Before going on holiday break, the United States House of Representatives passed HR 5119, the Protect Small Business and Prevent Illicit Financial Activity Act, by a vote of 420-1.

The bill can be found at https://www.congress.gov/bill/118th-congress/house-bill/5119/text.

In 2021, the Infrastructure Investment and Jobs Act led to the addition the law of IRC §7451(b) by Congress. This provision was first examined in the Tax Court during the case of Sall v. Commissioner, 161 T.C. No. 13.[1]  The case presented an opportunity for an in-depth analysis of the application of this newly added section.

In Private Letter Ruling (PLR) 202348007,[1] the IRS denied a taxpayer’s petition for an extension of time to submit a request for a change in accounting method.

The potentially pivotal role of the phrase “as such” in determining whether state law limited partners are automatically exempt from recognizing self-employment income from the partnership was underscored in Soroban Capital Partners LP et al. v. Commissioner, 161 TC No. 12.[1]

The Financial Crimes Enforcement Network (FinCEN), in coordination with the IRS Criminal Investigation Division (CI), has issued an alert[1] to financial institutions concerning fraud schemes associated with the Employee Retention Credit (ERC). This alert includes a list of 10 red flags for financial institutions to identify, prevent, and report suspicious transactions that may indicate ERC fraud.

The IRS has once more postponed the implementation date for the expanded reporting requirements on Form 1099-K, as announced in Notice 2023-74.[1] Previously, the IRS had deferred the effective date of Internal Revenue Code (IRC) §6050W(e), which was initially set to commence in 2022, extending it to 2023.

Additionally, in Fact Sheet 2023-27,[2] the IRS indicated plans to implement a threshold of $5,000 for 2024 as part of phasing in the new law, though this planned threshold was not mentioned in the Notice.

The Internal Revenue Service (IRS) has provided clarifications of its position on a widely promulgated theory by numerous Employee Retention Credit (ERC) consultants, which has implications for a significant cohort of employers claiming eligibility for the ERC. This clarification pertains to interpretations of guidance issued by the Occupational Safety and Health Administration (OSHA), as detailed in the IRS General Legal Advice Memorandum (GLAM) AM-2023-007.[1]

Although the General Legal Advice Memorandum (GLAM) does not constitute official guidance that binds the IRS, taxpayers, or the judiciary, it offers employers valuable perspective on the probable stances IRS agents may adopt in response to claims predicated on the OSHA directives outlined within the memorandum.

The estate of actor James Caan contended that he had accurately rolled over the entire balance of an IRA from UBS to Merrill Lynch. The IRS largely concurred with this stance, save for the transfer of an interest in a non-publicly traded hedge fund. This asset encountered numerous challenges during its transfer from UBS to Merrill Lynch. Ultimately, the hedge fund interest was liquidated, and the proceeds were transferred to Merrill Lynch—nearly a year after UBS reported the fund’s distribution to Mr. Caan.

In Estate of Caan v. Commissioner,[1] the estate posited two potential explanations: either UBS never actually disbursed the hedge fund from the IRA, or the IRS unjustly declined to grant late rollover relief through a private letter ruling request. The Tax Court did not concur with either proposition. It determined that UBS had indeed disbursed the amount in 2015. Moreover, the IRS’s denial of relief was deemed appropriate since the exact asset distributed from the UBS IRA was not the one transferred to the new Merrill Lynch IRA, thus contravening the stipulations of IRC §408(d)(3)(A)(i).

The Internal Revenue Service (IRS) has provided details about its program allowing employers to voluntarily withdraw their refund claims for the Employee Retention Tax Credit (ERC). This provision applies to those who have not yet received the refund or, if received, have not cashed the check.[1]

The Financial Crimes Enforcement Network (FinCEN) has issued a proposed rule[1] extending the deadline for covered entities formed in 2024 to file their initial beneficial ownership information reports under the Corporate Transparency Act. The new deadline is 90 days after formation, an increase from the previous 30-day requirement.

Concurrently, the agency issued a news release[2] detailing the new proposed rule.

The Financial Crimes Enforcement Network (FinCEN) has published a 56-page Small Entity Compliance Guide[1] to aid small businesses in adhering to the beneficial ownership information reporting requirements introduced by the Corporate Transparency Act (31 U.S.C. 5336).

Once again, a taxpayer has learned the critical importance of securing evidence that adheres to the regulations set forth in IRC §7502. In the case of Wrhel v. United States, No. 3:21-cv-00424, U.S. District Court for the Western District of Wisconsin,[1] the IRS contended that the taxpayer's 2016 return was not filed within the requisite time frame, thereby disqualifying him from receiving a refund for an overpayment of taxes for that year.

In Program Manager Technical Advice 2023-003,[1] the IRS discussed scenarios in which a payor receives a CP2100/2100A notice concerning identification numbers. The memorandum explores whether the payor is liable for backup withholding amounts that were not withheld prior to receiving the notice, under two different circumstances, assuming the payor promptly obtains the proper ID number from the vendor.

The IRS announced a moratorium on processing new Employee Retention Credit (ERC) claims through the end of 2022, as specified in News Release IR-2023-169.[1] According to the IRS, the delay aims to protect honest small business owners from scams. Additionally, the agency has developed an ERC checklist[2] to assist employers in determining the legitimacy of the claims they are considering filing. An updated document highlighting red flags for ERC claims has also been made available in News Release IR-2023-170.[3]

In Johnson v. Commissioner,[1] the taxpayer conceded multiple errors on the returns in question but opted for litigation solely to contest the 20% accuracy-related penalty under IRC §6662(a). The taxpayer argued that the penalty was unwarranted due to their reasonable reliance on the advice of the CPA who prepared the returns, which led to the erroneous positions taken.

Unfortunately for the taxpayer, his extensive experience in the real estate industry, spanning over half a century, counted against him in court. The Court concluded that, had he reviewed the returns before filing, he should have identified most of these errors. Furthermore, he failed to demonstrate that the CPA had actually advised him on any of the disputed positions.

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.