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The IRS has provided a waiver for any individual who failed to meet the foreign earned income or deduction eligibility requirements of Code Sec. 911(d)(1) because adverse conditions in a f...
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President Biden support extending the individual tax provisions of the Tax Cuts and Jobs Act, many of which are set to expire next year, Department of the Treasury Secretary Janet Yellen said.
President Biden support extending the individual tax provisions of the Tax Cuts and Jobs Act, many of which are set to expire next year, Department of the Treasury Secretary Janet Yellen said.
"The President has made it clear that he would oppose raising back the taxes for working people and families making under $400,000," Secretary Yellen testified before the Senate Finance Committee during a March 21, 2024, hearing to review the White House fiscal year 2025 budget proposal.
She then affirmed that "he would" support extending the individual tax provisions of the TCJA when asked by committee Ranking Member Mike Crapo (R-Idaho), who noted that the budget did not make any mention of this.
Yellen defended the fiscal 2025 budget request against assertions that taxes will indeed go up for those making under $400,000, contrary to President Biden’s promise, because the taxes that are targeted to wealthy corporations to ensure they are paying their fair share will ultimately be passed down to their consumers in the form of higher prices and lower wages.
"I think what the impact when you change taxes on corporations, what the impact is on families involves a lot of channels that are speculative," Yellen said. "They are included in models that sometimes the Treasury used for the purposes of analysis, in a tax that is levied on corporations, that has no obvious direct effect on households."
The proposed budget would increase the corporate minimum tax from the current 15 percent to 21 percent, as well as raise the tax rate on U.S. multinationals’ foreign earnings from the current 10.5 percent to 21 percent. The current corporate tax rate would climb to 28 percent and the budget would eliminate tax breaks for million-dollar executive compensation. It would also increase the tax rate on corporate stock buybacks from 1 percent to 4 percent, among other business-related tax provisions.
By Gregory Twachtman, Washington News Editor
Corporations and billionaires will be paying more in taxes if Congress follows recommendations President Biden gave during his State of the Union address.
Corporations and billionaires will be paying more in taxes if Congress follows recommendations President Biden gave during his State of the Union address.
President Biden highlighted a number of initiatives during the March 7, 2024, address. For corporations, he said that it is "time to raise the corporate minimum tax to at least 21 percent."
"Remember in 2020, 55 of the biggest companies in America made $40 billion and paid zero in federal income taxes," President Biden said. "Zero. Not anymore. Thanks to the law I wrote [and] we signed, big companies have to pay minimum 15 percent. But that’s still less than working people paid federal taxes."
Additionally, he alluded to further recommendations that will likely be included when the administration released its budget proposal, expected as early as the week of March 11, 2024. This includes limiting tax breaks related to corporate and private jets and capping deductions on certain employees at $1 million.
For billionaires, President Biden is looking to increase their tax rate to 25 percent.
"You know what the average federal taxes for those billionaires [is]?" he asked. “"They’re making great sacrifices. 8.2 percent. That’s far less than the vast majority of Americans pay. No billionaire should pay a lower federal tax rate than a teacher or a sanitation worker or nurse."”
President Biden said this proposal would raise $500 billion over the next 10 years and suggested some of that additional tax money would help strengthen Social Security so that there would be no need to cut benefits or raise the retirement age to extend the life of the Social Security program.
The IRS has launched a new initiative to improve tax compliance among high-income taxpayers who have not filed federal income tax returns since 2017.
The IRS has launched a new initiative to improve tax compliance among high-income taxpayers who have not filed federal income tax returns since 2017. This effort, funded by the Inflation Reduction Act, involves sending out IRS compliance letters to over 125,000 cases where tax returns have not been filed since 2017. These mailings include more than 25,000 to individuals with incomes exceeding $1 million and over 100,000 to those with incomes ranging between $400,000 and $1 million for the tax years 2017 to 2021. The IRS will begin mailing these compliance alerts, formally known as the CP59 Notice, this week.
Recipients of these letters should act promptly to prevent further notices, increased penalties, and stronger enforcement actions. Consulting a tax professional can help them swiftly file late tax returns and settle outstanding taxes, interest, and penalties. The failure-to-file penalty is 5 percent per month, capped at 25 percent of the tax owed. Additional resources are available on the IRS website for non-filers.
The non-filer initiative is part of the IRS's broader campaign to ensure large corporations, partnerships, and high-income individuals fulfill their tax obligations. Non-respondents to the non-filer letter will face further notices and enforcement actions. If someone consistently ignores these notices, the IRS may file a substitute tax return on their behalf. However, it's still advisable for the individual to file their own return to claim eligible exemptions, credits, and deductions.
An individual’s claim for innocent spouse relief was rejected for lack of jurisdiction because the taxpayer failed to file his petition within the 90-day deadline under Code Sec. 6015(e)(1)(A).
