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Weekly IRS Roundup December 12 – December 16, 2022

by McDermott Will & Emery | Dec 19, 2022 | IRS Appeals, 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 December 12, 2022 – December 16, 2022.

December 12, 2022: The IRS released Internal Revenue Bulletin 2022-50, which highlights the following:

Revenue Procedure 2022-41: This guidance specifies when information shown on an income tax return will be an adequate disclosure for purposes of reducing an understatement of income tax under Section 6662(d) and for purposes of avoiding the Section 6694(a) preparer penalty. This revenue procedure updates Revenue Procedure 2021-52 and applies to any income tax return filed on 2022 tax forms for a taxable year beginning in 2022 and any income tax return filed in 2023 on 2022 tax forms for short taxable years beginning in 2023.

December 12, 2022: The IRS reminded people over the age of 72 to start withdrawals from individual retirement arrangements (IRAs) and retirement plans in order to avoid penalties. Required minimum distributions (RMDs) are the minimum amounts that many retirement plan and IRA account owners must withdraw annually after they reach age 72. Account owners can delay taking their first RMD until April 1 following the later of the calendar year in which they reach age 72 or, with a workplace retirement plan, when they retire. RMDs are taxable income and may be subject to penalties if not timely taken.

December 12, 2022: The IRS and the US Department of the Treasury (Treasury) announced a new revenue procedure that sets out key processes for manufacturers and sellers of clean vehicles. Revenue Procedure 2022-42 provides guidance on new rules added as part of the Inflation Reduction Act of 2022 on how to enter into a written agreement with the IRS to provide periodic written reports containing specified information related to a manufactured clean vehicle. The revenue procedure also provides the procedures for people selling vehicles to report information to the IRS in order for the vehicle to be eligible for the credit.

December 13, 2022: The IRS urged families and people paying for disability-related expenses to consider using an Achieving a Better Life Experience (ABLE) savings account. ABLE accounts do not affect a person’s eligibility for government assistance programs and can also provide tax advantages.

December 13, 2022: The IRS released Revenue Procedure 2022-43, which sets out the final qualified intermediary withholding agreement (QI agreement) entered into under Section 1.1441-1(e)(5) of the regulations, which begins on January 1, 2023. The QI agreement allows certain people to enter into an agreement with the IRS to simplify their obligations as withholding agents and as payors for amounts paid to their account holders and allows certain people to act as qualified derivatives dealers and assume primary withholding and reporting responsibilities on all dividend equivalent payments they make.

December 14, 2022: The IRS Independent Office of Appeals selected Elizabeth (Liz) [...]

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Weekly IRS Roundup December 5 – December 9, 2022

by McDermott Will & Emery | Dec 12, 2022 | 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 December 5, 2022 – December 9, 2022.

December 5, 2022: The IRS released Internal Revenue Bulletin 2022-49, which highlights the following:

Revenue Procedure 2022-39: This revenue procedure obsoletes Revenue Procedure 94-69, 1994-2 C.B. 804, and sets out the procedures for eligible taxpayers to file an amended return under Section 1.6664-2(c)(4)(ii) of the regulations. This revenue procedure also sets out the procedures for eligible taxpayers to avoid Sections 6662(b)(1) and 6662(b)(2) accuracy-related penalties to the extent that the taxpayers report errors resulting in additional tax or adequately discloses the tax treatment of an item that has a reasonable basis.

Notice 2022-60: This notice sets forth the corporate bond monthly yield curve, the corresponding spot segment rates and the 24-month average segment rates for November 2022. The notice also provides guidance as to interest rates on 30-year Treasury securities and 30-year Treasury weighted average rates.

Notice 2022-62: This notice contains the 2022 Required Retirement Plan Amendments List. The list establishes the end of the remedial amendment period and the plan amendment deadline for changes in qualification requirements and Section 403(b) requirements for qualified individually designed plans and Section 403(b) individually designed plans, respectively.

Proposed Regulations 112096-22: This document contains proposed regulations related to the foreign tax credit, which provide guidance with respect to the reattribution asset rule for purposes of allocating and apportioning foreign taxes, the cost recovery requirement and the attribution rule for withholding tax on royalty payments. Written comments should be received by January 23, 2023, for consideration.

Revenue Rule 2022-22: This revenue ruling provides the applicable federal rates for federal income tax purposes for December 2022. The short-term federal interest rate will increase to 4.55%, the mid-term rate will rise to 4.27% and the long-term rate will rise to 4.34%.

