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IRS Releases 2023 Annual Inflation Adjustments

by , and | Oct 21, 2022 | ,

On October 18, 2022, the Internal Revenue Service (IRS) announced the annual inflation adjustments for 2023 related to more than 60 tax provisions, with some increasing, some maintaining and some new additions to the list. The tax adjustments generally apply to tax returns for the 2023 tax year that will be filed in 2024 (i.e., the adjustment will not apply to tax returns filed next year for the 2022 tax year). The highlights are summarized below, but you can find the complete list detailed in Revenue Procedure 2022-38.

2023 Marginal Income Tax Brackets

Tax Rate Single Taxpayers,
Income Greater Than: Married Couples Filing Jointly, Income Greater Than: 37% $578,125 $693,750 35% $231,250 $462,500 32% $182,100 $364,200 24% $95,375 $190,750 22% $44,725 $89,450 12% $11,000 $22,000 10% $11,000 or less $22,000 or less

 

2023 Standard Deduction

Married couples filing jointly $27,700 (increase of $1,800) Single taxpayers and married individuals filing separately $13,850 (increase of $900) Heads of households $20,800 (increase of $1,400)

 

Alternative Minimum Tax Exemption

  • Unmarried individuals: $81,300
  • Joint returns or surviving spouses: $126,500
  • Married individuals filing separately: $63,250
  • Estates and Trusts: $28,400

Earned Income Tax Credit

  • $3,995 for one qualifying child
  • $6,604 for two qualifying children
  • $7,430 for three or more qualifying children

Qualified Transportation Fringe Benefit

  • $300

Foreign Earned Income Exclusion

  • $120,000

Basic Exclusion Amount for Estates of Decedents

  • $12,920,000

Annual Exclusion for Gifts

  • $17,000

New for 2023: Energy-Efficient Commercial Building Deduction

  • The applicable dollar value used to determine the maximum allowance of the deduction is $0.54 (increased by $0.02), but not above $1.07, for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.
  • The applicable dollar value used to determine the increased deduction amount for certain property is $2.68 (increased by $0.11), but not above $5.36, for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25%.

Items Not Changing

  • Personal exemption for the 2023 tax year remains at zero
  • No limit on itemized deductions (same as 2022, 2021, 2020, 2019 and 2018)

Practice Point: The above adjustments are a welcome development for taxpayers in the wake of inflation. However, it is important to note that any tax relief will not be immediate as the adjustments are for the 2023 tax year and will be reflected on tax returns filed in 2024.



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Weekly IRS Roundup February 22 – February 26, 2021

by | Mar 2, 2021 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 22, 2021 – February 26, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

February 25, 2021: The IRS issued an alert warning taxpayers to refrain from submitting meritless amended returns to claim the Domestic Production Activities Deduction (DPAD) for prior tax years—the DPAD was repealed as part of the Tax Cuts and Jobs Act for taxable years after December 31, 2017. This alert was in response to a large number of filings claiming the DPAD deduction based on studies conducted after the fact, which the IRS claims contained unreasonable assumptions of facts and law. The IRS further noted that examining these claims will continue to be a priority and that penalties may be asserted under section 6676. We have previously written about section 199 refund claims and penalties under section 6676.

February 25, 2021: The IRS released Internal Revenue Bulletin 2021-9, dated March 1, 2021, containing the following highlights: Announcement 2021-4 (Administrative).

February 26, 2021: The IRS issued Notice 21-18 providing the adjusted limitations on housing expenses for 2021 for purposes of section 911, which allows a qualified individual to elect to exclude from gross income certain foreign earned income and to exclude or deduct certain housing expenses.

February 26, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Samuel DiPietro in our Chicago office for this week’s roundup.



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Weekly IRS Roundup September 7 – September 11, 2020

by | Sep 14, 2020 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 7, 2020 – September 11, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

September 4, 2020: The IRS published Competent Authority Arrangements between the United States and the Republic of Serbia and the United States and the Commonwealth of the Bahamas. Each country previously signed an intergovernmental agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA). The new arrangements establish procedures for IGA-related automatic exchange obligations and for the exchange of information.

