Tax Reform
Subscribe to Tax Reform's Posts

It’s Official: President Biden Signs the Inflation Reduction Act into Law, IRS to Receive Increased Funding

On August 16, 2022, US President Joe Biden signed into law the Inflation Reduction Act of 2022 (Act). A press release from the White House touts the Act as one that will “lower the costs for families, combat the climate crisis, reduce the deficit, and finally ask for the largest corporations to pay their fair share.” The press release provides a numerical summary of the Act’s impact on the healthcare, clean energy and tax sectors.

As we previously discussed, the Act provides for a significant increase in funding for the Internal Revenue Service (IRS). IRS Commissioner Chuck Rettig shared the following written statement regarding the Act:

The signing of the historic reconciliation package marks a transformational moment for our agency—and an opportunity for the future of tax administration. The IRS has struggled for many years with insufficient resources to fulfill our important mission. During the next 10 years, these funds will help us in many areas, including adding critical resources to not just close the tax gap but meaningfully improve taxpayer service and technology. This will allow the IRS to provide services to taxpayers in the manner they expect and deserve. The act also includes a wide range of tax law changes that we will have to implement very quickly.

 

Given the scope of the bill, keep in mind these changes will not be immediate. It’s a 10-year plan, and it will take time to put these provisions into place. More details will be available in coming months.

 

We have a lot of hard work in front of us to deliver on the high expectations this historic funding will provide. But I have great confidence IRS employees are up to the task—and will deliver for Americans as they have countless times before in the history of our agency.

The Act also contains several new provisions relating to the corporate alternative minimum, a tax on stock buybacks, and tax credits for clean energy use and production. These provisions will require immediate guidance given that they are effective for taxable years beginning after December 31, 2022.

Practice Point: The IRS has its work cut out for it. It is critical that timely guidance be provided to taxpayers impacted by the Act’s new provisions to allow for proper planning and modeling. Additionally, the IRS needs to create and execute a plan to improve its technology and customer service.

Update as of August 18, 2022: US Secretary of the Treasury Janet Yellen has issued a memorandum to Commissioner Rettig, directing the IRS to produce, within six months, an operational plan detailing how the additional funding would be deployed over the next decade. Secretary Yellen specifically stated that she would like the IRS to work closely with Deputy Secretary of the Treasury Wally Adeyemo “to identify specific operational initiatives and associated timelines that will improve taxpayer service, modernize technology, and increase equity in our system of tax administration [...]

Continue Reading




Weekly IRS Roundup August 8 – August 12, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 8, 2022 – August 12, 2022.

August 8, 2022: The IRS released Internal Revenue Bulletin 2022-32, highlighting Notice 2022-32, which provides guidance on the corporate bond monthly yield curve and corresponding spot segment rates and the 24-month average segment rates. The notice also provides guidance as to interest rates on 30-year Treasury securities and the 30-year Treasury weighted average rates.

August 8, 2022: The IRS released IR-2022-146, reminding truckers to file Form 2290, Heavy Highway Vehicle Use Tax Return, on or before the August 31, 2022, deadline. Truck owners who drive a highway motor vehicle weighing 55,000 pounds or more must file the return and pay the tax. Vehicles that used 5,000 miles or less (7,500 miles for farm vehicles) must file the return but do not have to pay the tax.

August 8, 2022: The IRS released Tax Tip 2022-120, explaining how some money raised through crowdfunding may be a gift and excluded from gross income. Crowdfunding websites must file Form 1099-K, Payment Card and Third-Party Network Transactions.

August 9, 2022: The Security Summit partners unveiled a new sample security plan designed to help tax professionals protect their data, particularly those with smaller practices. Tax professionals, software and industry partners and representatives from state tax groups, along with the IRS, developed the plan, dubbed the Written Information Security Plan. Federal law requires that all professional tax preparers create and implement a data security plan.

August 9, 2022: The IRS released COVID Tax Tip 2022-121, reminding taxpayers of the resources available on IRS.gov to help them file their tax returns electronically, get tax account information and find the status of their refund.

August 10, 2022: The IRS released IR-2022-148, reminding teachers and educators that they can deduct up to $300 of out-of-pocket classroom expenses when they file their 2022 tax return. This is the first increase since the deduction was enacted in 2002. From 2002 through 2021, the limit was $250 per year.

August 10, 2022: The IRS announced that storm victims in parts of Missouri now have until November 15, 2022, to file individual and business tax returns and make tax payments if they had a valid extension to file their 2021 returns. The relief is available to anyone in an area designated by the Federal Emergency Management Agency as qualifying for individual or public assistance. The current list of eligible localities is available here.

August 10, 2022: The IRS released Tax Tip 2022-122, outlining the steps business owners need to take when closing a business.

August 11, 2022: The IRS announced Tax Tip 2022-123, highlighting two educational tax credits available to taxpayers who paid higher [...]

