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Weekly IRS Roundup December 20 – December 24, 2021

by McDermott Will & Emery | Dec 27, 2021 | 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 20, 2021 – December 24, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 20, 2021: The IRS published a news release announcing that victims of this month’s tornadoes in parts of Illinois and Tennessee will have until May 16, 2022, to file various individual and business tax returns and make tax payments.

December 20, 2021: The IRS released instructions for Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), to reflect a new separate Schedule A and eliminate the requirement for domestic partnerships to file the form.

December 20, 2021: The IRS released Publication 17, Your Federal Income Tax (for Individuals), which was updated for the 2021 tax year. This publication covers the general rules for filing a federal income tax return and supplements the information contained in tax form instructions.

December 21, 2021: The IRS released a memorandum that reissues interim guidance AP-08-0521-0015 concerning procedures for accepting images of signatures and digital signatures and approval to receive documents by email and transmit documents to taxpayers. The memorandum is in response to the COVID-19 pandemic, where the IRS took several steps to protect employees while still delivering on their mission-critical functions.

December 21, 2021: The IRS released Published 15, (Circular E), Employer’s Tax Guide, which explains tax responsibilities as an employer. The updates reflect COVID-19 related employment tax credits and other tax relief.

December 22, 2021: The IRS published a news release announcing that victims of Hurricane Ida in six states now have until February 15, 2022 (extended from January 3), to file various individual and business tax returns and make tax payments. The updated relief covers the entire states of Louisiana and Mississippi, as well as parts of New York, New Jersey, Connecticut and Pennsylvania.

December 23, 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 Robbie Alipour in our Chicago office for this week’s roundup.

Weekly IRS Roundup December 13 – December 17, 2021

by McDermott Will & Emery | Dec 21, 2021 | 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 13, 2021 – December 17, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 13, 2021: The IRS published a memorandum concerning its commitment to creating an environment conducive to civility, which includes mutual respect, politeness and fairness. The IRS stated that acting with civility and treating others with respect furthers confidence in the legal system, thus enhancing the quality of justice. The memorandum also stated that the IRS’s sole objective is to reach the correct result.

December 13, 2021: The IRS issued a news release announcing that it joined with several leading nonprofits to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 federal income tax return.

December 14, 2021: The IRS released a practice unit, providing an overview of base erosion anti-abuse tax under Section 59A after issuance of final regulatory packages in 2019 and 2020.

December 14, 2021: The IRS released a practice unit, addressing the general process for determining if a nonresident alien (NRA) student, trainee, teacher or researcher is eligible to claim a treaty-based exemption on Form 1040NR or Form 1040NR-EZ for income received that is effectively connected with a US trade or business.

December 14, 2021: The IRS released a practice unit, guiding examiners through the procedures for properly conducting promoter investigations. The goal of a promoter investigation is to identify and quickly terminate the abusive promotion or activity, assert promoter penalties where applicable and identify participants in the abusive transaction.

December 14, 2021: The IRS released a practice unit, reflecting the recently finalized Treasury Regulation 1.861-9 (regarding interest expense apportionment) and addressing the impact of flow-through entities on the foreign tax credit. The concept unit is applicable to individual taxpayers who receive Schedule K-1(s) from partnerships or S corporations that report foreign income, related deductions and taxes. Members of limited liability companies who file a Form 1065 and beneficiaries of a trust who file a Form 1041 are also subject to the rules discussed in the practice unit.

December 14, 2021: The IRS released a practice unit, explaining the process for calculating the interest due under Section 453A on a deferred tax liability in installment sales transactions.

December 14, 2021: The IRS published a news release announcing that victims of tornadoes in Kentucky will have until May 16, 2022, to file various individual and business tax returns and make tax payments.

December 14, 2021: The IRS published a revenue ruling, providing various prescribed rates for federal income tax purposes for January 2022.

December 15, 2021: The IRS published a notice concerning procedures under Section 446 of Section 1.446-1(e) of the Income [...]

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Types of Tax Court Opinions and Their Precedential Effect (Updated)

by Kevin Spencer and McDermott Will & Emery | Dec 20, 2021 | Court Procedure Matters, Trial Courts

At the end of 2016 we posted “Types of Tax Court Opinions and Their Precedential Effect” and added that document to the Resources tab on the blog. We recently updated this resource and, below, we’ve also provided the updated text.

