Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 4 – 8, 2019.

February 4, 2019: The IRS released final instructions for Form 1065, US Return of Partnership Income, incorporating changes made by the Tax Cuts and Jobs Act.

February 5, 2019: The IRS issued a news release postponing certain tax deadlines for taxpayers affected by the earthquake that occurred in Alaska on November 30, 2018.

February 6, 2019: The IRS released final instructions for Form 1041, US Income Tax Return for Estates and Trusts, and supporting schedules, incorporating changes made by the Tax Cuts and Jobs Act.

February 6, 2019: The IRS released final instructions for Form 8991, dealing with the base erosion and anti-abuse tax (BEAT) of section 59A of the Code, enacted as part of the Tax Cuts and Jobs Act.

February 7, 2019: The IRS issued a news release providing guidance on identifying and avoiding unethical tax return preparers.

February 8, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our DC office for this week’s roundup.

Each New Year, many of us look back on the previous year’s activities, and determine what we want to accomplish in the coming year – lose weight, start exercising, read more tax articles, etc. The Internal Revenue Service (IRS) Large Business & International (LB&I) Division memorialized its New Year’s resolutions for 2019 in Publication 5319. So, for taxpayers with more than $10 million in assets, you may want listen up and see what the IRS has in store for 2019!

LB&I’s goals come during a time of significant reduction in workforce and increase in responsibilities. LB&I experienced a significant reduction in workforce between October 2017 and October 2018, reducing its workforce by a net of 344 employees (down from 4,868 to 4,524) spread across several positions. This included 18 individuals in leadership, 218 revenue agents and 25 tax examiners. With the exception of tax law specialists, which remained at 24, every other position saw a reduction in personnel. This reduction in personnel comes at critical point for LB&I, as it undoubtedly spent much of its time and resources last year working on guidance necessary to implement the substantial changes made by the Tax Cuts and Jobs Act enacted in late 2017. It will continue to be responsible for training and compliance related to those changes. Continue Reading IRS LB&I Division Announces Its New Year’s Resolutions

On March 2, 2018, President Trump nominated Michael Desmond to be the Chief Counsel of the Internal Revenue Service (IRS). Unfortunately, the Senate did not get around to confirming him. On January 16, 2019, President Trump renominated Mr. Desmond, and the US Senate Committee on Finance has scheduled a hearing for February 5th to consider his renomination.

The Chief Counsel is the top legal advisor to the IRS Commissioner on all matters pertaining to the interpretation, administration and enforcement of the Internal Revenue laws. The Chief Counsel also provides legal guidance and interpretive advice to the IRS, Treasury and to taxpayers. Mr. Desmond clerked for Judge Ronald S.W. Lew of the United States District Court for the Central District of California. From 1995 through 2000, he served as a trial attorney in the Tax Division at the Department of Justice, and from 2005 through 2008 he served as tax legislative counsel at the Department of the Treasury, Office of Tax Policy.

Mr. Desmond has a strong reputation in the tax community, and we hope that his nomination is acted on immediately.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 28 – February 1, 2019.

January 28, 2019: The IRS issued Revenue Ruling 2019-04, providing various prescribed rates for federal income tax purposes for February 2019.

January 28, 2019: The IRS issued a news release announcing the opening of the 2019 tax-filing season and providing information to taxpayers about filing and refunds.

January 29, 2019: The IRS issued a news release reminding employers about filing deadlines for wage statements and independent contractor forms.

January 30, 2019: The IRS issued Notice 2019-13, providing baseline interest rates referenced in various provisions of the Code dealing with employee benefits.

February 1, 2019: The IRS issued a corrected version of final regulations providing guidance on the deduction for qualified business income under section 199A of the Code, enacted as part of the Tax Cuts and Jobs Act.

February 1, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our DC office for this week’s roundup.

On January 29 and 30, 2019, the Internal Revenue Service’s Large Business and International (LB&I) division released new Practice Units on Permanent Establishments, which can be found here and here. Permanent Establishments create taxing nexus for foreign businesses doing business in the United States and for those who have “effectively connected income.” The Practice Units provide the IRS’s LB&I audit teams with a general guide on the tax concepts related to permanent establishments. The Practice Units provide examples of the analysis necessary to determine whether a foreign company has a permanent establishment, for example, as a result of its agent concluding contracts on its behalf in the United States. Additionally, the Practice Unit on treaty exemptions describes whether an activity has a preparatory or auxiliary character for purposes of determining whether a foreign enterprise has a US permanent establishment. LB&I auditors will use the Practice Units as tools to help analyze whether a US permanent establishment exists and an income tax adjustment is necessary.

Practice Point: If you have potential PE issues, it is a good idea to look at what your auditors are looking at. The Practice Units are helpful to understand the perspective of IRS auditors on these issues, the types of questions they are likely to ask and the information that they will request.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 21 – 25, 2019. Tax news is very limited because of the government shutdown:

January 22, 2019: The IRS issued a news release cancelling a public hearing on proposed regulations relating to user fees for enrolled agents and enrolled retirement plan agents, due to the partial federal government shutdown.