December 5, 2022: The IRS released Tax Tip 2022-185, promoting IRS social media accounts and e-News services. The IRS utilizes several social media platforms, including YouTube, Facebook, Instagram, Twitter and LinkedIn.

December 6, 2022: The IRS and the US Department of the Treasury (Treasury) issued proposed regulations that identify certain syndicated conservation easement (SCE) transactions as “listed transactions,” which means they must be reported to the IRS. The IRS previously identified certain SCE transactions in Notice 2017-10, however, courts have recently held that Notice 2017-10 is invalid because it did not follow notice and public comment procedures. The IRS also released Announcement 2022-28, which provides additional background information related to Notice 2017-10 and notes the IRS and the Treasury’s disagreement with the courts.

December 6, 2022: The IRS encouraged taxpayers to take important steps in December in preparation of filing their 2022 federal [...]

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Weekly IRS Roundup November 28 – December 2, 2022

by McDermott Will & Emery | Dec 5, 2022 | 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 November 28, 2022 – December 2, 2022.

November 28, 2022: The IRS released Internal Revenue Bulletin 2022-48, which highlights the following:

Notice 2022-59: This notice provides the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the fee imposed by Sections 4375 and 4376 for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023. The amount is $3.00, up from $2.79.

Announcement 2022-23: This announcement notifies taxpayers of new credit amounts for calendar year 2022 for the renewable electricity production credit under Section 45, in the case of any qualified facility placed in service after December 31, 2021.

November 28, 2022: The IRS and Security Summit partners announced the kick-off date for the 7th National Tax Security Awareness Week. The group also urged people to be aware of holiday scams and to protect their personal information.

November 28, 2022: The IRS released Tax Tip 2022-181, reminding taxpayers to be aware of gift card scammers during the holidays. One of the common scams used this time of year is con artists asking taxpayers to pay fake tax bills with gift cards. Scammers also sometimes use a compromised email account to request gift card purchases for family and friends.

November 29, 2022: The IRS warned taxpayers to be on alert for scammers using fake charities as a way to make money during the holiday season. The message came on Giving Tuesday as part of Nationwide Tax Security Awareness Week. Tips for avoiding fake charity scams include not giving into pressure, being wary of how donations are requested and not giving more than is needed.

November 29, 2022: The IRS released Tax Tip 2022-182, reminding people that they may be eligible for more than one filing status. The IRS suggests that taxpayers review their options and pick the one that makes the most sense for them.

November 29, 2022: The IRS announced that interest rates will increase for the first quarter of 2023. The new interest rates, published in Revenue Ruling 2022-23, begin January 1, 2023, and are as follows:

Overpayments: 7%
Overpayments for corporations: 6%
Corporate overpayments for portion exceeding $10,000: 4.5%
Underpayments: 7%
Large corporate underpayments: 9%

November 29, 2022: The IRS announced that the IRS Office of Chief Counsel, along with the American Bar Association, held its first centralized National Virtual Settlement Event in October. Over the course of four days, 44 cases were settled and at least 59 meetings took place with taxpayers, pro bono attorneys and representatives from the IRS Office of Chief Counsel.

November 29, 2022: The IRS
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IRS Issues New Procedures for Large Corporate Audit Disclosures

by Kevin Spencer and McDermott Will & Emery | Nov 30, 2022 | IRS Audits, IRS Guidance, Tax Refunds

For decades, large corporate taxpayers under continuous audit have been able to make disclosures under Revenue Procedure 94-69 at the beginning of an examination to notify the Internal Revenue Service (IRS) of adjustments (both positive and negative) to their tax returns and thereby obtain protection from various penalties and obviate the need to file a formal amended tax return. In 2020, the IRS questioned the continuing utility of this disclosure process and invited comments on said process. With the new Revenue Procedure 2022-39, the IRS has moved the largest corporate taxpayers into a new era of voluntary disclosure. This is a significant development for impacted taxpayers.

Weekly IRS Roundup November 21 – November 25, 2022

by McDermott Will & Emery | Nov 28, 2022 | 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 November 21, 2022 – November 25, 2022.

November 21, 2022: The IRS released Internal Revenue Bulletin 2022-47, which highlights the following:

Revenue Procedure 2022-40: This revenue procedure provides that a plan sponsor that maintains a Section 403(b) individually designed plan will be permitted to submit a determination letter application for an initial plan determination, for a determination upon plan termination and in certain other circumstances.

