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Weekly IRS Roundup October 17 – October 21, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 17, 2022 – October 21, 2022.

October 17, 2022: The IRS released Internal Revenue Bulletin 2022-42, which highlights the following:

  • Notice 2022-45: This notice extends the deadline for amending an eligible retirement plan to reflect the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). Both allow for special tax treatment with respect to a coronavirus-related distribution or a qualified disaster distribution.
  • Notice 2022-43: This notice provides guidance regarding the extension of the four-year replacement period for livestock sold because of the drought. The relief extends to 44 states, two US territories and two independent nations. It generally applies to capital gains realized on sales of livestock held for draft, dairy or breeding purposes.

October 17, 2022: The IRS announced its continued support to fight fraud targeting charities, businesses and individuals during Charity Fraud Awareness Week, which was October 17 to October 21. The IRS estimates that charities lose 5% of their revenue each year to fraud.

October 17, 2022: The IRS released Tax Tip 2022-158, reminding taxpayers to review their withholdings and estimated tax payments.

October 17, 2022: The IRS released Revenue Ruling 2022-20, providing various prescribed rates for federal income tax purposes for November 2022.

October 17, 2022: The IRS released Notice 2022-54, which provides guidance on the corporate bond monthly yield curve and corresponding spot segment rates and the 24-month average segment rates for October 2022. The notice also provides guidance as to interest rates on 30-year Treasury securities and 30-year Treasury weighted average rates.

October 17, 2022: The IRS reminded families that they may be eligible for the Child Tax Credit if they claim at least one child as their dependent. The IRS specifically urges grandparents, foster parents or people caring for siblings or other relatives to check whether they are eligible to receive the 2021 Child Tax Credit.

October 18, 2022: The IRS released Tax Tip 2022-159, suggesting that taxpayers with an outstanding tax bill consider making an Offer in Compromise. An Offer in Compromise is an option for taxpayers who cannot pay their full tax liabilities or in situations where paying the balance would create financial hardship.

October 18, 2022: The IRS announced the 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. The Inflation Reduction Act of 2022 is extending certain tax breaks related to energy for the first time in 2023. The standard deduction for a married couple filing jointly and single and married taxpayers filing separately is also increasing. All of the 2023 adjustments can be found in
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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 [...]

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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 [...]

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Weekly IRS Roundup May 31 – June 3, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 31, 2022 – June 3, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

May 31, 2022: The IRS issued a press release, reminding taxpayers living and working outside the United States that their 2021 federal income tax return is due on June 15, 2022. The deadline applies to both US citizens and resident aliens abroad, including those with dual citizenship. The press release also contains other information to assist said taxpayers with their filings.

June 1, 2022: The IRS issued the first part of its “Dirty Dozen” tax scams for 2022, focusing on the following items:

  • Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain. In this transaction, appreciated property is transferred to a CRAT. Taxpayers improperly claim the transfer of the appreciated assets to the CRAT, which in and of itself gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain because of the claimed step-up in basis. Next, the CRAT uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary reports, as income, only a small portion of the annuity received from the SPIA. Through a misapplication of the law relating to CRATs, the beneficiary treats the remaining payment as an excluded portion representing a return of investment for which no tax is due. Taxpayers seek to achieve this inaccurate result by misapplying the rules under sections 72 and 664.
  • Maltese (or Other Foreign) Pension Arrangements Misusing Treaty. In these transactions, US citizens or US residents attempt to avoid US tax by making contributions to certain foreign individual retirement arrangements in Malta (or possibly other foreign countries). In these transactions, the individual typically lacks a local connection, and local law allows contributions in a form other than cash or does not limit the amount of contributions by reference to income earned from employment or self-employment activities. By improperly asserting that the foreign arrangement is a “pension fund” for US tax treaty purposes, the US taxpayer misconstrues the relevant treaty to improperly claim an exemption from US income tax on earnings in, and distributions from, the foreign arrangement.
  • Puerto Rican and Other Foreign Captive Insurance. In these transactions, US owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation with cell arrangements or segregated asset plans in which the US owner has a financial interest. The US-based individual or entity claims deductions for the cost of “insurance coverage” provided by a fronting carrier, which reinsures the “coverage” with the foreign corporation. The characteristics of the purported insurance arrangements typically include one or more of the following: implausible risks covered, non-arm’s length pricing and lack of [...]

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Weekly IRS Roundup April 17 – April 23, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 17, 2022 – April 23, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 18, 2022: The IRS issued Revenue Ruling 2022-9, providing various prescribed interest rates for federal income tax purposes for May 2022.

April 18, 2022: The IRS issued a news release, reminding taxpayers of the option to request an automatic extension of time to file individual income tax returns and noting certain categories of taxpayers who automatically qualify for extensions.

April 18, 2022: The IRS issued a news release, setting forth certain penalty relief options that may be available to taxpayers who are unable to pay increased tax liabilities resulting from retroactive claims for employee retention tax credits.

April 19, 2022: The IRS issued Revenue Procedure 2022-23, providing procedures for taxpayers to make late elections under Sections 168(j)(8), 168(l)(3)(D) and 181(a)(1) of the Code, relating to certain depreciation deductions, for taxable years 2018 and 2019.

April 19, 2022: The IRS issued Notice 2022-16, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

April 19, 2022: The IRS issued a news release, announcing that the 2022 IRS Nationwide Tax Forum, an annual series of continuing education seminars for tax professionals, will be held virtually from July 19, 2022, through August 18, 2022.