January 22, 2019: The IRS issued final instructions for Form 461, dealing with limitations on business losses under section 461(l) of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 22, 2019: The IRS issued final instructions for Form 965-A, dealing with individual taxpayers’ transition tax obligations under section 965 of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 22, 2019: The IRS issued final instructions for Form 965-B, dealing with corporations’ and REITs’ transition tax obligations under section 965 of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 23, 2019: The IRS issued final instructions for the 2018 version of Form 1065 Schedule D, dealing with reporting of capital gains and losses on partnership returns, to reflect changes made by the Tax Cuts and Jobs Act.

January 25, 2019: The IRS issued a news release reminding taxpayers to seek information regarding their eligibility for the earned income tax credit.

Special thanks to Le Chen in our DC office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 14 – 18, 2019.

January 15, 2019: The IRS issued final regulations implementing the transition tax under section 965 of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 15, 2019: The IRS released an updated contingency plan describing its actions and activities in light of the partial federal government shutdown.

January 16, 2019: The IRS released Notice 2019-11, providing a penalty waiver, under certain conditions, for an individual taxpayer’s underpayment of withholding and estimated income tax, in light of the major changes made by the Tax Cuts and Jobs Act.

January 18, 2019: The IRS issued final regulations providing guidance on the deduction for qualified business income under section 199A of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 18, 2019: The IRS released proposed regulations dealing with previously suspended losses and ownership interests in certain entities for purposes of calculating the deduction under section 199A of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 18, 2019: The IRS released Revenue Procedure 2019-11, providing methods for calculating W-2 wages for purposes of the deduction under section 199A of the Code, enacted as part of the Tax Cuts and Jobs Act.

January 18, 2019: The IRS released Notice 2019-07, proposing a safe harbor for rental real estate enterprises for purposes of the deduction under section 199A of the Code, enacted as part of the Tax Cuts and Jobs Act.

Special thanks to Le Chen in our DC office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 7 – 11, 2019. Tax news is very limited because of the government shutdown:

January 7, 2019: The IRS issued a news release confirming that, despite the partial federal government shutdown, it will process tax returns beginning January 28, 2019, and provide refunds to taxpayers as scheduled.

January 7, 2019: The IRS released the final 2018 version of Form 8996, dealing with certification as a qualified opportunity fund under section 1400Z-2 of the Code, enacted in the Tax Cuts and Jobs Act.

January 7, 2019: The IRS issued an announcement cancelling a public hearing—originally scheduled for January 10, 2019—on proposed regulations concerning qualified opportunity funds under section 1400Z-2 of the Code, in light of the partial federal government shutdown.

January 7, 2019: The IRS released final instructions for Form 8992, dealing with the calculation of global intangible low-taxed income under section 951A of the Code, enacted in the Tax Cuts and Jobs Act.

January 8, 2019: The IRS released the final 2018 version of Form 8992, dealing with the calculation of global intangible low-taxed income under section 951A of the Code, enacted in the Tax Cuts and Jobs Act.

January 11, 2019: The IRS issued a news release announcing the start of the IRS Free File program for this filing season and detailing new consumer protections that have been added to the program.

Special thanks to Le Chen in our DC office for this week’s roundup.

Clients ask us all of the time, “What is the Joint Committee on Taxation’s (JCT) process for reviewing refund claims granted by the Internal Revenue Service (IRS)?” Recently, the JCT has released an overview of its process. Wait, what? After the IRS has agreed to issue you a refund, there is a congressional committee that has to check the IRS’s work? Yep!

Internal Revenue Code (IRC) §6405 prohibits the IRS/US Department of the Treasury from issuing certain refund payments to taxpayers until 30 days after a “report” is given to the JCT. Only refunds “in excess” of $5 million for corporate taxpayers and $2 million for all other taxpayers (partnerships, individuals, trusts, etc.) are required to be reported to the JCT. A refund claim is an amount listed on an amended return (e.g., Forms 1140X and 1120X), tentative carrybacks (e.g., Forms 1139 and 1045), and refunds attributable to certain disaster losses. Numerous types of refund payments are excepted from JCT review, including refunds claimed on originally filed returns, resulting from litigation and employment taxes. It is important to note that this process is not limited to the IRS Examination stage; it can also occur at the IRS Appeals stage or even in tax court litigation. Continue Reading Joint Committee Releases Overview of Its Refund Review Process

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 24, 2018 – January 4, 2019. Tax news is very limited because of the government shut down:

December 31, 2018: The IRS released Notice 2019-09, providing interim guidance on section 4960 of the Code, enacted by the Tax Cuts and Jobs Act, regarding excise taxes on excess remuneration and excess parachute payments paid by certain tax-exempt organizations to covered employees.

December 31, 2018: The IRS released the final 2018 version of Form 8990, dealing with limitations on business interest expense deductions under section 163(j) of the Code.

December 31, 2018: The IRS released final instructions for the 2018 version of Form 1116, dealing with the foreign tax credit, reflecting changes made by the Tax Cuts and Jobs Act.

January 4, 2018: The IRS released final instructions for the 2018 version of Form 8990, dealing with limitations on business interest expense deductions under section 163(j) of the Code, reflecting changes made by the Tax Cuts and Jobs Act.

Special thanks to Le Chen in our DC office for this week’s roundup.