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New Treasury Regulations Ease Payroll Administration Related to Employer-Provided Vehicles

For decades, employers and employees have been effectively precluded from using two of the handiest special valuation rules—the fleet-average and vehicle cents-per-mile valuation rules—to value employees’ personal use of employer-provided vehicles.  The 1989 fringe benefit regulations imposed modest maximum vehicle values ($16,500 and $12,800, respectively, as adjusted for inflation) to limit the use of the … Continue Reading

IRS Releases Proposed Regulations on the Mechanics of Income Tax Withholding

Today, the IRS published proposed regulations addressing changes made by the Tax Cuts and Jobs Act of 2017 (the “TCJA”) to how an employee instructs an employer to withhold income taxes on his or her Form W-4 (Employee’s Withholding Certificate). The Form W-4 was redesigned for 2020 to reflect the TCJA changes to how income … Continue Reading

Justice Department Continues Criminal Prosecutions in Employment Tax Cases

Over the last few years, the Justice Department has worked with the IRS to more aggressively prosecute cases involving employment tax noncompliance and the failure to remit trust fund taxes to the U.S. Treasury.  Trust fund taxes are taxes withheld from the wages of employees such as federal income tax withholding and FICA tax withholding.  … Continue Reading

IRS Launches New Tax Withholding Estimator

Earlier this year, the IRS issued IR-2020-09, in which it announced the launch of a new and improved Tax Withholding Estimator. The Tax Withholding Estimator (the “Estimator”) is designed to help employees adjust their federal income tax withholdings by performing a “Paycheck Checkup.”  The process also helps employees  target the refund they want by adjusting … Continue Reading

Treasury Finalizes Section 871(m) Regulations and Further Extends Transitory Relief

On December 16, 2019, the Treasury and the IRS released final regulations under section 871(m) of the Internal Revenue Code.  The regulations finalize the 2017 temporary and proposed section 871(m) regulations without any substantive change.  On the same day, the Treasury and the IRS released Notice 2020-2 to extend through 2022 the relief provided in … Continue Reading

Proposed 162(m) Regulations are a “Lump of Coal”

To corporations hoping for a holiday reprieve from the IRS’s narrow interpretation of the grandfathering rules included in the Tax Cut and Jobs Act (“TCJA”) amendment of section 162(m), the IRS has said “Bah… Humbug!”  To those foreign private issuers, publicly traded partnerships, and issuers of public debt hoping for relief from the expanded definition … Continue Reading

Notice 2019-63 Delivers Relief for Providers of Minimum Essential Coverage

Holding true to its holiday tradition, the IRS yet again decided to extend the deadline by which providers of minimum essential coverage (including certain applicable large employers (“ALEs”)) must furnish information statements to individuals regarding their 2019 insurance coverage. However, due to the effective elimination of the ACA’s individual mandate penalty through the Tax Cuts … Continue Reading

The IRS Introduces More Informative Backup Withholding Notices for Payers

On November 14, 2019, the IRS announced that it has redesigned Notices CP2100 and CP2100A with the goal of providing more information to affected payers. These Notices are used to alert payers that the IRS received Forms 1099 containing incorrect or missing Taxpayer Identification Numbers (TINs) for payees and that the payer may need to contact … Continue Reading

Significant TCJA Guidance Due Before End of Year, Kautter Says

Treasury Assistant Secretary for Tax Policy David Kautter attended the AICPA National Tax Conference on November 13, 2019, and commented that significant TCJA-related guidance should be expected to be released before the end of 2019.  Such guidance is likely to include proposed regulations addressing (1) federal income tax withholding under section 3402, (2) the executive … Continue Reading

November 15 Deadline Approaching for 2019 Qualified Intermediary Applications

On November 6, the IRS issued its final reminder alert that the deadline for all Qualified Intermediary (“QI”) (including Qualified Derivatives Dealer (“QDD”)), Withholding Foreign Partnership (“WP”) and Withholding Foreign Trust (“WT”) applications for the 2019 year is November 15, 2019.… Continue Reading

Proposed Regulations Provide Guidance for Classification of Digital Content Transactions and Cloud Transactions

On August 9, 2019, Treasury and the IRS issued proposed regulations under section 861 of the Code to clarify how transactions involving digital content and cloud computing are classified for tax purposes.  The new rules propose to revise and expand upon Treasury Regulation § 1.861-18 regarding digital content transactions and establish new Treasury Regulation § … Continue Reading

IRS Ramps Up Efforts to Target Taxpayers Who Deal in Cryptocurrency

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

IRS Releases Updated Tax Withholding Estimator

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

IRS Rules 23andMe’s Home DNA Kit Eligible for Partial FSA Reimbursement

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

IRS Updates Country-by-Country Reporting Instructions

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

IRS Proposes Regulations under Section 1446(f) — Reporting Requirements and the “Backstop Withholding” Rules (Post 3 of 3)

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

IRS Proposes Regulations under Section 1446(f) — Determining the Withholding Amount (Post 2 of 3)

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

IRS Proposes Regulations under Section 1446(f) — Which Party is Required to Withhold? (Post 1 of 3)

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

New Rule Permits Employers to Include Truncated TINs on Forms W-2 and Forms W-2c

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

IRS to Launch FATCA Compliance Campaign for FFIs

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

IRS Warns Withholding Agents to Consider FPP Correction Program to Avoid Penalties

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

Draft 2020 Form W-4 Addresses Some Privacy Concerns

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
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