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IRS Statement on balance due notices (CP-14) 

The IRS is aware that some payments made for 2021 tax returns have not been correctly applied to joint taxpayer accounts, and these taxpayers are receiving erroneous balance due notices (CP-14 notices) or notices showing the incorrect amount.

Who is affected: Generally, these are payments made by the spouse (second taxpayer listed) on a married filing jointly return submitted through their Online Account. Some other taxpayers may also be affected outside of this group.

No immediate action or phone call needed: Taxpayers who receive a notice but paid the tax they owed in full and on time, electronically or by check, should not respond to the notice at this time. The IRS is researching the matter and will provide an update as soon as possible. Taxpayers who paid only part of the tax reported due on their 2021 joint return, should pay the remaining balance or follow instructions on the notice to enter into an installment agreement or request additional collection alternatives. Taxpayers can ensure that their payment is on their account by checking Online Account under the SSN that made the payment. Note that any assessed penalties and interest will be automatically adjusted when the payment(s) are applied correctly.

For additional information for tax professionals, click here.

 

Notice from Maryland Comptroller 

The Comptroller is considering requiring PTEs to make the election to be taxed at the entity level on the 510D with first estimated payment of a tax year beginning after December 31, 2022. The election will be irrevocable for that tax year. The election will be made yearly.

The policy/ procedure change is intended to provide clarity to the Comptroller and taxpayers, and to assist with the expeditious processing of year-end PTE returns.

The Comptroller is soliciting questions and concerns about this change in policy. The Comptroller also wishes to put practitioners on notice of this change for planning purposes.  Please submit questions and concerns to ksermon@marylandtaxes.gov.

TG 10-102.1(b)(2)(ii) permits a pass-through entity to elect to pay tax on all members’ share of income at the entity level. The election operates as a work-around to the federal SALT deduction cap.

Until now, the election has been made on the PTE’s year-end return for the year the return covers. The PTE has been able to make estimated payments, but has not had to decide to make the election until the tax year was over.

 

Security Summit Warns Tax Pros of Evolving Email and Cloud-Based Schemes to Steal Taxpayer Data | IR-2022-143

As part of a special Security Summit series, the IRS, state tax agencies, and the nation’s tax industry warn tax professionals to beware of evolving scams designed to steal client data.

The Security Summit partners continue to see instances where tax professionals have been vulnerable to identity theft phishing emails that pose as potential clients. The criminals then trick practitioners into opening email links or attachments that infect computer systems with the potential to steal client information.

The Summit also warns tax professionals using cloud-based systems to store and prepare tax returns and information to make sure they use multi-factor authentication in light of recent attacks. Specifically, the Summit partners urge people using cloud-based platforms to use multi-factor options like phone, text or tokens. This can avoid potential vulnerabilities with authentication done just through email, which is easier for identity thieves to access.

Continue reading here.

 

ABLE Accounts Can Help People With Disabilities Pay For Disability-Related Expenses | Tax Tip 2022-112

People with disabilities can use an Achieving a Better Life Experience or ABLE account to help pay qualified disability-related expenses. This tax-advantaged savings account doesn’t affect their eligibility for government assistance programs.

Here are some key things people should know about these accounts.

 

AICPA Solicits Feedback on CPA Exam Exposure Draft 

The American Institute of CPAs (AICPA) is soliciting feedback on the Exposure Draft of the new design of the Uniform CPA Examination® (CPA Exam). Developed through research and input from the profession, the Exposure Draft informs the content and scope of the CPA Exam expected to launch in January 2024. Stakeholders are asked to provide feedback through September 30, 2022.

This request for stakeholder input is the next step in the AICPA and National Association of State Boards of Accountancy (NASBA) joint CPA Evolution initiative, which is transforming the CPA licensure model to recognize the rapidly changing skills and competencies the accounting profession requires.

The Exposure Draft is the result of two years of research conducted through a Practice Analysis to align the CPA Exam to the CPA Evolution initiative. The Practice Analysis collected input about the work newly licensed CPAs are required to perform from various stakeholders who share an interest in preserving the strength and mission of the accounting profession.

The Exposure Draft includes the draft Uniform CPA Examination® Blueprints, which is the official document that presents content eligible for assessment on the Exam, based on the knowledge and skills required of a newly licensed CPA.

Continue reading here.

 

Semiconductor Manufacturing Tax Credit Passes House | via Wolters Kluwer IntelliConnect

A tax credit for semiconductor manufacturers is on its way to the White House for President Biden’s signature.

The CHIPS and Sciences Act of 2022 (H.R. 4346) passed in the House of Representatives by a 243-187 vote on July 28, 2022, after clearing the Senate a day earlier. No Democrats voted against the bill, although one did vote “present,” while 25 Republicans crossed the aisle to vote with the majority.

