by | Oct 6, 2020 | Tax Tips and News
Achieving a Better Life Experience (ABLE) accounts now have final regulations from the Internal Revenue Service. Published last Thursday, this is the latest in a series of recently published final regulations that address changes to programs and rules affected by the 2017 Tax Cuts and Jobs Act.
What is an Achieving a Better Life Experience (ABLE) Account?
ABLE accounts were created by the 2014 ABLE Act to provide tax-advantaged savings accounts for paying expenses related to a disability. The IRS says that distributions and earnings from ABLE accounts will not be taxed when used to pay for any of the following qualified disability expenses:
- Housing
- Education
- Transportation
- Health
- Prevention and wellness
- Employment training and support
- Assistive technology and personal support services
- Other disability-related expenses
While using money from an ABLE account to pay certain expenses is tax-free, the IRS notes that “contributions are not deductible.”
What was included in the final regulations for ABLE accounts?
The ABLE Account final regulations address comments from proposed regulations and guidance for a number of issues:
- Recordkeeping and reporting requirements
- Gift and generation-skipping transfer tax consequences of contributions
- Federal income, gift, and estate tax consequences of distributions
- Changing the designated beneficiary
- Beneficiary eligibility for the saver’s credit
- Rolling over funds from the designated beneficiary’s 529 qualified tuition program account
Check out the ABLE account final regulations for more information.
Read more about ABLE accounts on IRS.gov:
Read more about recently published final regulations:
Source: IR-2020-227
– Story provided by TaxingSubjects.com
by | Oct 6, 2020 | Tax Tips and News
As we’ve mentioned before, the Internal Revenue Service has been fighting abusive tax shelters that use syndicated conservation easements as their main vehicle. More details have now been released on how their prosecution may unfold.
The IRS Chief Counsel has released Chief Counsel Notice 2021-001, also termed “CC Notice,” containing information on the Chief Counsel’s settlement initiative for certain pending Tax Court Cases.
The cases involve abusive syndicated conservation easement transactions laid out in IRS Notice 2017-10 (“SCE Transactions”). Previous details of the settlement initiative can be found in the IRS news release IR-2020-196.
“The IRS encourages investors to seek independent professional assistance with understanding the settlement terms and CC Notice, and to help them assess their hazards of litigation. Investors would be well advised to obtain counsel from competent, independent advisers not related to or recommended by the SCE transaction promoter,” the IRS writes.
The IRS assesses its effort to crack down on these abusive tax schemes as “very successful.”
The IRS isn’t convinced by the “different” defense.
Some promoters, the IRS notes, have tried to distance their particular scheme from those in the IRS crosshairs, claiming their transactions are “different” and don’t suffer from the same flaws as the stated plans.
The agency will soon publish updates to the Conservation Easement Audit Technique Guide that set out new arguments that taxpayers can expect the IRS to make in SCE cases.
The newly established Office of Fraud Enforcement and the National Fraud Counsel are teaming up with examining agents and Chief Counsel attorneys to canvas cases for additional fraud considerations, which might include assertion of the 75% civil fraud penalty, or where applicable, referrals to Criminal Investigation.
The CC Notice, the IRS reminds, also responds to a frequent question raised by several groups of partners who have approached the IRS Chief Counsel, asking to resolve their cases. The Chief Counsel settlement initiative requires the partnership engaged in the SCE transaction – and all of its partners – to agree to settle on the terms offered by the IRS.
The terms include a complete disallowance of the claimed charitable contribution deductions and penalties, although some partners may deduct their cost of investing in the partnership. In rare cases, Chief Counsel has the authority to permit less than all the partners to settle on these terms.
Why are some settling groups paying an additional penalty?
In most cases, though, the IRS will demand that settling groups of less than all partners pay an additional 5% penalty, offsetting the lost efficiencies of the IRS having to proceed with the partnership case.
The IRS and the Chief Counsel’s office encourage partners who want to settle to work with the other partners to reach a full resolution of the case. The CC Notice also shows the IRS will settle with individual partners (or groups of individual partners) only if they own a significant percentage of the partnership and they cooperate with the Chief Counsel. Such cooperation may include providing evidence the Chief Counsel might use to support the IRS’ position in court.
Individual partners or groups of partners have just 30 days from the date of the CC Notice to elect to settle.
The CC Notice also explains that the Chief Counsel may consider making the same settlement offer to newly filed cases in Tax Court. The Chief Counsel’s office can consider a wide number of factors when deciding whether to extend the settlement offer – including whether the partnership fully cooperated with the IRS during the audit.
Source: IR-2020-130
– Story provided by TaxingSubjects.com
by | Oct 2, 2020 | Tax Tips and News
The Internal Revenue Service closed out September by announcing the publication of final regulations for the business-related entertainment deductions that were removed from section 274 by the Tax Cuts and Jobs Act.
Corporations celebrated the new 21 percent tax rate and small businesses took advantage of the section 199A qualified business deduction, but the TCJA elimination of “entertainment, amusement, or recreation activities” was a far less popular change.
Business relationships are like any other relationship: shaped by shared experiences. That’s why taking clients and potential business partners to concerts and baseball games as part of a business discussion was long seen as an essential part of sealing a deal. Despite the removal of most such deductions in the TCJA, some still remain.
What business entertainment deductions can taxpayers still claim?
The IRS points out in the final regulations that “Congress did not amend the provisions relating to the deductibility of business meals. Thus, taxpayers generally may continue to deduct 50 percent of the food and beverage expenses associated with operating their trade or business, including meals consumed by employees on work travel” (TD-9925, 5).
Since the TCJA didn’t make changes to business meals, the old restrictions still apply: “No deduction is allowed for the expense of any food or beverages unless (a) the expense is not lavish or extravagant under the circumstances, and (b) the taxpayer (or an employee of the taxpayer) is present at the furnishing of the food or beverages” (5).
To learn more about which business entertainment deductions are and are not allowed, check out the TD-9925. The IRS also recommends taking a look at their “Tax Reform” page for a broad overview of all TCJA-related changes.
Want to read about other final regulations?
Source: IR-2020-225
– Story provided by TaxingSubjects.com
by | Oct 1, 2020 | Tax Tips and News
Final regulations for the default rate of individual income withholding for certain periodic retirement and annuity payments that are made in 2021 are now available. The Internal Revenue Service announced the document’s publication this week, adding to the growing list of recently published final regulations related to the Tax Cuts and Jobs Act (TCJA). (Read about final regulations for the 100 percent bonus depreciation and estate and non-grantor trust deduction on Taxing Subjects.)
The TCJA made sweeping changes to the tax code, modifying income tax brackets, corporate and passthrough tax rates, itemized deductions, and much more. The final regulations published this week shed light on how the IRS intends to handle the withholding rate for periodic payments that do not have a withholding certificate.
The IRS says that the previous rule treated affected taxpayers as if they were married and claiming three withholding exemptions. Now, the rule is solely defined by the Treasury Secretary, who made no changes to the rate for calendar years 2018, 2019, and 2020 (TD-9920, 4). While the IRS says it plans to keep the default rate the same in 2021, taxpayers and tax professionals will have to look for the current rate “in applicable forms, instructions, publications, and other guidance” after December 31, 2020.
In the final regulations, the IRS explains that moving “the communication and mechanical details of the default rate of withholding on periodic payments … to applicable forms, instructions, publications, and other guidance prescribed by the Commissioner” will “[enable] the Treasury Department and the IRS to make updates more quickly” (6).
Source: IR-2020-223
– Story provided by TaxingSubjects.com
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