Newsletters
The IRS has urged taxpayers to conduct an end-of-summer tax checkup to avoid unexpected tax bills in the upcoming year. The agency emphasized that many taxpayers, particularly those engaged in the gig...
The IRS has reminded businesses that starting in tax year 2023 changes under the SECURE 2.0 Act may affect the amounts they need to report on their Forms W-2. The provisions potentially affecting Form...
The IRS and the Security Summit concluded their eight-week summer awareness campaign by urging tax professionals to implement stronger security measures to protect themselves and their clients from es...
The IRS has reminded employers that educational assistance programs can be used to help employees pay off student loans until December 31, 2025. This option, available since March 27, 2020, allows fun...
The IRS has updated the applicable percentage table used to calculate an individual’s premium tax credit and required contribution percentage for plan years beginning in calendar year 2025. This per...
Updated guidance is provided, in light of guidance issued by the Internal Revenue Service (IRS), on relief available to taxpayers who are unable to timely file certain returns or make certain payments...
The New Jersey Division of Taxation has announced that it will follow the latest guidelines provided by the Internal Revenue Service (IRS) for special tax relief for taxpayers in declared Presidential...
New York has provided additional information about its previously announced improvements intended to streamline withholding tax and wage reporting forms and Web File applications beginning in March 20...
Pennsylvania has issued guidance regarding a law enacted this year allowing corporate income taxpayers to make an election excluding specific types of income added back to a related entity’s base fo...
The IRS has released the 2024-2025 special per diem rates. Taxpayers use the per diem rates to substantiate certain expenses incurred while traveling away from home. These special per diem rates include:
The IRS has released the 2024-2025 special per diem rates. Taxpayers use the per diem rates to substantiate certain expenses incurred while traveling away from home. These special per diem rates include:
- the special transportation industry meal and incidental expenses (M&IE) rates,
- the rate for the incidental expenses only deduction,
- and the rates and list of high-cost localities for purposes of the high-low substantiation method.
Transportation Industry Special Per Diem Rates
The special M&IE rates for taxpayers in the transportation industry are:
- $80 for any locality of travel in the continental United States (CONUS), and
- $86 for any locality of travel outside the continental United States (OCONUS).
Incidental Expenses Only Rate
The rate is $5 per day for any CONUS or OCONUS travel for the incidental expenses only deduction.
High-Low Substantiation Method
For purposes of the high-low substantiation method, the 2024-2025 special per diem rates are:
- $319 for travel to any high-cost locality, and
- $225 for travel to any other locality within CONUS.
The amount treated as paid for meals is:
- $86 for travel to any high-cost locality, and
- $74 for travel to any other locality within CONUS.
Instead of the meal and incidental expenses only substantiation method, taxpayers may use:
- $86 for travel to any high-cost locality, and
- $74 for travel to any other locality within CONUS.
Taxpayers using the high-low method must comply with Rev. Proc. 2019-48, I.R.B. 2019-51, 1392. That procedure provides the rules for using a per diem rate to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.
Notice 2023-68, I.R.B. 2023-41 is superseded.
The U.S. Department of the Treasury announced it has recovered $172 million from 21,000 wealthy taxpayers who have not filed returns since 2017.
The U.S. Department of the Treasury announced it has recovered $172 million from 21,000 wealthy taxpayers who have not filed returns since 2017.
The Internal Revenue Service began pursuing 125,000 high-wealth, high-income taxpayers who have not filed taxes since 2017 in February 2024 based on Form W-2 and Form 1099 information showing these individuals received more than $400,000 in income but failed to file taxes.
"The IRS had not had the resources to pursue these wealthy non-filers," Treasury Secretary Janet Yellen said in prepared remarks for a speech in Austin, Texas. Now it does [with the supplemental funding provided by the Inflation Reduction Act], and we’re making significant progress. … This is just the first milestone, and we look forward to more progress ahead.