The bill includes what is being called the Advanced Manufacturing Investment Tax Credit. According to a summary document, the ITC “provides a 25 percent investment tax credit for investments in semiconductor manufacturing. The credit covers both manufacturing equipment as well as the construction of semiconductor manufacturing facilities.”

Also covered under the ITC are “incentives for the manufacturing of the specialized tooling equipment required in the semiconductor manufacturing process,” the summary states.

The document notes that when paired with the more than $54 billion in grants to semiconductor chip manufacturers, the ITC “would completely erase the 40 percent cost difference for leading-edge semiconductor production.”

By Gregory Twachtman, Washington News Editor

 

Schumer, Manchin Find Agreement On Corporate Minimum Tax, IRS Funding | via Wolters Kluwer IntelliConnect

Senate Majority Leader Charles Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.V.) reached agreement on a scaled back reconciliation bill that would, among other legislative actions, implement a corporate minimum tax of 15 percent and provide new funds to the Internal Revenue Service for compliance and enforcement activities.

Dubbed the Inflation Reduction Act of 2022 (H.R. 5376), Democratic leadership in the Senate state the bill would raise about $450 billion to cover its spending provisions. The newly negotiated bill is missing key provisions from the Build Back Better Act, which failed to move due to objections by Manchin, such as a targeted income tax on the wealthiest Americans, adjustments to the state and local tax deduction, and a continuation of monthly child tax credit payments.

According to a summary document of the tax proposals, the bill would set a corporate alternative minimum tax rate of 15 percent “on adjusted financial statement income for corporations with profits in excess of $1 billion.”

The bill would allow corporations “to claim net operating losses and tax credits against the AMT, and would be eligible to claim a tax credit against the regular corporate tax for AMT paid in prior years, to the extent the regular tax liability in any year exceeds 15 percent of the corporation’s adjust finance statement income.”

A separate overall bill summary document notes that the 15 percent corporate alternative minimum tax would raise $313 billion, citing estimates from the Joint Committee on Taxation.

Money For IRS Enforcement

The reconciliation bill also provides long-requested funds to the IRS to improve taxpayer compliance through an $80 billion investment over 10 years.

The breakdown of how the funds are to be allocated are $45.6 billion for enforcement; $25.3 billion for operations support; $4.8 billion for business modernization; and $3.2 billion for taxpayer services.

“By investing $80 billion over the next ten years for tax enforcement and compliance, the Congressional Budget Office estimates the IRS will collect $203 billion,” the tax summary document states.

Energy-Related Tax Credits

The Inflation Reduction Act also includes a number of tax credits related to energy policy.

According to the summary document of the energy policy provisions, the bill will provide 10 years of “consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC and water heaters more affordable.”

On the manufacturing side, there is a “$10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines and solar panels,” the energy policy summary document states. The bill also allocates an estimated $30 billion in production tax credits “to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing.”

Consumers also will be eligible for tax credits to purchase electric vehicles. This is a means-tested tax credit of up to $4,000 for the purchase of a used electric vehicle or up to $7,500 for the purchase of a new electric vehicle. It is aimed at low- and middle-income purchasers of electric vehicles.

Other tax credits will be available for clean sources of electricity and electricity storage, as well as tax credits for clean fuels and clean commercial vehicles; the reduction of emissions from industrial manufacturing processes; and in support of domestic production of biofuels.

No date has been set on when the upper chamber of Congress will consider the Inflation Reduction Act.

By Gregory Twachtman, Washington News Editor

 

Delaware—Personal Income Tax: Subtraction for Military Pension Income Increased | via Wolters Kluwer IntelliConnect

Delaware is increasing the subtraction adjustment for military pension income received by personal income taxpayers who are under the age of 60. Effective for tax years beginning on or after January 1, 2022, the subtraction from federal adjusted gross income increases from $2,000 to $12,500.

 

Looking for more CPE opportunities? The following Wolters Kluwer webinars are available to you at a special rate:

• Estate and Gift Taxation and Preparing Form 706 and 709 | August 2, 2022 | 10 a.m. – 6 p.m. | 8 CPE (Recommended) | $212
• Proving Material Participation for the Passive Loss Rules | August 3, 2022 | 12 – 2 p.m. | 2 CPE (Recommended) | $106
• How to Prepare for Your Upcoming AICPA Peer Review | August 5, 2022 | 3 – 5 p.m. | 2 CPE (Recommended) | $106

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The Comptroller is considering requiring PTEs to make the election to be taxed at the entity level on the 510D with first estimated payment of a tax year beginning after December 31, 2022. The election will be irrevocable for that tax year. The election will be made yearly.

