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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 24 – April 30, 2022

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 24, 2022 – April 30, 2022. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 25, 2022: The IRS issued a news release, soliciting applications for the IRS Advisory Council, a forum consisting of representatives of the public to advise the IRS on various tax administration issues.

April 26, 2022: The IRS issued proposed regulations under Section 2010(c)(3) of the Code, as amended by the Tax Cuts and Jobs Act (TCJA), relating to the increase in the estate and gift tax exclusion amount for taxable years 2018 through 2025. The proposed regulations generally provide that the special rule of Treas. Reg. § 20.2010-1(c), which states that certain coordinating rules for estate and gift tax with respect to decedents who made gifts during the period of the increased exclusion amount but died following such period, does not apply with respect to gifts that are includible in the decedent’s estate.

April 26, 2022: The IRS issued Notice 2022-21, soliciting recommendations from the public regarding items to be included in the IRS Priority Guidance Plan for 2022-2023.

April 27, 2022: The IRS issued proposed regulations, setting forth updated general mortality tables for use in applying rules under Section 430 of the Code regarding defined benefit pension plans.

April 27, 2022: The IRS issued Notice 2022-22, setting forth specific mortality tables applicable to 2023 for use in applying rules under Section 430 of the Code regarding defined benefit pension plans.

April 27, 2022: The IRS issued a news release announcing the appointment of Lia Colbert, formerly the deputy chief of the IRS Independent Office of Appeals, as commissioner of the IRS Small Business/Self-Employed Division.

April 27, 2022: The IRS issued a news release, providing an update to a Fact Sheet containing answers to frequently asked questions regarding the Child Tax Credit under Section 24 of the Code, as expanded by the American Rescue Plan Act of 2021 (ARPA).

April 29, 2022: The IRS issued Revenue Procedure 2022-24, announcing various inflation-adjusted amounts relevant to health savings accounts (HSAs) for calendar year 2023.

April 29, 2022: The IRS issued Notice 2022-17, announcing that the reference price under Section 45K(d)(2)(C) of the Code, which is relevant for certain Code sections regarding oil and gas production, is $65.90 for calendar year 2021.

April 29, 2022: The IRS issued Notice 2022-18, providing the applicable reference price and associated credit amount used in determining the marginal well production credit under Section 45I of the Code.

April 29, 2022: The IRS issued Notice 2022-19, announcing the inflation adjustment factor and associated phase-out amount for purposes of determining the enhanced oil recovery credit under [...]

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