This builds on a separate initiative that began in the fall of 2023 that targeted about 1,600 high-wealth, high-income individuals who failed to pay a recognized debt, with the agency reporting that nearly 80 percent of those with a delinquent tax debt have made a payment and leading to more than $1.1 billion recovered, including $100 million since July 2024.
By Gregory Twachtman, Washington News Editor
The Internal Revenue Service has made limited progress in developing a methodology that would help the agency meet the directive not to increase audit rates for those making less than $400,000 per year, the Treasury Inspector General for Tax Administration reported.
The Internal Revenue Service has made limited progress in developing a methodology that would help the agency meet the directive not to increase audit rates for those making less than $400,000 per year, the Treasury Inspector General for Tax Administration reported.
In an August 26, 2024, report, TIGTA stated that while the IRS has stated it will use 2018 as the base year to compare audit rates against, the agency "has yet to calculate the audit coverage for Tax Year 2018 because it has not finalized its methodology for the audit coverage calculation."
The Treasury Department watchdog added that while the agency "routinely calculates audit coverage rates, the IRS and the Treasury Department have been exploring a range of options to develop a different methodology for purposes of determining compliance with the Directive" to not increase audit rates for those making less than $400,000, which was announced in a memorandum issued in August 2022.
The Directive followed the passage of the Inflation Reduction Act, which provided supplemental funding to the IRS that, in part, would be used for compliance activities primarily targeted toward high wealth individuals and corporations. Of the now nearly $60 billion in supplemental funding, $24 billion will be directed towards compliance activities.
TIGTA reported that the IRS initially proposed to exclude certain types of examinations from the coverage rate as well "waive" audits from the calculation when it was determined that there was an intentional exclusion of income so that the taxpayer to not exceed the $400,000 threshold.
The watchdog reported that it had expressed concerns that the waiver criteria "had not been clearly articulated and that such a broad authority may erode trust in the IRS’s compliance with the Directive."
It was also reported that the IRS is not currently considering the impact of the marriage penalty as part of determining the audit rates of those making less than $400,000.
"When asked if this would be unfair to those married taxpayers, the IRS stated that the 2022 Treasury Directive made no distinction between married filing jointly and single households, so neither will the IRS," TIGTA reported.
By Gregory Twachtman, Washington News Editor
National Taxpayer Advocate Erin Collins is working to address deficiencies highlighted by the Treasury Inspector General for Tax Administration regarding the speed of service offered by the Taxpayer Advocate Service.
National Taxpayer Advocate Erin Collins is working to address deficiencies highlighted by the Treasury Inspector General for Tax Administration regarding the speed of service offered by the Taxpayer Advocate Service.
Collins noted in a September 19, 2024, blog post that TAS, as highlighted by the TIGTA audit, is “not starting to work cases and we are not returning telephone calls as quickly as we would like.”
She noted that while overall satisfaction with TAS is high, Collins is hearing "more complaints than I would like of unreturned phone calls, delays in providing updates, and delays in resolving cases." She identified three core challenges in case advocacy:
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The increasing number of cases;
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An increase in new hires that need proper training before they can effectively assist taxpayers; and
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A case management system that is more than two decades old that causes inefficiencies and delays.
Collins noted that there has been an 18 percent increase in cases in fiscal year 2024 and advocates have inventories of more than 100 cases at a time. According to the blog post, in each of FY 2022 and 2023, there were about 220,000 cases. TAS is on track to receive nearly 260,000 in FY 2024.
"Our case advocates are doing their best to advocate for you," Collins wrote in the blog. "But when we experience a year like this in which case receipts have jumped by 18 percent, something must give. Since we don’t turn away taxpayers who are eligible for our assistance, the tradeoff is that we’re taking longer to assign new cases to be worked, longer to return telephone calls, and sometimes longer to resolve cases even after we’ve begun to work them."
Collins added that while the employment ranks continue to rise, about 30 percent of the case advocates "have less than one year of experience, and about 50 percent have less than two years of experience," meaning "nearly one-third of our case advocate workforce is still receiving training and working limited caseloads or have no caseloads yet, and half are likely to require extra support for complex cases."