Announcement 2022-22: This announcement contains a correction to Notice 2022-41, which contained a typographical error in the first sentence of the “GUIDANCE” section. The sentence included a reference to a “non-calendar year” cafeteria plan but should instead refer to any cafeteria plan.

Revenue Ruling 2022-21: This revenue ruling provides that the base period T-bill rate for the period that ended September 30, 2022, is 1.71%.

Notice 2022-56: This notice requests comments related to the qualified commercial clean vehicles provisions and the alternative fuel vehicle refueling property.

Notice 2022-57: This notice requests comments related to the tax credit for carbon oxide sequestration.

Notice 2022-58: This notice requests comments related to the tax credit for the production of clean hydrogen and the clean fuel production credit.

November 21, 2022: The IRS released Tax Tip 2022-178, reminding individuals that the amount they can contribute to their Section 401(k) plans in 2023 will increase to $22,500. All of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 are included in Notice 2022-55.

November 21, 2022: The IRS released Notice 2022-62, which contains the 2022 Required Retirement Plan Amendments List. This list establishes the end of the remedial amendment period and the plan amendment deadline for changes in qualification requirements and Section 403(b) requirements set forth on the list for qualified individually designed plans and Section 403(b) individually designed plans, respectively.

November 22, 2022: The IRS released Tax Tip 2022-179, providing guidelines to help keep online personal information safe. The tips include the following:

Always protect personal data
Only shop at reputable retailers
Use security software
Choose strong passwords and two-factor authentication
Know the risk of public Wi-Fi
Learn to recognize and avoid scams
Be aware of compromised accounts.

November 22, 2022: The IRS encouraged taxpayers to get ready to file their 2022 federal income tax returns by gathering records, renewing expired tax ID numbers and bookmarking online tools at IRS.gov.

November 22, 2022: The IRS issued proposed regulations related to the foreign tax credit, which provide guidance with respect to the reattribution asset rule for purposes of allocating and apportioning foreign taxes, the cost recovery requirement and the [...]

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Weekly IRS Roundup November 14 – November 18, 2022

by McDermott Will & Emery | Nov 21, 2022 | 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 November 14, 2022 – November 18, 2022.

November 14, 2022: The IRS released Internal Revenue Bulletin 2022-46, which highlights the following:

Announcement 2022-21: The Office of Professional Responsibility announced recent disciplinary sanctions involving lawyers, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents and appraisers.

November 14, 2022: The IRS released Notice 2022-59, which provides the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the fee imposed by Sections 4375 and 4376 for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023. The amount is $3.00, up from $2.79.

November 14, 2022: The IRS released Tax Tip 2022-174, which provides an overview of the Taxpayer Bill of Rights (TBOR). We have previously posted about TBOR.

November 15, 2022: The IRS released Tax Tip 2022-175, reminding people that Giving Tuesday is coming up and is a good time to review whether their charitable donation is tax deductible. Giving Tuesday is the Tuesday after Thanksgiving.

November 15, 2022: The IRS reminded taxpayers that IRS Free File will be closed after November 17. IRS Free File allows people with incomes of $73,000 or less to file a return online for free using brand name software.

November 15, 2022: The IRS Advisory Council issued its 2022 Public Report, which includes recommendations for new and continuing issues in tax administration. The report emphasized the need for “consistent and multi-year funding for the IRS to achieve its goals of providing efficient, effective, modern service to the nation’s taxpayers.” The 146-page report details recommendations for 21 issues, including:

IRS business and information technology modernization
Reduction in electronic filing threshold for information return filers
Alignment of electronic signature requirements on withholding certificates
Accelerated issuance of IRS Form 6166, Certification of US Residency
Series 8038 Form Redesign and Updates
Business Master File Transcript Delivery Service

November 15, 2022: The IRS issued Revenue Rule 2022-22, which provides the applicable federal rates for federal income tax purposes for December 2022. The short-term federal interest rate will increase to 4.55%, the mid-term rate will rise to 4.27% and the long-term rate will rise to 4.34%.

November 16, 2022: The IRS released Revenue Procedure 2022-39, which obsoletes Revenue Procedure 94-69, 1994-2 C.B. 804, and sets out the procedures for eligible taxpayers to file an amended return in accordance with Section 1.6664-2(c)(4)(ii) of the regulations. This revenue procedure also sets out the procedures for eligible taxpayers to avoid the Sections 6662(b)(1) and 6662(b)(2) accuracy related penalties to the extent that the taxpayers report errors resulting in additional tax or adequately discloses the tax treatment of an [...]