April 19, 2022: The IRS issued a news release urging taxpayers who missed the April 18, 2022, filing deadline to file their individual tax returns as soon as possible in order to obtain tax refunds and limit penalties and interest.

April 20, 2022: The IRS issued a news release, announcing the awarding of more than $12.1 million in grants to 131 organizations across the country as part of its Low Income Taxpayer Clinic program, a program to assist organizations in providing pro bono representation to low-income and English as a second language (ESL) taxpayers in federal tax disputes.

April 21, 2022: The IRS issued a news release, reminding tax-exempt organizations of the May 16, 2022, filing deadline with respect to certain information and tax returns.

April 22, 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 Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup February 13 – February 19, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 13, 2022 – February 19, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

February 14, 2022: The IRS issued a news release announcing the launch of a resource page that provides taxpayers with 2022 filing season updates, including updates concerning the resolution of unprocessed returns from the 2021 filing season.

February 15, 2022: The IRS issued Revenue Ruling 2022-4, providing various prescribed interest rates for federal income tax purposes for March 2022.

February 15, 2022: The IRS issued a news release announcing the release of an updated Form 14457, which relates to the IRS Voluntary Disclosure Practice for criminal prosecution. The updates include an expanded section on the reporting of virtual currency.

February 15, 2022: The IRS issued a news release, providing an update to a Fact Sheet containing answers to frequently asked questions regarding the tax treatment of emergency grants for higher education, which were introduced pursuant to pandemic-related legislation.

February 16, 2022: The IRS issued a news release recommending that taxpayers use the online resources on its homepage as their first resource for tax inquiries and provided links to certain commonly used resources.

February 16, 2022: The IRS issued a news release, warning tax professionals to be alert for a new phishing scam designed to steal tax preparation software account credentials.

February 16, 2022: The IRS issued a news release, soliciting applications for Taxpayer Advocacy Panel membership, an advisory body that receives taxpayer feedback and makes suggestions for improving IRS customer service.

February 16, 2022: The IRS issued a news release, setting forth additional transition relief (in the form of an additional exception for certain taxpayers for tax year 2021) from the requirement to file the new Schedules K-2 and K-3 relating to partnerships and flow-through entities.

February 17, 2022: The IRS issued Notice 2022-09, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

February 17, 2022: The IRS issued a news release, reminding taxpayers with income from a farming or fishing business to file returns and pay taxes that are due by March 1, 2022, unless they have made estimated tax payments.

February 17, 2022: The IRS issued a news release, providing an update to a Fact Sheet containing answers to frequently asked questions regarding the 2021 Recovery Rebate Credit, enacted as part of the American Rescue Plan Act of 2021 (ARPA).

February 18, 2022: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special [...]

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Recent Tax Developments Concerning Staking Rewards

Stakers—taxpayers involved in proof of stake (PoS) validation of blockchain transactions—continue to operate in uncharted tax waters. PoS blockchains represent over half of the $1.68 trillion cryptocurrency market capitalization, with five of the top 10 PoS blockchains having a stake rate greater than 50%. Despite the remarkable growth of the PoS market in the last two years, there is no government guidance about the tax treatment of staking rewards.

In a closely followed case in the US District Court for the Middle District of Tennessee, Jarrett v. United States, No. 3:21-cv-00419 (M.D. Tenn.), a taxpayer paid tax on staking rewards and sued for a refund. The question before the district court is whether the receipt of staking rewards generates taxable income at the date the rewards are received.

On February 3, 2022, it was reported that the Internal Revenue Service (IRS) offered to refund the taxpayer’s money for taxes paid on staking rewards. The taxpayer rejected the IRS’s offer to receive a definitive ruling that will be binding on the IRS.

In this article, we look at the issue before the district court and address the significance of the recent offer by the IRS to refund the taxpayer’s tax payment.

VIRTUAL CURRENCY STAKING

In PoS systems, stakers are chosen by combinations of random selection plus the amount of units making up their stake and/or the amount of time they agree to lock up the stakes in a specific digital wallet. Staked units support the blockchain operations by validating transactions on the blockchain and earning rewards. Unlike the mining activities of proof of work (PoW) blockchain miners, stakers validate new blocks by forging the next block on the blockchain without mathematical computations. Certain platforms participate in staking by pooling their customers’ tokens and sharing the staking rewards.

Although each blockchain protocol is different, PoS protocols require stakers to hold (for an agreed amount of time) and post a minimum number of units (stake) to participate in the validation process. Stakers receive, as staking rewards, a specified number of units. These reward units can redistribute ownership stakes away from computers (nodes) that do not put up a stake to those nodes that do put up stakes.

The IRS has addressed the tax treatment of PoW blockchain miners but has not addressed the tax treatment of staking rewards. This means that taxpayers must consider general tax principles that apply to property transactions and adopt a tax methodology they believe is supportable on audit, subject to judicial and administrative review.

Stakers take a wide range of positions with respect to the tax character and tax timing of staking rewards. For example, some stakers take the position that the receipt of staking rewards result in taxable income from the performance of services, while others assert that staking rewards are not taxable until they sell, exchange or otherwise dispose of the rewards. The policy considerations behind each of these positions vary as well, with the timing of taxation on staking rewards currently being litigated in Jarrett v. United [...]

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