ERC Compliance Efforts Top $1 Billion in Six Months, IR-2024-78 The IRS announced that compliance efforts around erroneous Employee Retention Credit (ERC) claims have topped more than $1 billion within six months. "We are encouraged by the results so fa...
IRS Releases Guidance on Form 1099-K, FS-2024-7; IR-2024-5 The IRS has released guidance to help taxpayers understand what to do with Form 1099-K. Responding to feedback from taxpayers, tax professionals and payment processors, the agency had announced b...
CA - List of Counties impacted by winter storm updated California updated its list of counties impacted by the winter storm, eligible for tax relief. The counties eligible for relief are: Humboldt, Imperial, Monterey, San Diego, San Mateo, Santa Cruz, Ven...
CO - Addback and subtraction rules adopted The Colorado Department of Revenue has adopted the following new individual income tax rules:Rule 39-22-104(3)(d), relating to the addback for state income taxes deducted in determining federal taxabl...
CT - Taxpayer’s petition challenging valuation was timely filed For Connecticut property tax purposes, the trial court erred in determining that it lacked subject matter jurisdiction over the taxpayer’s appeal on the basis that the taxpayer’s petition to the t...
HI - House, senate advance bills to update IRC conformity The Hawaii House of Representatives and Senate approved identical, companion bills introduced in their own chambers that would update Hawaii’s Internal Revenue Code tie-in date for computing corpora...
IL - Tentative cass County multiplier announced for 2023 The tentative Cass County equalization factor (multiplier) for Illinois property tax purposes has been set for 2023 at 1.0000. The final 2022 multiplier was 1.0000. Release, Illinois Department of Rev...
NJ - Earned income tax credit discussed The New Jersey Department of the Treasury encourages eligible taxpayers to take advantage of earned income tax credit. For 2023tax year, eligible taxpayers could receive a refundable credit up to USD ...
President Bidensupportextending the individualtaxprovisions of the Tax Cuts and Jobs Act, many of which are set to expire next year, Department of the Treasury Secretary Janet Yellen said.
PresidentBidensupportextendingtheindividualtaxprovisionsof theTax Cuts and Jobs Act, many of which are set to expire next year, Department of the Treasury Secretary JanetYellensaid.
"The President has made it clear that he would oppose raising back thetaxesfor working people and families making under $400,000,"SecretaryYellentestified before the Senate Finance Committee during a March 21, 2024,hearingto review the White House fiscal year 2025budget proposal.
She then affirmed that"he would"supportextendingtheindividualtaxprovisionsof theTCJAwhen asked by committee Ranking Member Mike Crapo (R-Idaho), who noted that the budget did not make any mention of this.
Yellendefended the fiscal 2025 budget request against assertions thattaxeswill indeed go up for those making under $400,000, contrary to PresidentBiden’s promise, because thetaxesthat are targeted to wealthy corporations to ensure they are paying their fair share will ultimately be passed down to their consumers in the form of higher prices and lower wages.
"I think what the impact when you changetaxeson corporations, what the impact is on families involves a lot of channels that are speculative,"Yellensaid."They are included in models that sometimes the Treasury used for the purposes of analysis, in ataxthat is levied on corporations, that has no obvious direct effect on households."
The proposed budget would increase the corporate minimumtaxfrom the current 15 percent to 21 percent, as well as raise thetaxrate on U.S. multinationals’ foreign earnings from the current 10.5 percent to 21 percent. The current corporatetaxrate would climb to 28 percent and the budget would eliminatetaxbreaks for million-dollar executive compensation. It would also increase thetaxrate on corporate stock buybacks from 1 percent to 4 percent, among other business-relatedtaxprovisions.
Corporations and billionaires will be paying more in taxes if Congress follows recommendations PresidentBiden gave during his State of the Union address.
Corporationsand billionaires will be paying more in taxes if Congress follows recommendationsPresidentBidengave during hisStateof theUnionaddress.
PresidentBidenhighlighted a number of initiatives during the March 7, 2024, address. Forcorporations, he said that it is"time to raise the corporate minimum tax to at least 21 percent."
