IRS Guidance Archives - Page 30 of 112

IRS Guidance

Can a Virtual Currency Position Be Treated as a Commodity for Tax Purposes?

by McDermott Will & Emery | Aug 7, 2020 | IRS Guidance, Tax Reform

Some virtual currency units and positions are treated as commodities by Commodity Futures Trading Commission (CFTC) and US courts. The IRS has told taxpayers that it views convertible virtual currency as property, not foreign currency, for federal tax purposes. Lacking clear guidance from either the Internal Revenue Service (IRS) or the Department of the Treasury, this article addresses issues that may help determine whether Internal Revenue Code provisions that apply to commodities might also apply to transactions involving virtual currencies and positions.

Access the full article here.

Virtual Currency Losses Disallowed on Infrequent Activities

by McDermott Will & Emery | Aug 5, 2020 | IRS Guidance, Tax Reform

If a taxpayer’s virtual currency activities are too infrequent to rise to the level of investment activities or do not qualify as trader or dealer activities, losses associated with virtual currency transactions are not deductible. This article explores tax-law issues that arise in the context of “personal use virtual currency” and reminds taxpayers to be aware of both their intent when acquiring or holding virtual currency and the potential tax implications arising from such activities.

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Weekly IRS Roundup July 27 – July 31, 2020

by McDermott Will & Emery | Aug 3, 2020 | IRS Guidance, Tax Reform

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 27, 2020 – July 31, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 28, 2020: The IRS issued final regulations providing guidance about the limitation on the deduction for business interest expense after amendment of the Internal Revenue Code (Code) by the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The regulations provide guidance to taxpayers on how to calculate the limitation, what constitutes interest for purposes of the limitation, which taxpayers and trades or businesses are subject to the limitation and how the limitation applies in consolidated group, partnership, international and other contexts.

July 28, 2020: The IRS published a notice of proposed rulemaking concerning rules that provide additional guidance on various business interest expense deduction limitation issues not addressed in the final regulations, including more complex issues related to the amendments made by the CARES Act.

July 28, 2020: The IRS added frequently asked questions regarding the aggregation rules under section 448(c)(2) that apply to the section 163(j) small business exemption.

July 29, 2020: The IRS posted a practice unit on issues concerning the receipt of dividends or interest from a related controlled foreign corporation.

July 29, 2020: The IRS posted a practice unit on accuracy-related penalties under section 6662.

July 29, 2020: The IRS published a notice of proposed rulemaking concerning regulations to implement legislative changes to sections 263A, 448, 460 and 471 that simplify the application of those tax accounting provisions for certain businesses having average annual gross receipts that do not exceed $25 million, adjusted for inflation. The notice also contains proposed regulations regarding certain special accounting rules for long-term contracts under section 460 to implement legislative changes applicable to corporate taxpayers. The proposed regulations generally affect taxpayers with average annual gross receipts of not more than $25 million (adjusted for inflation). The IRS also requested comments regarding the application of section 460 (or other special methods of accounting) to a contract with income that is accounted for in part under section 460 (or other special method) and in part under section 451. Comments must be received by September 14, 2020.

July 31, 2020: The IRS published a notice of proposed rulemaking concerning proposed regulations that provide guidance under section 1061. Section 1061 recharacterizes certain net long-term capital gains of a partner that holds one or more applicable partnership interests as short-term capital gains. The regulations also amend existing regulations on holding periods to clarify the holding period of a partner’s interest in a partnership that includes in whole or in part an applicable partnership interest and/or a profits interest. The regulations affect taxpayers who directly or indirectly [...]

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Specific Identification of Virtual Currency Positions

by McDermott Will & Emery | Jul 31, 2020 | IRS Guidance, Tax Reform

The Internal Revenue Service (IRS) views convertible virtual currency as property, not foreign currency. As such, taxpayers must record and track the tax basis of each unit of virtual currency held in order to properly report taxable gain or loss when disposing of a unit or units of virtual currency. This article reviews the IRS’s position with respect to the identification and tax basis of such units.

Access the full article here.