Continue Reading




Weekly IRS Roundup August 1 – August 5, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 1, 2022 – August 5, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 1, 2022: The IRS released Internal Revenue Bulletin 2022-31, which highlights the following:

  • Administrative: Revenue Procedure 2022-30 provides specifications for the private printing of red ink substitutes for the 2022 Forms W-2 and W-3.
  • Income Tax: Revenue Ruling 2022-14 provides the applicable federal rates for federal income tax purposes for August 2022.

August 1, 2022: The IRS released Tax Tip 2022-116, explaining the basics of excise tax and what businesses should know.

August 1, 2022: The IRS announced Revenue Procedure 2022-29, which modifies and supersedes Revenue Procedure 2006-36, 2006-38 I.R.B 498. The Procedure updates how government agencies and members of the public should request the creation of special statistical studies and compilations involving return information. It also sets forth the criteria for determining reasonable fees for the costs associated with the creation of the special statistical studies and compilations.

August 2, 2022: The IRS released IR-2022-144, urging tax professionals to learn the signs of data theft so that they can react quickly to protect clients. This topic is the third of a five-part series from the Security Summit, including the IRS, state tax agencies and others from the tax community. Tax professionals or firms that are the victim of data theft should immediately report it to the local IRS Stakeholder Liaison.

August 2, 2022: The IRS announced that Kentucky storm and flooding victims now have until November 15, 2022, to file individual and business tax returns and make tax payments if they had a valid extension to file their 2021 returns. The relief is available to anyone in an area designated by the Federal Emergency Management Agency as qualifying for individual or public assistance. The current list of eligible localities is available here.

August 2, 2022: The IRS released Tax Tip 2022-117, providing the legal distinctions between an employee and an independent contractor.

August 3, 2022: The IRS released Notice 2022-33, extending the deadlines for amending a retirement plan or individual retirement arrangement to reflect certain provisions of Division O of the Further Consolidated Appropriations Act, also known as the Setting Every Community Up for Retirement Enhancement Act of 2019, and section 104 of Division M of the Further Consolidated Appropriations Act, 2020, also known as the Bipartisan American Miners Act of 2019.

August 3, 2022: The IRS released COVID Tax Tip 2022-118, explaining the educator expense deduction, which allows eligible teachers and administrators to deduct part of their cost for technology, supplies and training from their personal taxes. This applies only to expenses [...]

Continue Reading




IRS Releases Five-Year Strategic Plan with Emphasis on Enforcement

The Internal Revenue Service (IRS) released its five-year strategic plan (Strategic Plan) for 2022 – 2026, laying out four major goals:

  1. Service: Provide quality and accessible services to enhance the taxpayer experience
  2. Enforcement: Enforce the tax law fairly and efficiently to increase voluntary compliance and narrow the tax gap
  3. People: Foster an inclusive, diverse and well-equipped workforce and strengthen relationships with external partners
  4. Transformation: Transform IRS operations to become more resilient, agile and responsive to improve the taxpayer experience and narrow the tax gap.

In the portion of his opening message that addressed enforcement, IRS Commissioner Chuck Rettig focused on listed transactions, saying, “We also continued to make important progress in our compliance programs, with a particular focus on abusive tax shelters, including syndicated conservation easements and microcaptive insurance arrangements.”

The Strategic Plan vows an increased focus on noncompliant, high-income and high-wealth taxpayers, partnerships and large corporations, which the report asserts “make up a disproportionate share of the unpaid taxes.” The IRS intends to improve efforts to collect unpaid taxes with effective deterrence and enhanced enforcement capabilities. Employees will also have access to Enterprise Case Management, which will provide agents with the full history of a taxpayer, along with other tools to prevent and address noncompliance. The IRS also wants to reduce the burden on taxpayers by decreasing the time between filing returns and compliance issue resolution. Finally, the IRS plans to improve public confidence by promoting compliance through publicizing criminal prosecutions and civil enforcement efforts.

Additionally, the IRS points to increasing efforts to proactively identify fraud schemes. Its Office of Fraud Enforcement is creating a new Virtual Currency Learning Academy for all IRS personnel—from beginners to experts—with training focused on cryptocurrencies, blockchain tracing, anti-money laundering compliance and Altcoins.

While responsibilities and workloads at the IRS have been increasing, resources to combat criminal fraud and tax evasion have been decreasing. The IRS says it must continue updating necessary tax guidance for new investments, invest in analytical approaches to improve case selection and maintain institutional knowledge of how to combat avoidance activities.

The Strategic Plan indicates that the IRS continues to navigate challenges related to insufficient funding, decreasing workforce and hiring difficulties. In response, the IRS intends to expand electronic services with online accounts and digital filing capabilities. The IRS also plans to expand resources for international taxpayers, as well as implement a Multilingual Strategy with new publications in multiple languages. Other goals include increasing outreach with enhanced social media strategies and prioritizing security while safeguarding taxpayer data.