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Update on IRS Enforcement Efforts

by Kevin Spencer and McDermott Will & Emery | Nov 16, 2022 | IRS Audits, IRS Guidance, Tax Reform, Transfer Pricing Resource

We frequently post about the Internal Revenue Service’s (IRS) tax enforcement trends and announcements. Prior examples from this year include the release of a five-year strategic plan emphasizing enforcement, the plan to hire up to 200 additional attorneys to assist with litigation efforts, the implementation of the Large Partnership Compliance (LPC) Pilot Program, a focus on tax compliance of non-US citizens and residents, and the creation of a new Joint Strategic Emerging Issues Team to identify emerging “abusive transactions.” Over the past several weeks, the IRS has provided additional updates on its enforcement efforts and future plans, including the following:

The IRS is considering raising the economic substance doctrine more frequently in transfer pricing examinations—even those where taxpayers have transfer pricing documentation—and asserting penalties more often in transfer pricing cases. This follows the announcement last April that executive approval is no longer needed before asserting the codified economic substance doctrine under Internal Revenue Code Section 7701(o).

The IRS plans to grow the LPC program and envisions it functioning similar to corporate examinations conducted by the Large Business & International Division.

The IRS’s Criminal Investigation (CI) Division is highly focused on criminal digital asset cases and intends to make many of these cases public. This follows the recent release of the CI Division’s annual report.

The IRS intends to expend more resources on examinations of high-income/high-net-worth taxpayers.

The IRS has proposed to require the disclosure of more information regarding corporate taxpayers’ uncertain tax positions, including citations to contrary authorities, which, if finalized, will likely lead to more examinations and challenges to tax reporting positions.

Practice Point: Tax enforcement has been down over the past several years, including a slowdown in audit operations during the COVID-19 pandemic. With increased funding from the Inflation Reduction Act of 2022 and proposed restrictions on access to IRS Appeals for certain matters, we expect more examinations and tax disputes in the near future. Taxpayers and their advisors should prepare. Consider working with your tax controversy advisor to discuss your more vulnerable return positions to see how to better defend against the impending tax enforcement wave!

Update on Schedule UTP Comments

by Kevin Spencer and McDermott Will & Emery | Nov 14, 2022 | IRS Guidance, Tax Refunds

We previously discussed the Internal Revenue Service’s (IRS) announcement regarding draft changes to Schedule UTP, Uncertain Tax Position Return Statement, and Instructions to Schedule UTP (Form 1120). The IRS requested comments by November 18, 2022.

On November 14, 2022, we submitted our comments to the IRS outlining some of our concerns with the draft changes, focusing primarily on the scope of disclosure. We made the following recommendations:

Reconsider whether any changes should be made to Schedule UTP given the current rules in place regarding other disclosures (g., Forms 8275 and 8275-R) and the serious privilege concerns raised by the additional disclosure requirements.

Remove the requirement to disclose any positions that are “contrary” to any authorities or, at a minimum, to any Private Guidance.

If changes are made to Schedule UTP, work with taxpayers to determine the appropriate standard for determining whether there is “contrary” authority and what steps a taxpayer or return preparer must take before being able to satisfy the jurat requirement.

Issue published guidance clarifying that proper disclosure on Schedule UTP will satisfy the adequate disclosure requirement for purposes of both the disregard of rules and regulations and substantial understatement of tax grounds for imposing penalties under I.R.C. § 6662.

If changes are made to Schedule UTP, delay the effective date to the 2023 tax year (processing year 2024).

We will continue to track potential changes to Schedule UTP and Form 1120 and will provide updates as they are made known.

Weekly IRS Roundup November 7 – November 11, 2022

by McDermott Will & Emery | Nov 14, 2022 | IRS Guidance, Tax Reform

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 7, 2022 – November 11, 2022.

November 7, 2022: The IRS released Internal Revenue Bulletin 2022-45, which highlights the following:

Proposed Regulations 100719-21: This guidance proposes increases for both the enrollment and renewal of enrollment user fees for enrolled actuaries from $250 to $680.

Revenue Procedure 2022-38: This revenue procedure establishes the annual inflation adjustments for more than 60 tax provisions.

