In the category of “everything old is new again,” the IRS announced in late July that it intends to require that nonemployee compensation (“NEC”) paid during the 2020 calendar year be reported on new Form 1099-NEC, instead of being reported in Box 7 of Form 1099-MISC. A draft of Form 1099-NEC was posted on the … Continue Reading
Reminiscent of Kermit’s lament, “it’s not easy to be green,” it has not been easy to be the Form W-4 since personal exemptions were eliminated by tax reform in 2017. Two days after unveiling its new Tax Withholding Estimator, which is discussed in our post of August 6, 2019, today the IRS released “the second … Continue Reading
Last July, the IRS announced its Virtual Currency Compliance Campaign, designed to intensify the IRS’s efforts to counter the underreporting of income related to cryptocurrency use. Through the campaign, the IRS will address noncompliance through taxpayer education, increased audits and initiations of criminal investigations. This past week the IRS began sending “educational” letters to more … Continue Reading
Today, the IRS unveiled its new Tax Withholding Estimator to help employees complete the Form W-4 and ensure that withholdings are sufficient to cover their income tax liability. The new calculator was previewed in the draft 2020 Form W-4. (See earlier coverage.) A near-final draft 2020 Form W-4 is expected to be released soon. Currently, … Continue Reading
In May, the IRS issued a private letter ruling to an individual taxpayer regarding the deductibility of 23andMe’s at-home DNA test kits under section 213(d) of the Code, which permits the deduction of medical expenses. In the ruling, the IRS determined that an allocable portion of the purchase price may be treated as a deductible medical … Continue Reading
On July 10, the IRS updated the Instructions for Form 8975 and Schedule A (Form 8975). Form 8975 (Country-by-Country Report) is used by taxpayers that are the parent entity of a U.S. multinational enterprise (“U.S. MNE”) with annual revenue of $850 million or more. Taxpayers must file Form 8975 to report information related to the taxpayer’s … Continue Reading
In our first post regarding the proposed section 1446(f) regulations, we addressed the rules regarding which party is the withholding agent for purposes of section 1446(f). Sections 864(c)(8) and 1446(f) were adopted as part of tax reform. Section 864(c)(8) was enacted to reverse the holding of the Tax Court in Grecian Magnesite Mining v. Commissioner, which was affirmed by … Continue Reading
In our first post on the proposed regulation under section 1446(f), we discussed which party is the withholding agent and outlined the various exceptions to withholding that could apply. Sections 864(c)(8) and 1446(f) were adopted as part of tax reform. Section 864(c)(8) was enacted to reverse the holding of the Tax Court in Grecian Magnesite Mining v. Commissioner, which … Continue Reading
This post is the first of three installments providing an overview of recent proposed regulations under section 1446(f) that address withholding on certain sales of partnership interests by foreign partners of a partnerships engaged in the conduct of a U.S. trade or business (a “U.S. trade or business”). Sections 864(c)(8) and 1446(f) were adopted as part … Continue Reading
Yesterday, the IRS released final regulations that aim to prevent identity theft by permitting, but not requiring, employers to truncate the taxpayer identification numbers (TINs) on copies of Forms W-2 and Forms W-2c furnished to employees. The regulations finalize proposed rules issued in 2017. Generally, this rule applies to Forms W-2 required to be filed or … Continue Reading
Last week, the Acting Director of IRS of Field Operations for the LB&I Foreign Payments Practice (“FPP”) announced that the IRS will launch a compliance campaign this summer focused on foreign financial institutions (“FFIs”) that are not satisfying their reporting obligations under the Foreign Account Tax Compliance Act (“FATCA”). Speaking at a tax controversy forum … Continue Reading
Last week, Kimberly Schoenbacher, the Acting Director of Field Operations for the LB&I Foreign Payments Practice (“FPP”), sent a message to taxpayers who may be noncompliant with Chapter 3 and FATCA withholding and reporting: the IRS is actively honing in on Form 1042 nonfilers, Form 1042 failures, and Forms 1042 and 1042-S that do not … Continue Reading
