Ending a prolonged wait for guidance on the revisions made to IRC §174 by the Tax Cuts and Jobs Act in 2017, which took effect in 2022, the IRS has released Notice 2023-63.[1] This Notice provides guidance related to the newly required amortization of research and experimentation costs.

The IRS issued a news release (IR-2023-157)[1] reminding most businesses that, starting January 1, 2024, they will be required to file Form 8300, “Reporting Cash Payments Over $10,000,” electronically with the Financial Crimes Enforcement Network (FinCEN). This requirement comes as final regulations[2] mandating the electronic filing of most information returns take effect.

In Chief Counsel Advice 202335014,[1] the IRS examined whether an Electing Small Business Trust (ESBT) can carry a net operating loss—attributable to net losses passed through from the S corporation—to a later year, or whether the loss simply goes unused indefinitely.

The IRS has issued Notice 2023-56,[1] providing guidance on state payments made in the 2023 tax year. This guidance addresses payments from various states to residents, paralleling similar payments made by certain states in 2022, which were previously covered in IRS News Release IR-2023-23.[2]

The IRS has released proposed regulations[1] to implement information reporting requirements for digital assets by brokers and certain other parties involved in arranging sales and/or exchanges of these assets. Originally introduced by the Infrastructure Investment and Jobs Act of 2021 and scheduled to take effect in 2023, the proposed regulations postpone the reporting obligations to cover transactions occurring in 2025. The IRS and customers will receive a newly announced Form 1099-DA in early 2026.

The IRS concurrently issued a news release[2] when the proposed regulations were published, providing a summary of the key points found in the regulations.

The IRS has published the cost-of-living adjustments for the 2024 premium tax credit in Revenue Procedure 2023-29.[1] While the applicable percentage table remains unchanged for 2024, owing to provisions in the American Rescue Plan Act that temporarily fix these values, the required contribution percentage continues to be adjusted for inflation annually.

One of the modifications introduced by the SECURE 2.0 Act was the stipulation that, starting in 2024, catch-up contributions to employer retirement plans for certain high-earning individuals must be made to designated Roth accounts within the retirement plan. Additionally, there was apprehension that this amendment might have unintentionally eliminated the option for individuals at all income levels to make such catch-up contributions. Notice 2023-62[1] from the IRS offers interim guidance and relief concerning these provisions.

Credit unions that meet the necessary criteria can claim the employee retention credit (ERC) for wages paid in 2021. However, they are ineligible for such claims for wages paid in 2020, as outlined in an IRS Chief Counsel Advice (CCA 202333001).[1]

Promoters of questionable tax schemes often distribute a “legal analysis” to potential victims. While these analyses might sound authoritative, they can sometimes resemble the output of ChatGPT in full hallucination mode. These analyses are typically designed to sound sufficiently authoritative to intimidate any tax professional who isn’t well-versed in the specific area of taxation being addressed.

In AM 2023-006,[1] the IRS targets a marketed trust tax structure. This structure aims to shelter nearly all income from assets transferred to the trust from federal income tax. The “legal analysis” supporting this program leans heavily on conflating the various forms of “income” associated with such trusts. It incorrectly treats distributable net income (DNI), taxable income, and accounting income as if they were synonymous concepts.

In Sinopoli v. Commissioner,[1] the taxpayers sought to leverage IRC 280A(g), a provision allowing individuals to rent out their personal residences for up to 14 days annually without declaring the income. The taxpayer's S corporation reported over $290,000 in rental expenses over a three-year span, purportedly for renting the shareholders' homes for monthly meetings. However, the Tax Court significantly curtailed the allowable deduction.

A taxpayer with property secured by a nonrecourse loan, who returns said property to the lender via foreclosure, deems the entire loan balance as the sales price for income tax purposes. This holds true even if the property’s fair market value is below the loan balance. But what happens when the lender consents to a payment less than the loan’s face value, facilitating a short sale by aligning with the buyer’s offer? Does this debt reduction equate to canceled debt income, or does it remain part of the sales price? Why does the distinction matter?