Most tax cases are decided by the US Tax Court, which issues two categories of opinions: formally published dispositions and unpublished dispositions. The first category consists of opinions that are published in the Tax Court Reports and are technically called “division opinions” but are more commonly referred to as “T.C. opinions.” The second category consists of three sets of unpublished dispositions:

memorandum opinions (commonly referred to as “memo opinions” or “T.C. memos”)
summary opinions
orders.

A common question asked by taxpayers relates to the difference between these forms of dispositions in terms of precedential effect.

T.C. opinions are binding in the Tax Court, precedential and published by the Tax Court. They generally address issues of first impression, issues that impact a large number of taxpayers or matters related to the validity or invalidity of regulations. To the extent there is a T.C. opinion on point, taxpayers should cite to it as primary authority in a Tax Court proceeding.

Memo opinions are not officially published but are reproduced by commercial publishers. They generally address cases that do not involve novel legal issues and the law is settled, or the result is factually driven. Although these opinions are technically not precedential, they are often cited by litigants, and the Tax Court does not disregard these opinions lightly. It is rare to find a non-T.C. opinion that rejects the reasoning of a memo opinion. Indeed, the trend in recent years seems to be that the weight afforded to T.C. opinions and memo opinions is not substantially different. This reflects the fact that there are significantly more memo opinions than T.C. opinions each year (approximately 90% of all Tax Court opinions are memo opinions), providing taxpayers with more authority upon which to provide support for their position.

Summary opinions are also not published by the Tax Court but are reproduced by commercial publishers. They are issued in cases where the amount in dispute is less than $50,000 and the taxpayer elects to have their case tried under the small tax case procedures. Most summary opinions involve run-of-the-mill facts, but some provide insightful discussions of the law that may support a taxpayer’s case. By statute, summary opinions are not precedential, however, the Tax Court does not prohibit the citation of this type of opinion and has noted that it may give consideration to the reasoning and conclusions in a summary opinion to the extent they are persuasive. Thus, in the absence of a T.C. opinion or memo opinion supporting a taxpayer’s position or addressing the issue presented, taxpayers may want to consider citing to a favorable summary opinion.

Finally, the Tax Court issues dozens of orders, some of which involve the discussion of substantive issues that may [...]

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Omitted Subpart F and GILTI Income May Be a Statute of Limitations Trap for the Unwary

by Kevin Spencer and McDermott Will & Emery | Dec 17, 2021 | IRS Guidance, Tax Reform

Taxpayers large and small desire closure with respect to tax reporting positions. This can occur in several ways, one of which is the closing of the limitations period for assessing additional tax. In this article published in the November-December 2021 issue of the International Tax Journal, McDermott Partners Andrew R. Roberson and Kevin Spencer discuss recent Internal Revenue Service (IRS) guidance relating to the limitations period for omitted Subpart F income.

Access the article.

An Overview of IRS Organization and Operations

by Kevin Spencer and McDermott Will & Emery | Dec 16, 2021 | IRS Guidance

McDermott’s Federal Tax Controversy Practice Group focuses on representing taxpayers in tax disputes with the Internal Revenue Service (IRS) in IRS examinations and IRS administrative appeals as well as litigation in federal trial and appellate courts. In resolving such disputes, it is helpful for taxpayers (and tax practitioners) to understand how the IRS operates as an organization in addition to its chain of command. To that end, below, we set forth some basic information regarding the organization and operations of the IRS.

Many of our clients are audited by the IRS’s Large Business & International (LB&I) division. On our Resources page, we added an LB&I Resources document that details its organization, including the roles and responsibilities of an LB&I examination team.

OVERVIEW OF THE IRS’S ORGANIZATION AND OPERATIONS

The IRS is organized to carry out the responsibilities of the US Secretary of the Treasury under Internal Revenue Code Section 7801. The Secretary has the authority to administer and enforce the internal revenue laws and the power to create an agency to enforce said laws. The IRS was created based on this grant of authority. The IRS Commissioner administers and supervises the execution and application of the internal revenue laws.

The IRS is organized into two primary organizations—the Deputy Commissioner for Services and Enforcement (DCSE) and the Deputy Commissioner for Operations Support (DCOS).

