Category Archives: criminal tax law

The U.S. Tax Court has held in AptarGroup Inc., 158 TC No. 4, that the American shareholder of a controlled foreign corporation (CFC) had to use the same method to characterize the stock of the CFC that the corporation used to apportion its own interest expense.

AptarGroup, a U.S. shareholder, owned stock in a CFC that apportioned interest expense under the Reg §1.861-9T(j) modified gross income method. AptarGroup claimed a foreign tax credit under Code Sec. 904 with respect to tax imposed on its income from the CFC.

To determine the amount of the foreign tax credit, AptarGroup characterized its stock in the CFC using the Reg §1.861-9T(g) asset method. Thus, AptarGroup didn't use the same method that the CFC used for interest expense apportionment.

The IRS issued a notice of deficiency to AptarGroup denying the foreign tax credit.

The issue before the court was whether AptarGroup must use the modified gross income method to characterize the stock of its CFC for purposes of computing the foreign tax credit, as that was the method the CFC used to apportion interest expense.

The court held that AptarGroup's position is inconsistent with the proper application of Reg §1.861-9T(f)(3)(iv), which requires the U.S. shareholder of a CFC to characterize the stock of the CFC using the same method the CFC used to apportion its interest expense.

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According to Law360, Despite a continuing trend of employees working from home during the pandemic, congressional lawmakers have shown little interest this year in expanding a popular tax deduction to telecommuters forced to abandon their office cubicles.

Tax pros and Capitol Hill tax aides say the renewal of the home office deduction is not on Congress' radar, especially since the provision's elimination was tied to eliminating all other miscellaneous deductions and doubling the standard deduction as part of the GOP's 2017 Tax Cuts and Jobs Act.

The tax law has had the dual impact of providing larger tax refunds for American workers while also lowering the number of Internal Revenue Service audits of tax returns claiming the deduction under Internal Revenue Code Section 67(g), they said.

Under the TCJA, Republicans eliminated the miscellaneous itemized deduction from 2018 to 2025, thereby raising $668.4 billion in revenue. Before that change, employees with home offices were allowed to deduct eligible work-related expenses above 2% of their adjusted gross income. Eligible expenses included legal fees, professional subscriptions, uniforms, medical examinations required by an employer, tools and job search costs.

Even though the deduction isn't currently available to teleworkers, who have used their own money to make their remote home offices workable for their employer, other taxpayers are still benefiting from the tax break. 

Self-employed business owners, independent contractors and gig workers never lost their ability to write off their home office expenses even as federal and state governments began mandating that office buildings close and employees work from home.

Rep. Joseph Morelle, D-N.Y., said he is working to add the tax deduction back to the code for employees who work from home.

So far, Morelle's bill hasn't drawn any lawmakers willing to co-sponsor it and the House Ways and Means Committee has not considered the legislation. 

If the deduction is restored, it could prove useful to millions of American workers who are growing used to not traveling outside their homes for work.

Keith Hall, president of the National Association for the Self-Employed, estimated that roughly one-third of all small-business owners do not claim the home office deduction because they think it's too complicated, or it's a red flag that will cause the IRS to automatically audit them. However, he said the rules for the deduction allow a simple calculation based on the amount of space used in the home.

"I'm confident that every single one of those self-employed business owners is doing some work from home" and should be claiming the deduction, Hall 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) 

 

Read more at: Tax Times blog

The IRS will see a $675 million funding increase in fiscal year 2022 that will allow it to focus more resources on providing taxpayer services under a $12.6 billion budget that President Joe Biden is expected to sign by Tuesday. 

House lawmakers voted to give the agency its largest budget increase in two decades in an early morning vote Wednesday and the Senate put its stamp of approval on the budget legislation a day later, sending the measure to the White House.  

The Measure Includes A Hefty 6% Increase Overall
For The IRS Although That Figure Falls Short Of The
Original 14% Increase Originally Proposed.

The measure does not include a tax title or provisions extending retirement security legislation.

The Internal Revenue Service budget was included in a $1.5 trillion omnibus appropriations bill, or H.R. 2471, to fund operations of the entire federal government through the end of September. Biden is expected to sign the legislation next week, a White House spokesperson said, adding that he plans to sign a separate, short-term continuing resolution bill Friday to keep the government open through March 15. 

The House voted 260-171 to pass the bill, and the Senate passed it in a 68-31 vote.

• The IRS budget would direct $2.7 billion to fund taxpayer services, which includes processing tax returns and answering telephone inquiries. That amounts to $225 million more than the last fiscal year, but $160 million less than what Biden and the Democrats had sought.
• The budget would also provide $5.5 billion for enforcement activities, roughly $173 million more than in 2021; $4.1 billion for operational support, about $172 million more than last year; and $275 million for business systems modernization, about $52 million more.

