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Weekly IRS Roundup April 19 – April 23, 2021

by | Apr 26, 2021 | , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 19, 2021 – April 23, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 19, 2021: The IRS issued a news release announcing the establishment of a new office, the IRS Office of Promoter Investigations (OPI), which will address promoters of abusive tax avoidance transactions, such as certain syndicated conservation easements and micro-captive insurance arrangements.

April 20, 2021: The IRS issued a news release reminding taxpayers of common filing errors that could delay the processing of returns and refunds.

April 21, 2021: The IRS issued a fact sheet and an accompanying news release, providing details about small business tax credits available under the American Rescue Plan Act of 2021 (ARPA), including credits for the cost of providing leave for employees who are unable to work because of COVID-19 and credits for the cost of providing leave for employees to receive, or recover from, COVID-19 vaccinations.

April 22, 2021: The IRS issued Revenue Procedure 2021-20 and an accompanying news release, providing a safe harbor for certain businesses that received COVID-related Paycheck Protection Program loans and did not deduct the associated expenses for the 2020 taxable year. In response to recent legislation permitting the deduction of such expenses, the Revenue Procedure provides that such businesses may deduct such expenses for the 2021 taxable year in lieu of filing an amended return for the 2020 taxable year.

April 22, 2021: The IRS issued Revenue Procedure 2021-21, waiving the residence requirements to qualify for benefits under section 911 of the Code for the 2020 taxable year, with respect to certain individual taxpayers who departed from Iraq after March 25, 2020.

April 22, 2021: The IRS issued a news release announcing a sixth round of Economic Impact Payments consisting of nearly two million payments totaling nearly $3.4 billion, bringing the total amount of disbursements under ARPA to approximately 161 million payments worth more than $379 billion.

April 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 Le Chen in our Washington, DC, office for this week’s roundup.



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IRS Extends Use of Digital Signatures for Certain Forms until End of 2021

by , and | Apr 23, 2021 |

The list of Internal Revenue Service (IRS) forms that can be digitally signed continues to grow. On August 28, 2020, the IRS issued a memorandum indicating that it would accept the use of digital signatures on various IRS forms because of the restrictions involved with the COVID-19 pandemic. In September 2020, it announced the addition of several more forms. Then, on April 15, 2021, the IRS announced it is extending the authorization to a large number of IRS forms until December 31, 2021. The IRS has not specified which digital signature product tax professionals must use but has advised that there are several commercial products available.

The current list of IRS forms that can be digitally signed are:

  • Form 11-C, Occupational Tax and Registration Return for Wagering
  • Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit
  • Form 637, Application for Registration (for Certain Excise Tax Activities)
  • Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return
  • Form 706-A, U.S. Additional Estate Tax Return
  • Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions
  • Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust
  • Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations
  • Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts
  • Form 706, Schedule R-1, Generation-Skipping Transfer Tax
  • Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return
  • Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return
  • Form 730, Monthly Tax Return for Wagers
  • Form 1120-C, U.S. Income Tax Return for Cooperative Associations
  • Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation
  • Form 1120-H, U.S. Income Tax Return for Homeowners Associations
  • Form 1120-IC DISC, Interest Charge Domestic International Sales — Corporation Return
  • Form 1120-L, U.S. Life Insurance Company Income Tax Return
  • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons
  • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return
  • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts
  • Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies
  • Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B)
  • Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship
  • Form 1128, Application to Adopt, Change or Retain a Tax Year
  • Form 2678, Employer/Payer Appointment of Agent
  • Form 3115, Application for Change in Accounting Method
  • Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts
  • Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner
  • Form 4421, Declaration — Executor’s Commissions and Attorney’s Fees
  • Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes
  • Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues
  • Form 8038-G, Information Return for Tax-Exempt Governmental Bonds
  • Form 8038-GC; Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales
  • Form 8283, Noncash Charitable Contributions
  • Form 8453 series, Form 8878 series and Form 8879 series regarding IRS e-file Signature Authorization Forms
  • Form 8802, Application for U.S. [...]