 

The policy/ procedure change is intended to provide clarity to the Comptroller and taxpayers, and to assist with the expeditious processing of year-end PTE returns.

 

The Comptroller is soliciting questions and concerns about this change in policy. The Comptroller also wishes to put practitioners on notice of this change for planning purposes.  Please submit questions and concerns to ksermon@marylandtaxes.gov.

 

TG 10-102.1(b)(2)(ii) permits a pass-through entity to elect to pay tax on all members’ share of income at the entity level. The election operates as a work-around to the federal SALT deduction cap.

 

Until now, the election has been made on the PTE’s year-end return for the year the return covers. The PTE has been able to make estimated payments, but has not had to decide to make the election until the tax year was over.

 

 

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IRS Encourages Tax Professionals to Inform Clients About IP PIN Opt-In Program | IR-2022-140

The IRS and the Security Summit Partners have encouraged tax professionals to inform their clients about the IRS Identity Protection (IP) PIN Opt-In Program to help protect taxpayers against tax related identity theft. The IP PIN Opt-In Program has been made available to all individuals capable of verifying their identity. The IRS has also highlighted key information that taxpayers need to know about the IP PIN Opt-In Program, namely:

• It’s a six-digit number known only to the taxpayer and the IRS;
• The Opt-In Program is voluntary;
• The IP PIN should be entered onto the electronic tax return when prompted by the software product or onto a paper return next to the signature line;
• The IP PIN is valid for one calendar year. Taxpayers must obtain a new IP PIN each year;
• Only taxpayers who can verify their identities may obtain an IP PIN; and
• IP PIN users should never share their number with anyone but the IRS and their trusted tax preparation provider. The IRS will never call, email or text a request for the IP PIN.

Further, if taxpayers are unable to validate their identity and their income is less than $ 72,000, they can file Form 15227, Application for an Identity Protection Personal Identification Number, upon which the IRS will attempt to verify their identities over a telephonic call and assign them an IP PIN for next filing season. Additionally, taxpayers can also get their identity verified by making an appointment with Taxpayer Assistance Center and carry necessary identification documents with them. The IP PIN process for confirmed victims of identity theft remains unchanged. These victims will automatically receive an IP PIN each year.

 

What Businesses Need to Know About Reporting Nonemployee Compensation and Backup Withholding to the IRS | IRS Tax Tip 2022-109

When a business hires an independent contractor, the employer is generally not responsible for withholding income taxes, Social Security, or Medicare taxes from their compensation. However, by law, business taxpayers who pay nonemployee compensation of $600 or more must report these payments to the IRS. They do this using Form 1099-NEC, Nonemployee Compensation.

Generally, payers must file Form 1099-NEC by January 31. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Nonemployee compensation reportable on Form 1099-NEC is subject to backup withholding if a payee has not provided a Taxpayer Identification Number to the payer or the IRS notifies the payer that the payee provided a TIN that does not match their name in IRS records.

Continue reading here.

 

Tax Rules That Expired 12/31/2021 | via Bob Jennings of TaxSpeaker

At the end of 2021, many existing tax rules expired, awaiting the normal Congressional extender bills and long-drawn-out political posturing before retroactive rule changes. This year it does not look like Congress will be able to extend anything in the current political climate, so here is a special list of things that have already expired and that are no longer in effect for 2022.

Selected Expired Individual Tax Items:

• The 1 year only increase in the child credit expired at the end of 2021. This credit reverted back to $2,000 (from $3,000); reduced the age back to under 17 (from under 18); is no longer fully refundable ($1,400 max), and reverts back to lower income phaseouts.
• The 1 year only increase in the dependent care credit also expired at the end of 2021. It reverts back to 20% (from 50%); reverts back to a very low AGI phaseout (at $15,000 it begins reducing from 35% to 20%); and lowers qualified expenses back to $3,000 for 1 child ($6,000 for >1) from the one year only amounts of $8,000 and $16,000.
• The $600 non-itemizer charitable deduction amount expired at the end of 2021.
• The 2021 increase to the earned income credit for taxpayers without children and for older and younger Americans reverts back to 2020 rules.
• The 100% of AGI charity deduction for cash contributions reverted back to a 60% limit.
• The credits for nonbusiness energy property (insulation, storm windows, and doors, etc.) and alternative fuel refueling (electric car chargers) expired at the end of 2021.
• The deduction for mortgage insurance premiums as mortgage interest expired at the end of 2021.
• Required minimum distributions returned for taxpayers 72 and over 72 after 2018.