In the case of Parker v. Commissioner,[1] the Tax Court examined such a scenario. Their conclusion: the debt reduction should be recognized by the taxpayer as part of the sales price, not as canceled debt income.

Although the IRS has recently focused its cautionary statements on the employee retention tax credit, News Release IR-2023-144[1] saw the agency shift its focus to compliance concerns related to employee stock ownership plans (ESOPs).

When two provisions in the tax law produce conflicting outcomes, the Courts utilize specific rules of interpretation to ascertain which provision takes precedence. A fundamental principle is that a more specific provision will override the conclusion drawn from a broader one.

In the case of Hoops, LP v. Commissioner,[1] the court had to decide if the timing of a deduction for a deferred compensation transaction would be governed by a regulation under IRC §461 (allowing a deduction upon the sale of the partnership's business) or by IRC §404(a)(5) (which would postpone the deduction until the employees received and recognized their deferred compensation as income).

The IRS has proposed regulations (Prop. Reg. §1.6011-13[1]) that would add monetized installment sales as a listed transaction, subject to the reporting provisions found in the regulations under IRC §6011 and the penalty rules of IRC §6707A when such disclosure is not properly and timely made.

One of the credits introduced by the Inflation Reduction Act is a credit for obtaining a home energy audit on the taxpayer's principal residence. In Notice 2023-59,[1] the IRS announced its intention to issue regulations under this provision and provided interim guidance that taxpayers can rely on until such regulations are published.

At the same time, the IRS issued a news release, IR-2023-140,[2] explaining the guidance outlined in the notice.

In Revenue Ruling 2023-14[1], the IRS formalized its stance regarding an issue first raised by the taxpayers in the Jarrett[2] case. The agency clarified that cryptocurrency earned from staking constitutes taxable income under federal tax law.

Revenue Officers generally will longer make unannounced visits to taxpayers the IRS announced in News Release IR-2023-133.[1]

The release begins:

As part of a larger transformation effort, the Internal Revenue Service today announced a major policy change that will end most unannounced visits to taxpayers by agency revenue officers to reduce public confusion and enhance overall safety measures for taxpayers and employees.

The change reverses a decades-long practice by IRS revenue officers, the unarmed agency employees whose duties include visiting households and businesses to help taxpayers resolve their account balances by collecting unpaid taxes and unfiled tax returns. Effective immediately, unannounced visits will end except in a few unique circumstances and will be replaced with mailed letters to schedule meetings.[2]

In the case of Doggart v. Commissioner,[1] a taxpayer lodged a complaint, arguing that they couldn’t have taxable income for the year 2017 since they did not receive any cash during that period. However, the taxpayer will soon discover that this assumption does not necessarily hold true when dealing with a lapsed life insurance policy coupled with outstanding loans taken against the cash value of the policy.

The Oversight Subcommittee of the House Ways & Means Committee convened a hearing on July 27, 2023, to discuss “The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud.”[1] Although the agenda covered three topics, the focus and highlights of the hearing centered around the issue of fraud. Notably, Representative Beth Van Duyne (R-TX) played a key role during the session by sharing a voice mail she received that very morning from an individual claiming to be “Beth” and working for an Employee Retention Credit (ERC) mill. In the voice mail, the representative was informed that she was eligible to receive a payment of $26,000 for every W-2 employee she employs.

In the Generic Legal Advice Memorandum (AM 2023-05),[1] the IRS scrutinized some of the questionable supply chain-based justifications for claiming the employee retention credit. The memorandum emphasizes the necessity of documenting the specific government orders that the employer relied upon, demonstrating how these orders created challenges for the supplier. Moreover, it highlights the employer's inability to procure critical and necessary supplies due to these issues and how such circumstances resulted in a qualifying suspension of the employer's own business. By clarifying these requirements, the IRS aims to ensure more accurate and substantiated claims for the employee retention credit.