The Strategic Plan also discusses the IRS’s aging workforce and above-average attrition rates. In response, the IRS intends to hire additional employees, enhance retention and implement a Comprehensive Training Strategy.

Finally, the IRS plans to make improvements to infrastructure, which includes reorganizing operations, upgrading and modernizing systems, accelerating cybersecurity modernization efforts from cyber threats and reducing the paper volume by using digital data more effectively.

Commissioner Rettig stated, “[w]orking toward these strategic goals with consistent multi-year funding will [...]

Continue Reading




Weekly IRS Roundup July 18 – July 22, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 18, 2022 – July 22, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 18, 2022: The IRS issued Tax Tip 2022-108, reminding people that they can get the latest IRS news through the agency’s verified social media accounts and by subscribing to e-news services.

July 18, 2022: The Treasury Inspector General for Tax Administration (TIGTA) released its Fiscal Year 2022 IRS Federal Information Security Modernization Act Evaluation report. In the report, TIGTA determined that the Cybersecurity Program was not effective in 17 out of 20 metrics. (TIGTA does not make recommendations as part of its evaluation.)

July 19, 2022: The IRS announced that the Security Summit partners are encouraging tax professionals to inform clients about the IRS Identity Protection PIN Opt-In Program to help protect people against tax-related identity theft. This announcement came during the first of the five-part summer series to highlight the critical steps tax professionals can take to protect client data and their businesses.

July 19, 2022: The IRS reminded 2021 tax extension filers not to wait until October to file their returns. (The IRS estimated that 19 million taxpayers requested an extension to file their 2021 tax return.) The announcement urges taxpayers to file their returns as soon as they have all the necessary information and to avoid the October 17 deadline and last-minute rush.

July 19, 2022: The IRS issued Tax Tip 2022-110, which contains information on reporting independent contractor compensation of $600 or more. This is completed using Form 1099-NEC, Nonemployee Compensation.

July 20, 2022: The IRS announced a new five-year strategic plan that outlines its goals to improve taxpayer service and tax administration. The IRS Strategic Plan FY 2022-2026 will serve as a roadmap to help guide the agency’s programs and operations and to meet the changing needs of taxpayers and members of the tax community. The plan also focuses on four goals to improve customer service: (1) Service; (2) Enforcement; (3) People and (4) Transformation. We will be posting more information about the plan on the blog in the coming days.

July 20, 2022: The IRS issued Tax Tip 2022-110, reminding taxpayers of the Taxpayer Advocate Service (TAS), an independent organization within the IRS that helps to protect taxpayer rights. The tax tip also includes information on the Taxpayer Bill of Rights (TBOR). We previously wrote an article explaining what TAS does and how it can be utilized by all types of taxpayers, as well as a post about how taxpayers can utilize the TBOR.

July 20, 2022: The IRS issued a notice and request for comments for [...]

Continue Reading




Weekly IRS Roundup July 11 – July 15, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 11, 2022 – July 15, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 11, 2022: The IRS announced that the Nationwide Tax Forum will start July 19, 2022. The programing includes a keynote address by IRS Commissioner Chuck Rettig, updates on tax law, cybersecurity, ethics and more. The virtual event will take place over a five-week period from July 19 to August 18 on Tuesdays, Wednesdays and Thursdays each week. Those wanting to participate must register at least three business days in advance to guarantee access. Attendance at the webinars qualifies as continuing education (CE) for enrolled agents, certified public accountants, Annual Filing Season Program participants, California Tax Education Council (CTEC) participants and Certified Financial Planners (CFP).

July 12, 2022: The IRS issued renewed warnings for tax professionals to guard themselves against identity theft. This effort begins next week with the Security Summit’s annual summer campaign, “Protect Your Clients; Protect Yourself,” which is focused on tax professionals taking steps to prevent data theft from their offices. This will mark the seventh year that the IRS, state tax agencies and the national tax community have teamed up to raise awareness on the issue.

July 12, 2022: The IRS announced a special virtual session for those interested in becoming an IRS revenue agent. The agency plans to hire 470 revenue agents for the Small Business Self Employed (SB/SE) division. For further discussion, see our recent post.

July 12, 2022: The IRS issued Tax Tip 2022-105, reminding taxpayers that they can log into their account to check account information, including balance, payments and tax records.

July 13, 2022: The IRS reminded taxpayers to file their tax returns as soon as possible. The agency also encourages people to utilize special tools on IRS.gov to help them file and access assistance.

July 13, 2022: The IRS issued Tax Tip 2022-106, which gives points on how taxpayers should evaluate whether they have a hobby or business.