An individual’s claim for innocent spouse relief was rejected for lack of jurisdiction because the taxpayer failed to file his petition within the 90-day deadline under Code Sec. 6015(e)(1)(A). The taxpayer argued that the deadline to file a petition for a denial of innocent spouse relief was not jurisdictional and asked that the Tax Court hear his case on equitable grounds. However, the Tax Court noted that a filing deadline is jurisdictional if Congress clearly states that it is. The IRS argued that argues that the 90-day filing deadline of Code Sec. 6015(e)(1)(A) was jurisdictional because Congress clearly stated that it was and the Supreme Court’s decision in Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, in addition to numerous appellate cases, supported this argument.
The Tax Court examined the "text, context, and relevant historical treatment" of the provision at issue and concluded that the 90-day filing deadline of Code Sec. 6015(e)(1)(A) was jurisdictional. On the basis of statutory interpretation principles, the jurisdictional parenthetical in Code Sec. 6015(e)(1)(A) was unambiguous. It did not contain any ambiguous terms and there was a clear link between the jurisdictional parenthetical and the filing deadline. Specifically, Code Sec. 6015(e)(1)(A) is a provision that solely sets forth deadlines. Further, it was unclear what weight, if any, should be given to the equitable nature of Code Sec. 6015. The statutory context arguments were not strong enough to overcome the statutory text. Accordingly, the Tax Court ruled that the 90-day filing deadline in Code Sec. 6015(e)(1)(A) was jurisdictional.
P.A. Frutiger, 162 TC —, No. 5, Dec. 62,432
The IRS has continued to increase the amount of information available in multiple languages. This was part of the IRS transformation work under the Strategic Operating Plan, made possible by additional resources provided by the Inflation Reduction Act (P.L. 117-169).
The IRS has continued to increase the amount of information available in multiple languages. This was part of the IRS transformation work under the Strategic Operating Plan, made possible by additional resources provided by the Inflation Reduction Act (P.L. 117-169). On IRS.gov, taxpayers can select their preferred language from the dropdown menu at the top of the page, including Spanish, Vietnamese, Russian, Korean, Haitian Creole, Traditional Chinese and Simplified Chinese. Additionally, the Languages page gives taxpayers information in 21 languages on key topics such as "Your Rights as a Taxpayer" and "Who Needs to File."
"The IRS is committed to making further improvements for taxpayers in a wide range of areas, including expanding options available to taxpayers in multiple languages," said IRS Commissioner Danny Werfel. "Understanding taxes can be challenging enough, so it’s important for the IRS to put a variety of information on IRS.gov and other materials into the language a taxpayer knows best. This is part of the larger effort by the IRS to make taxes easier for all taxpayers," he added.
If taxpayers cannot find the answers to their tax questions on IRS.gov, they can call the IRS or get in-person help at an IRS Taxpayer Assistance Center. Finally, hundreds of IRS Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs have access to Over the Phone Interpreter services. VITA and TCE offer free basic tax return preparation to qualified individuals.
The IRS has granted to withholding agents an administrative exemption from the electronic filing requirements for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.
The IRS has granted to withholding agents an administrative exemption from the electronic filing requirements for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. Under the exemption:
- withholding agents (both U.S. and foreign persons) are not required to file Forms 1042 electronically during calendar year 2024; and
- withholding agents that are foreign persons are not required to file Forms 1042 electronically during calendar year 2025.
The exemption is automatic, so withholding agents do not need to file an electronic filing waiver request to use the exemption.
Electronic Filing of Form 1042
Under Code Sec. 6011(e), the IRS must prescribe regulations with standards for determining which federal tax returns must be filed electronically. In 2023, final regulations were published to implement amendments to Code Sec. 6011(e) that lowered the threshold number of returns for required electronic filing of certain returns. The regulations included requirements for filing Form 1042 electronically.
The final regulations provide that:
- a withholding agent (but not an individual, estate,or trust) must electronically file Form 1042 if the agent is required to file 10 or more returns of any type during the same calendar year in which Form 1042 is required to be filed;
- a withholding agent that is a partnership with more than 100 partners must electronically file Form 1042 regardless of the number of returns the partnership is required to file during the calendar year; and
- a withholding agent that is a financial institution must electronically file Form 1042 without regard to the number of returns it is required to file during the calendar year.
The final regulations apply to Forms 1042 required to be filed for tax years ending on or after December 31, 2023. This means that withholding agents must apply the new electronic filing requirements beginning with Forms 1042 due on or after March 15, 2024.
Challenges to Withholding Agents
Since the final regulations were published, the IRS received feedback from withholding agents noting challenges in transitioning to the procedures needed for filing Forms 1042 electronically. Withholding agents expressed concerns about the limited number of Approved IRS Modernized e-File Business Providers for Form 1042, and difficulties accessing the schema and business rules for filing Form 1042 electronically. Withholding agents that do not rely on modernized e-file business providers said that they needed more time to upgrade their systems for filing on the IRS’s Modernized e-File platform. Agents also noted challenges specific to foreign persons filing Forms 1042 regarding the authentication requirements necessary for accessing the platform.