"Remember in 2020, 55 of the biggest companies in America made $40 billion and paid zero in federal income taxes,"PresidentBidensaid."Zero. Not anymore. Thanks to the law I wrote [and] we signed, big companies have to pay minimum 15 percent. But that’s still less than working people paid federal taxes."
Additionally, he alluded to further recommendations that will likely be included when the administration released its budget proposal, expected as early as the week of March 11, 2024. This includes limiting tax breaks related to corporate and private jets and capping deductions on certain employees at $1 million.
For billionaires,PresidentBidenis looking to increase their tax rate to 25 percent.
"You know what the average federal taxes for those billionaires [is]?"he asked. “"They’re making great sacrifices. 8.2 percent. That’s far less than the vast majority of Americans pay. No billionaire should pay a lower federal tax rate than a teacher or a sanitation worker or nurse."”
PresidentBidensaid this proposal would raise $500 billion over the next 10 years and suggested some of that additional tax money would help strengthen Social Security so that there would be no need to cut benefits or raise the retirement age to extend the life of the Social Security program.
The IRS has launched a new initiative to improve tax compliance among high-incometaxpayers who have not filed federal income tax returns since 2017.
TheIRShas launched a newinitiativeto improve tax compliance amonghigh-incometaxpayerswho have not filed federal incometax returnssince 2017. This effort, funded by the Inflation Reduction Act, involves sending outIRScompliance letters to over 125,000 cases wheretax returnshave not been filed since 2017. These mailings include more than 25,000 to individuals with incomes exceeding $1 million and over 100,000 to those with incomes ranging between $400,000 and $1 million for the tax years 2017 to 2021. TheIRSwill begin mailing these compliance alerts, formally known as theCP59Notice, this week.
Recipients of these letters should act promptly to prevent further notices, increased penalties, and stronger enforcement actions. Consulting a tax professional can help them swiftly file latetax returnsand settle outstanding taxes, interest, and penalties. The failure-to-file penalty is 5 percent per month, capped at 25 percent of the tax owed. Additional resources are available on theIRSwebsitefor non-filers.
The non-filerinitiativeis part of theIRS's broader campaign to ensure large corporations, partnerships, andhigh-incomeindividuals fulfill their tax obligations. Non-respondents to the non-filer letter will face further notices and enforcement actions. If someone consistently ignores these notices, theIRSmay file a substitutetax returnon their behalf. However, it's still advisable for the individual to file their ownreturnto claim eligible exemptions, credits, and deductions.
An individual’s claim for innocent spouse relief was rejected for lack of jurisdiction because the taxpayer failed to file his petition within the 90-day deadline under Code Sec. 6015(e)(1)(A).
Anindividual’sclaimforinnocent spouse reliefwas rejected for lack of jurisdiction because the taxpayerfailedtofilehispetitionwithin the 90-day deadline underCode Sec. 6015(e)(1)(A). The taxpayer argued that the deadline tofileapetitionfor a denial ofinnocent spouse reliefwas not jurisdictional and asked that the Tax Court hear his case on equitable grounds. However, the Tax Court noted that a filing deadline is jurisdictional if Congress clearly states that it is. The IRS argued that argues that the 90-day filing deadline ofCode Sec. 6015(e)(1)(A)was jurisdictional because Congress clearly stated that it was and the Supreme Court’s decision inBoechler, P.C. v. Commissioner, 142 S. Ct. 1493, in addition to numerous appellate cases, supported this argument.
The Tax Court examined the"text, context, and relevant historical treatment"of the provision at issue and concluded that the 90-day filing deadline ofCode Sec. 6015(e)(1)(A)was jurisdictional. On the basis of statutory interpretation principles, the jurisdictional parenthetical inCode Sec. 6015(e)(1)(A)was unambiguous. It did not contain any ambiguous terms and there was a clear link between the jurisdictional parenthetical and the filing deadline. Specifically,Code Sec. 6015(e)(1)(A)is a provision that solely sets forth deadlines. Further, it was unclear what weight, if any, should be given to the equitable nature ofCode Sec. 6015. The statutory context arguments were not strong enough to overcome the statutory text. Accordingly, the Tax Court ruled that the 90-day filing deadline in Code Sec. 6015(e)(1)(A) was jurisdictional.