She said TAS is revieing its training protocols, including focusing new hires on high volume cases so "they can begin to work those cases more quickly, while continuing to receive comprehensive training that will enable them to become effective all-around advocates over time."
TAS is also deploying a new case management system next year that will better integrate with the Internal Revenue Service’s electronic data offerings.
"My commitment is to continue to be transparent about our progress as we work toward becoming a more effective and responsive organization, and I ask for your understanding and patience as our case advocates work to resolve your issues with the IRS," Collins said.
By Gregory Twachtman, Washington News Editor
The IRS has highlighted important tax guidelines for taxpayers who are involved in making contributions and receiving distributions from online crowdfunding. The crowdfunding website or its payment processor may be required to report distributions of money raised, if the amount distributed meets certain reporting thresholds, by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.
The IRS has highlighted important tax guidelines for taxpayers who are involved in making contributions and receiving distributions from online crowdfunding. The crowdfunding website or its payment processor may be required to report distributions of money raised, if the amount distributed meets certain reporting thresholds, by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS.
The reporting thresholds for a crowdfunding website or payment processor to file and furnish Form 1099-K are:
- Calendar years 2023 and prior – Form 1099-K is required if the total of all payments distributed to a person exceeded $20,000 and resulted from more than 200 transactions; and
- Calendar year 2024 – The IRS announced a plan for the threshold to be reduced to $5,000 as a phase-in for the lower threshold provided under the ARPA.
Alternatively, if non-taxable distributions are reported on Form 1099-K and the recipient does not report the transaction on their tax return, the IRS may contact the recipient for more information.
If crowdfunding contributions are made as a result of the contributor’s detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized. Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee’s gross income. If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer’s gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized. More information is available to help taxpayers determine what their tax obligations are in connection with their Form 1099-K at Understanding Your Form 1099-K.
The IRS has significantly improved its online tools, using funding from the Inflation Reduction Act (IRA), to facilitate taxpayers in accessing clean energy tax credits. These modernized tools are designed to streamline processes, improve compliance, and mitigate fraud. A key development is the IRS Energy Credits Online (ECO) platform, a free, secure, and user-friendly service available to businesses of all sizes. It allows taxpayers to register, submit necessary information, and file for clean energy tax credits without requiring any specialized software. The platform also features validation checks and real-time monitoring to detect potential fraud and enhance customer service.
The IRS has significantly improved its online tools, using funding from the Inflation Reduction Act (IRA), to facilitate taxpayers in accessing clean energy tax credits. These modernized tools are designed to streamline processes, improve compliance, and mitigate fraud. A key development is the IRS Energy Credits Online (ECO) platform, a free, secure, and user-friendly service available to businesses of all sizes. It allows taxpayers to register, submit necessary information, and file for clean energy tax credits without requiring any specialized software. The platform also features validation checks and real-time monitoring to detect potential fraud and enhance customer service.
In November 2023, the IRS announced a significant enhancement to the ECO platform. Qualified manufacturers could submit clean vehicle identification numbers (VINs), while sellers and dealers were enabled to file time-of-sale reports completely online. Additionally, the platform facilitates advance payments to sellers and dealers within 72 hours of the clean vehicle credit transfer, significantly reducing processing time and enhancing the overall user experience.
In December 2023, the IRS expanded the ECO platform’s capabilities to accommodate qualifying businesses, tax-exempt organizations, and entities such as state, local, and tribal governments. These entities can now take advantage of elective payments or transfer their clean energy credits through the ECO system. This feature allows taxpayers who may not have sufficient tax liabilities to offset to still benefit from the available tax credits under the IRA and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act.
The IRS’s move towards digital transformation also led to the creation of an online application portal for the Qualifying Advanced Energy Project Credit and Wind and Solar Low-Income Communities Bonus Credit programs in partnership with the Department of Energy. The portal, which launched in June 2023, simplifies the submission and review processes for clean energy projects, lowering barriers for taxpayers to participate in these incentives.