In response to these concerns, the IRS used its power under the regulations to provide the exemption from the electronic filing requirement for Form 1042, in the interest of effective and efficient tax administration.
Casualty losses are damages from a sudden, unexpected or unusual event, including natural disasters. These losses are deductible to the extent they fit under specific tax rules. Ironically, however, due to insurance reimbursements and other payments, you may actually have taxable "casualty gain" as the result of a disaster or accident. Casualty losses and gains are reported on Form 4684.
Casualty losses are damages from a sudden, unexpected or unusual event, including natural disasters. These losses are deductible to the extent they fit under specific tax rules. Ironically, however, due to insurance reimbursements and other payments, you may actually have taxable "casualty gain" as the result of a disaster or accident. Casualty losses and gains are reported on Form 4684.
Casualty loss
The amount of casualty loss is based on the fair market value of the property immediately before it was damaged compared to its value immediately after the event. Alternatively, the loss determination can be based on the property's adjusted basis just before the loss. However, if business property (or property that produces income) is totally destroyed, the casualty loss is the adjusted basis of the property regardless of its fair market value. Whatever value you place on the loss, however, you then must deduct any insurance reimbursement that you receive or are likely to receive for that loss. That final figure is your official casualty loss for tax purposes.
Deductions
You can deduct a personal casualty loss only as an itemized deduction, only to the extent that it is more than $100 for any one event and only to the extent that all such losses over the course of the tax year are than 10 percent of your adjusted gross income. If the property is covered by insurance, you must file a claim for reimbursement. Otherwise, the loss cannot be deducted as a casualty loss. If the loss is on business property, the deduction is not restricted by the $100 or 10 percent rule. These restrictions apply only to personal casualty loss.
Disaster loss
A disaster loss can receive special treatment if it occurs in an area declared by the President of the United States to be eligible for federal disaster assistance. Typically, these are areas damaged by fire, hurricane or other natural disasters. A special rule allows you to deduct the loss in either the year in which the loss occurred or the preceding year. Claiming it in the preceding year typically allows you to file a refund claim immediately and, therefore, have immediate cash-in-hand from the deduction.
Gain
If your insurance reimbursement is more than your personal property's cost or basis (which may be the case if your property has increased in value since you bought it), you have a "personal casualty gain." If personal casualty gains from any year exceed personal casualty losses, a net capital gain results. Net capital gain generally is taxed at a maximum rate of 15 percent.
You may, however, be able to pay no tax on your gain. You can postpone net casualty gain using the so-called involuntary conversion rules. To postpone gain, you must purchase replacement property for a price equal to or more than the reimbursement you received.
You should beware of fancy footwork when it comes to estimating, filing, and paying federal taxes. One misstep can lead to harsh penalties. Willful or fraudulent mistakes can generate criminal sanctions as well.
Failure to pay tax
If you don't pay your taxes when due, the IRS may impose a penalty in addition to the tax. The addition to tax is one-half of one percent of the amount not paid, for each month (or part of a month) it remains unpaid, up to a maximum of 25 percent.
Delinquent returns
Failure to file on time may result in an "addition to tax" (the formal name that the IRS gives to its late-payment fee). This penalty is five percent for each month that no return is filed, up to 25 percent. If the return is not filed within 60 days of the due date (including extensions), the penalty will be at least $100 or 100 percent of the tax due on the return, whichever is less.
The penalty doesn't apply if you can show a reasonable cause for not filing. However, a "reasonable cause" for failure to file does not include (1) reliance on the advice of an agent; (2) reliance on the accountant to do the filing; or (3) misjudging the extension date.
Understatement of tax
If you substantially understate taxes due, the IRS can impose a 20 percent accuracy-related penalty. A "substantial understatement" occurs if the amount is (1) 10 percent of the tax required to be shown on the return (including self-employment tax) or (2) $5,000, which ever is greater.
You may be able to avoid this penalty if:
-- You acted in good faith and there was reasonable cause for the understatement;
-- The understatement was based on substantial authority; or
-- There was a reasonable basis for the tax treatment and the relevant facts were adequately disclosed.
Negligence, fraud, and criminal acts
If underpayment is due to negligent, reckless or intentional disregard of the tax laws, the IRS may impose a 20 percent accuracy-related penalty. Negligence includes failure to reasonably comply with the tax laws, to exercise reasonable care in preparing a tax return, to keep adequate books and records, or to properly substantiate items.
Fraud is punished more harshly. A penalty may be imposed on 75 percent of the underpayment due to fraud. The fraud penalty will not apply, however, if no return is filed, other than a return prepared by the IRS when a person fails to file a return. Criminal sanctions also are likely.
Frivolous returns
If you file a frivolous return, you risk a $500 penalty. A return is "frivolous" if it omits necessary information, shows a substantially incorrect tax, is based on a frivolous position, or is filed in an attempt to avoid tax collection. Changing or crossing-out the "penalty of perjury" language above the signature line on a return is treated as filing a frivolous return.