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Show Me the Money: IRS Introduces Webpage for Large Refunds Subject to JCT Review

When we previously wrote about the Joint Committee on Taxation’s (JCT) process for reviewing refund claims granted by the Internal Revenue Service (IRS), we explained that the IRS generally must submit proposed refunds in excess of $5 million for corporate taxpayers and $2 million for all other taxpayers to the JCT before any such refunds can be paid. However, getting through the JCT review process can be difficult and time-consuming in some situations—and sometimes taxpayers are left in the dark.

On September 22, 2021, the IRS announced the launch of its new webpage that provides information to taxpayers whose large refunds are subject to JCT review. Topics covered include general information about how a JCT review matter arises and how the IRS handles a JCT review case.

Practice Point: The IRS’s new webpage provides a helpful general overview of the JCT review process but does not provide any new information on it. A more detailed discussion of the JCT review process can be found in our prior post and in the JCT’s 2019 process overview.




Weekly IRS Roundup September 13 – 17, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 13, 2021 – September 17, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

September 13, 2021: The IRS issued a news release concerning resources available to help small businesses learn their employer tax responsibilities and to help their employees.

September 13, 2021: The IRS postponed various tax filing and payment deadlines for victims of Hurricane Ida in parts of Pennsylvania. Victims now have until January 3, 2022, to file various individual and business tax returns and make tax payments.

September 14, 2021: The US Department of the Treasury (Treasury) and the IRS published a notice and request for comments concerning the interest rates and appropriate foreign loss payment patterns for determining the qualified insurance income of certain controlled corporations under IRC § 954(f). Written comments should be received on or before November 15, 2021.

September 14, 2021: The IRS issued a news release reminding employers about a valuable tax credit available to them for hiring long-term unemployment recipients and other groups of workers facing significant employment barriers.

September 15, 2021: The Treasury and the IRS published a notice and request for comments concerning forms related to foreign account tax compliance act registration (FATCA), including Forms 8966, 8957, 8966-C, 8809-I and 8508-I. Written comments should be received on or before November 15, 2021.

September 16, 2021: The IRS issued a news release reminding taxpayers who asked for an extension to file their 2020 return that they should file on or before October 15, 2021, to avoid the penalty for filing late.

September 16, 2021: The IRS published a practice unit concerning the limitation of exchange gain or loss on payment or disposition of debt instrument.

September 16, 2021: The Treasury and the IRS published a notice and request for comments on Revenue Procedure 99-17 that prescribes the time and manner for dealers in commodities and traders in securities or commodities to elect to use the mark-to-market method of accounting under IRC § 475(e) or IRC § 475(f). Written comments should be received on or before November 15, 2021.

September 16, 2021: The Treasury and the IRS published a notice and request for comments on Revenue Procedure 2003-33, which provides qualifying taxpayers with an extension of time—pursuant to Treasury Regulations Section 301.9100-3—to file an election described in IRC § 338(a) or IRC § 338(h)(10) to treat the purchase of a corporation’s stock as an asset acquisition. Written comments should be received on or before November 15, 2021.

September 17, 2021: The Treasury and the IRS published a notice and request for comments on forms used by business entity taxpayers, including Forms 1065, 1066, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, [...]

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The Results are in: IRS Appeals Retains Discretion to Continue to Allow Exam Teams and Chief Counsel to Attend Conferences

The IRS Independent Office of Appeals (IRS Appeals, Appeals) has seen many changes over the past several years. One of the more controversial and publicized change related to the 2017 pilot program to test whether inviting Large Business & International (LB&I) exam teams and Chief Counsel attorneys to engage with taxpayers and their representatives at the IRS Appeals conference would improve Appeals’ ability to work large, complex cases. The pilot program technically applied only to IRS Appeals’ largest and most complex cases, however, the IRS also revised the Internal Revenue Manual to provide IRS Appeals with discretion to invite exam teams and Chief Counsel attorneys to any conference. The pilot program ended on May 1, 2020, and the IRS has been gathering feedback and data from multiple sources (both within and outside the IRS) to determine the effectiveness of the program.

The results are in, as reflected in the recently released Appeals Team Case Leader Conferencing Initiative: Summary of Findings and Next Steps (IRS Appeals Summary). Generally, IRS Appeals Officers found that the exam team’s participation improved their understanding of the dispute and helped them identify, narrow and resolve factual and legal differences between the parties before engaging in settlement negotiations with taxpayers. On the other hand, some taxpayers expressed concerns over the presence of exam teams and Chief Counsel attorneys because they found it hindered the ability to resolve cases without litigation and required more concrete ground rules before the start of the conference.

The IRS Appeals Summary concluded that the process was generally helpful and that IRS Appeals would be given discretion to invite exam teams and Chief Counsel attorneys to attend the IRS Appeals conference in the future. In exercising such discretion, the Appeals Officer must consider several factors and solicit and consider both the taxpayers’ and the exam team’s views as to whether joint participation would be helpful.

