelligence collection activities such as search warrants, interviews and subpoenas. It is expected that further criminal, civil and regulatory action will arise from these actions.

January 23, 2020: The IRS released an issue snapshot about third-party payer arrangements, focusing specifically on professional employer organizations (PEOs) and their related employment tax responsibilities under IRC section 3511. The IRS provided tax resources to help taxpayers address issues that arise when a common law employer’s employment tax obligations are shared by or shifted to a PEO. The IRS also provided audit tips to these taxpayers.

January 24, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Jenni Saperstein in our Chicago office for this week’s roundup.




Weekly IRS Roundup December 30, 2019 – January 3, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 30, 2019 – January 3, 2020.

December 30, 2019:  The IRS issued a news release announcing an agreement with Free File, Inc. that is designed to bring more clarity for taxpayers choosing to use free online software during the 2020 filing season. The IRS hopes for the agreement to make the Free File program more taxpayer-friendly while strengthening consumer protections in several key areas.

December 31, 2019:  The IRS issued a news release regarding a notice that provides the optional 2020 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. The notice also provides the amount that taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan. The guidance is generally effective for deductible transportation expenses paid or incurred on or after January 1, 2020.

January 2, 2020:  The IRS officially set January 13, 2020, as the publication date in the Federal Register for final regulations on investments in qualified opportunity zones.

January 2, 2020:  The IRS issued its annual revenue procedures listing no-rule areas under the jurisdiction of the Associate Chief Counsels (Corporate, Financial Institutions and Products, Income Tax and Accounting, Passthroughs and Special Industries, Procedure and Administration, and Tax Exempt and Government Entities). The revenue procedures provide a detailed list of areas in which letter rulings and determination letters will not be issued, under any circumstances. The revenue procedures also provide a detailed list of areas in which letter rulings and determination letters will not ordinarily be issued, but may be issued under unique and compelling circumstances. 

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures for applications, including applicable user fees for requesting determination letters. It provides specific procedures for determination letter requests for recognition of exempt status under section 501 and section 521, as well as for determination letter requests on Form 8940. It provides additional guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under section 7428. The IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure that provides determination letter procedures on matters under the Tax Exempt and Government Entities Division’s Employee Plans Rulings and Agreements Office. Again, the IRS provided a list of significant changes from the prior year’s guidance.

January 2, 2020:  The IRS issued a revenue procedure detailing procedures regarding when and how an Associate office provides technical advice through a technical advice memorandum (TAM). The revenue procedure also provides guidance regarding taxpayers’ rights when a field office requests a TAM regarding a tax matter.

January [...]

Continue Reading




Weekly IRS Roundup December 16 – 20, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 16 – 20, 2019.

December 16, 2019: The IRS released a notice extending the phase-in period for the enforcement and administration of section 871(m) of the IRC. The notice extends the transition relief provided in Notice 2018-72, 2019-40 I.R.B. 522, for two years. As a result, the regulations under section 871(m) will not apply to any payment made with respect to a non-delta-one transaction issued before January 1, 2023. The IRS noted that the anti-abuse rule provided in §1.871-15(o) will continue to apply during the phase-in years.

December 16, 2019: The IRS issued final regulations providing guidance regarding a corporation’s distribution of stock or securities of a controlled corporation without the recognition of income, gain or loss. More specifically, the regulations address how to determine whether a corporation is a predecessor or a successor of a distributing controlled corporation for purposes of section 355(e) of the IRC. The regulations also address the extent to which section 355(f) causes a distributing corporation—and in some cases, its shareholders—to recognize income or gain on the distribution of stock or securities of a controlled corporation. The final regulations became effective on December 18, 2019.

December 17, 2019: The IRS issued final regulations relating to certain financial products that provide for payments that are contingent upon or determined by reference to US source dividend payments. The regulations define the term broker for purposes of section 871(m) of the IRC, and provide guidance on how to identify which party to a potential section 871(m) transaction is responsible for determining whether that transaction qualifies as a section 871(m) transaction if multiple brokers or dealers are involved. The final regulations withdraw the temporary regulations under Treas. Reg. § 1.871-15T.