These advancements reflect the IRS’s commitment to modernizing taxpayer services, focusing on efficiency, and enhancing the overall user experience. Looking ahead, the IRS is poised to continue leveraging technology to further improve processes and support taxpayers in utilizing clean energy tax incentives.
Final regulations on consistent basis reporting have been issued under Code Secs. 1014 and 6035.
Final regulations on consistent basis reporting have been issued under Code Secs. 1014 and 6035.
Consistent Basis Requirement
The general rule is that a taxpayer's initial basis in certain property acquired from a decedent cannot exceed the property's final value for estate tax purposes or, if no final value has been determined, the basis is the property's reported value for federal estate tax purposes. The consistent basis requirement applies until the entire property is sold, exchanged, or otherwise disposed of in a recognition transaction for income tax purposes or the property becomes includible in another gross estate.
"Final value" is defined as: (1) the value reported on the federal estate tax return once the period of limitations on assessment has expired without that value being adjusted by the IRS; (2) the value determined by the IRS once that value can no longer be contested by the estate; (3) the value determined in an agreement binding on all parties; or (4) the value determined by a court once the court’s determination is final.
Property subject to the consistent basis requirement is property the inclusion of which in the gross estate increases the federal estate tax payable by the decedent’s estate. Property excepted from this requirement is identified in Reg. §1.1014-10(c)(2). The zero-basis rule applicable to unreported property described in the proposed regulations was not adopted. The consistent basis requirement is clarified to apply only to "included property."
Required Information Returns and Statements
An executor of an estate who is required to file an estate tax return under Code Sec. 6018, which is filed after July 31, 2015, is subject to the reporting requirements of Code Sec. 6035. Executors who file estate tax returns to make a generation-skipping transfer tax exemption or allocation, a portability election, or a protective election to avoid a penalty are not subject to the reporting requirements. An executor is required to file Form 8971 (the Information Return) and all required Statements. In general, the Information Return and Statements are due to the IRS and beneficiaries on or before the earlier of 30 days after the due date of the estate tax return or the date that is 30 days after the date on which the estate tax return is filed with the IRS. If a beneficiary acquires property after the due date of the estate tax return, the Statement must be furnished to the beneficiary by January 31 of the year following the acquisition of that property. Also, by January 31, the executor must attach a copy of the Statement to a supplement to the Information Return. An executor has the option of furnishing a Statement before the acquisition of property by a beneficiary.
Executors have a duty to supplement the Information Return or Statements upon the receipt, discovery, or acquisition of information that causes the information to be incorrect or incomplete. Reg. §1.6035-1(d)(2) provides a nonexhaustive list of changes that require supplemental reporting. The duty to supplement applies until the later of a beneficiary's acquisition of the property or the determination of the final value of the property under Reg. §1.1014-10(b)(1). With the exception of property identified for limited reporting in Reg. §1.6035-1(f), the property subject to reporting is included property and property the basis of which is determined, wholly or partially, by reference to the basis of the included property.
Penalties
Penalties may be imposed under Reg. §301.6721-1(h)(2)(xii) for filing an incorrect Information Return, and Reg. §301.6722-1(e)(2)(xxxv) for filing incorrect Statements. In addition, an accuracy-related penalty can be imposed under Reg. §1.6662-9 on the portion of the underpayment of tax relating to property subject to the consistent basis requirement that is attributable to an inconsistent basis.
Applicability Dates
Reg. §1.1014-10 applies to property described in Reg. §1.1014-10(c)(1) that is acquired from a decedent or by reason of the death of a decedent if the decedent's estate tax return is filed after September 17, 2024. Reg. §1.6035-1 applies to executors of the estate of a decedent who are required to file a federal estate tax return under Code Sec. 6018 if that return is filed after September 17, 2024, and to trustees receiving certain property included in the gross estate of such a decedent. Reg. §1.6662-9 applies to property described in Reg. §1.1014-10(c)(1) that is reported on an estate tax return required under Code Sec. 6018 if that return is filed after September 17, 2024.