The Legal Effect of IRS Pronouncements on Virtual Currency

by McDermott Will & Emery | Jul 29, 2020 | Court Procedure Matters, IRS Guidance, Tax Reform

Given limited guidance by US tax authorities regarding taxation of virtual currency activities, taxpayers with such holdings may find themselves in uncharted territory as to whether to take positions that are contrary to IRS pronouncements. This article explores relevant notices, rulings and FAQs, and reviews the types of deference that courts tend to put on different types of IRS interpretations and guidance.

Access the full article here.

Weekly IRS Roundup July 20 – July 24, 2020

by McDermott Will & Emery | Jul 27, 2020 | IRS Guidance, Tax Reform, Tax Refunds

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 20, 2020 – July 24, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 20, 2020: The IRS published a news release on after-tax-day tips for taxpayers who missed the July 15, 2020, tax deadline and did not request an extension. The tips include advice on obtaining a refund and on reducing penalties and interest.

July 20, 2020: The IRS released public comments on the 2020-21 Priority Guidance Plan in response to Notice 2020-47, which invited the public to submit recommendations for items to be included on the 2020-2021 Priority Guidance Plan. The US Department of the Treasury and the IRS use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices and other published administrative guidance.

July 21, 2020: The IRS announced the creation of the new Enterprise Digitalization and Case Management office, which will spearhead IRS efforts to empower taxpayers and IRS employees to rapidly resolve issues in a simplified digital environment. The office’s efforts will support overall IRS modernization and implementation of long-term changes stemming from the Taxpayer First Act. The new stand-alone office will focus on enhancing the taxpayer experience by improving business processes and modernizing systems.

July 22, 2020: The IRS published a notice to solicit comments on Form 3800 (General Business Credit). Section 38 permits taxpayers to reduce their income tax liability by the amount of their general business credit, which is an aggregation of various credits. Form 3800 is used to figure the correct credit. Comments are due on or before September 21, 2020.

July 23, 2020: The IRS published a notice requesting comments on TD 8435 that provides final income, estate and gift, and employment tax regulations relating to elections made under the Technical and Miscellaneous Revenue Act of 1988. This regulation enables taxpayers to take advantage of various benefits provided by the Internal Revenue Code (Code). Comments are due on or before September 21, 2020.

July 23, 2020: The IRS published final regulations under the global intangible low-taxed income (GILTI) and subpart F income provisions of the Code regarding income subject to a high rate of foreign tax. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their GILTI computation on an elective basis. The final regulations are effective on September 21, 2020.

July 23, 2020: The IRS also published proposed regulations that generally conform the rules implementing the subpart F high-tax exception to the rules implementing the GILTI high-tax exclusion set forth in the final regulations, and provided for a single election under section 954(b)(4) for purposes [...]

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Weekly IRS Roundup July 13 – July 17, 2020

by McDermott Will & Emery | Jul 20, 2020 | IRS Guidance, Tax Reform

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 13, 2020 – July 17, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 14, 2020: The IRS issued a news release on a proposed redesigned partnership form for tax year 2021 (filing season 2022). The proposed form is designed to provide greater clarity for partners on how to compute their US income tax liability with respect to items of international tax relevance, including claiming deductions and credits. Comments are due by September 14, 2020.

July 16, 2020: The IRS issued a notice requesting comments concerning consent to extend the time to assess tax with respect to gain recognition agreements covered by section 367 of the Internal Revenue Code (Code). Form 8838 is used to extend the statute of limitations for US persons who transfer stock or securities to a foreign corporation. The form is filed when the transferor makes a gain recognition agreement. This agreement allows the transferor to defer the payment of tax on the transfer. The IRS uses Form 8838 so that it may assess tax against the transferor after the expiration of the original statute of limitations. Comments are due on or before September 14, 2020.

July 16, 2020: The IRS released various prescribed rates for federal income tax purposes for August 2020, including the applicable federal rates under section 1274(d); the adjusted applicable federal rates under section 1288(b); the adjusted federal long-term rate and the long-term tax-exempt rate under section 382(f); the appropriate percentages for determining the low-income housing credit under section 42(b)(1); and the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest under section 7520.