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Finding John Doe: IRS Steps up Enforcement Efforts to Take the Anonymity Out of Virtual Currency

by | Apr 21, 2021 | , , ,

The Internal Revenue Service (IRS) is stepping up its virtual currency enforcement, and taxpayers who have engaged in a cryptocurrency transaction should immediately assess any potential tax implications as the IRS has recently issued two John Doe summonses to popular exchanges. These are the first it has issued in about three years, sending a very clear signal that the IRS is ready to tackle what it believes to be a continuing noncompliance. A US Federal District Court in Massachusetts upheld the summons issued to Circle Internet Financial Inc., including the popular cryptocurrency exchange Poloniex, while a US Federal Court for the Northern District of California required the government to submit a response explaining its need for the information requested in its summons to Kraken. (See: In re Tax Liability of John Does, No. 21-cv-2201, ECF No. 8 (N.D. Cal. Mar. 31, 2021)).

Filed on April 14, 2021, the government’s response provided numerous examples of how the data received in the Coinbase summons required additional requests in order for the exchange to locate actual taxpayers. The response argued that the need for multiple follow-ups defeated the purpose of the summons. It also described how information in Kraken’s possession, such as accountholder telephone numbers and email addresses, will facilitate the IRS’s ability to utilize relevant cryptocurrency platform data in its possession that was received from other sources relating to foreign-based cryptocurrency exchanges. Noting the potential for abuse by an accountholder, the response provided an example of an individual falsifying their identity as the basis for its need for complete account history in order to catch these issues. In addition, the response stated, “[m]atching the IP addresses for Kraken users to IP addresses and other data points in the IRS’s information will allow the IRS to link substantive account information from multiple sources for a single individual taxpayer and make a more accurate initial determination of whether that individual is in compliance with the internal revenue laws.”

It remains to be seen how the court will react to the government’s response. What is clear, though, from the response and the accompanying affidavit is that the IRS has made significant progress in its analysis of this data and its ability to follow leads. As a result, now is the time for individuals involved in these transactions to consult a tax professional to determine if they have any tax liability or potential exposure, including criminal exposure. After the Coinbase summons, the IRS issued 10,000 letters to taxpayers regarding virtual currency transactions. In the wake of these summonses, and potentially others, it is only a matter of time before the IRS reaches out to thousands of other taxpayers.

It is also clear that the enforcement arm of the IRS is working very closely with its counterparts around the world. The need for email addresses and phone numbers mentioned above to use foreign data certainly drives this point home. Even more so, as a precursor of things to [...]

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Weekly IRS Roundup April 12 – April 16, 2021

by | Apr 19, 2021 | ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 12, 2021 – April 16, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 12, 2021: The IRS issued proposed regulations setting forth requirements that certain foreign taxpayers must meet in order to obtain the benefits of investing in a qualified opportunity fund (QOF) under section 1400Z-2 of the Code. The proposed regulations also expand the flexibility of a disaster-related working capital safe harbor in the existing QOF regulations.

April 13, 2021: The IRS issued Notice 2021-24, extending previously announced relief from penalties for failure to make timely deposits of employment taxes. The Notice extends relief to apply to deposits reduced in anticipation of certain employment tax credits with respect to qualified leave wages and Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage premiums during 2021.

April 13, 2021: The IRS issued Notice 2021-27, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

April 13, 2021: The IRS issued a news release urging low and moderate income taxpayers to use IRS Free File to prepare and electronically file their tax returns.

April 14, 2021: The IRS issued Notice 2021-28, inviting the public to submit recommendations for items to be included on the 2021-2022 Priority Guidance Plan.

April 14, 2021: The IRS issued a news release announcing a fifth round of Economic Impact Payments consisting of over two million payments totaling over $3.4 billion, bringing the total amount of disbursements under the American Rescue Plan of 2021 to approximately 159 million payments worth more than $376 billion.

April 15, 2021: The IRS issued Revenue Ruling 2021-08, providing various prescribed interest rates for federal income tax purposes for May 2021.

April 15, 2021: The IRS issued a news release emphasizing that individuals experiencing homelessness may still qualify for tax benefits such as Economic Impact Payments and urged community groups and employers to share information and help such individuals file tax returns so that they can obtain such benefits.

April 16, 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 Le Chen in our Washington, DC, office for this week’s roundup.