Passage of the “Tax Extenders” undeniably provided one of the major headlines – and tax benefits – to come out of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law on December 18, 2015. Although these tax extenders (over 50 of them in all) were largely made retroactive to January 1, 2015, valuable enhancements to some of these tax benefits were not made retroactive. Rather, these enhancements were made effective only starting January 1, 2016. As a result, individuals and businesses alike should treat these enhancements as brand-new tax breaks, taking a close look at whether one or several of them may apply. Here’s a list to consider as 2016 tax planning gets underway now that tax filing-season has ended.
Passage of the “Tax Extenders” undeniably provided one of the major headlines – and tax benefits – to come out of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law on December 18, 2015. Although these tax extenders (over 50 of them in all) were largely made retroactive to January 1, 2015, valuable enhancements to some of these tax benefits were not made retroactive. Rather, these enhancements were made effective only starting January 1, 2016. As a result, individuals and businesses alike should treat these enhancements as brand-new tax breaks, taking a close look at whether one or several of them may apply. Here’s a list to consider as 2016 tax planning gets underway now that tax filing-season has ended:
Section 179 expensing. The PATH Act permanently extended the Code Section 179 dollar of investment limitations at the higher $500,000 and $2 million, levels, which are adjusted for inflation for tax years beginning after 2015 (it is $500,000 and $2,010,000 for 2016). In addition, starting only in 2016, the $250,000 limitation on the amount of section 179 property that can be attributable to qualified real property has been eliminated. Further, for tax years beginning after 2015, the Code Section 179 expense deduction is now allowed for air conditioning and heating units.
Bonus depreciation. In addition to the big news that the PATH Act extended Code Section 168(k) bonus depreciation to apply to most qualifying property placed in service before January 1, 2020, it made a number of modifications, including:
- replacement of the bonus allowance for qualified leasehold improvement property with a bonus allowance for additions and improvements to the interior of any nonresidential real property, effective for property placed in service after 2015; and
- allowance to farmers of a 50 percent deduction in place of bonus depreciation on certain trees, vines, and plants in the year of planting or grafting rather than the placed-in-service year, effective for planting and grafting after 2015.
Section 181 expensing. Special Section 181 expensing for qualified film and television productions is extended for two years to apply to qualified film and television productions commencing before January 1, 2017. However, the expensing rule is also expanded to apply to qualified live theatrical productions commencing after December 31, 2015.
WOTC. The Work Opportunity Tax Credit (WOTC) has been extended five years through December 31, 2019. In addition, the credit has been expanded and made available to employers who hire individuals who are qualified long-term unemployment recipients who begin work for the employer after December 31, 2015.
Research credit. The PATH Act permanently extended the research credit that applies to amounts paid or incurred after December 31, 2014. However, a new allowance of the research credit against alternative minimum tax liability applies to credits determined for tax years beginning after December 31, 2015. In addition, a new payroll tax credit associated with the research credit applies only to tax years beginning after December 31, 2015 (Act Sec. 121(d) (3) of the PATH Act).
Military differential pay. The PATH Act extended the employer tax credit for differential wage payments made to qualified employees on active military duty has been made permanent and applies to payments made after December 31, 2014. Effective only for tax years beginning after December 31, 2015, however, the credit may be claimed by all employers regardless of the average number of individuals employed during the tax year. The credit is also no longer limited to eligible small business employers with less than 50 employees.
Teachers' classroom expense deduction. The PATH Act permanently extended the above-the-line deduction for elementary and secondary school teachers' classroom expenses. Additionally, for tax years after 2015, the Act includes "professional development expenses" within the scope of the deduction. These expenses include courses related to the curriculum in which the educator provides instruction.
Nonbusiness energy property credit. The PATH Act extended the nonrefundable nonbusiness energy property credit allowed to individuals under Code Sec. 25C for two years, making it available for qualified energy improvements and property placed in service before January 1, 2017. For property placed in service after December 31, 2015, the standards for energy efficient building envelope components are modified to meet new conservation criteria.
If you have any questions about these new “extenders,” please contact our office.
