Friday, June 21, 2024

IRS Commissioner Says That 2024 Hiring Efforts Shifting to Examination

In 2023, the first full year funding from the Inflation Reduction Act (PL 117-169) became available to the IRS, the agency focused on hiring customer service representatives now, there is a shift towards onboarding new examination staff, according to the head of the agency.

Speaking on June 13, 2024 at a joint conference hosted by the IRS and the Tax Policy Center, IRS Commissioner Danny Werfel said Inflation Reduction Act funds in fiscal year 2024 are not only bringing in new auditors and lawyers, but also data scientists, engineers, and industry subject matter experts, including those in the digital asset space.

Calling Hiring A "Multi-Pronged Effort," This Wave Is
Centered Around Increasing Scrutiny On Those On
The IRS' "High Risk" List, Including Tax Delinquent Millionaires, Non-Filers, And Complex Partnerships
Seeking To Avoid Tax Exposure.

Due to years of underfunding, IRS audit rates of large corporations and multimillionaires fell between 2010 and 2021. Overall staffing in the agency’s compliance offices declined 30% during that time.

The Agency's Efforts Have so Far Recovered
$520 Million from Millionaires Who Have Either
Not Filed Their Taxes or Failed to Pay Their Tax Debt.

Through a combination of increasing compliance staff and recently announced targeted enforcement campaigns against high-risk taxpayers making over $400,000 a year, the IRS can demonstrate "that this is a positive return on investment" by closing the overall gap between taxes owed and taxes paid, Werfel said of the inflation bill's funds.

He added that investments in artificial intelligence will assist in audit selection and recognizing areas "where tax evasion is occurring," such as transfer pricing, using "much more sophisticated analytics."

Providing Context On Why Expanding The IRS Workforce
Is Necessary, Werfel Said That Before The Enactment Of
The Inflation Reduction Act, The Agency's Staff Size
"Was Roughly The Same As It Was In The Late 70s."

Continuing, he mentioned that leaders of other countries' tax authorities have commented to him about "how small the IRS is on a per capita basis compared to the other nations."

Since 2022, the IRS has added about 11,000 full-time positions, including staff working on audits as well as those tasked with customer service and other jobs. The agency plans to add an additional 14,000 full-time positions with funding from the Inflation Reduction Act by fiscal year 2029. Some new hires will be replacing people retiring or leaving. The increases would bring the number of total IRS employees to 102,500, Werfel said.

Have an IRS Tax Problem?


     Contact the Tax Lawyers at
Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

 







Sources:

CNN

Daily Tax Report


SCOTUS Finds IRC §965 Transition Tax Constitutional

The U.S. Supreme Court upheld the 2017 federal tax overhaul's mandatory repatriation tax on June 20, 2024, finding the measure applies to the earnings of foreign corporations with U.S. shareholders and therefore does not raise constitutional questions about taxing unrealized income. 

In a 7-2 ruling, the justices found that the repatriation provision operates in a way that does not require the high court to weigh whether the Constitution's Sixteenth Amendment prohibits Congress from taxing unrealized income. Specifically, the majority ruled that the measure, known as the mandatory repatriation tax under IRC §965, taxes income that was realized by foreign corporations with U.S. shareholders, and Congress has the authority to attribute a company's realized and undistributed income to shareholders for taxation.

Justice Brett Kavanaugh, who wrote the majority's opinion, said the court 

"Need Not Resolve That Disagreement Over Realization"
To Decide This Case, Adding That Those Are
Potential Issues For Another Day."

Justice Kavanaugh, pointed out that the MRT taxes a shareholder on income that is clearly realized by a controlled foreign corporation, so the real question is “whether Congress may attribute an entity’s realized and undistributed income to the entity’s shareholders or partners, and then tax the shareholders or partners on their portions of that income.”

The majority found support for this proposition and dismissed petitioners’ attempts to distinguish 
 IRC §965 from the many taxes based on the undistributed income of partnerships, S-corporations, controlled foreign corporations, and the like.