Selected Expired Business Tax Items:

• Full expensing of R&D costs changes from 2021 to a 5-year amortizing asset deduction in 2022.
• The business interest expense deduction goes from 30% of EBITDA in 2021 to 30% of EBIT in 2022.
• The 1099-K reporting threshold of $20,000 for 2021 has been dropped to $600 for 2022.
• The Employee Retention Credit for all businesses, including startups, expired at the end of 2021, although it may still be claimed on amended 941s for 2021 and 2020.
• The 3-year recovery period for racehorses two years old or younger also reverted back to 7 years for 2022

For more updates like this, subscribe to TaxSpeaker’s newsletter here.

 

IRS Updates to CTC FAQs | via NATP

The IRS revised the FAQs (Fact Sheet 2022-32) for the 2021 child tax credit and advance child tax credit. The revisions removed question 7 and renumbered question 8 under “Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit.” Former question 7 was:

Q B7. How could I have checked to see if I was eligible for Advance Child Tax Credit payments? (updated Jan. 11, 2022)

A7. The Advance Child Tax Credit Eligibility Assistant allowed you to see if you were eligible for Advance Child Tax Credit payments.

The IRS removed the eligibility assistant from their website. If taxpayers need to check information regarding payments, they should use the online portal.

 

What To Do When the IRS Balance-Due Notice Arrives | via Jim Buttonow, Accounting Today

Much has been publicized about the IRS pausing some of its compliance and collection notices in 2022. Specifically, the IRS announced that it would suppress many balance-due reminder notices until the IRS caught up on processing paper returns, correspondence, and other backlogged items.

But tax professionals and their clients shouldn’t get too comfortable. The IRS can’t suppress about 9 million notices that go out every year. These notices are the first balance-due notice in a series of collection notices. In IRS terms, this notice is called the CP14 notice and demand for tax.

The CP14 notice is required by law (Internal Revenue Code Section 6303) to be issued within 60 days after the IRS assesses the tax. The bulk of CP14 notices show up in the beginning of June (for 2021 returns, this date was likely June 6, 2022), asking for payment within 21 days.

This notice and demand letter sets the stage for the IRS to enforce collection. If the taxpayer doesn’t respond to the CP14 notice with payment, the IRS can begin the process to collect the taxes by levy or by filing a notice of federal tax lien. Usually, the IRS will send a series of reminder notices, called the collection notice stream, to ask for payment before starting enforced collection.

For details on what to do if your client gets a CP14 notice, click here.

 

District of Columbia—Personal Income Tax: Earned Income Credit and Some Exclusions Expanded | via Wolters Kluwer IntelliConnect

The District of Columbia has enacted emergency legislation that makes changes to income tax provisions regarding:

• the earned income tax credits; and
• gross income exclusions.

What changes are made to the earned income tax credits?

The earned income tax credit is expanded for fiscal years beginning after December 31, 2022. A resident of the District who files a return, but who is not a citizen or resident alien of the United States, is allowed a credit against the personal income tax. Further, an individual can claim an earned income tax credit despite not having a social security number as required by IRC Sec. 32(m). An individual taxpayer identification number is allowed.

Which gross income exlcusions are changed?

As of January 1, 2022, the exclusion for cash assistance for excluded workers given pursuant to grants awarded by the Washington Convention and Sports Authority is extended through the end of 2023.

Further, exclusions are enacted for:

• grants to housing providers to cover the costs of past due rent of District residents who are tenants of those housing providers;
• grants awarded under § 1-328.04(x);
• funding received by a taxpayer from the District Department of the Environment or the District of Columbia Sustainable Energy Utility to incentivize solar installations benefiting low-income residents;
• grants issued under § 8-1774.10(c)(23);
• rebates issued pursuant to the Public Access to Automated External Defibrillator Act of 2000; and
• lump-sum payments an individual receives from the early educator pay parity program.

Act 24-470 (D.C.B. 845), Laws 2022, effective July 19, 2022, for a 90 day period that expires October 11, 2022

 

District of Columbia—Sales and Use Tax: Budget Bill Signed that Authorizes Sales Tax Apply to Sales in Federal Buildings and by Federal Organizations | via Wolters Kluwer IntelliConnect

District of Columbia Mayor Muriel Bowser has signed the Fiscal Year 2023 Budget Request Act of 2022 (Act), which includes changes to sales tax laws.

The Act provides that sales and use tax will be imposed on sales made in federal buildings and by government-sponsored enterprises, corporations, institutions, and organizations. Taxable sales include transactions made in federal buildings at:

• gift shops;
• souvenir shops;
• kiosks;
• convenience stores;
• food shops;
• cafeterias;
• restaurants; and
• similar establishments

Additionally, sales of goods and services by a government sponsored enterprise or corporation, institution or organization established by federal statute or regulation will be subject to tax. Examples include, but are not limited to the:

• Smithsonian Institution;
• National Gallery of Art;
• National Building Museum;
• Federal National Mortgage Association; and
• Federal Home Loan Mortgage Corporation.