Tax reform continues to be highly touted in Congress as lawmakers from both parties call for simplification of countless complex rules, overhaul of tax rates, and more. At times this year, President Obama and Congressional Republicans seem far apart on a way forward, but at similar times in the past, agreements have quickly and often surprisingly emerged, most recently in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). As the November elections approach more closely every passing day, lawmakers from both parties and the President have a short window to agree on tax legislation. The weeks leading up to Congress’ summer recess may be decisive.
Tax reform continues to be highly touted in Congress as lawmakers from both parties call for simplification of countless complex rules, overhaul of tax rates, and more. At times this year, President Obama and Congressional Republicans seem far apart on a way forward, but at similar times in the past, agreements have quickly and often surprisingly emerged, most recently in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). As the November elections approach more closely every passing day, lawmakers from both parties and the President have a short window to agree on tax legislation. The weeks leading up to Congress’ summer recess may be decisive.
PATH Act as path forward
The scope of the PATH Act surprised many Hill observers. Instead of merely extending the so-called tax extenders (including the state and local sales tax deduction, research tax credit, teachers’ classroom expense deduction), Congress voted to make permanent many of the incentives. Although there had been hearings and discussions about permanently extending some of the incentives, the prospect of getting a bill through Congress and to the President’s desk seemed remote right up to December. Behind the scenes negotiations between the White House and Congressional Republicans resulted in the largest tax bill since the American Tax Relief Act of 2012. The PATH Act went far beyond the extenders. It made changes to the rules for IRS administration, real estate investment trusts (REITs), how the Tax Court works, and more.
Passage of the PATH Act shows that another tax bill, possibly an even larger tax reform package, could make it out of Congress before year-end. Speaking in Washington, D.C. earlier this year, Senate Finance Committee (SFC) ranking member Ron Wyden, D-Oregon, suggested such an outcome. “Against all odds, Democrats and Republicans reached a bipartisan agreement on the PATH Act," Wyden said. "The December agreement (leading to passage of the PATH Act worked out because of the approach members took to the negotiations." Wyden predicted that lawmakers would use the PATH Act as a "blueprint for broader reform."
Everything on the table
Almost everything in the Tax Code appears to be on the table at this time. House Ways and Means Chair Kevin Brady, R-Texas, who is a leading proponent of tax reform, in the House has said as much. "Not all deductions and exclusions will stay; not all will go. The question to ask is: how will these policies drive economic growth?" Among the provisions/ideas being discussed by legislators are:
- Consolidation of the individual income tax rates
- Enhancing incentives for lower and middle income taxpayers
- Revising/repealing some of the tax measures under the Affordable Care Act
- Lowering the U.S. corporate tax rate
- Consolidating education tax incentives
- Eliminating/consolidating some energy tax breaks
- Repealing the alternative minimum tax (AMT)
- Tweaking the child tax credit, earned income tax credit, child and dependent care credit
International tax reform
Reforming the rules for international taxation, such as the complex rules for corporate inversions, transfer pricing, and more, has been of special interest this year to the House Ways and Means Committee. One unanswered question is whether international tax reform can move forward by itself or if proponents need to add “sweeteners” such as expanded tax breaks for lower and middle income taxpayers to win support in Congress. Some lawmakers want to link international tax reform to a cut in the U.S. corporate tax rate. How to pay for any rate cuts also is generating questions and few answers. President Obama has proposed to tighten the international tax rules and use the expected revenue to pay for infrastructure projects, along with reducing the corporate tax rate.
Energy tax measures
Before Congress’ summer recess, a package of energy tax breaks could be approved by the House and Senate. Many of these are temporary incentives that were not included in the PATH Act, such as the special credits for fuel cell vehicles. There appears to be bipartisan support to make permanent some, if not all, of these tax breaks. SFC ranking member Wyden is spearheading the movement to win passage of these energy tax incentives, seeking to attach them to a bipartisan aviation bill.
Please contact our office if you have any questions about tax reform and what measures might be taken now in anticipation of various changes.