December 17, 2019: The IRS released a revenue ruling that provides various prescribed rates for federal income tax purposes for January 2020. These rates include the applicable federal rates for the current month for purposes of both section 1274(d) and section 1288(b) of the IRC, the adjusted federal long-term rate and the long-term tax-exempt rate in section 382(f), and the federal rate for determining the present value of an annuity, among others.

December 17, 2019: The IRS released a revenue procedure providing that the third six-year remedial amendment cycle for pre-approved defined benefit plans begins on May 1, 2020, and ends on January 31, 2025. The on-cycle submission period for providers to submit applications for opinion letters for pre-approved defined benefit plans begins on August 1, 2020, and ends on July 31, 2021.

December 19, 2019: The IRS issued a news release regarding final regulations that provide details about investment in qualified opportunity zones (QOZ). The final regulations provide guidance for taxpayers eligible to make an election to temporarily defer the [...]

Continue Reading




Weekly IRS Roundup December 9 – 13, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 9 – 13, 2019.

December 10, 2019: The IRS issued a notice providing that the requirement to report partners’ shares of partnership capital on the tax basis method will not be effective for 2019 for partnership taxable years beginning in calendar 2019. Instead, the requirements will be effective beginning in 2020 (for partnership taxable years that begin on or after January 1, 2020). The notice also defines a partner’s share of “net unrecognized Section 704(c) gain or loss” for purposes of partnership reporting.

December 10, 2019: The Joint Committee on Taxation released a report detailing proposed provisions of the “Restoring Tax Fairness for States and Localities Act.” The bill would increase the maximum state and local tax deduction that married couples can claim in 2019 and would eliminate the limitations on the maximum state and local tax deduction in 2020 and 2021. The bill would also increase the top marginal individual income tax rate under temporary rules.

December 11, 2019: The IRS issued a notice providing guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under section 417(e)(3), and the 24-month average segment rates under section 430(h)(2). The notice also provides guidance regarding both the interest rate on 30-year Treasury securities under section 417(e)(3) as well as the 30-year Treasury weighted average rate under section 431(c)(6).

December 13, 2019: The IRS issued proposed regulations that provide amendments to regulations under sections 162, 164 and 170 of the IRC. The proposed regulations reflect current law regarding the application of section 162 to a taxpayer that makes a payment or transfer to an entity described in section 170(c) for a business purpose; the regulations also provide safe harbors under section 162 to provide certainty for such payments. The regulations also provide a safe harbor under section 164 for payments made to an entity described in section 170(c) by individuals who itemize deductions and receive or expect to receive a state or local tax credit in return. The proposed regulations are scheduled to be published in the Federal Register on December 17, 2019. Public comments regarding the contemplated rules must be received by January 31, 2020.

December 13, 2019: The IRS released a revenue procedure clarifying that all plan amendments that both relate to a plan’s hardship distribution provisions and that are effective no later than January 1, 2020, shall be treated as integral to the required amendments under newly-updated sections 401(k) and 401(m). The revenue procedure also extended the deadline for pre-approved plans to adopt an interim amendment relating to those regulations.

December 13, 2019: The IRS released a revenue ruling providing that the base period T-bill rate for the period ending September 30, 2019, is 2.32%. Section 995(f)(1) of the IRC provides that a shareholder of a domestic international sales corporation (a “DISC”) shall pay annual interest equal to [...]

Continue Reading




Weekly IRS Roundup December 2 – 6, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 2 – 6, 2019.

December 2, 2019: The IRS issued final regulations providing guidance relating to the determination of the foreign tax credit as well as guidance relating to changes made by the 2017 US tax law. The regulations finalize the proposed regulations that were published on December 7, 2018. The regulations also finalize proposed regulations on overall foreign losses that were published on June 25, 2012, as well as certain portions of proposed regulations published on November 7, 2007, relating to a US taxpayer’s obligation to notify the IRS of a foreign tax redetermination. The final regulations will be effective upon their date of publication in the federal register.

