Yearly Archives: 2022

One of the most pressing audit issues for large taxpayers today centers on the Internal Revenue Code (Code) Section 965 transition tax. The Internal Revenue Service (IRS) has designated Code Section 965 as a campaign issue and is actively auditing taxpayers’ transition tax calculations and positions, along with other tax reform items. The stakes are high, particularly given the potential to pay this tax over a period of eight years.

On March 23, 2021, the IRS released a Practice Unit that provides an overview of the Code Section 965 transition tax with references to relevant resources. Unfortunately, unlike some other Practice Units, guidance is not provided as to the type of information revenue agents should be requesting from taxpayers.

As IRC 965(k) provides a six (6) year statute of limitations on assessment for returns with an IRC 965 transition tax, this results in the IRS having to make any IRC 965 assessment on or before March 15, 2024 for corporations and April 15, 2024 for individuals or September 15, 2024 or October 15, 2024 for corporations or individuals respectively. who filed valid extensions in 2018.

Practice Units are presentation-type materials compiled by the IRS as a means for collaborating and sharing knowledge among IRS employees. They provide helpful guidance to revenue agents in the form of an overview of the law in a specific area, examination tips and guidance and references to relevant resources. 

Although the Code Section 965 transition tax Practice Unit does not provide insights into the types of questions and information that revenue agents may seek on audit, it is still useful for taxpayers to review to understand the IRS’s perspective in this area.

 

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 

 

Read more at: Tax Times blog

The House of Representatives on July 20, 2022 approved a fiscal year 2023 budget for the IRS and the Treasury Department that includes $13.6 billion for the revenue agency, an increase of $1 billion from the year's enacted level. 

The legislation was approved as part of the Financial Services Appropriations bill and was one of six spending measures passed by the House. 

The Senate Has Yet To Complete Any
Of Its 12 Appropriations Bills.
Current Funding Levels For The Federal
Government Expire With The End Of Fiscal
Year 2022 on September 30.

The largest increase in the IRS budget will go for taxpayer services: $3.4 billion, up $630 million from this year. This includes support for the Volunteer Income Tax Assistance and Matching Grants programs, Low Income Taxpayer Clinics, the National Taxpayer Advocate, Tax Counseling for the Elderly, and hiring of additional personnel to improve IRS customer service. 

The IRS' tax enforcement function received an appropriation of $6.1 billion, up $682 million from the level enacted this year. The funds support stepped-up enforcement and hiring of personnel. The agency's business systems modernization program, which aims to update technology and improve online applications and tax filing processing, received $310 million, an increase of $35 million above the current enacted amount. Another $3.8 billion went for overhead in the IRS' operations support area.

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)

 

Read more at: Tax Times blog

The Treasury Department has begun dismantling the United States' tax treaty with Hungary, whose government recently blocked the European Union from finalizing details of an international agreement to set a 15% global minimum tax on the biggest multinational corporations.

In a statement July 8, the department cited Hungary's lowering of its domestic corporate income tax rate to 9.9%, less than half of the 21% U.S. rate, as cause for severing the bilateral tax treaty, which took effect in 1979.

A Treasury spokesperson told reporters the treaty's benefits were no longer mutual. "There is a substantial loss in potential revenue to the United States, and very little return on investment by U.S. businesses in Hungary," they said.

The timing of the treaty termination suggests President Joe Biden's administration is seeking to pressure Viktor Orbán, Hungary's prime minister, to implement the 15% global minimum tax brokered by the Organization for Economic Cooperation Development. The deal, reached in October, has been signed by about 140 countries and territories.

Without mentioning Hungary's move in mid-June to block an EU directive on establishing the minimum tax, the Treasury spokesperson said the country had "made America's long-standing concerns about the 1979 tax treaty worse." 

While the EU generally requires decisions with legal force to be approved by all 27 member states, officials who have championed the bloc's participation in the tax have said they remain steadfast, with or without a Hungarian presence.

Hungary nearly halved its corporate tax rate to 9.9%, lowest in the EU, from 19% in 2010. 

Not stated it that the U.S. Treasury Department believes that the Existing Treaty has been exploited, (No Limitations on Benefit Provision, in the Hungary Treaty) particularly in the case of interest, by Hungarian finance corporations ultimately owned by persons from third countries that either are not covered by an income tax treaty with the U.S. or covered by a treaty that did not eliminate source-country withholding tax on interest. 

Treaty benefits enjoyed by individual taxpayers would no longer be available if the treaty is terminated.  As a result, benefits of lower tax rates on certain income (e.g., interest, dividends), exclusion for certain employment income, as well as relief from double taxation would expire with the termination. This could give rise to double taxation without relief for individual taxpayers and higher international assignment costs for mobility programs. 

Effective Date of Termination 

Article 26 of the Tax Treaty provides for a six-month advance notice for termination. After the notice, which occurred in July of 2022, withholding taxes apply to amounts paid or credited on or after the first day of the next January following the expiration of the six-month period. Accordingly, payments made on or after January 1, 2024 will be subject to 30% withholding.

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 

Read more at: Tax Times blog

According to Law360, Roger Stone and his wife have agreed to owing more than $2 million to the IRS to settle a suit alleging the associate of former President Donald Trump, hid income from the U.S., they told a Florida federal court on July 15, 2022.

In a filing, Stone and the federal government asked the court to approve a settlement under which the political associate and his spouse, Nydia Stone, would agree to an income tax liability exceeding $1.6 million. Roger Stone also would be separately liable for more than $450,000 in taxes, according to the proposed settlement.

The Government Has Contended That The Couple
Used A Business Entity To Hide Their Income,

Improperly Receive Payments Paid To Roger Stone
Personally And Pay For Personal Expenses.

Meanwhile, Stone has claimed that the government is pursuing its case against him and Nydia Stone despite good-faith efforts to keep up with tax installment payments and their transparency with the agency concerning their assets and liabilities.

The government's suit, filed in April 2021, claimed Stone and his wife relied on a trust and Drake Ventures LLC to evade Internal Revenue Service collection efforts and to fund their lavish lifestyle. 

The Couple Entered Into An Agreement With The Government To Pay Their Taxes In Monthly Installments Of Almost $20,000 But Defaulted On That Agreement In March 2019, According To Court Documents.

While the Stones admitted that they owe outstanding taxes for 2007 through 2011, they've alleged that the suit wouldn't have been filed if it weren't for the individual at its center. Stone said his ability to keep up with those installment payments was impeded by an investigation by then-Special Counsel Robert Mueller into Russian election interference, which he contends "nearly bankrupted" him.

The proposed settlement filed Friday said that the trust's assets, including an interest it holds in the couple's condo, can be used to pay off Nydia Stone's taxes, and that liens on their properties remain enforceable, according to the filing. The deal, if approved, would also resolve the government's claims that they improperly used Drake Ventures' cash to buy the condo, the filing said.

Read more at: Tax Times blog