Act 24-485 (D.C.B. 24-715), Laws 2022, approved July 19, 2022, effective after a 30-day congressional review period.

 

Looking for more CPE opportunities? The following Wolters Kluwer webinars are available to you at a special rate:

• Building Effective Budget Spreadsheets in Excel | July 25, 2022 | 12 – 2 p.m. | 2 CPE (Recommended) | $106
• Estate and Gift Taxation and Preparing Form 706 and 709 | August 2, 2022 | 10 a.m. – 6 p.m. | 8 CPE (Recommended) | $212
• Proving Material Participation for the Passive Loss Rules | August 3, 2022 | 12 – 2 p.m. | 2 CPE (Recommended) | $106
• How to Prepare for Your Upcoming AICPA Peer Review | August 5, 2022 | 3 – 5 p.m. | 2 CPE (Recommended) | $106

For more information, Click here.

Registration and pricing details coming soon. RSVP here to get on the waitlist — limited spots are available.

 

SDAT Raises Business Personal Property Exemption From $2,500 TO $20,000 

The Maryland State Department of Assessments and Taxation (SDAT) announced that HB268, which raises the exemption from personal property assessment for all Maryland businesses from $2,500 to $20,000, has taken effect. This legislation will save 14,217 businesses from paying taxes on $44.2 million in assessment, and is an extension of HB90, which SDAT sponsored in 2018 and exempted 28,493 businesses from $10.8 million in assessment.

HB268 took effect on June 1, 2022, and is effective for tax years starting after June 30, 2022, and includes annual filings submitted as early as January 2022. SDAT will automatically adjust assessments of filings that were submitted between January 1, 2022, and June 30, 2022 so that reported business personal property less than $20,000 is not assessed.

Late filing penalties previously billed on 2022 business personal property returns reporting less than $20,000 have been abated and filers who have already paid a late filing penalty billed on a return filing reporting less than $20,000 are being mailed a refund check for the penalty paid.

Beginning in 2023, filers with a total original cost of personal property less than $20,000 will also be able to self-attest on their Annual Report that their personal property falls within the exemption range and will no longer be required to submit a return detailing their personal property.

 

Here’s What Taxpayers Need to Know About Business-Related Travel Deductions | IRS Tax Tip 2022-104

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day’s work and a need for sleep or rest to meet the demands the work while away.

Travel expenses must be ordinary and necessary. They can’t be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business and there are special rules for conventions held outside North America.

For information about deductible travel expenses while away from home, click here.

 

VIRGINIA — New Electronic Payment Requirement for Some Individual Income Taxpayers | Virginia Department of Taxation

A recent legislative change requires taxpayers to submit all of their income tax payments electronically if:

• Any estimated tax payment exceeds $1,500; or
• Any extension payment exceeds $1,500; or
• The total anticipated income tax liability in any taxable year exceeds $6,000.

Individual taxpayers should start making all of their payments electronically if any of the above conditions apply to them. This includes all payments for estimated taxes, extension payments, and any other amounts due when a taxpayer files a return.

We’re sending letters to taxpayers who may meet this requirement with their estimated tax payment, which is due September 15.

Visit the Virginia Tax website for more information on individual income tax payment options.

 

Simplified DSUE Portability Election | via NATP

Rev. Proc. 2022-31 provides a simplified method for some estates to obtain an extension of time to make the portability of the deceased spousal unused election (DSUE) amount pursuant to §2010(c)(5)(A). This revenue procedure applies to estates that are not normally required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold in §6018(a). In addition, the election must be filed on or before the fifth annual anniversary of the decedent’s date of death.

To make the election, the executor filing Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, on behalf of the decedent’s estate must state at the top of the form that the return is “Filed pursuant to Rev. Proc. 2022-32 to elect portability under §2010(c)(5)(A).”

Rev. Proc. 2022-32 supersedes Rev. Proc. 2017-34.

 

Pennsylvania—Corporate Income Tax: Rate Reduction, Market Based Sourcing for Intangibles Enacted | via Wolters Kluwer IntelliConnect

Pennsylvania has enacted legislation:

• to reduce the corporate income tax over a series of years;
• to require market based sourcing for the sales of intangibles; and
• codify the existing economic nexus rules currently in place as tax policy issued in Corporation Tax Bulletin 2019-04.

What are the reduced corporate income tax rates?

The corporate income tax rate will be reduced as follows:

• 9.99% through December 31, 2022;
• 8.99%, January 1, 2023 through December 31, 2023;
• 8.49%, January 1, 2024 through December 31, 2024;
• 7.99%, January 1, 2025 through December 31, 2025;
• 7.49%, January 1, 2026 through December 31, 2026;
• 6.99%, January 1, 2027 through December 31, 2027;
• 6.49%, January 1, 2028 through December 31, 2028;
• 5.99%, January 1, 2029 through December 31, 2029;
• 5.49%, January 1, 2030 through December 31, 2030; and
• 4.99%, January 1, 2031 and each taxable year after.

