Monthly Archives: August 2024

The U.S. Treasury Department should scrap or revise significantly an anti-abuse rule for nonresident aliens who receive loans from foreign trusts, which was included in proposed regulations on how to report foreign trust transactions, the American Institute of Certified Public Accountants said in a letter published on July 15, 2024.

The AICPA said in its letter that the rule should be significantly revised in several ways if it cannot be eliminated entirely. The proposed rule would treat certain loans as distributions under IRC Section 643(i) that originate from foreign trusts and are granted to a nonresident alien who becomes a U.S. person within two years.

Section 643(I) Would Apply To The Outstanding Loan
Amount From The Date The Beneficiary Becomes A
U.S. Citizen Or Resident
"If The Loan Was Not A Qualified Obligation
As Of The Date That It Was Made"
Under The Proposed Anti-Abuse Rule.

Among the institute's recommendations were applying the rule only on a prospective basis, limiting the applicability of the rule to "only if the loan was made to an individual who was previously a resident alien for at least a three-year period, and if the loan was made within two years before the individual resumed his or her resident alien status."

Treasury issued these proposed regulations in May 8, 2024 which were designed to provide guidance on the requirements for individuals to report their transactions with foreign trusts to the Internal Revenue Service, including the receipt of large gifts.

Read more at: Tax Times blog

The Internal Revenue Service is opening its compliance assurance process real-time audit program to privately held C corporations, including foreign-owned ones, for 2025, the agency announced on August 15, 2024 in IR-2024-211,

The Internal Revenue Service today announced the opening of the application period for the 2025 Compliance Assurance Process (CAP) program, which will run from Sept. 4 to Oct. 31, 2024. 

The IRS will inform applicants if they’re accepted into the program in February 2025.

Launched in 2005, CAP employs real-time issue resolution through transparent and cooperative interaction between taxpayers and the IRS to improve federal tax compliance by resolving issues prior to the filing of a tax return.

To be eligible to apply for CAP, applicants must:

• Have assets of $10 million or more,

• Be a U.S. publicly traded corporation with a legal requirement to prepare and submit SEC Forms 10-K, 10-Q and 8-K or a privately held C-corporation including foreign-owned. Privately held applicants will be required to submit audited financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or another permissible method, as deemed appropriate by the IRS, specific to the taxpayer applying to the CAP program on an annual basis and unaudited financial statements on a quarterly basis.

• Not be under investigation by, or in litigation with, any government agency that would limit the IRS’s access to current tax records.

See highlights and updates for detailed information on revisions to the CAP program for 2025, including updates on Bridge Plus, an expansion of the applicant eligibility criteria, a new eligibility exception and a new form for international issues. General program information and the 2025 application details are available on the CAP webpage. 

Privately held C corporations that apply will have to furnish audited financial statements, and related-entity or parent-audited statements won't be acceptable, the IRS said.

The agency also said Thursday that new applicants for the 2025 program will have to submit the Form 14234-E cross border activities questionnaire with their application. Returning applicants are directed to file it 90 days after the end of the prior tax year and simultaneously with filing tax returns, the IRS said.

The IRS also said it will add a new exception to the closed/open year eligibility rule because of Inflation Reduction Act provisions. A tax year staying open solely because of an outstanding Inflation Reduction Act  issue won't be deemed an open-filed return on the first day of an applicant's CAP year for purposes of program eligibility standards for returns, the agency said Thursday. President Joe Biden signed the tax and climate act into law in 2022.

Want To Avoid a IRS Tax Problem?

 

 

Read more at: Tax Times blog

On April 23, 2004  we posted IRS Releases Digital Asset Draft Form 1099-DA where we discussed that the new 2025 Form 1099-DA is generally expected to be included on federal income tax returns by taxpayers who answer "yes" to the digital asset question that asks if they, at any time during the relevant tax year, received, sold, exchanged, or disposed of a digital asset or financial interest in a digital asset. 

Now in IR-2024-178 dated June 28, 2024 The U.S. Department of the Treasury and the Internal Revenue Service issued final regulations requiring custodial brokers to report sales and exchanges of digital assets, including cryptocurrency. These reporting requirements will help taxpayers to file accurate tax returns with respect to digital asset transactions, which are already subject to tax under current law.

They require brokers to report certain sale and exchange transactions that take place beginning in calendar year 2025 and will be reported on the soon-to-be released Form 1099-DA. The regulations implement reporting requirements by the Infrastructure Investment and Jobs Act, enacted in 2021.

Read more at: Tax Times blog

On March 7, 2024 we posted Treasury States That BOI Filing is Still Required for ALL But Plaintiffs in National Small Business United  where we discussed that in National Small Business United v. Janet Yellen, a Northern District of Alabama Federal Judge ruled on March 1, 2024, that the CTA was unconstitutional. However, the Treasury Department's Financial Crimes Enforcement Network made its interpretation of the ruling clear in a statement issued by FinCEN stated that the ruling applies (ONLY) to the plaintiffs.

Now with the Corporate Transparency Act’s beneficial ownership reporting deadline looming, the Treasury’s Financial Crimes Enforcement Network (FinCEN) is continuing its outreach to businesses and refining its FAQs.

FinCEN has been collaborating with lawmakers around the country on education events over the last few months including an August 2 event in New York City with Representative Nydia Velázquez (D-NY). 

They advised businesses to refer to the list of 23 exemptions available on FinCEN’s website but assured that if a business is in scope of the BOI rules, “you do not need an accountant or lawyer to file.” Further, small business owners showing good-faith efforts to comply “should not lose sleep” over the new requirements.

Also on July 24, FinCEN Issued revised BOI FAQs, including a New FAQ on “Disregarded Entities” and an Updated FAQ for Entities Needing to Obtain a Tax Identification Number.

FinCEN clarified that entities that are “disregarded” for U.S. tax purposes, meaning the entity’s owner reports on its tax return the entity’s income and deductions, still must report BOI if they fall within the definition of a “reporting company.” 

Disregarded entities may report using different types of tax identification numbers depending on the circumstances, such as an Employer Identification Number, a Social Security Number, or an Individual Taxpayer Identification Number. 

Foreign Reporting Companies Without A
Tax Identification Number May Need To
Provide One Issued By A Foreign Jurisdiction. 

FinCEN also provided more detail on how new companies can obtain a tax identification number to ensure their BOI report is timely filed. Reporting companies may need to submit Form SS-4, Application for Employer Identification Number and foreign person responsible parties may need to submit that form by mail or fax, rather than via the online portal.

In addition, FinCEN clarified that reporting companies will not be able to submit their BOI report without a tax identification number. They should, however, request “all necessary information as early as practicable” and “consider retaining documentation associated with [their] efforts to comply with the BOI reporting requirements in a timely manner.”

On July 26, 2024 FinCEN issued yet another notice, this time clarifying that financial institution customers may be required to report BOI to FinCEN directly as well as to their financial institution as part of the federal customer due diligence requirements. The notice includes charts comparing reporting requirements under the Corporate Transparency Act and under the separate provision for financial institutions and it specifies that the required information and the definition of a “beneficial owner” do not completely align under the two reporting schemes.

Read more at: Tax Times blog