September 9, 2020: The IRS publishing news release reminding self-employed individuals, investors, retirees and others with income not subject to withholding that third-quarter estimated tax payments for 2020 are due September 15.

September 9, 2020: The IRS announced that, as part of a larger effort to reach underserved communities, it is taking a number of aggressive steps to expand information and assistance available to taxpayers in additional languages, including providing the Form 1040 in Spanish for the first time.

September 10, 2020: The IRS published a notice and request for comments concerning United States gift (and generation-skipping transfer) tax return (Form 709). Form 709 is used by individuals to report transfers subject to the gift and generation-skipping transfer taxes and to compute these taxes. The IRS uses the information to collect and enforce these taxes, verify that the taxes are properly computed and compute the tax base for the estate tax. Comments are due on or before November 9, 2020.

September 10, 2020: The IRS published a notice and request for comments concerning Form 15254 (Request for Section 754 Revocation) which is a new form for a partnership to submit a revocation request from an election to adjust the basis of partnership property. Comments are due on or before November 9, 2020.

September 10, 2020: The IRS published a practice unit focusing on audit techniques for examiners assigned foreign earned income exclusion cases.

September 10, 2020: The IRS published a news release urging individuals who owe taxes but have not yet filed for 2019 to act now to avoid larger penalties that, by law, start after September 14.

September 11, 2020: The IRS released Internal Revenue Bulletin 2020-38, dated September 14, 2020, containing the following highlights: (1) Announcement 2020-15 (Exempt Organizations); (2) Announcement 2020-16 (Exempt Organizations); (3) Notice 2020-65 (Administrative, Employment Tax); (4) Notice 2020-68 (Employee Plans); (5) Revenue Procedure 2020-40 (Employee Plans); and (6) TD 9907 (Income Tax).

September 11, 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 [...]

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Weekly IRS Roundup August 24 – August 28, 2020

by | Sep 2, 2020 | , , , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 24, 2020 – August 28, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

August 24 2020: The IRS published a memorandum concerning guidance to the field on the criteria that should be applied in considering if a request for designation for litigation should be made to the Office of Chief Counsel. The memorandum also provides interim guidance on the requirements of Section 1001 of the Taxpayer First Act (TFA) with respect to the limitation on designation of cases as not eligible for referral to the IRS Independent Office of Appeals.

August 25, 2020: The IRS published a Summer 2020 Statistics of Income Bulletin. The Summer 2020 Bulletin focuses individual income tax shares, 2017; foreign recipients of US income, calendar year 2017; effects of post-filing adjustments on Statistics of Income (SOI) estimates; and implementation of the Tax Cuts and Jobs Act.

August 25, 2020: The IRS published a practice unit focusing on the definition of foreign earned income for purposes of section 911.

August 26, 2020: The IRS published a notice and request for comments on Treasury Decision 8702 concerning certain transfers of domestic stock or securities by US persons to foreign corporations. The regulation relates to certain transfers of stock or securities of domestic corporations pursuant to the corporate organization, reorganization or liquidation provisions of the Internal Revenue Code (Code). Transfers of stock or securities by US persons in tax-free transactions are treated as taxable transactions when the acquirer is a foreign corporation, unless an exception applies under section 367(a). The regulation provides that no US person will qualify for an exception unless the US target company complies with certain reporting requirements. The comments should be received on or before October 26, 2020.

August 26, 2020: The IRS published a notice and request for comments on Treasury Decision 8612 concerning the availability of the gift and estate tax marital deduction when the donee spouse or the surviving spouse is not a US citizen. The regulation provides guidance to individuals or fiduciaries: (1) for making a qualified domestic trust election on the estate tax return of a decedent whose surviving spouse is not a US citizen in order that the estate may obtain the marital deduction; and (2) for filing the annual returns that such an election may require. The comments should be received on or before October 26, 2020.

August 27, 2020: The IRS published an announcement on the opening of the application period for the 2021 Compliance Assurance Process program. The application period runs September 1 to November 13, 2020. The IRS will inform applicants if they’re accepted into the program in February 2021.

August 28, 2020: The IRS published
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