The IRS has continued to increase the amount of information available in multiple languages. This was part of the IRS transformation work under the Strategic Operating Plan, made possible by additional resources provided by the Inflation Reduction Act (P.L. 117-169).
TheIRShas continued toincreasethe amount of information available in multiplelanguages. This was part of theIRStransformation work under the Strategic Operating Plan, made possible by additionalresourcesprovided by the Inflation Reduction Act (P.L. 117-169). OnIRS.gov,taxpayerscan select their preferredlanguagefrom the dropdown menu at the top of the page, including Spanish, Vietnamese, Russian, Korean, Haitian Creole, Traditional Chinese and Simplified Chinese. Additionally, theLanguagespagegivestaxpayersinformation in 21languageson key topics such as"Your Rights as aTaxpayer"and"Who Needs to File."
"TheIRSis committed to making further improvements fortaxpayersin a wide range of areas, including expandingoptionsavailable totaxpayersin multiplelanguages,"saidIRSCommissioner Danny Werfel."Understanding taxes can be challenging enough, so it’s important for theIRSto put a variety of information onIRS.gov and other materials into thelanguageataxpayerknows best. This is part of the larger effort by theIRSto make taxes easier for alltaxpayers,"he added.
Iftaxpayerscannot find the answers to their tax questions onIRS.gov, they can call theIRSor get in-person help at anIRSTaxpayerAssistance Center. Finally, hundreds ofIRSVolunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs have access to Over the Phone Interpreterservices. VITA and TCE offer free basic tax return preparation to qualified individuals.
The IRS has granted to withholding agents an administrative exemption from the electronic filing requirements for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.
TheIRShas granted to withholding agents an administrativeexemptionfrom theelectronic filingrequirements forForm 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. Under theexemption:
withholding agents (both U.S. and foreign persons) are not required to fileForms 1042electronically during calendar year 2024; and
withholding agents that are foreign persons are not required to fileForms 1042electronically during calendar year 2025.
Theexemptionis automatic, so withholding agents do not need to file anelectronic filingwaiver request to use theexemption.
Electronic FilingofForm 1042
UnderCode Sec. 6011(e), theIRSmust prescribe regulations with standards for determining which federal tax returns must be filed electronically. In 2023, final regulations were published to implement amendments toCode Sec. 6011(e)that lowered the threshold number of returns for requiredelectronic filingof certain returns. The regulations included requirements for filingForm 1042electronically.
The final regulations provide that:
a withholding agent (but not an individual, estate,or trust) must electronically fileForm 1042if the agent is required to file 10 or more returns of any type during the same calendar year in whichForm 1042is required to be filed;
a withholding agent that is a partnership with more than 100 partners must electronically fileForm 1042regardless of the number of returns the partnership is required to file during the calendar year; and
a withholding agent that is a financial institution must electronically fileForm 1042without regard to the number of returns it is required to file during the calendar year.
The final regulations apply toForms 1042required to be filed for tax years ending on or after December 31, 2023. This means that withholding agents must apply the newelectronic filingrequirements beginning withForms 1042due on or after March 15, 2024.
Challenges to Withholding Agents
Since the final regulations were published, theIRSreceived feedback from withholding agents noting challenges in transitioning to the procedures needed for filingForms 1042electronically. Withholding agents expressed concerns about the limited number of ApprovedIRSModernizede-FileBusiness Providers forForm 1042, and difficulties accessing the schema and business rules for filingForm 1042electronically. Withholding agents that do not rely on modernizede-filebusiness providers said that they needed more time to upgrade their systems for filing on theIRS’s Modernizede-Fileplatform. Agents also noted challenges specific to foreign persons filingForms 1042regarding the authentication requirements necessary for accessing the platform.
In response to these concerns, theIRSused its power under the regulations to provide theexemptionfrom theelectronic filingrequirement forForm 1042, in the interest of effective and efficient tax administration.