July 17, 2020: The IRS provided a notice of public hearing on proposed regulations clarifying that certain deductions allowed to an estate or non-grantor trust are not miscellaneous itemized deductions and thus are not affected by the suspension of the deductibility of miscellaneous itemized deductions for taxable years beginning after December 31, 2017, and before January 1, 2026. The proposed regulations also provide guidance on determining the character, amount and allocation of deductions in excess of gross income succeeded to by a beneficiary on the termination of an estate or non-grantor trust. The public hearing is being held on Wednesday, August 12, 2020, at 10:00 am. The IRS must receive speakers’ outlines of the topics to be discussed at the public hearing by Wednesday, July 29, 2020.

July 17, 2020: The IRS released a Competent Authority Arrangement between the authorities of Switzerland and the United States regarding the interpretation of the term “North American Free Trade Agreement” (NAFTA). NAFTA is being superseded by the US-Mexico-Canada Agreement [...]

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Skip Jail and Clean Up Your Tax Problems

by Jenny L. Johnson Ware, Kevin Spencer and Le Chen | Jul 16, 2020 | IRS Appeals, IRS Audits, IRS Guidance, Tax Reform

If you have knowingly failed to report income or claimed deductions you know you are not entitled to, or just decided not to file your tax returns and pay the tax owed, you may be liable for civil penalties and even jail time for criminal tax evasion. Taxpayers with civil and criminal tax exposure may want to fix their past mistakes but are afraid of what will happen if they “come clean.” So, the majority of offenders keep offending year after year. But did you know there is an Internal Revenue Service (IRS) program that can help taxpayers get out of that “evasion” cycle, and clean up past tax issues, usually without criminal liability?

The IRS has a longstanding program through which taxpayers can make voluntary disclosures of tax underreporting and tax criminal evasion. Such disclosures may help taxpayers limit their criminal exposure, although disclosure does not automatically guarantee immunity from criminal prosecution.

The latest iteration of the voluntary disclosure program is known as the Voluntary Disclosure Practice (VDP). (Here is a link to the IRS’s VDP program description.) Under the terms of the program, a taxpayer must submit Part I of Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, which contains basic identifying and procedural information necessary to determine if the taxpayer is eligible to participate in the VDP program. The IRS uses this information to verify that the taxpayer is not already under criminal investigation, which is a bar to entering into the VDP program. Once the taxpayer has been “precleared,” the taxpayer must submit Part II of Form 14457, which seeks detailed information regarding the nature of the tax reporting failures and the associated unpaid tax liabilities. If the taxpayer is approved to participate in the VDP program, the taxpayer’s case is transferred to the appropriate IRS civil division for examination. Ultimately, the taxpayer must cooperate with the IRS to determine its correct tax liability and must make good faith arrangements to pay all unpaid liabilities, including interest and penalties. Typically, this will include the filing of corrected tax returns for six years; the payment of the correct tax and interest for those returns; and the payment of enhanced penalties for one tax year.

The current version of Form 14457 was released in April 2020. On July 14, 2020, Carolyn A. Schenck, the National Fraud Counsel for the IRS Fraud Enforcement Program, stated that the IRS is planning to issue additional instructions for Form 14457 to provide further guidance on the mechanics of the VDP. Conforming additions will be made to the Internal Revenue Manual.

Practice Point: The risk of criminal prosecution for tax offenses is increasing due to significant improvements in IRS enforcement strategies. IRS commissioner Charles Rettig was formerly in private practice defending taxpayers and has implemented significant changes in IRS programs and leadership. There is an unprecedented degree of coordination among the enforcement divisions and emphasis on preventing tax fraud, with Eric Hylton, previous deputy [...]