What will market based sourcing of intangibles mean?

The sales factor used for apportioning the income of multi-state corporations will be determined using market-based sourcing rules for intangible related receipts. Currently, corporations source those receipts using costs of performance. The change will apply to tax years beginning after December 31, 2022.

Sales of intangibles will be sourced to Pennsylvania if the gross receipt are:

• from the lease or license of intangible property, including a sale or exchange of property where the receipts from the sale or exchange derive from payments that are contingent on the productivity, use or disposition of the property, if and to the extend the property is used in Pennsylvania;
• from when the property sold is a contract right, government license or similar property that authorizes the holder to conduct a business activity in a specific geographic areas, if and to the extent the property is use in or associated with Pennsylvania;
• from the sale, redemption, maturity or exchange of securities, held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business, if the customers are in Pennsylvania;
• received by a corporation that regularly lends fund to unaffiliated entities or to individuals from interest, fees and penalties imposed in connection with loans secured by real property;
• received by a corporation that regularly lends funds to unaffiliated entities or to individuals from interest, fees, and penalties imposed in connection with loans not described above, if the borrower is in Pennsylvania;
• received from interest, fees and penalties in the nature of interest from credit card receivables and gross receipts from fees charged to cardholders, such as annual fees, if the billing address of the cardholder is in Pennsylvania;
• received from interest, not described above, is included in the numerator of the sales factor if the lender’s commercial domicile is in Pennsylvania; and
• received from intangible property, not described above, will be excluded from the numerator and the denominator of the sales factor.

What are the nexus rules being codified?

Corporations, with no physical presence, and sales of $500,000 or more per year sourced to Pennsylvania are deemed to have nexus in Pennsylvania. The change applies to tax years beginning after December 31, 2022.

You’re invited to “Summer Wine Tasting.” Tap here to RSVP – Paperless Post Flyer

 

Pension Relief Coming For Union Workers And Retirees | via Wolters Kluwer IntelliConnect

The Biden Administration announced it will be implementing the American Rescue Plan’s Special Financial Assistance program that will provide financial assistance to struggling multiemployer pension programs.

“Under the program, financially struggling multiemployer pension plans can apply to the PBGC [Pension Benefit Guaranty Corporation] for assistance,” a fact sheet issued July 6, 2022, by the White House states.

PBGC published July 8, 2022, in the Federal Register a final regulation detailing the mechanics of how the SFA program will distribute the $94 billion approved by Congress for this program. It is expected to help about 200 plans that otherwise would have become insolvent in the near term, denying plan participants of receiving their full pension benefits.

“This action will have a significant impact on the lives of workers and their families, and represents one of the most meaningful improvements in our nation’s retirement security in years,” Department of the Treasury Secretary Janet Yellen said in a statement. “In addition, this initiative extends the solvency of the program that insures multiemployer pensions by nearly three decades.”

The White House said multiemployer pension plans that receive funds from this program are expected to remain solvent through 2051 and beyond.

By Gregory Twachtman

Applicability of Section 432(b)(7) Following A Merger Involving Multiemployer Defined Benefit Plan Discussed (Rev. Rul. 2022-13) | via Wolters Kluwer IntelliConnect

The IRS has issued guidance on the applicability of Code Sec. 432(b)(7) following a merger involving a multiemployer defined benefit plan that has received special financial assistance. According to the Service, after a merger of a multiemployer defined benefit pension plan that has received special financial assistance (SFA) from the Pension Benefit Guaranty Corporation (PBGC) with a second multiemployer defined benefit pension plan that has not received SFA, with the second plan designated as the ongoing plan after the merger, the ongoing plan is not deemed to be in critical status under Code Sec. 432(b)(7).

Merger Between Multiemployer Defined Benefit Pension Plans

Plan A and Plan B were multiemployer defined benefit pension plans. The merger agreement between Plan A and Plan B designated Plan B as the ongoing plan for the plan years beginning on or after January 1, 2024 (the effective date of the merger) and provided that Plan B would obtain all of Plan A’s assets and assumed all of its liabilities. In accordance with the designation of Plan B as the ongoing plan, all plan-related documentation and reports with respect to all plan years beginning on or after January 1, 2024, including Form 5500, Annual Return/Report of Employee Benefit Plan, were in the name of Plan B and use Plan B’s EIN and the plan number.