In contrast with the majority’s narrow approach, four justices: Justice Barrett, in a concurrence joined by Justice Alito, and Justice Thomas, in a dissent joined by Justice Gorsuch all endorsed the existence of a constitutional realization requirement. 

These justices effectively invite future challenges to Congress’s authority to tax various types of income or gains under the Sixteenth Amendment.

Have an IRS Tax Problem?


     Contact the Tax Lawyers at
Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

 




Sources:

Law360

Kostelanetz



Thursday, June 6, 2024

SCOTUS Affirms That Estate's Value of Closely Held Company Includes Insurance Payout on Key Man Life Policy

The U.S. Supreme Court on June 6, 2024 affirmed a decision denying a tax refund to the estate of an owner of a building materials company that used a payout from his $3.5 million life insurance policy to purchase his shares in the business in Thomas A. Connelly v. U.S., case number 23-146.

In a unanimous opinion, the court affirmed a summary judgment decision by the Eighth Circuit, which ruled last year that the life insurance proceeds, used to fund a stock redemption by Crown C Supply following the death of its co-owner Michael Connelly, were an asset that increased Crown's value, inflating the value of Connelly's stock and driving up the tax liability of his estate.

The court rejected the estate's argument that the proceeds were a stock redemption that should be treated as a liability for Crown C Supply that reduced its value for purposes of calculating estate tax, similar to any debt.

Have an IRS Tax Problem?


     Contact the Tax Lawyers at
Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

 


Wednesday, June 5, 2024

Document Upload Tool Reaches 1 Million Received Submissions Milestone


In Issue Number: IR-2024-155 the Internal Revenue Service announced the Document Upload Tool accepted its one millionth taxpayer submission.

Use of the Document Upload Tool, sometimes referred to as DUT, continues to grow. During the first six months of this fiscal year, more than 265,000 taxpayers used the tool, and the number continues to grow each month.

“The Document Upload Tool is a key part of our ambitious initiative to transform the IRS into a virtually paperless agency, and we continue to see increased use of this by taxpayers,” said IRS Commissioner Danny Werfel. “This tool saves time for taxpayers and helps IRS employees process responses faster and more efficiently. 

A Growing Number Of Taxpayers Are Using Their Smart Phones Or Computers To Scan And Upload Their Responses To IRS Correspondence, Rather Than The More Time-Consuming Option Of Writing A Letter Or Mailing In Documents.”

The Document Upload Tool has shown steady growth over time as well. Since 2022, average monthly use of the DUT has more than doubled every year, from around 16,000 in 2022, to around 37,000 in 2023 and finally almost 84,000 so far in 2024. The document submissions cover a wide range of tax issues, including responding to IRS Notice CP2000, where the agency notifies taxpayers of potentially underreported income.

The IRS receives about 76 million paper tax returns and forms, as well as 125 million pieces of correspondence, notice responses and non-tax forms each year. In the past, the agency’s limited capability to accept these forms digitally or to digitize paper has added time-consuming steps that has created challenges for taxpayers, tax professionals and IRS employees. For decades, the only option available was to have taxpayers or their representatives mail or fax these documents to the tax agency.

The IRS Estimates That More Than 94% Of Individual Taxpayers Will Have The Option Of No Longer Having To
Send Mail To The IRS, Potentially Replacing Up To
125 Million Paper Documents Per Year, Easing
The Paperwork Burden For Both Them And The IRS.

To learn more about the Document Upload Tool, visit IRS.gov/DUT.

Have an IRS Tax Problem?


     Contact the Tax Lawyers at
Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

 



Tuesday, June 4, 2024

11th Circ. Affirms TC Invalidation of IRS Easement Disclosure Guidance

On November 10, 2022 we posted Notice 2017-10 Conservation Easement Penalty Notice Struck Down By Tax Court where we discussed that the IRS violated administrative law in issuing a notice requiring the disclosure of potentially abusive conservation easement transactions under threat of penalty, the U.S. Tax Court ruled on November 9, 2022, striking down the guidance and rejecting penalties the agency sought to impose on four North Carolina partnerships.