July 14, 2022: The IRS is requesting comments on Form 8874, Form 1041-QFT and Form 706-GS(T). Form 8874 is for investors seeking a credit for their equity investment; Form 1041-QFT is the return for a qualified funeral trustee to report the trust’s taxes; and Form 706-GS(T) is used to report taxes due from trust terminations subject to generation-skipping transfer tax.

July 14, 2022: The IRS issued Tax Tip 2022-107, which provides information on Individual Retirement Arrangements.

July 14, 2022: The IRS announced a free IRS/Federal Trade Commission webinar focused on scams and identity theft. The webinar will also cover how a taxpayer can add a layer of protection by applying for [...]

Continue Reading




Weekly IRS Roundup June 27 – July 1, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 27, 2022 – July 1, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 27, 2022: The IRS issued Bulletin 2022-26, announcing that it is revising the optional standard mileage rates for business, medical and moving expenses. This modification stems from increased fuel prices. The revised standard mileage rates are 62.5 cents per mile for business expenses and 22 cents per mile for medical and moving expenses.

June 27, 2022: The IRS issued Notice 2022-30, announcing that it intends to amend regulations under sections 59A and 6038A to defer the applicability date of certain provisions related to qualified derivative payments (QDPs) until 2025.

June 28, 2022: The IRS issued Rev. Proc. 2022-26, which provides the exclusive procedures for requesting a determination under § 4672(a)(2) of the Internal Revenue Code (Code) that a substance be added to or removed from the list of taxable substances.

June 28, 2022: The IRS proposed amendments to regulations under section 2053, which provide guidance on determining: (1) the amount deductible by an estate for funeral expenses, administration expenses and certain claims against the estate; (2) the deductibility of interest expenses accruing on tax and penalties owed by an estate and interest expenses accruing on certain loan obligations incurred by an estate; (3) the requirements for substantiating the value of a claim against an estate that is deductible; and (4) the deductibility of amounts paid under a decedent’s personal guarantee.

June 29, 2022: The Electronic Tax Administration Advisory Committee (ETAAC) released its annual report to US Congress. The featured recommendations include a focus on budget support for the IRS as well as enhancements to e-filing. The IRS issued a subsequent news release discussing the report.

June 29, 2022: The IRS issued Notice 2022-31, providing guidance on changes made by section 9707 of the American Rescue Plan Act of 2021 (ARPA) to the election of alternative minimum funding standards under section 430(m) of the Code for a defined benefit pension plan that is a community newspaper or any other plan that is sponsored by an eligible newspaper plan sponsor.

June 29, 2022: The IRS announced that beginning September 25, 2022, it will implement a new electronic fingerprinting process, which will require users to schedule an appointment with an IRS authorized vendor for fingerprinting. The deadline to mail in fingerprint cards (Form FD-258) to the IRS is August 15, 2022.

July 1, 2022: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Sarah Raben in our Chicago office for this week’s roundup.




Weekly IRS Roundup June 20 – June 24, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 20, 2022 – June 24, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 20, 2022: The IRS announced that it’s on track to complete the processing of originally filed Form 1040s that were received in 2021 this week and that business paper returns also filed in 2021 will follow shortly thereafter. According to the announcement:

“IRS employees have been working tirelessly to process these tax returns as quickly as possible and help people who are waiting on refunds or resolution of an account issue,” said IRS Commissioner Chuck Rettig. “Completing the individual returns filed last year with no errors is a major milestone, but there is still work to do. We remain focused on doing everything possible to expedite processing of these tax returns, and we continue to add more people to this effort as our hiring efforts continue this summer.”

 

Rettig emphasized that adding sustained funding increases for the IRS will help the agency add more employees to process tax returns and answer phones as well as help improve technology and ensure fair enforcement of the tax laws.

 

“Taxpayers and tax professionals deserve the absolute highest-quality service from the nation’s tax system,” Rettig said. “Long-term and consistent funding for the agency is critical to ensuring the IRS is prepared for future tax seasons. It’s also critical for the IRS to be ready to answer the call for the nation during the next crisis, just as the agency did delivering three rounds of historic stimulus payments and advance Child Tax Credit payments during the pandemic.”

June 22, 2022: National Taxpayer Advocate Erin Collins released her statutorily mandated midyear report to US Congress. A highlight of the report is that concerns over continuing delays in the processing of paper-filed tax returns and the impact on taxpayer refunds are brought to light. The IRS issued a subsequent news release discussing the report.

June 23, 2022: The IRS advised taxpayers that more tax forms can now be amended electronically (with more enhancements planned for the future).

June 24, 2022: The IRS announced that it has issued frequently asked questions (FAQs) regarding the reinstated Superfund chemical excise tax. The FAQs detail what the tax is, how it is computed and who may be liable for the tax.

June 24, 2022: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).




STAY CONNECTED

TOPICS

ARCHIVES