An individual was allowed to deduct the amount of premiums paid to provide health insurance coverage for his ex-spouse as alimony. The taxpayer had agreed to pay his then spouse’s health insurance premiums, incident to a separation agreement pending divorce, through a cafeteria plan provided by the taxpayer’s employer. Subsequently, the taxpayer had excluded the amount equal to the health […]
The IRS has reminded taxpayers that the last quarter of 2021 is a good time to check withholding. The IRS’s convenient Tax Withholding Estimator (https://www.irs.gov/individuals/tax-withholding-estimator), will help taxpayers determine if they have too much withheld and how to make an adjustment to put more cash into their own pocket now. About 70 percent of taxpayers over withhold their taxes every year, […]
The IRS released standards that a limited liability company (LLC) must satisfy to receive a determination letter recognizing it as tax-exempt under Code Secs. 501(a)(1) and 501(c)(3). This does not affect the status of organizations currently recognized under Code Sec. 501(c)(3).
Required ProvisionsThe IRS would issue said letter only if an LLC’s articles of organization and its operating agreement each include:
provisions requiring that each member […]
Final regulations under Code Sec. 301 update the existing regulations under this provision to reflect statutory changes made by the Technical and Miscellaneous Revenue Act of 1988 ( P.L. 100-647) (the 1988 Act). These changes generally provide that the amount of a Section 301 distribution of property made by a corporation to its shareholder is the fair market value of the distributed property. The final Section […]
The Treasury and IRS have issued final regulations addressing the calculation of qualified business asset investment for qualified improvement property, under the alternative depreciation system (ADS), for purposes of the Code Sec. 250 deduction (for foreign-derived intangible income and Code Sec. 951A global intangible low-taxed income (GILTI)) and for purposes of determining GILTI.
The regulations also contain transition rules relating to the impact of loss […]
For 2022, the Social Security wage cap will be $147,000, and Social Security and Supplemental Security Income (SSI) benefits will increase by 5.9 percent. These changes reflect cost-of-living adjustments to account for inflation.
Wage Cap for Social Security TaxThe Federal Insurance Contributions Act (FICA) tax on wages is 7.65 percent each for the employee and the employer. FICA tax has two […]
The IRS has released the 2021-2022 special per diem rates. Taxpayers use the per diem rates to substantiate certain expenses incurred while traveling away from home. These special per diem rates include:
the special transportation industry meal and incidental expenses (M&IE) rates;the rate for the incidental expenses only deduction; andthe rates and list of high-cost localities for purposes of the high-low […]
The IRS and the Treasury Department have issued guidance to employers about reporting the amount of qualified sick and family leave wages paid to employees for leave taken in 2021 on Form W-2, Wage and Tax Statement. Further, the notice provides guidance under recent legislation, including: the Families First Coronavirus Response Act (FFCRA) ( P.L. 116-127), as amended by the COVID-Related Tax […]
Temporary, Proposed Regs Authorize Assessment of Erroneous Refund of COVID-19 Employment Tax CreditsMelody Clark
The IRS has issued temporary and proposed regulations that authorize the assessment of any erroneous refund of the COVID-19 employment tax credits which were added by the American Rescue Plan Act of 2021 ( P.L. 117-2). These credits for certain wages paid by employers are:
the Credit for Paid Sick Leave under Code Sec. 3131,the Credit for Paid Family Leave under Code Sec. 3132, […]
The IRS has announced that it intends to defer until 2023 the applicability of certain final regulations under Code Sec. 1446(a) and (f) relating to withholding of tax on foreign partners’ share of effectively connected income.
Withholding Provisions on Transfers of Interests in Publicly Traded Partnerships DeferredThe amendments will defer the applicability date to January 1, 2023, for certain provisions relating to (1) withholding under Code […]
The IRS has reminded taxpayers to file their 2020 tax returns by the upcoming October 15, 2021 due date. Taxpayers must file on or before the extension deadline to avoid the penalty for filing late if they request an extension. Tax returns can still be filed through electronic filing options, such as the IRS Free File.
However, the following taxpayers may […]
The IRS has reminded taxpayers to develop emergency preparedness plans due to the upcoming hurricane season and the ongoing threat of wildfires in some parts of the country. September is declared as the National Preparedness Month.