On May 31, the IRS released a draft 2020 Form W-4 that addresses some, but not all, of the privacy concerns that led the IRS to abandon the redesigned form for 2019. According to an accompanying news release, the IRS anticipates releasing a near-final form in July to allow payroll processors and employers to begin … Continue Reading
On May 31, the IRS released a legal memorandum, ILM 201922026, regarding the information return obligations of a common law employer when it appoints a pay agent in the middle of a calendar year. In general, an employer may appoint a pay agent under section 3504 by using IRS Form 2678 (Employer/Payer Appointment of Agent) … Continue Reading
In 1987, the IRS released Notice 87-7 providing guidance on whether certain recipients of payments from employer deferred compensation plans, individual retirement plans, and commercial annuities are subject to federal income tax withholding under section 3405. The notice provided that: payors must withhold on periodic and nonperiodic payments under section 3405(a) or 3405(b), respectively, to payees … Continue Reading
On May 23, the IRS and Treasury released final regulations governing certified professional employer organizations (“CPEOs”). CPEOs were created by the Tax Increase Prevention Act of 2014, P.L. 113-295, which added new Code sections 3511 and 7705 that contain certification requirements for, and the federal employment tax consequences of, being a CPEO. The measure, passed … Continue Reading
On remand from the Eleventh Circuit, the Tax Court, in Romano-Murphy v. Comm’r, determined that the failure of the IRS to provide a pre-assessment appeals hearing invalidated the IRS’s assessment of trust fund recovery penalty under section 6672 and proposed levy to collect the same. In July 2006, the IRS sent a letter to the … Continue Reading
The Treasury Inspector General for Tax Administration released a partially redacted report on May 20 asserting that the IRS has failed to take steps to address nearly $2 billion in discrepancies between withholding reported on withholding tax returns and withholding reported on information returns. The TIGTA report found that 7,265 taxpayers reported nearly $925 million … Continue Reading
On April 26, 2019, the IRS released PLR 201917002 concluding that an entity’s extension of credit, incidental to its sale of nonfinancial goods or performance of nonfinancial services, would not create an obligation under section 6050P to file a Form 1099-C if the entity subsequently discharged the indebtedness associated with the extension of credit.… Continue Reading
On April 11, 2019, the IRS announced the results of a national two-week education and enforcement campaign to combat employment tax crimes. Payroll taxes account for approximately 70% of all revenue collected by the U.S. Treasury. Given the significance of payroll tax collections to the federal government, IRS revenue officers across the country visited nearly … Continue Reading
For the second time in the past year, the IRS Office of Chief Counsel issued a ruling addressing how transactions are counted for purposes of applying the de minimis threshold applicable to third party settlement organizations (“TPSOs”) under section 6050W. In recently released PLR 201907006, the IRS considered the facts related to a payment processing … Continue Reading
Dan Lauer, an IRS executive for SBSE, told an audience at the American Payroll Association’s Capital Summit on March 25 that the Service is launching a program in the summer of 2019 to pursue backup withholding failures. Backup withholding is required under section 3406, and the current backup withholding rate is 24%. Generally, backup withholding … Continue Reading
The Justice Department has again demonstrated its willingness to prosecute corporate executives for failing to remit employment taxes. On March 22, 2019, the Department of Justice issued a press release to announce that the U.S. District Court for the Eastern District of North Carolina sentenced a North Carolina man to 30 months in prison, restitution … Continue Reading
On March 15, 2019, the IRS released a new practice unit entitled “Introduction to Traditional Automatic Exchange of Information.” The practice unit provides a summary of the procedures for the IRS Automatic Exchange of Information or AEOI Program, which administers the regular and automatic exchange of taxpayer information required by tax treaties and Tax Information … Continue Reading
