Line items

LB&I taxpayers can base R&D credit expenses on financial statements

In Directive LB&I-04-0917-005, the IRS instructed its examiners to accept as qualified research expenses (QREs) that LB&I taxpayers (those with assets of $10 million or more) may apply toward the Sec. 41 credit for increasing research activities (R&D credit) those R&D expenses the taxpayers reported for financial accounting purposes under FASB ASC Topic 730, Research and Development, as adjusted and certified according to the directive. Noting that both taxpayers and examiners have been burdened by determining the correct R&D credit, the method should provide a more efficient means of approving QREs, the directive stated. Eligible taxpayers must also follow U.S. GAAP and show their Topic 730 expenses for the credit year as a separate line item in, or note to, their certified audited financial statements.

IRS proposes allowing partial SSNs on W-2s

The IRS issued proposed regulations (REG-105004-16) permitting employers to use a truncated Social Security or other taxpayer identification number on the copy of Form W-2, Wage and Tax Statement, furnished to the employee. The truncated numbers, the use of which would be voluntary, would show the last four digits, with the preceding five digits replaced by asterisks or X's. The proposed rules, which the IRS stated are intended to help employers protect employees from identity theft, were authorized by an amendment to Sec. 6051(a)(2) by the Protecting Americans From Tax Hikes (PATH) Act, P.L. 114-113, enacted in 2015.

IRS to again rule on general tax consequences of tax-free transactions

In Rev. Proc. 2017-52, the IRS launched a pilot program expanding the scope of private letter rulings it will issue on the tax consequences of tax-free distributions and reorganizations under Secs. 355 and 368. The revenue procedure supersedes Rev. Proc. 2013-32, in which the IRS announced it would no longer rule on the general tax consequences of certain corporate transactions including Sec. 355 distributions but would only do so on "significant issues" raised in those transactions. Under the pilot program, taxpayers may request letter rulings addressing the general federal income tax consequences of a transaction intended to qualify under Secs. 368(a)(1)(D) and 355 or a distribution intended to qualify under Secs. 355(a) and (c). The program is effective for requests postmarked or received by the IRS after Sept. 21, 2017, and will last at least until March 21, 2019.

Where to find September’s flipbook issue

The Journal of Accountancy is now completely digital. 





2022 Payroll Update

Employees working remotely have created numerous issues for employers. The 2022 Payroll Update report provides insight on remote workforce tax issues, pandemic payroll issues and employer credits, and worker classification issues in the gig economy.