Given the size and complexity of today’s tax code, avoiding disputes with the IRS can be difficult. Even a carefully run business can inadvertently run afoul of a new rule, a revised procedure, or updated guidance.
In recent years, however, some taxpayers dealing with IRS notices or enforcement actions have begun to use the complexity of federal law in their own defense, claiming the IRS itself failed to follow proper procedures when drafting regulations. In several cases, federal courts have agreed with the taxpayers, calling into question the validity of a growing number of IRS rules.
Although these cases involve a variety of tax issues, they have a common element: the taxpayers successfully sued the IRS for violating the Administrative Procedure Act (APA), a 1940s-era law designed to spell out acceptable rulemaking processes for the many new executive branch agencies that were created during the New Deal and World War II. (more…)
Since the IRS first introduced them for the 2021 tax year, Schedules K-2 and K-3 have caused concerns—and confusion—for many partnerships and S corporations. The purpose of the two schedules is to report information related to foreign financial activities, but some pass-through entities found themselves subject to the forms’ requirements—even though they had no foreign interests or concerns. (more…)
For investment businesses—including many private equity, venture capital, real estate, and hedge fund partnerships—new rules governing the taxation of “carried interest” have been a source of concern for several years. The Tax Cut and Jobs Act of 2017 changed the way such income is to be reported and taxed, but 2022 is the first year in which the final regulations implementing those changes take full effect. (more…)
The ability to deduct research and development (R&D) costs as a current business expense, rather than treat them as a capital asset that must be amortized over time, has helped many businesses over the years. By enabling companies to lower their income tax burden, this tax treatment encouraged valuable research and technological innovation. (more…)
Many businesses form wholly owned captive insurance companies for legitimate risk management purposes and to take advantage of potential tax savings. Unfortunately, some promoters of so-called “microcaptive” schemes have run afoul of the IRS by helping businesses set up captive insurers solely to evade federal income taxes.
If your business is considering forming a microcaptive insurance company to reduce its tax burden, you should consult with a qualified, objective tax professional before taking any action. The penalties for illegal tax-avoidance schemes can be severe, and the IRS has been quite successful in pursuing such cases in recent years. (more…)
In early August 2022, a reduced version of the Biden Administration’s tax reform, climate change, green energy, and social policy agenda was passed by both the House and Senate. On August 16, 2022, President Biden signed the $750 billion Inflation Reduction Act of 2022 into law. The numerous changes will require significant guidance from multiple federal agencies to implement. With one exception, the Act’s provisions will be effective beginning January 1, 2023. We have summarized some of the key provisions below, and as guidance is released, will continue to keep you updated on how the Inflation Reduction Act may affect you or your business. (more…)
If your company is among the millions of businesses that still file paper versions of tax information returns such as Form W-2 and the various types of Form 1099, proposed new regulations from the IRS could soon affect you. The agency has proposed new regulations that would greatly expand the number of employers who are required to file these documents electronically rather than on paper.
The new rules are still subject to revision and the IRS has not yet officially announced when they will take effect. When they were first unveiled, however, the agency said it wanted to implement them by the end of this year. Companies that are still filing paper W-2s and 1099s should consider transitioning soon. (more…)
The state’s popular California Competes Tax Credit program continues to be available during the 2022-2023 fiscal year. The state has allocated approximately $304 million in California Competes Tax Credits and a total of $120 million in California Competes Grant funding. (more…)
With unemployment at its lowest level in decades, many businesses are struggling to retain employees and fill vacancies. An attractive retirement or profit-sharing plan can help meet this challenge while also reducing a company’s tax liability. It can also help company owners accumulate wealth for their own retirement. (more…)