Now according to Law360, the Eleventh Circuit affirmed on June 4, 2024 that an Internal Revenue Service notice imposing reporting requirements on potentially abusive conservation easements was invalid because the agency failed to solicit the public feedback required by administrative law.

A three-judge panel affirmed the ruling of an Alabama federal judge who last year sided with the land donation advisory firm Green Rock LLC in invalidating the notice on the grounds that it wasn't put through the Administrative Procedure Act's notice-and-comment procedures.

The panel rejected the government's argument that Internal Revenue Code Section 6011, which governs information tied to reportable tax shelter transactions, had authorized the agency to promulgate guidance without following the APA's public comment requirements.

The panel said no such express exemption exists in the law and that provisions that might provide an exemption "make no explicit reference to notice and comment, the Administrative Procedure Act, or procedural requirements at all."

Have an IRS Tax Problem?


     Contact the Tax Lawyers at
Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

 



Monday, June 3, 2024

Proposed Cannabis Rescheduling May Allow Business Expenses

According to Law360On May 21, the U.S. Department of Justice's proposed rules to move marijuana to Schedule III of the Controlled Substances Act were published in the Federal Register. Public comments will be solicited for 60 days from that date, and hearings will be scheduled before final rules are adopted.

Despite widespread media reports heralding the "game-changing" nature of this development, the DOJ's proposed rulemaking leaves the cannabis industry with more questions than answers.

The DOJ explicitly warns that (1) "if marijuana is transferred into Schedule III, the manufacture, distribution, dispensing, and possession of marijuana would remain subject to the applicable criminal prohibitions of the CSA [Controlled Substances Act]," and (2) marijuana would remain subject to the limitations within the Food, Drug, and Cosmetic Act.

It instead sidesteps the challenging questions and punts by "seeking comment on the practical consequences of rescheduling marijuana." By way of explanation, the DOJ offers:

DOJ recognizes this action may have unique economic impacts. As stated above, marijuana is subject to a number of State laws that have allowed a multibillion dollar industry to develop. DOJ acknowledges that there may be large impacts related to Federal taxes and research and development investment for the pharmaceutical industry, among other things. DOJ is specifically soliciting comments on the economic impact of this proposed rule. DOJ will revise this section at the final rules stage if warranted after consideration of any comments received.

One Immediate Positive Effect Of Moving Marijuana To Schedule III Is That Cannabis Companies Will Avoid The Draconian Impact Of Section 280E of The Internal Revenue Code, Which Prevents Most Business Deductions and Results
In Exceedingly High Effective Tax Rates That Have
Impeded Profitability For Most Cannabis Companies.

The industry could also expect better access to commercial banking, new financial services products offered to cannabis companies and new listings on public exchanges. 

In addition, moving marijuana to Schedule III will mean that an insurance company's risk of violation of the Bank Secrecy Act and anti-money laundering statutes will effectively end.

The DOJ will accept public comments for 60 days commencing May 21, and we can expect robust commentary from cannabis businesses, state regulators, trade organizations and ancillary industries.

We might see regulatory dysfunction if the DOJ's final rules on marijuana as a Schedule III drug provide inadequate direction to the FDA and other federal agencies on the enforcement of existing federal laws. It seems apparent that clarity through congressional action is needed now more than ever.

Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)




Tuesday, May 21, 2024

Argentina 1st Country to Have Automatic FATCA Information Exchange

According to Law360the Internal Revenue Service approved cybersecurity measures by Argentina in a step that clears the way for the first automatic information exchange under the Foreign Account Tax Compliance Act between the two countries in September, Argentina's revenue service said on May 20, 2024.

Florencia Misrahi, the Argentina revenue agency's federal administrator, met with banking associations and other organizations in April to prepare them for the upcoming exchanges, the agency said in a news release. Such entities will need to report bank account information, such as U.S. tax identification numbers and account balances, of U.S. citizens holding accounts in Argentina.

The countries reached a FACTA agreement in 2022, Argentina's Federal Administration of Public Income said. FATCA requires foreign financial institutions to report the banking information of U.S. clients as a way to combat tax avoidance and to improve compliance.


Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)