Practice Point: Our experiences with the exam team and Chief Counsel attorneys attending the IRS Appeals conference has been mixed. Similar to concerns raised by other taxpayers, we have seen certain IRS personnel repeatedly interrupt the taxpayer during the presentation of their case and offer the exam team’s views of an acceptable settlement. However, we have also seen situations where the IRS Appeals Officer has been able to hold IRS personnel accountable by questioning factual and legal positions. In any event, exam team participation is here to stay and LB&I taxpayers and their representatives need to be aware of the new ground rules in this area.

Prior coverage of changes within the IRS Appeals can be accessed below.




IRS Releases Fact Sheet on Acceptable Electronic Signatures

The Internal Revenue Service (IRS) released a fact sheet, providing guidance on acceptable methods for taxpayers to electronically or digitally sign certain paper forms that they cannot file electronically. In order to provide taxpayers with greater flexibility during the COVID-19 pandemic, the IRS previously announced taxpayers may use digital signatures for certain forms through the end of 2021. The newly released fact sheet is the first guidance as to what constitutes an acceptable electronic signature.

The fact sheet notes that the IRS is balancing the flexibility of electronic signatures with security and fraud protections. Electronic signatures accepted by the IRS include:

  • A name typed on a signature block
  • A scanned or digitized image of a handwritten signature that is attached to an electronic record
  • A handwritten signature input onto an electronic signature pad
  • A handwritten signature, mark or command input on a display screen with a stylus device
  • A signature created by a third-party software

Additionally, the IRS will accept images of electronic signatures provided the image is a file type supported by Microsoft Office, such as .jpg, .pdf and .tiff.

The fact sheet provides a list of paper-filed forms—which cannot be e-filed—where a taxpayer may use an electronic signature:

  • Form 11-C, Occupational Tax and Registration Return for Wagering;
  • Form 637, Application for Registration (For Certain Excise Tax Activities);
  • Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
  • Form 706-A, U.S. Additional Estate Tax Return;
  • Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions;
  • Form 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust;
  • Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations;
  • Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts;
  • Form 706 Schedule R-1, Generation Skipping Transfer Tax;
  • Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
  • Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;
  • Form 730, Monthly Tax Return for Wagers;
  • Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
  • Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
  • Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation;
  • Form 1120-H, U.S. Income Tax Return for Homeowners Associations;
  • Form 1120-IC DISC, Interest Charge Domestic International Sales – Corporation Return;
  • Form 1120-L, U.S. Life Insurance Company Income Tax Return;
  • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;
  • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;
  • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
  • Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies;
  • Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
  • Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship;
  • Form 1128, Application to Adopt, Change or Retain a Tax Year;
  • Form 2678, Employer/Payer Appointment of Agent;
  • Form 3115, Application for Change in Accounting Method;
  • Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts;
  • Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner;
  • Form 4421, Declaration – [...]

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Weekly IRS Roundup August 30 – September 3, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 30, 2021 – September 3, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 30, 2021: With September being National Preparedness Month, the IRS reminded everyone to develop an emergency preparedness plan—especially with the height of hurricane season approaching and the ongoing wildfires. To prepare, taxpayers should secure and duplicate essential tax and financial documents.

August 31, 2021: The IRS postponed various tax filing and payment deadlines for victims of Hurricane Ida. Affected individuals and businesses will have until January 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on October 15, 2021, will now have until January 3, 2022, to file. However, tax payments related to 2020 tax returns that were due on May 17, 2021, are not eligible for this relief. This extension also applies to quarterly estimated income tax payments due on September 15, 2021.

September 1, 2021: The IRS issued a practice unit on general principles for foreign tax credits, specifically addressing foreign tax credits as changed by the Tax Cuts and Jobs Act of 2017.

September 2, 2021: The IRS issued final regulations, modifying previous regulations relating to IRS administrative proceedings, to reflect limitations that are required by the enactment of the Taxpayer First Act of 2019. The regulations implement new rules regarding the persons who may be provided books, papers, records or other data obtained pursuant to Internal Revenue Code Section 7602 for the sole purpose of providing expert evaluation and assistance to the IRS. The regulations adopt further limitations on the type of non-governmental attorneys to whom any books, papers, records or other data may be provided. Under the final regulations, IRS contractors are prohibited from asking substantive questions of a summoned witness under oath or asking a summoned person’s representative to clarify an objection or assertion of privilege.

September 3, 2021: The IRS issued Revenue Procedure 2021-40, announcing that it will not issue private letter rulings or determination letters on whether certain transactions are considered an act of self-dealing under Internal Revenue Code Section 4941.