DCSE oversees the following operating divisions:

Wage and Investment (W&I)
Small Business/Self-Employed (SB/SE)
Large Business and International (LB&I)
Tax Exempt and Government Entities (TE/GE)
Criminal Investigation (CI)
Office of Professional Responsibility (OPR)
Whistleblower Office
Return Preparer Office (RPO)
Online Services

DCOS oversees the following integrated support functions:

Information Technology (IT)
Chief Financial Office (CFO)
Facilities Management and Security Services (FMSS)
Human Capital Office (HCO)
Private, Government Liaison and Disclosure (PGLD)
Equity, Diversity and Inclusion (EDI)
Office of the Chief Risk Office (CRO)
Procurement
Research Applied Analytics and Statistics (RAAS)

Certain key functions report directly to the IRS Commissioner. Those include:

Chief Counsel (Counsel)
Communications and Liaison (C&L)
IRS Independent Office of Appeals (Appeals)
National Taxpayer Advocate

Practice Point: IRS examinations are a fact of life, especially for large corporate taxpayers. The above overview and the LB&I Resources guide provide more information on how the IRS is organized and operated. The more taxpayers and tax practitioners know, the better the odds of a smooth and efficient examination process.

Tax Court Orders Are Searchable (Again)

by Kevin Spencer and McDermott Will & Emery | Dec 15, 2021 | Trial Courts

In late 2020, the US Tax Court transitioned to a new case management system, DAWSON (Docket Access Within a Secure Online Network), which was named after the late Judge Howard A. Dawson, Jr.. We previously discussed DAWSON here and here.

Over the past year, the Tax Court has made improvements to DAWSON in order to provide better access to taxpayers and their representatives. One of the helpful features of the old case management system was the ability to search Orders, however, that feature was not present in DAWSON—until now.

On December 14, 2021, the Tax Court announced that the Order search feature is once again available to the public. In addition to searching for Orders by case name or docket number, the public can also search by keyword or phrase, by judge or by date range. The Tax Court’s DAWSON Release Notes page provides the following additional information:

Implemented Order search for public users
- Includes keyword and phrase search
- Includes ability to find exact matches with “” (quotation marks) ex: “innocent spouse”
- Includes ability to combine two or more keywords or phrases with the + (plus sign) ex: “collection due process” + remand
- Includes ability to find documents with one or more keywords or phrases with the | (pipe character) ex: Lien | levy [Note: this search will return documents that contain the words “lien” or “levy”]
- Includes ability to filter by date, judge, case title, petitioner name, or docket number
Petitions and other documents with form fields now upload correctly for all browsers.

Similar guidance concerning searching for documents is also available on the Tax Court’s website. The Tax Court also updated its Public Guide, Self-Represented (Pro Se) Petitioner Guide and Practitioner Guide for DAWSON. The Public Guide indicates that the ability to search court opinions in DAWSON is coming soon. Additionally, cases that migrated from the prior case management system appear as sealed in DAWSON if there were any sealed documents in the case. It remains to be seen whether unsealed Orders in such cases will be searchable in the future.

The Tax Court’s announcement does not indicate how far back the public can go to search for Orders. Using the Order search function and restricting the date range, the earliest Order we were able to find dates back to May 22, 1980. Based on entering different date ranges, it appears that certain Orders are available back to this date but not all Orders dating back to May 22, 1980, are available. This is not surprising given that Tax Court records are sent offsite to storage after a set period of time. Regardless, the ability to search for Orders back to 1980, at least for those Orders that are available on the website, is an improvement over the prior Order search feature, which [...]

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Weekly IRS Roundup December 6 – December 10, 2021

by McDermott Will & Emery | Dec 13, 2021 | 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 6, 2021 – December 10, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 6, 2021: The IRS published updated guidance on requesting estate tax closing letters and transcript request procedures.

December 6, 2021: The US Treasury Inspector General for Tax Administration (TIGTA) released a semiannual report to US Congress, summarizing the accomplishments of the TIGTA from April 1, 2021, through September 30, 2021. The TIGTA’s Office of Audit completed 52 audits, and its Office of Investigations completed 1,430 investigations. Its combined audit and investigative efforts resulted in the recovery, protection and identification of monetary benefits totaling more than $9 billion.

