Taxpayers and practitioners breathed a sigh of relief in January when Congress passed the American Taxpayer Relief Act of 2012 (ATRA), P.L. 112-240, at the last minute, bringing some certainty to a host of provisions that had been uncertain. Many expired and expiring provisions were extended by ATRA, including the
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Tax
Supreme Court resolves circuit split on 40% gross valuation misstatement penalty
On Tuesday, the U.S. Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero (Woods, No. 12-562 (U.S. 12/3/13),
FASB to seek feedback on accounting for income taxes
FASB plans to ask financial statement users, preparers, auditors, and others for feedback on how to best address concerns about its standard on accounting for income taxes. The board also plans to ask stakeholders whether addressing those concerns should be a priority in comparison to other projects that could be
IRS oversight of CPAs who provide valuation services
Under Sec. 6695A, enacted by the Pension Protection Act of 2006, P.L. 109-280, appraisers may face monetary penalties for appraisals that lead to substantial and gross valuation misstatements on returns. This section is intended to provide greater assurance that all appraisers and appraisals meet a minimum threshold of qualification. These
FICA and FUTA caps refer to common law employment relationships
The Court of Appeals for the Federal Circuit upheld a lower court decision that the wage caps for the Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) must be calculated by reference to common law employment relationships rather than statutory employment relationships. Thus, a payroll service company
Long-awaited repair regulations are issued
The IRS issued long-awaited final regulations (T.D. 9636) regarding the treatment of expenditures incurred in acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements. The IRS noted that it had received many comments on the regulations, most
IRS bound to honor designation of voluntary payment by one taxpayer of another’s liability
In a reviewed opinion, the Tax Court held that the IRS must follow a corporation’s designation of voluntary payments toward the income tax liabilities of its owners/employees. However, because the payments did not represent taxes withheld at the source, the IRS was allowed to levy on the assets of the
Health coverage information-reporting guidance issued
The IRS issued two related proposed regulation projects on health care coverage reporting requirements under the Patient Protection and Affordable Care Act, P.L. 111-148. One set of proposed regulations gives guidance to providers of minimum essential health coverage that are subject to the information-reporting requirements of Sec. 6055 (REG-132455-11). The
IRS issues employment tax refund procedures for same-sex spouses
In Notice 2013-61, the IRS announced the procedures employers should follow for filing refund claims for overpaid Federal Insurance Contributions Act (FICA) and income taxes paid on employer-provided benefits for same-sex spouses that, because of the Supreme Court’s Windsor decision, are now tax free. The notice provides two streamlined administrative
What to do when a client has an undisclosed foreign account
CPAs often have clients with an interest in or signature authority over a foreign account. The IRS has emphasized compliance in reporting requirements for U.S. owners of foreign accounts, but many taxpayers may still not know their responsibilities and liabilities. This article outlines these responsibilities and liabilities and describes current
Tenth Circuit resurrects Colorado’s Amazon law
The Tenth Circuit Court of Appeals recently dismissed a lower court’s permanent injunction that had enjoined Colorado from enforcing its Amazon law requiring remote sellers to report sales in the state. The Tenth Circuit held that the Tax Injunction Act (TIA) precludes federal jurisdiction over the claim that Colorado’s law
Higher stakes for tax treatment of rental real estate
The Health Care and Education Reconciliation Act of 2010 (Reconciliation Act), P.L. 111-152, imposes an additional 3.8% tax on net investment income, which includes income from common financial investments and from passive trade or business activities, including real estate rentals. Starting in 2013, this tax raises the stakes for taxpayers
Final rules released on 0.9% Medicare surtax
The IRS issued final regulations governing the 0.9% Medicare surtax, which took effect this year (T.D. 9645). The regulations contain guidance for employers and individuals on the implementation of the tax, including the requirement to file a return reporting the tax, the process for employers to make adjustments of underpayments
Final and proposed regs. issued on 3.8% net investment income tax
Late on Tuesday, the IRS issued final and proposed regulations giving guidance on the application and computation of the 3.8% net investment income tax imposed by Sec. 1411 (T.D. 9644 and REG-130843-13). The final regulations adopt, with changes, proposed regulations issued late in 2012. Starting in 2013, Sec. 1411 imposes
IRS proposes curbing political activities of Sec. 501(c)(4) social welfare organizations
The IRS announced its intention on Tuesday to amend the regulations governing social welfare organizations, a topic that has recently created an enormous amount of political controversy, especially during the recent scandal over how the IRS was mishandling applications from groups that had “tea party” and other terms in their
TIGTA report says IRS should do a better job protecting taxpayer data
The IRS does not do a good job of correcting security weaknesses, thereby failing to protect taxpayer data, the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report released Thursday. TIGTA’s audit found that the IRS does not always correct known security problems and the corrective action process
For penalty calculation, amount of tax shown on return reduced by credits, Tax Court holds
The Tax Court held that the amount of tax shown on the taxpayers’ return was reduced by refundable credits, but not below zero, for purposes of calculating the Sec. 6662(a) accuracy-related penalty (Rand, 141 T.C. No. 12 (2013)). The court reached that conclusion even though the taxpayers were not entitled
Tax return preparers suspected of filing inaccurate EITC claims to be targeted by IRS
The IRS announced in an email to tax practitioners that it will send letters in November and December to return preparers “suspected of filing inaccurate EITC [earned income tax credit] claims” (Quick Alerts for Tax Professionals, Nov. 6, 2013). According to the IRS, the letters will explain “critical issues identified
IRS extends fast-track settlement to smaller businesses nationwide
Formerly available only to large and midsize businesses and in a geographically limited pilot program for smaller entities, the IRS’s Fast Track Settlement program is now available to smaller businesses nationwide, the IRS announced Wednesday. Fast-track settlement allows the IRS and business or self-employed taxpayers under examination to use alternative
Health FSA use-it-or-lose-it rule modified to allow a $500 carryover
On Thursday, the IRS issued Notice 2013-71, which permits companies to amend their Sec. 125 cafeteria plans to allow participants in health flexible spending arrangements (FSAs) who do not use all of the money in a plan year to use up to $500 in the next plan year, in addition
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