September 3, 2021: The IRS issued Notice 2021-52, providing travel per diem rates for 2021 – 2022.

September 3, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Emily Mussio in our Chicago office for this week’s roundup.




What are the Time Limits for Assessing Additional Federal Tax and Filing a Refund Claim?

The Internal Revenue Service (IRS) must follow the “statute of limitations” as stated in Internal Revenue Code (IRC) Section 6501 to “assess” additional federal tax. Likewise, taxpayers must seek a tax overpayment or refund within the statutory period stated in IRC Section 6511. In this article, we’ll answer some of the most common questions regarding when the IRS can assess additional federal tax and when taxpayers must file a refund claim.

WHEN DOES THE STATUTE OF LIMITATIONS FOR ASSESSING ADDITIONAL TAXES START?

Typically, the period during which the IRS can seek additional tax starts when the taxpayer files their tax return. A taxpayer “self-assesses” when the amount of tax is stated on the return, but tax assessment can also occur when the IRS creates a “substitute for return” under IRC Section 6020. (For example, when the taxpayer fails to timely file a return.) Assessment merely means that the IRS records the tax liability on its official ledger for each taxpayer. An assessment is significant because it is legally considered a debt of the taxpayer for which the IRS can commence collection activities, like placing a lien and levy on property.

Self-Assessment Example: The taxpayer reports on a timely filed return a tax liability of $10,000 and submits payment of $5,000. The $10,000 tax is automatically assessed and constitutes a tax debt of the taxpayer, despite only a partial payment. In this case, the IRS would seek to collect the balance due ($5,000) from the taxpayer under the collection rules.

WHAT IS A TAX ASSESSMENT?

The IRS assesses tax by recording the amount owed in its official records. The assessment establishes the fact and amount of the tax liability that’s due to the IRS and starts the period during which the IRS can collect the amounts due and owing. Generally, the IRS may not lien or levy a taxpayer’s property until after an assessment is made.

There are three primary types of assessments:

  1. A “summary assessment” occurs automatically when the taxpayer reports an amount of tax on a return.
  2. A “jeopardy assessment” occurs when the IRS determines that the taxpayer may abscond with property that the IRS may need to lien and/or levy to satisfy a tax deficiency.
  3. A “tax deficiency assessment” occurs after the IRS determines the amount owed by the taxpayer and follows its procedures to permit the taxpayer to challenge its determination (usually after an audit).

STATUTORY NOTICE OF DEFICIENCY (THE 90-DAY LETTER)

If the IRS audits a return and determines that the taxpayer owes additional tax, it generally cannot assess the tax before sending the taxpayer a statutory notice of deficiency, or the so-called “90 day letter.” The letter must be sent by certified or registered mail to the last known address of the taxpayer (which is usually the address listed on the last return filed with the IRS). If the taxpayer does not file a timely petition with the US Tax Court in response to the 90-day letter, the IRS may then assess [...]

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Weekly IRS Roundup August 23 – August 27, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 23, 2021 – August 27, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 23, 2021: The IRS announced that the application period for the 2022 Compliance Assurance Process (CAP) program will run September 1 to November 1, 2021. Acceptance notices will be delivered in February 2022. The CAP program employs real-time issue resolution between taxpayers and the IRS to improve federal tax compliance by resolving problems prior to the filing of a tax return. To be eligible, applicants must: (1) have assets worth $10 million or more; (2) be a US publicly traded corporation with a legal requirement to prepare and submit US Securities and Exchange Commission (SEC) Forms 10-K, 10-Q and 8-K and (3) not under investigation by—or in litigation with—any government agency that would limit the IRS’s access to current tax records. The IRS’s CAP webpage can be found here.

August 25, 2021: The IRS announced that interest rates for the calendar quarter starting October 1, 2021, will remain the same and will be issued in Rev. Rul. 2021-17, dated September 13, 2021.

August 27, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Emily Mussio in our Chicago office for this week’s roundup.




Weekly IRS Roundup August 9 – August 13, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 9, 2021 – August 13, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 10, 2021: The IRS issued Revenue Procedure 2021-33 and an accompanying news release, providing a safe harbor pursuant to which employers are permitted to exclude certain amounts from gross receipts for purposes of determining Employee Retention Credit eligibility.

August 10, 2021: The IRS issued Notice 2021-43 and an accompanying news release, providing relief for employers to claim the Work Opportunity Tax Credit under Section 51 of the Code with respect to employees who began work after December 31, 2020. This latest update is in response to the extension of the associated Empowerment Zone designations through December 31, 2025, and pursuant to the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

August 10, 2021: The IRS issued a news release as part of a Security Summit series in partnership with state tax agencies and the tax industry, advising tax professionals to guard against pandemic-related phishing scams.