December 2, 2019: The IRS issued proposed regulations that also provide guidance relating to the determination of the foreign tax credit. The proposed regulations relate to the allocation and apportionment of deductions and creditable foreign taxes, to foreign tax redeterminations, to the availability of foreign tax credits under the Transition Tax and to the application of the foreign tax credit limitation to consolidated groups. The IRS has requested that written or electronic comments as well as requests for a public hearing be received by February 5, 2019.

December 2, 2019: The IRS issued final regulations implementing the base erosion and anti-abuse tax (the BEAT tax). The regulations finalize the proposed regulations that were published on December 21, 2018, and provide detailed guidance regarding which taxpayers will be subject to section 59A, the determination of what is a base erosion payment, the method for calculating the base erosion minimum tax amount, and the required BEAT tax resulting from that calculation. The final regulations are effective as of December 6, 2019.

December 2, 2019: The IRS issued proposed regulations that also provide guidance regarding the BEAT tax imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties. The proposed regulations would affect corporations that have substantial gross receipts that also make payments to foreign related parties. The IRS has requested that written or electronic comments as well as requests for a public hearing be received by February 4, 2020.

December 2, 2019: The IRS issued a revenue procedure that replaced Rev. Proc. 2019-09 and that identifies when a taxpayer’s disclosure on his income tax return with respect to an item or position is adequate both to reduce the understatement of income tax under section 6662(d) (relating to the substantial understatement aspect of the accuracy-related penalty) as well as to avoid the tax return preparer penalty under section 6694(a) (relating to understatements due to unreasonable positions). The IRS explained that this revenue procedure does not apply to other penalty provisions, and that it will apply to any income tax return filed on 2019 tax forms for a taxable year beginning in 2019, and to any income tax return filed in 2020 [...]

Continue Reading




Weekly IRS Roundup November 25 – 29, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 25 – 29, 2019.

November 26, 2019: The IRS issued a News Release regarding a Revenue Procedure that updates the rules for using per diem rates to substantiate, under section 274 and Treas. Reg. § 1.274-5,  the amount of ordinary and necessary business expenses paid or incurred while traveling away from home, including employees’ lodging, meals, and incidental expenses. The IRS noted that taxpayers are not required to use a method described in the Revenue Procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

November 26, 2019: The IRS released the Fall 2019 Statistics of Income Bulletin, which is issued quarterly by the Statistics of Income Division of the IRS and provides the most recent statistics available from tax and information returns filed by US taxpayers. The bulletin focused on high-income individual income tax return data from 2016, individual noncash charitable contributions from 2017, and partnership returns from 2017.

November 26, 2019: The IRS issued Interim Guidance under Internal Revenue Manual 4.31.9 that outlines field examination procedures for use by LB&I and SB/SE employees when auditing partnership returns under the centralized partnership audit regime. The guidance applies to partnerships for taxable years beginning after December 31, 2017, and partnerships that elect into the BBA regime for taxable years beginning after November 2, 2015, and before January 1, 2018.

November 26, 2019: The IRS issued Interim Guidance under Internal Revenue Manual 11.3.13 that provides guidance on processing FOIA requests for access to tax records protected by section 6103 where required identification or authorization has not been established by the requester. Effective immediately, such requests will be denied citing FOIA exemption (b)(3)/ section 6103 and appeal rights will be granted.

November 26, 2019: The IRS issued a News Release noting the approaching tax filing season and cautioning taxpayers not to rely on receiving refunds by a certain date. The IRS explained that though most refunds are issued in less than 21 days, various transactions—including year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, and real estate sold at a profit—can delay a taxpayer’s refund.

November 29, 2019: The IRS released a Treasury Decision in which it announced a correcting amendment to final regulations and removal of temporary regulations (T.D. 9623) that were published in the Federal Register on July 3, 2013. The final regulations relate to the application of section 108(i) to partnerships and S corporations and provide guidance regarding the deferral of discharge of indebtedness income and original issue discount deductions by a partnership or an S corporation with respect to reacquisitions of applicable debt instruments after December 31, 2008 and before January 1, 2011. The amendment removes the sectional authority for Treas. Reg. § 1.108(i)-2T to read as follows: “Authority: 26 U.S.C. 7805, unless otherwise noted.”

November 29, 2019: The [...]

Continue Reading




STAY CONNECTED

TOPICS

ARCHIVES