The IRS budget also includes several policy directives added by lawmakers to increase their oversight of the agency's activities.

• Within 30 days of Biden signing the legislation, the IRS would have to brief Congress on the status of the backlog in tax returns and correspondence, and provide a strategy and time frame for corrective action. 
• Within 60 days of the bill's signing, the IRS would have to brief Congress on the tax gap, focusing on its composition and the taxpayers that are neglecting to pay their tax liabilities. It would also have to provide a report on how the agency determines its audit policies.

The legislation also would allow the agency to increase funding for taxpayer services by transferring funds from enforcement and operation support activities. It would also give the agency the authority to hire additional staff to work on the backlog.

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Under the broker information reporting rules, brokers must report transactions in securities to both the IRS and the investor. These transactions must be reported on Form 1099-B. Legislation enacted in 2021 extends these broker information reporting rules to cryptocurrency exchanges, custodians, or platforms (e.g., Coinbase, Gemini, or Binance), and to digital assets such as cryptocurrency (e.g., Bitcoin, Ether, or Dogecoin).

In addition to extending the above information reporting requirement to cryptocurrency, the legislation also extends existing cash reporting rules (for cash payments of $10,000 or more) to cryptocurrency, so that businesses that accept payments of $10,000 or more in cryptocurrency will have to report that to the IRS (on IRS Form 8300).

The new reporting rules apply to transactions that take place in 2023 and later years.

Existing broker reporting rules. Under current rules, if you have a stock brokerage account, then whenever you sell stock or other securities, you receive a Form 1099-B at the end of the year. On that form, your broker reports details of transactions, such as sale proceeds, relevant dates, your tax basis for the sale, and the character of gains or losses.

Furthermore, under the "broker-to-broker" reporting rules, if securities are transferred from one broker to another broker, then the old broker must furnish a statement with relevant information, such as tax basis, to the new broker.

New reporting for digital assets (most cryptocurrencies, and potentially some non-fungible tokens (NFTs)). The 2021 legislation expanded the definition of "brokers" who must furnish Forms 1099-B to include businesses that are responsible for regularly providing any service accomplishing transfers of digital assets on behalf of another person (for example, cryptocurrency exchanges). Thus, any platform on which you can buy and sell cryptocurrency will have to report digital asset transactions to the IRS and to you at the end of each year.

The cryptocurrency exchanges/platforms will have to gather information from customers, so that they can properly issue Forms 1099-B at the end of each tax year. Specifically, cryptocurrency exchanges will have to get the customer's name, address, and phone number, the gross proceeds from the sale of digital assets, and capital gains or losses and whether these were short-term (held for one year or less) or long-term (held for more than one year).

Note that it's not yet known whether exchanges/platforms will have to file Form 1099-B itself (modified to include digital assets) or some other, new IRS form.

Digital assets defined. For these reporting requirements, a "digital asset" is any digital representation of value recorded on a cryptographically secured distributed ledger or any similar technology. The IRS is allowed to modify this definition.

As it stands, the definition will capture most cryptocurrencies, and could potentially include some non-fungible tokens (NFTs) that are using blockchain technology for one-of-a-kind assets like digital artwork.

Cash transaction reporting on Form 8300 will apply to cryptocurrency. Under a set of rules separate from the broker reporting rules, when a business receives $10,000 or more in cash in a transaction, that business must report the transaction, including the identity of the person from whom the cash was received, to the IRS on Form 8300. For this cash reporting requirement, businesses will have to treat digital assets like cash.

IRS's Form 8300 requires the reporting of the identifying information of the individual from whom the cash was received-including address, occupation, and taxpayer identification number-as well as other information. The current-law rules that apply to cash usually apply to in-person payments in actual cash. It may be difficult for businesses seeking to comply with the post-2022 reporting rules for more than $10,000 in cryptocurrency to collect the information that must be reported on Form 8300.

What you should know. If you use a cryptocurrency exchange or platform, and it has not already collected a Form W-9 from you (seeking your taxpayer identification number), expect it to do so.

Cryptocurrency exchanges and platforms, in addition to collecting information from their customers, will need to begin tracking the holding period and the buy and sell prices of the digital assets in customers's accounts.

Be aware that the transactions subject to the new reporting rules will include not only the selling of cryptocurrencies for fiat currencies (government-issued currency such as the U.S. dollar), but also exchanges of cryptocurrencies for other cryptocurrencies.

Finally, it's good to keep in mind that the cryptocurrency exchanges or platforms will probably not have all the information they need to meet their reporting requirements under the new rules. This may make the first year of reporting for digital assets challenging for investors, as well as exchanges and platforms.

Sources:

Thomson Reuters Checkpoint

National Law Review

Read more at: Tax Times blog