December 6, 2021: The IRS issued guidance for employers regarding the retroactive termination of the Employee Retention Credit. The Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, amended the law so that the Employee Retention Credit applies only to wages paid before October 1, 2021 (unless the employer is a recovery startup business).

December 7, 2021: The IRS published a news release encouraging taxpayers to take important actions this month to help them file their federal tax returns in 2022, including special steps related to Economic Impact Payments and advance Child Tax Credit payments. A special page, updated and available on IRS.gov, outlines the steps taxpayers can take now to make tax filing easier next year.

December 7, 2021: The IRS published frequently asked questions (FAQs), providing guidance on what certain pass-through businesses should do in the absence of updated forms for the 2021 tax year. The tax year 2021 forms, to which Schedules K-2 and K-3 must be attached, have not yet been finalized. The FAQs address questions concerning whether Schedules K-2 and K-3 must be attached to tax year 2020 forms for partnerships or S corporations with 2021 short tax years or, in the case of Form 8865, filers of Form 8865 with 2021 short tax years.

December 7, 2021: The IRS published a memorandum providing interim guidance for in-person conference procedures. The guidance provides that the IRS Independent Office of Appeals (IRS Appeals) will use its best efforts to schedule the in-person conference at a location that is reasonably convenient for both the taxpayer and the IRS Appeals. This guidance does not modify any temporary procedures in place due to COVID-19.

December 8, 2021: The IRS released guidance for IRS Appeals employees working Tax-Exempt/Government Entities (TE/GE)-sourced cases. For TE/GE-sourced cases in which a taxpayer or representative raises a new issue, provides new information or advances a new theory or an alternative legal argument to the IRS Appeals, the IRS Appeals employee is required to follow the instructions provided by the IRS.

December 10, 2021: The [...]

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Weekly IRS Roundup November 29 – December 3, 2021

by McDermott Will & Emery | Dec 6, 2021 | Appellate Courts, 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 29, 2021 – December 3, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

November 29, 2021: The IRS published a news release warning taxpayers and tax professionals to beware of a dangerous combination of events that can increase their exposure to tax scams and identity theft. The IRS stated that the holiday shopping season, the upcoming tax season and the pandemic all create additional opportunities for criminals to steal sensitive personal or finance information.

November 30, 2021: The IRS issued Revenue Procedure 2021-53, which provides temporary guidance regarding the treatment of certain stock distributions by publicly offered real estate investment trusts and publicly offered regulated investment companies in recognition of the need for liquidity as a result of COVID-19. The guidance reduces the minimum required aggregate amount of cash that distributee shareholders may receive to no less than 10% of the total distribution in order for Section 301 (by reason of Section 305(b)) to apply to such distribution.

November 30, 2021: The IRS published a news release warning taxpayers to be wary of fake charities used by scammers to trick unsuspecting donors into providing money and sensitive financial and personal information.

November 30, 2021: The IRS posted an issue snapshot concerning issue indicators and audit tips for public and tax-exempt employer contributions to eligible deferred compensation plans (as defined in Section 457(b)).

December 1, 2021: The US Competent Authority posted the arrangement between Competent Authorities of the United States and Turkey, setting forth parameters on the exchange of county-by-country reporting agreements to combat transfer pricing, base erosion and profit shifting-related risks.

December 1, 2021: The IRS published a news release reminding taxpayers they can get extra protection starting in January by joining its Identity Protection Personal Identification Number (IP PIN) program. Anyone who can verify their identity can protect themselves against tax-related identity theft by opting into the program.

December 2, 2021: The IRS published a news release warning tax professionals that they face additional security risks from cybercriminals seeking to use the pandemic and phishing scams to steal sensitive client information.

December 2, 2021: The IRS recommended nonacquiescence in Mayo Clinic v. United States, 997 F.3d 789 (8th Cir. May 13, 2021), rev’g 412 F. Supp. 3d 1038 (D. Minn. 2019), where the appeals court invalidated Treasury Regulations Section 1.170A-9(c)(1)’s requirement that the primary function of an educational organization described in Section 170(b)(1)(A)(ii) be the presentation of formal instruction. For more background, see our recent post.

