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.
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. …
In February, a U.S. Tax Court opinion in Anikeev v. Commisioner addressed challenging issues regarding the IRS’s existing policy with respect to the taxation of credit card rewards and other rebates. The case involves Mr. and Mrs. Anikeev, each of whom held a Blue Cash American Express Card (“Blue Card”) during 2013 and 2014, on which they accumulated a substantial amount of reward dollars through the use of their cards. At issue in Anikeev is whether the reward dollars were taxable income to the Anikeevs. Basing its decision on longstanding IRS policy, the court determined that the overwhelming majority of the rewards were not taxable to the Anikeevs, although the decision does address how the Service could potentially reform its policy regarding credit card rewards to prevent the same result in the future.
Continue Reading Making a Point: Tax Court’s Anikeev Decision Challenges Longstanding IRS Policy on Credit Card Rewards
Earlier this month, both houses of Congress passed the 2021 National Defense Authorization Act (“2021 NDAA”). Included in Title LXIV of the 2021 NDAA (Title 64 for those of us rusty on Roman numerals), are new information reporting requirements intended to identify individual beneficial owners of certain business entities. Subject to a number of exceptions, the bill requires certain U.S. and foreign entities to file annual reports with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) that will disclose information regarding the beneficial owners of reporting companies. Overall, the reporting will identify those individuals exercising “control,” as the term is defined, over those entities required to report. According to the legislation, over two million corporations, LLCs, and similar entities are formed under state law in the United States each year, and many “malign actors seek to conceal their ownership” of various entities intended to facilitate illegal activity. Accordingly, the reporting mandated by the legislation is intended to help protect national security interests and interstate and foreign commerce, as well as counter the financing of terrorism.
The legislation passed both chambers by overwhelming majorities − 335-78 in the House and 84-13 in the Senate. Notwithstanding the significant Congressional support, President Trump has not yet signed the bill into law and has suggested that he may veto the bill (H.R. 6395). The legislation will become law tomorrow (December 24, 2020) if the President does not veto the bill. Even if the President vetoes the bill, it appears likely that Congress will override it by reconvening after Christmas and before the new year. H.Res. 1271 (the rule providing for the consideration of the Senate amendment to H.R. 133 (the end-of-year package that includes COVID relief)) provided that if a veto message is laid before the House on the 2021 NDAA, the veto message and the bill shall be postponed until the legislative day of Monday, December 28, 2020. Accordingly, if Trump vetoes the bill, the House will vote on its override on December 28.
UPDATE: President Trump vetoed the bill on December 23, 2020.
UPDATE: The House of Representatives voted to override President Trump’s veto on December 28, 2020. Additional coverage is available here.
UPDATE: The Senate voted to override President Trump’s veto on January 1, 2021. Additional coverage is available here.…
On August 19, 2020, the IRS urged employers to exercise caution in selecting their payroll service providers (“PSPs”) following ongoing concerns that some disreputable PSPs may fail to deposit employment taxes, leaving businesses vulnerable to unpaid payroll taxes as well as penalties.
Continue Reading IRS Warns Employers to Choose Carefully When Selecting a Payroll Service Provider
On Friday, June 19, the IRS updated several FAQs on its website related to the Employee Retention Credit adopted as part of the Coronavirus Relief, Aid, and Economic Security (“CARES”) Act. The updated FAQs provide additional insight into the IRS’s current thinking regarding employer eligibility for and determination of the credit. Unfortunately, the updated FAQs still leave significant uncertainty regarding the eligibility of some employers, many of whom will be making a determination of their eligibility before filing their Forms 941, Employer’s Quarterly Federal Tax Return, for the second quarter in July. …
Continue Reading IRS Updates FAQs on Employee Retention Credit Enacted as Part of CARES Act
On May 28, 2020, the IRS issued Notice 2020-35, postponing deadlines for more time-sensitive actions until July 15, 2020. Notice 2020-35 is the latest in a series of IRS notices issued since mid-March providing for delays under the authority of section 7508A due to the COVID-19 emergency declaration. Specifically, the relief relates to employment tax returns and returns filed by employee benefit plans exempt organizations due on or after March 30, 2020, and before July 15, 2020. The big news arising out of the notice—although certainly not broadcast by the IRS—pertains to the extension of the period for correcting errors that occurred in prior calendar years until July 15, 2020. This extension of time until July 15, 2020, permits employers to correct errors ascertained with respect to calendar year 2016 employment taxes, which ordinarily would have to have been corrected on or before April 15, 2020—the day on which the period of limitations would otherwise have lapsed.
Continue Reading IRS Adds Employment Tax Corrections to Expanding List of Postponed Time-Sensitive Actions Due to COVID-19