Code Sec. 432(b)(7) provides for deemed critical status, applies only to an eligible multiemployer plan described in Code Sec. 432(k)(3) that applies for and receives SFA. Thus, if a multiemployer plan that is eligible for and has received SFA merges into a plan that did not receive SFA, and, under the terms of the merger, the plan that did not receive SFA is designated as the ongoing plan, that ongoing plan is not deemed to be in critical status under Code Sec. 432(b)(7). Because Plan B was not an eligible multiemployer plan described in Code Sec. 432(k)(3) that may apply for and receive SFA under section 4262 of ERISA, Code Sec. 432(b)(7) did not apply to Plan B. Accordingly, Plan B was not deemed to be in critical status pursuant to Code Sec. 432(b)(7) as a result of the merger with Plan A for the plan years beginning on or after the effective date of the merger.

IRS Webinar: Accessing IRS Online Services – Understanding the Identity Verification Process | Tuesday, July 19, 2021 @ 2 PM EST

This webinar discusses:

• Improved access to IRS online services
• What this means for e-Services users
• IRS’s new identity verification and authentication platform
• Registration overview
• Key takeaways
• Plus, a live Q&A

1 CE credit will be offered for this webinar. Category: Federal Tax

Questions? Email cl.sl.web.conference.team@irs.gov.

Register here: Accessing the IRS: Understanding the Identity Verification Process (webcaster4.com)

Gig Economy Worker’s Tax Responsibilities | IRS Tax Tip 2022-97

Gig work is taxable and must be reported as income on the worker’s tax return. Examples of gig work include:

• Driving a car for booked rides
• Selling goods online
• Renting out property
• Providing other on-demand work

Here are some things gig workers should know to stay on top of their tax responsibilities.

Changes to the e-file Application Fingerprinting Process | IRS QuickAlert

Beginning September 25, 2022, the IRS will implement a new electronic fingerprinting process for e-file applicants. Individuals will be required to use the IRS authorized vendor for fingerprinting. Each new Principal and Responsible Official listed on a new e-file application or added to an existing application needing fingerprints, must schedule an appointment with the IRS authorized vendor.

The cutoff date to mail paper fingerprint cards (Form FD-258) to the IRS is August 15, 2022. Fingerprint cards must be postmarked by August 15, 2022, and the application must be submitted prior to mailing the fingerprint cards.

The IRS will not process fingerprint cards postmarked after August 15, 2022. Customers needing fingerprints will need to wait until September 25, 2022, to schedule an electronic fingerprinting appointment. On September 25, 2022, you can schedule your appointment by accessing the scheduling link located on the e-file application summary page.

Instructions for scheduling an appointment will be provided upon submitting an e-file application and on IRS.gov. The IRS will provide additional information about the new fingerprinting process on September 25, 2022. Please continue to check the Become an Authorized e-file Provider webpage for the most up-to-date information,

Electronic Tax Administration Advisory Committee Annual Report to Congress 

The ETAAC released its annual report to Congress, featuring recommendations focused on budget support for the IRS and enhancements to e-filing. Read the report here.

Click the image below for a special message to the MSATP Community ☺️

If you would like to speak to Gigi, call (800) 922-9672 or email ghawkins@msatp.org.

 

IRS Webinar: Sale of Partnership Interest – Comprehensive Case Study | Thursday, July 14, 2022 @ 2 PM EST

This webinar will:

• Review the tax law relating to the sale of partnership interest tax issues
• Gain insight into the common sale of partnership interest tax issues by reviewing a comprehensive case study
• Explain the Service’s position with respect to the common sale of partnership interest tax issues
• Plus, a live Q & A

1 CE credit will be offered for this webinar. Category: Federal Tax

Questions? Email cl.sl.web.conference.team@irs.gov.

Register Now

IRS Increases Mileage Rate For Remainder of 2022 | IR-2022-124

The IRS announced an increase in the optional standard mileage rate for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022. The IRS provided legal guidance on the new rates in Announcement 2022-13.

Taxpayers Now Have More Options to Correct, Amend Returns Electronically | IR-2022-130

The IRS announced that more forms can now be amended electronically. These include people filing corrections to the Form 1040-NR, U.S. Nonresident Alien Income Tax Return and Forms 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico) and Forms 1040-PR, Self-Employment Tax Return – Puerto Rico.

Read more here.

Here’s What Businesses Need to Know About the Enhanced Business Meal Deduction | IRS Tax Tip 2022-91

The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

Read more here about who qualifies for the enhanced deduction.