Further, the IRS advised taxpayers to:
secure critical documents such as tax returns, birth certificates, deeds, titles and insurance policies inside waterproof containers in a secure […]
The IRS has emphasized the importance of correctly determining whether the individuals providing services to businesses were employees or independent contractors. Generally, an employee performs services that businesses control. Independent contractors offer their services to the public. Businesses have a right to control the details of the services performed.
The classification depends on the:
company’s behavioral Control on what the worker does […]
The IRS has allowed taxpayers to use electronic or digital signatures on certain paper forms they cannot file electronically. The Service has balanced the e-signature option with critical security and protection needed against identity theft and fraud. The IRS will accept a wide range of electronic signatures. Acceptable electronic signature methods include:
a typed name typed on a signature block;a scanned […]
The Tax Court had jurisdiction to determine the appropriate relief available to an individual who sought innocent spouse relief for two tax years at issue. Initially, the taxpayer submitted a request for innocent spouse relief for one tax year, which the IRS denied in a final determination. Subsequently, the taxpayer filed an untimely petition for Tax Court review which was […]
The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2021 and the lease inclusion amounts for business vehicles first leased in 2021.
Luxury Passenger Car Depreciation CapsThe luxury car depreciation caps for a passenger car placed in service in 2021 limit annual depreciation deductions to:
$10,200 for the first year without bonus depreciation$18,200 for the […]
The IRS has issued guidance for employers claiming the employee retention credit under Code Sec. 3134, enacted by section 9651 of the American Rescue Plan Act of 2021 (ARP), P.L. 117-2, which provides a credit for wages paid after June 30, 2021, and before January 1, 2022. The guidance amplifies previous notices which addressed the employee retention credit under section 2301 of […]
The Treasury and IRS have provided an optional safe harbor allowing employers to exclude the following amounts from their gross receipts solely for determining eligibility for the employee retention credit:
the amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;the amount of any Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; […]
The U.S. Small Business Administration ( SBA) is launching a streamlined application portal to allow certain borrowers to apply for Paycheck Protection Program (PPP) Loan forgiveness directly through the SBA. The SBA also is explaining why it discontinued use of Loan Necessity Questionnaires for PPP borrowers.
PPP Direct Forgiveness PortalThe SBA announced that it is launching a streamlined application portal to allow borrowers with […]
The IRS stated that families should use the Child Tax Credit (CTC) Update Portal to confirm their eligibility for the payments. If eligible, the tool also indicates whether taxpayers are enrolled to receive their payments by direct deposit. More information can be found at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.
Direct DepositFor taxpayers currently using direct deposit, the tool will list the full bank routing number and the last […]
The IRS provided additional guidance on the application of the American Rescue Plan Act of 2021 (ARP) (P.L. 117-2) relating to temporary premium assistance for Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continuation coverage. This notice supplements Notice 2021-31, I.R.B. 2021-23, and addresses additional issues.
EligibilityThe IRS noted that if the original qualifying event was a reduction in hours or an […]
The foreign tax credit did not apply against the net investment income tax (NIIT). The structure of the Internal Revenue Code made the credit inapplicable to the NIIT, and tax treaties did not override that fact.
Under Code, Foreign Tax Credit Did Not Apply to NIITThe foreign tax credit is in chapter 1, subtitle A of the Code, and it expressly […]
A missing or unknown federal gift tax return could constitute reasonable cause for the late filing of an estate tax return.
To understand the appropriate steps to take after the decedent’s death, the executor was in contact with the decedent’s tax preparer, a family office service, and an attorney. Several months after the decedent’s death, the attorney advised that no estate […]
The IRS issued transition relief for certain employers claiming the Work Opportunity Tax Credit (WOTC) under Code Sec. 51. This would apply for certain employees beginning work after December 31, 2020, in response to legislation permitting the designation of an Empowerment Zone under Code Sec. 1393(b) to be extended from December 31, 2020, through December 31, 2025. Specifically, section IV of this notice […]
The IRS has announced the launch of two new online tools to help families verify, manage and monitor monthly payments of child tax credits under the American Rescue Plan Act (ARP) (P.L. 117-2). These are in addition to the Non-filer Sign-up tool announced last week, which helps families register for child tax credits. The tools are both available through the […]