As we have been discussing in recent blog posts, the Treasury Department released its Fiscal Year 2024 General Explanations of the Administration’s Revenue Proposals, commonly called the “Green Book,” on March 9, 2023. This year’s Green Book includes a proposal that both employers and employees are likely to embrace: an enhanced tax credit for employers that provide childcare.
Continue Reading Administration Proposes Increased Childcare Tax Credit for Employers
On March 9, 2023, the U.S. Department of the Treasury released the Greenbook (formally known as the General Explanations of the Administration’s Revenue Proposals), to explain the revenue proposals included in Administration’s budget. One proposal in the Administration’s budget would increase the additional Medicare tax rate by 1.2 percentage points for high-income taxpayers.
Self-employment earnings and wages are subject to employment taxes under either the Self-Employment Contributions Act (SECA) or the Federal Insurance Contributions Act (FICA). Both SECA and FICA taxes apply at a rate of 12.4 percent for social security tax on self-employment earnings and wages (capped at $160,200 in 2023) and at a rate of 2.9 percent for Medicare tax on all self-employment earnings and wages (not subject to a cap). In the case of FICA taxes, the employee and employer each pay half of the taxes imposed on wages.
Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. For the second year in a row, the Green Book addresses the treatment of “on-demand” pay arrangements also known as “daily pay” or “earned wage access programs.” These arrangements permit employees to access a portion of their earned wages in advance of the employee’s normal pay date.
These programs raise potential tax concerns because, depending upon the program design, the employee could be considered to be in “constructive receipt” of their wages as soon as they earn them. This creates payroll withholding and depositing obligations for employers regardless of whether the employee actually receives a wage payment. In addition, the program can cause uncertainty regarding how to properly calculate the required FICA tax and income tax withholdings when the employee elects to receive a payment of earned wages. For this reason, some programs (which are often app-based) are structured as loans or attempt to avoid the constructive receipt issue by requiring the payment of a small fee when the earned wages are paid.
Continue Reading Treasury Reiterates Position on “On-Demand” Pay
On March 7, 2023, the IRS issued a renewed warning to employers considering an Employee Retention Credit (“ERC”) claim. While many businesses with legitimate ERC claims have already made them, a cadre of consulting firms have come forward to, in the words of the IRS, “push[] ineligible people to file” claims.
Continue Reading IRS Repeats Cautions Regarding Aggressive Claims for Employee Retention Credit
On February 28, 2023, the Supreme Court decided Bittner v. United States—a rare Supreme Court foray into Financial Crimes Enforcement Network or FinCEN reporting of foreign bank and financial accounts under the Bank Secrecy Act (“BSA”). The BSA is codified under Title 31 (Money and Finance) of the United States Code rather than Title 26 (the Internal Revenue Code) so the section references in this post are to Title 31. At issue was how to calculate penalties for nonwillful violations of the BSA’s recordkeeping and reporting obligations for foreign transactions and accounts. By a narrow 5-4 majority, the Supreme Court held that the penalty for a nonwillful violation of the reporting requirements shall be assessed on a per-form basis rather than a per-account basis, a result favorable for those taxpayers with nonwillful failures.
Continue Reading Supreme Court Limits Penalties for Nonwillful FBAR Failures in Bittner Decision
Last week, the IRS issued Notice 2023-11 providing relief procedures for foreign financial institutions (“FFIs”) in countries with Model 1 intergovernmental agreements (“IGAs”) that have failed to provide U.S. taxpayer identification numbers (“TINs”) for certain preexisting accounts. Preexisting accounts are defined in Model 1 IGAs as a financial account maintained by a reporting financial institution as of June 30, 2014. Those FFIs in eligible Model 1 IGA jurisdictions that comply with the procedures described in the notice will avoid being identified by the U.S. Competent Authority as being in significant non-compliance with the IGA. (A list of U.S. IGAs, including Model 1 IGAs, along with other useful information regarding the status of all IGAs may be found at the Treasury’s FATCA page.)
This afternoon, in Announcement 2023-2, the IRS announced that brokers are not required to report additional information with respect to dispositions of digital assets until the IRS and Treasury issue final regulations under sections 6045 and 6045A. The Infrastructure Investment and Jobs Act of 2021 (the “Act”) amended sections 6045 and 6045A to clarify and expand the rules regarding the reporting of information on digital assets by brokers. These provisions of the Act were intended to increase tax compliance through additional information reporting regarding transactions involving digital assets.
Today, in Notice 2023-10, the IRS announced a delay in the new reduced reporting threshold for section 6050W applicable to third-party settlement organizations (TPSOs). Section 9674(a) of the American Rescue Plan Act of 2021 amended section 6050W(e) to provide that, for returns for calendar years beginning after December 31, 2021, a TPSO is required to report payments in settlement of third party network transactions with respect to any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions. Prior to the change, the threshold was $20,000 and 200 transactions.
Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. Among its proposals, the Green Book includes a new proposal that could signal stepped-up enforcement of section 409A, as well as a new tool for the IRS. Section 409A, adopted almost two decades ago, represented a significant shift in the tax treatment of non-qualified deferred compensation plans. Prior to its adoption, these plans often relied on traditional concepts of constructive receipt to determine when it was required that a plan participant recognize income. Section 409A overlaid those principles with significant new rules regarding the time that an election to defer compensation must be made, as well as limitations on the time and form of payment of deferred compensation.
Continue Reading Administration Proposes New Withholding Requirements for 409A Failures
Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. Among its proposals, the Green Book suggests the expansion of the requirement to collect Forms W-9 to additional payments.
Under current law, payors are required to backup withhold on certain payments to payees