Notice 2022-54: This notice provides guidance on the corporate bond monthly yield curve and corresponding spot segment rates and the 24-month average segment rates for October 2022. The notice also provides guidance as to interest rates on 30-year Treasury securities and 30-year Treasury weighted average rates.

Notice 2022-55: This notice provides the dollar limitations on benefits and contributions under qualified retirement plans.

Notice 2022-53: This notice announces that the US Department of the Treasury (Treasury) and the IRS intend to issue final regulations related to required minimum distributions under Section 401(a)(9) that will apply no earlier than the 2023 distribution calendar year. The notice also provides guidance related to certain Section 401(a)(9) provisions that apply for 2021 and 2022 and the related excise tax under Section 4974.

Proposed Regulation 121509-00: This document withdraws proposed regulations related to exclusion from gross income of previously taxed earnings and profits under Section 959, as well as related basis adjustments under Section 961.

Revenue Ruling 2022-20: This guidance provides the various prescribed rates for federal income tax purposes for November 2022.

Treasury Decision 9968: These final regulations amend the regulations concerning eligibility for the premium tax credit to provide that affordability of employer-sponsored minimum essential coverage for family members of an employee is determined based on the employee’s share of the cost of covering the employee and those family members—not the cost of covering only the employee—under Section 36B.

November 7, 2022: The IRS and the Treasury announced that they will now allow Section 403(b) retirement plans to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans. Revenue Procedure 2022-40 outlines the additions and changes.

November 7, 2022: The IRS issued COVID Tax Tip 2022-170, which cautions employers to be aware of third parties advising them to claim the employee retention credit when they may not qualify.

November 7, 2022: The IRS requested comments on the reporting requirements for settlement funds, which are funds established or approved by a governmental authority to resolve or satisfy certain liabilities (such as those involving tort or breach of contract). Comments should be received by January 6, 2023, to be assured of consideration.

November [...]

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Weekly IRS Roundup October 31 – November 4, 2022

by McDermott Will & Emery | Nov 7, 2022 | IRS Appeals, IRS Audits, 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 October 31, 2022 – November 4, 2022.

October 31, 2022: The IRS released Internal Revenue Bulletin 2022-44, which highlights the following:

Treasury Decision 9966: These final regulations increase the renewal user fee for enrolled retirement plan agents from $67 to $140 and also increase both the enrollment and renewal of enrollment user fees for enrolled agents from $67 to $140.

Proposed Regulations 113068-22: These proposed regulations relate to recordkeeping and reporting requirements for the average income test for purposes of the low-income housing credit.

Revenue Ruling 2022-19: This revenue ruling provides a rule for valuing noncommercial flights on employer-provided aircraft, including the three Standard Industry Fare Level (SIFL) rates: the Unadjusted SIFL Rate, the SIFL Rate Adjusted for PSP Grants, and the SIFL Rate Adjusted for PSP Grants and Promissory Notes.

Treasury Decision 9967: This document contains final and temporary regulations, which set forth guidance on the average income test for purposes of the low-income housing credit.

October 31, 2022: The IRS released COVID Tax Tip 2022-166, announcing that more than nine million people may qualify for tax benefits they did not claim by filing a 2021 federal income tax return. Many of these people may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit and the Earned Income Tax Credit, among others, which were expanded last year under the American Rescue Plan Act of 2021 and other legislation.

November 1, 2022: The IRS released COVID Tax Tip 2022-167, alerting taxpayers in areas covered by certain Federal Emergency Management Agency disaster declarations that they may have more time to file their returns and may qualify for penalty relief under Notice 2022-36.

November 2, 2022: The IRS released COVID Tax Tip 2022-168, reminding people to review their tax withholdings to avoid tax surprises, such as a balance due or a larger-than-expected refund.

November 3, 2022: The IRS requested comments on three notices related to different aspects of extensions and enhancements of energy tax benefits in the Inflation Reduction Act of 2022. The IRS hopes that comments will aid the agency in drafting the related guidance items. Feedback should be submitted by December 3, 2022. The notices include:

Notice 2022-56, which requests comments related to the qualified commercial clean vehicles provisions and the alternative fuel vehicle refueling property

Notice 2022-57, which requests comments related to the carbon capture tax credit

Notice 2022-58, which requests comments related to the tax credit for the production of clean hydrogen and the clean fuel production tax credit.

November 3, 2022: The IRS
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