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Weekly IRS Roundup April 5 – April 9, 2021

by | Apr 13, 2021 | , ,

Presented below is our summary of significant Internal Revenue Serve (IRS) guidance and relevant tax matters for the week of April 5, 2021 – April 9, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

April 5, 2021: The IRS issued a news release announcing that it is mailing letters to certain taxpayers who claimed the 2020 Recovery Rebate Credit, explaining why they may be getting a different amount than expected.

April 5, 2021: The IRS issued a news release estimating that more than $1.3 billion of unclaimed income tax refunds are available to the estimated 1.3 million taxpayers who did not file a 2017 Form 1040 and reminding such taxpayers to file their 2017 returns before the May 17, 2021, deadline for claiming refunds.

April 7, 2021: The IRS issued a news release announcing a fourth round of Economic Impact Payments consisting of over 25 million payments totaling over $36 billion, bringing the total amount of disbursements under the American Rescue Plan of 2021 (ARPA) to more than 156 million payments worth approximately $372 billion.

April 8, 2021: The IRS issued Notice 2021-25 and an accompanying news release, providing guidance on the application of section 274(n)(2)(D) of the Code, a provision added by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 which provides for a temporary 100% deduction for food and beverages provided by a restaurant.

April 8, 2021: The IRS issued a news release reminding taxpayers who make estimated tax payments that the due date for the first estimated tax installment remains April 15, 2021.

April 8, 2021: The IRS issued a news release announcing various internal executive changes, including the appointment of Douglas O’Donnell as IRS Deputy Commissioner, Services and Enforcement, and Nikole Flax as Commissioner of the Large Business and International Division.

April 8, 2021: The IRS issued a news release reminding residents of US territories that, pursuant to recent legislation, they may be eligible to exclude up to $10,200 per person of unemployment compensation from gross income for the 2020 taxable year.

April 9, 2021: The IRS issued a news release announcing that, pursuant to ARPA, it was suspending the requirement that taxpayers repay excess advance payments of Premium Tax Credits.

April 9, 2021: The IRS issued a news release urging participants in abusive micro-captive insurance arrangements to exit the arrangements as soon as possible.

April 9, 2021: The IRS issued a news release reminding taxpayers that the deadline for filing the Report of Foreign Bank and Financial Accounts (FBAR) remains April 15, 2021.

April 9, 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 Le Chen in our Washington, DC, [...]

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IRS Issues Practice Unit on Section 965 Transition Tax

by and | Mar 24, 2021 | , ,

One of the most pressing audit issues for large taxpayers today centers on the Internal Revenue Code (Code) Section 965 transition tax. The Internal Revenue Service (IRS) has designated Code Section 965 as a campaign issue and is actively auditing taxpayers’ transition tax calculations and positions, along with other tax reform items. The stakes are high, particularly given the potential to pay this tax over a period of eight years.

On March 23, 2021, the IRS released a Practice Unit that provides an overview of the Code Section 965 transition tax with references to relevant resources. Unfortunately, unlike some other Practice Units, guidance is not provided as to the type of information revenue agents should be requesting from taxpayers.

Practice Point: Practice Units are presentation-type materials compiled by the IRS as a means for collaborating and sharing knowledge among IRS employees. They provide helpful guidance to revenue agents in the form of an overview of the law in a specific area, examination tips and guidance and references to relevant resources. Although the Code Section 965 transition tax Practice Unit does not provide insights into the types of questions and information that revenue agents may seek on audit, it is still useful for taxpayers to review to understand the IRS’s perspective in this area.



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Weekly IRS Roundup April 8 – 12, 2019

by | Apr 15, 2019 | , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 8 – 12, 2019.

April 8, 2019: The IRS issued a news release warning taxpayers against rushing to file their returns and recommending they file for an extension if needed.

April 9, 2019: The IRS issued a news release seeking volunteers for the taxpayer advocate panel. The application process is open through May 3, 2019.

April 10, 2019: The IRS issued corrections to final regulations (TD 9846) implementing Section 965 of the code.