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Weekly IRS Roundup July 6 – July 10, 2020

by McDermott Will & Emery | Jul 14, 2020 | IRS Guidance, Tax Reform

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 6, 2020 – July 10, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 6, 2020: The IRS added new frequently asked questions on the treatment of grants or loans to businesses through the Coronavirus Relief Fund established by the Coronavirus Aid, Relief and Economic Security (CARES) Act. The IRS stated that a government grant is taxable because the grant generally is not excluded from the business’s gross income except in narrow circumstances. A government loan, however, generally is not included in gross income except to the extent it is forgiven. If a government forgives all or a portion of the loan, then the amount forgiven is included in gross income and taxable unless an exclusion applies. If an exclusion applies, the IRS indicated the taxpayer may lose an equivalent amount of tax attributes.

July 6, 2020: The IRS added frequently asked questions on the treatment of grants or loans to health care providers through the Provider Relief Fund established by the CARES Act. The IRS stated that payments from this fund do not qualify as a qualified disaster relief payment under section 139 of the Internal Revenue Code (IRC) and, in turn, are includible in gross income. The IRS also stated that a tax-exempt recipient generally is not subject to tax on a fund payment unless the amount is a reimbursement to an unrelated trade or business under section 511.

July 6, 2020: The IRS added content to its Large Business & International (LB&I) Active Campaign covering section 965 for individuals. In connection with the transition to a participation exemption system, certain individuals had an obligation to include in gross income (and report) their pro rata share of the untaxed earnings and profits of certain directly and indirectly owned foreign corporations. The IRS indicated it will address noncompliance through soft letters and examinations.

July 7, 2020: The IRS issued a news release reminding tax-exempt organizations that certain forms they file with the IRS are due on July 15, 2020, including Form 990. Tax-exempt organizations that need additional time to file beyond the July 15 deadline can request an automatic extension by filing Form 8868. The IRS also indicated that extending the time for filing a return does not extend the time for paying tax.

July 8, 2020: The IRS issued a news release reminding certain taxpayers to restart their tax payments by July 15. Some taxpayers took advantage of tax relief measures under the People First Initiative and did not make previously owed tax payments between March 25 and July 15. The IRS also set forth what taxpayers should do to resume their payment agreements to the IRS, including Installment Agreements, Offers in Compromise and [...]

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Weekly IRS Roundup June 29 – July 3, 2020

by McDermott Will & Emery | Jul 8, 2020 | IRS Guidance, Tax Reform

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 29, 2020 – July 3, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 29, 2020: The IRS issued a news release announcing that the tax filing and payment deadline of July 15 will not be postponed. However, individual taxpayers may request an automatic extension of time to file until October 15. Individual taxpayers that file Form 1040 series returns must file Form 4868 by July 15 to obtain the automatic extension.

June 29, 2020: The IRS issued corrections to proposed regulations regarding the credit for carbon oxide sequestration under section 45Q. Among other changes, the IRS clarified that the applicable recapture period ends upon five years, and not three years, after the last taxable year in which the taxpayer claimed a tax code section 45Q credit.

June 29, 2020: The IRS published the 2019 IRS Data Book, which summarizes tax filings, revenue collections, taxpayer services, enforcement activities and agency operations. The IRS added new key information to the annual publication and addressed the agency’s response to COVID-19.

June 29, 2020: The IRS added new frequently asked questions regarding filing extension relief for Forms 1139 and 1045. The IRS clarified that Notice 2020-26, which grants a six-month extension to file Forms 1139 and 1045 for certain net operating losses (NOLs), applies to consolidated groups. The IRS also clarified that if Notice 2020-26 extended a taxpayer’s filing date to file Forms 1139 and 1045, and if the extended due date is a date on or after April 1, 2020, and before July 15, 2020, then the taxpayer will also receive relief under Notice 2020-23, which allows taxpayers to file Forms 1139 and 1045 until July 15, 2020.

July 1, 2020: The IRS issued a news release announcing that it added new retail partners that will accept cash payments for federal taxes owed by both individual and business taxpayers.

July 2, 2020: The IRS released proposed regulations and temporary regulations providing guidance regarding NOLs for consolidated groups. The temporary regulations permit consolidated groups that have acquired certain new members to elect to waive all or part of the pre-acquisition portion of certain losses where there is a retroactive statutory extension of the NOL carryback period. Public comments regarding the contemplated rules must be received by August 31, 2020.

July 3, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.