August 11, 2021: The IRS issued Revenue Procedure 2021-34, updating and modifying procedures for taxpayers to obtain automatic consent for certain income tax accounting method changes made to comply with Section 451 of the Code, as amended by the Tax Cuts and Jobs Act (TCJA).

August 11, 2021: The IRS issued Revenue Procedure 2021-35, modifying procedures for the safe harbor method of accounting for original issue discounts on a pool of credit card receivables in response to changes made to Section 451 by the TCJA.

August 13, 2021: The IRS issued Announcement 2021-13, announcing that the United States and United Kingdom have entered into an arrangement providing that references to the North American Free Trade Agreement (NAFTA) in the US-UK income tax treaty are to be interpreted as references to the United States-Mexico-Canada Agreement (USMCA) upon the USMCA’s entry into force.

August 13, 2021: The IRS issued Announcement 2021-14, announcing that the United States and United Kingdom have entered into an arrangement providing that, notwithstanding the United Kingdom’s withdrawal from the European Union, UK residents will continue to be treated as “equivalent beneficiaries” for purposes of applying the derivative benefits test to trusts under the Limitation on Benefits provision of the US-UK income tax treaty.

August 13, 2021: The IRS issued a news release announcing the disbursement of the August round of advance payments of the Child Tax Credit, consisting of approximately 36 million payments worth approximately $15 billion.

August 13, 2021: 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 [...]

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Weekly IRS Roundup August 2 – August 6, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 2, 2021 – August 6, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 3, 2021: The IRS issued a news release as part of a Security Summit series in partnership with state tax agencies and the tax industry, advising tax professionals on how to guard against—and mitigate—the effects of unemployment compensation fraud.

August 4, 2021: The IRS issued Notice 2021-49 and an accompanying news release, providing guidance on the employee retention credit under Section 3134 of the Code (as enacted by the American Rescue Plan Act of 2021) and supplementing previously-issued guidance under earlier COVID-related legislation.

August 4, 2021: The IRS issued a news release reminding taxpayers with registered large trucks and buses of the August 31, 2021, deadline to file Form 2290: Heavy Highway Vehicle Use Tax Return.

August 5, 2021: The IRS released corrections and correcting amendments to final regulations regarding the election, which were published on January 13, 2020, under Section 1400Z-2 of the Code. The corrections specifically address federal tax benefits with respect to certain equity interests in qualified opportunity funds.

August 5, 2021: The IRS issued Notice 2021-47, announcing the inflation adjustment factor and associated phase-out amount for purposes of determining the enhanced oil recovery credit under Section 43 of the Code.

August 6, 2021: The IRS issued Revenue Procedure 2021-31, providing tables used in determining depreciation deduction limitations and income inclusions with respect to passenger automobiles for Calendar Year 2021 under Section 280F of the Code.

August 6, 2021: 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 July 26 – July 30, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 26, 2021 – July 30, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 26, 2021: The IRS issued Notice 2021-46 as a supplement to Notice 2021-31 issued in May, providing additional guidance on the temporary premium assistance for Consolidated Omnibus Budget Reconciliation Act (COBRA) health insurance benefits and the associated COBRA premium assistance credit—enacted by the American Rescue Plan Act of 2021 (ARPA).

July 27, 2021: The IRS issued a news release urging tax professionals to raise awareness amongst clients about the availability of Identity Protection PINs, a tax return security feature designed to protect against tax-related identity theft.

July 28, 2021: The IRS issued a news release announcing the imminent issuance of another round of tax refunds to those who paid taxes on unemployment compensation in 2020, pursuant to the retroactive exclusion of such compensation from 2020 taxable income under ARPA. The refunds will be issued to approximately 1.5 million taxpayers, averaging more than $1,600.

July 29, 2021: The IRS issued a news release announcing an update to previously-released FAQs regarding paid sick and family leave tax credits under ARPA.

July 30, 2021: The IRS issued Notice 2021-45, providing a list of counties and parishes that constitute as qualified disaster zones for purposes of determining low-income housing tax credits under section 42 of the Code, as expanded by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

July 30, 2021: The IRS issued Notice 2021-48, providing guidance on changes made under ARPA to the funding rules for single-employer defined benefit pension plans.

July 30, 2021: The IRS issued Announcement 2021-12, revealing recent disciplinary sanctions imposed on certain tax practitioners pursuant to the Circular 230 rules for practice before the IRS.

July 30, 2021: The IRS issued a news release announcing the awarding of a $100,000 Low Income Taxpayer Clinic grant to West Virginia University College of Law to assist the university in providing tax controversy litigation services to low-income and English as a second language (ESL) taxpayers.

July 30, 2021: The IRS issued a news release reminding taxpayers who hold Employer Identification Numbers (EINs) of their responsibility to file Form 8822-B, updating their information with the IRS upon a change of responsible party or contact information.

July 30, 2021: 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.




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