April 11, 2019: The IRS released Revenue Procedure 2019-18 providing a safe harbor for professional sports teams when determining the value of player and staff-member contracts for the purpose of recognizing gain or loss on a trade, staff-member contract or draft pick.

April 11, 2019: The IRS issued corrections to proposed regulations (REG–104464–18) dealing with the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

April 12, 2019: The IRS issued a news release announcing 50 million people still needed to file their 2018 returns as the deadline approaches.

April 12, 2019:  IRS Commissioner Chuck Rettig released a message thanking taxpayers for filing their returns.

Special thanks to Terence McAllister in our New York office for this week’s roundup.



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The (Potential) Demise of Auer Deference?

by | Dec 12, 2018 | , ,

On December 10, 2018, the Supreme Court granted certiorari in the case of James L. Kisor v. Peter O’Rourke, Acting Secretary of Veteran Affairs, S.Ct. Dkt. No. 18-15. Although this is not a tax case, it has significant implications for taxpayers and tax practitioners. The reason: the Court will finally squarely address the issue of whether it should overrule its controversial opinions in Auer v. Robbins, 519 US 452 (1997) and Bowles v. Seminole Rock & Sand Co., 325 US 410 (1945). Those opinions held that an agency is uniquely positioned to interpret any ambiguity in its own regulations and, therefore, such interpretations should be afforded controlling deference so long as reasonable. The Court’s decision to grant certiorari in Kisor is significant because the sole question to be considered is “[w]hether the Court should overrule Auer and Seminole Rock” and not how to apply that doctrine.

In the tax context, the Internal Revenue Service (IRS) and the Department of Justice (DOJ) Tax Division have both argued that interpretations taken in unpublished guidance are eligible for Auer deference, even if such positions are articulated for the first time on brief in a pending case in which the agency is a party. Courts have not been uniform in their application of Auer. For example, the Tax Court has indicated that to receive deference the IRS’s position should be in published guidance while some courts have given deference to statements made on brief.

The death of Justice Scalia, who ironically wrote Auer but later advocated for its demise, seemed to strike a blow to those seeking to overrule it. However, with the recent additions of Justices Gorsuch and Kavanaugh, it appears that the Supreme Court many now have a majority of Justices in the anti-Auer camp given that Chief Justice Roberts and Justices Thomas and Alito have all expressed doubts about the doctrine in the past. Additionally, the continuing role of Chevron deference has been questioned and, if Auer is overruled, Chevron could be the next deference battleground.

We will continue to follow this case closely and provide updates in the future. In the meantime, the links below contain prior discussions on Auer and other forms of deference in the tax context.



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Weekly IRS Roundup November 19 – 23, 2018

by | Nov 26, 2018 | , ,

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of November 19 – 23, 2018:

November 19, 2018: The IRS in a news release reminds taxpayers that the non-recognition treatment for like-kind exchanges under Code Section 1031 is now limited to certain exchanges of real property.

November 19, 2018: The IRS issued the final regulations under Code Section 267A on allocating costs to certain property produced or acquired for resale by a taxpayer.

November 19, 2018: The IRS issued Revenue Procedure 2018-56, expanding the list of changes of methods of accounting for which the taxpayers may obtain automatic consent under the regulations of Code Section 267A.

November 20, 2018: The IRS issued a notice to request comments on Form W-8CE, Notice of Expatriation and Waiver of Treaty Benefits, which the taxpayers use to notify expatriating payers of information necessary to determine the proper tax treatment of their payments.

November 20, 2018: The IRS in IRS Tax Reform Tax Tip 2018-179 advises that certain taxpayers may benefit from converting an S corporation into a C corporation due to the new, 21 percent tax rate.

November 23, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Alex Cheng-Yi Lee in our DC office for this week’s roundup.



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Law360: A Look At Tax Code Section 199’s Last Stand

by and | Nov 7, 2018 | , , , , , ,

Andy Roberson, Kevin Spencer and Emily Mussio recently authored an article for Law360 entitled, “A Look At Tax Code Section 199’s Last Stand.” The article discusses the IRS’s contentious history in handling Code Section 199 and the taxpayers’ continued battle to claim the benefit – even after its recent repeal.

Access the full article.

Originally published in Law360, November 2018.



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