In an audit, the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS has greatly improved its identity theft protection program since the 2012 filing season but that additional changes should be made (The Taxpayer Protection Program Improves Identity Theft Detection; However, Case Processing Controls Need to Be
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Tax
New method for determining who gets Sec. 199 deduction under contract manufacturing arrangements
The IRS issued new guidance to examiners in its Large Business & International (LB&I) Division regarding how to determine which taxpayer is entitled to claim the Sec. 199 domestic production activities deduction in a contract manufacturing arrangement (LB&I-04-0713-006). The directive replaces earlier guidance (LB&I-4-0112-001) issued last year, which had used
Transfer pricing and its effect on financial reporting
This article examines the relationship between transfer pricing and an entity’s tax and financial reporting. Due to increased IRS audit procedures, transfer pricing has become one of the riskiest areas for multinational corporations from both a compliance and tax planning perspective. Amazon, AOL, Adobe, Hewlett-Packard, Microsoft, and other multinationals have
Rules for deferral of income from gift card sales clarified
The IRS issued guidance clarifying that taxpayers that sell gift cards can defer recognizing income from the sale of gift cards redeemable by an unrelated third party until the year after the payment is received (Rev. Proc. 2013-29, clarifying and modifying Rev. Proc. 2011-18). With the rapid growth in the
Write it down: The importance of documenting oral advice
CPAs routinely provide oral advice to clients. While professional standards generally do not require such advice to be documented, the experience of the AICPA Professional Liability Insurance Program demonstrates that undocumented advice weakens the defense to a professional liability claim. This real-life scenario provides an example: A CPA providing bank
IRS updates special per diem rates for 2013–2014 travel expenses
On Wednesday, the IRS issued its annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2013 and 2014 (Notice 2013-65).The notice provides the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and
Streamlined procedures for post-Windsor FICA refunds are released
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
New York state proposes to regulate tax return preparers
Stepping into the void left when a federal court threw out the IRS’s registered tax return preparer program (see article here), the New York State Department of Taxation and Finance has proposed amendments to its Personal Income Tax Regulations and Procedural Regulations to regulate tax return preparers (N.Y. Comp. Codes
New procedures for equitable innocent spouse relief are released
On Monday, the IRS issued Rev. Proc. 2013-34, providing the rules under which taxpayers can obtain equitable innocent spouse relief from joint liability under Sec. 66(c) or 6015(f). Married couples who file joint returns are jointly liable for their federal income tax liability, while married couples who live in community
Repair regulations are finally issued
On Friday, the IRS issued long-awaited final (T.D. 9636) and proposed regulations 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
Preventive health services with no deductible qualify as high-deductible health plans
In its latest guidance on health care rules, the IRS issued a notice on Monday clarifying that preventive health services that are provided without a deductible under a health insurance plan will not disqualify a high-deductible health plan (HDHP) (Notice 2013-57). Under Sec. 223, individuals who participate in a health
IRS explains Sec. 179 qualified real property allocations and procedures for filing amended returns
On Tuesday, the IRS released Notice 2013-59, explaining how the retroactive extension of the Sec. 179 rules under the American Taxpayer Relief Act of 2012 (ATRA), P.L. 112-240, operates when applied to qualified real property and how to allocate the portion of gain attributable to the qualified real property upon
Health coverage information reporting requirements guidance issued
The IRS on Friday 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
Proposed regulations change definition of R&D expenditures
In proposed regulations issued on Thursday, the IRS provided guidance on the treatment under Sec. 174 of research and development (R&D) expenditures incurred in connection with the development of tangible property, including pilot models (REG-124148-05). The proposed changes would, among other things, settle the question of whether the sale of
Final rules remove “credit ratings” from regulations
The IRS on Thursday issued final regulations that remove all references to and all requirements of reliance on “credit ratings” from Treasury regulations (T.D. 9637). The regulations provide substitute standards of creditworthiness. They finalize rules that were issued in temporary form in 2011 to meet requirements mandated by the Dodd-Frank
Regulations clarify treatment of a debt instrument under straddle rules
On Wednesday, the IRS issued identical temporary (T.D. 9635) and proposed regulations (REG-111753-12) to clarify the treatment of debt instruments that are part of a straddle. The regulations provide guidance for when an issuer’s obligation under a debt instrument may be a position in actively traded personal property, in which
Final regulations attack artificially generated foreign tax credits
The IRS issued final regulations on determining the amount of taxes paid for purposes of the foreign tax credit (T.D. 9634). The regulations are designed to curb certain transactions that the IRS says “produce inappropriate foreign tax credit results.” They finalize proposed regulations issued in 2011 with no substantive change
Preventing a challenge to (un)reasonable compensation
As the IRS increases scrutiny of executive compensation, CPAs need to proactively advise their clients on how to withstand these inquiries. As a result of IRS training initiatives, three types of entities draw the most attention and therefore need good advice from CPAs. First, closely held C corporations are examined
IRS strikes out against Steinbrenner
In a family trust case, the U.S. District Court for the Middle District of Florida found in favor of the son of the New York Yankees’ late owner, George Steinbrenner, by ruling that a claim for refund was timely filed and that the date of payment was the correct starting
No constructive dividend from services rendered at cost
The Tax Court held that the sole owner of a construction corporation did not receive a constructive dividend in the amount of forgone profit when the corporation built a lakefront home for him and his wife at cost. The shareholder fully reimbursed the corporation for its costs, including overhead, and
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