December 2, 2021: The IRS published a news release reminding tax professionals and taxpayers that they can use digital signatures on a variety of common IRS forms and access a [...]

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Weekly IRS Roundup November 22 – November 26, 2021

by McDermott Will & Emery | Nov 29, 2021 | 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 22, 2021 – November 26, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

November 22, 2021: The IRS released a memorandum concerning a temporary deviation from the handwritten signature requirement for certain tax forms. To alleviate COVID-19 concerns while promoting timely filing, the IRS will allow taxpayers and representatives to use electronic or digital signatures when signing listed forms that currently require a handwritten signature. No specific technology is required to create the signature. The IRS has listed the eligible forms, which must be postmarked on August 28, 2020, or later.

November 22, 2021: The IRS released a memorandum extending through October 31, 2023, temporary deviations that allow IRS employees to: (1) accept images of signatures and digital signatures on documents related to the determination or collection of tax liability and (2) send or receive documents to or from taxpayers using emails with encrypted attachments when no other approved electronic alternative is available.

November 22, 2021: The IRS released a memorandum providing guidance concerning employee retention credits and the deferral of paying social security taxes in 2020.

November 23, 2021: The IRS published a news release announcing the launch of a new Spanish-language version of the Child Tax Credit Update Portal (CTC-UP). Families who are already receiving monthly payments use the CTC-UP to update their accounts. Now, all the features that have only been available in English are also available in Spanish.

November 26, 2021: The IRS published a notice and request for comments on Form 944, Employer’s Annual Employment Tax Return, and Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund, which are used in part to ensure the smallest non-agricultural and non-household employers are paying the correct amount of social security tax, Medicare tax and withheld federal income tax. Comments are due on or before January 25, 2022.

November 26, 2021: The IRS published a notice and request for comments concerning TD 8857 (addressing the determination of underwriting income by non-life insurance companies), which allows a non-life insurance company to increase unpaid losses on a yearly basis by the amount of estimated salvage recoverable if the company discloses this to the state insurance regulatory authority. Comments are due on or before January 28, 2022.

November 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 Robbie Alipour in our Chicago office for this week’s roundup.

Weekly IRS Roundup November 15 – November 19, 2021

by McDermott Will & Emery | Nov 24, 2021 | 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 15, 2021 – November 19, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

November 15, 2021: The IRS published a news release announcing the launch of a new online tool designed to help US withholding agents comply with their reporting and withholding responsibilities with respect to IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The tool performs a quality review of data before submitting to the IRS. Use of the tool does not change a withholding agent’s obligations to file Form 1042-S with the IRS and furnish a copy to the payee.

November 15, 2021: The IRS published a news release announcing that victims of wildfires that began July 14, 2021, now have until January 3, 2022, to file various individual and business tax returns and make tax payments.

November 16, 2021: The IRS published a news release announcing that, effective November 15, 2021, tax professionals are able to order up to 30 Transcript Delivery System transcripts per client through the Practitioner Priority Service line. This is an increase from the previous 10 transcripts per client limit.

November 16, 2021: The IRS published a news release regarding Notice 2021-63, which details how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules of Revenue Procedure 2019-48 when using per diem rates.

November 17, 2021: The IRS published a news release announcing that victims of Hurricane Ida throughout Mississippi now have additional time—until January 3, 2022—to file various individual and business tax returns and make tax payments.

November 17, 2021: The Internal Revenue Service Advisory Council (IRSAC) published a news release announcing its annual report for 2021, which includes recommendations to the IRS regarding new and continuing issues in tax administration. The 2021 report includes recommendations on 24 issues, covering a broad range of topics. The IRSAC is a federal advisory committee that provides an organized public forum for the discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members offer constructive observations regarding current or proposed IRS policies, programs and procedures.

November 17, 2021: The IRS published a news release announcing it unveiled a new how-to video series enabling taxpayers to avoid potential scams by considering and applying for an Offer in Compromise themselves and to avoid paying excessive fees to companies advertising outlandish claims.

November 17, 2021: The IRS published a news release announcing the launch of an improved identity verification and sign-in process that enables more people to securely access IRS online tools and applications.

November 17, 2021: The IRS’s National Taxpayer Advocate published a blog post indicating that US Congress [...]

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