MSATP is excited to introduce our new Executive Director, Giavante’ Hawkins! Giavante’ earned a bachelor’s in Sociology at Saint Vincent College and a master’s degree in Non-Profit and Association Management at the University of Maryland University College. She has accrued considerable management and leadership experience working with various organizations, including McKinley Marketing Partners, Foundation for Excellence in Education, and American Bankers Association. She has received recognition for achieving organizational targets and growth metrics throughout her career. In her previous role Giavante’ served as the Director of Membership Operations at the American Bankers Association. Giavante’ was responsible for the annual due’s revenue cycle capturing $45 million in annual dues, member engagement, and the day-to-day operational functions of the Membership Department. Giavante’ enjoys spending time with her family, weightlifting, and traveling in her spare time. A native Washingtonian, Giavante’ currently resides in Anne Arundel County. Giavante’s top priorities are to work alongside the Board of Directors to serve the members and enhance the member experience while growing a diverse and inclusive membership community. If you would like to speak to Giavante’, you can call the office at (800) 922-9672, or email her at ghawkins@msatp.org.   IRS Expands Voice Bot Options For Faster Service, Less Wait Time | IR-2022-127 The IRS has expanded voice bot options to help eligible taxpayers easily verify their identity to set up or modify a payment plan while avoiding long wait times. Voice bots run on software powered by artificial intelligence, which enables a caller to navigate an interactive voice response. The IRS has been using voice bots on numerous toll-free lines since January, enabling taxpayers with simple payment or notice questions to get what they need quickly and avoid waiting. Taxpayers can always speak with an English- or Spanish-speaking IRS telephone representative if needed. For more information, click here. Senate Finance Committee Votes Unanimously To Advance Retirement Legislation | via Wolters Kluwer IntelliConnect The Enhance American Retirement Now (EARN) Act, the Senate version of the House-passed SECURE 2.0 Act, has cleared the Senate Finance Committee. The bill, designed to help make it easier for Americans to save more money for retirement, contains a number of tax provisions to help people save as well as access saved funds to help in emergency situations. It passed by a unanimous vote during a June 22, 2022 during an open executive session held by the committee. The specific legislative language was not released, but a chairman’s mark describing the bill and its intended effects was released and that was the basis for the committee vote. A section-by-section summary of the bill can be found here. IRS Will Not Issue Letter Rulings on Whether Certain Transactions Result in Employer Reversion | via Wolters Kluwer IntelliConnect The IRS announced it would not issue letter rulings on whether an employer reversion from a qualified plan occurred under Code Sec. 4980(c)(2) in connection with a spin-off/termination transaction that involved excess assets. A spin-off/termination transaction that involves excess assets means a transaction where (1) less than 100 percent of the assets of a defined benefit plan are spun off to another defined benefit plan sponsored or maintained by the same employer; (2) the defined benefit plan receiving the assets that have been spun off is terminated within a short period of time after receiving those assets; and (3) assets remain in the trust of the terminated defined benefit plan after all benefits are distributed to or on behalf of all participants and their beneficiaries. Background The IRS answers inquiries from individuals and organizations regarding their status for tax purposes and the tax effects of their acts or transactions. There are, however, areas in which the IRS will not issue rulings or determination letters. Effective Date This revenue procedure applies to all ruling requests pending with or received by the IRS on or after June 21, 2022. Rev. Proc. 2022-3, I.R.B. 2022-1, is amplified. Virginia—Multiple Taxes: Biennial Budget Legislation Containing Tax Provisions Enacted | via Wolters Kluwer IntelliConnect* Virginia enacted biennial budget bills that contain a variety of retail sales and use, cigarette, tobacco products, and other tax provisions. The text of the bills are available on the Virginia State Budget website. *Access news updates by signing up for CCH Tax Aware, a complimentary benefit of being an MSATP member! Visit the perks page of your profile for information on how to sign up.

 

 

MSATP’s Executive Director, Bill Feehley, CPA, is retiring this month. We want to recognize Bill for his many years of hard work and dedication to MSATP — from being a volunteer on various committees to serving as president and now Executive Director, Bill has made a lasting impact on MSATP and will be missed. Thank you, Bill — we wish you all the best! 

Administrative Releases | Comptroller of Maryland The Maryland Comptroller has published updates to three Administrative Releases. Administrative Release 38 on Decoupling from Federal Tax Laws. The updates include a description of More Jobs for Marylanders Act, and how the Act impacts decoupling modifications for manufacturers. The publication can be found here. Administrative Release 43 on Corporate Apportionment of Income. This is a new release that addresses the impact of single sales factor apportionment on the special apportionment formulas for certain industries carved out in regulations. The publication can be found here. Administrative Release 22 on Apportionment of Income Airlines. The AR has been updated to clarify that Airlines shall continue to use the apportionment formula prescribed by regulation. The publication can be found here. Questions can be addressed to Krista Sermon at ksermon@marylandtaxes.gov. IRS Provides Update on Backlogged Returns | via NATP Status of unprocessed Form 1040 returns The IRS is opening mail within normal time frames and all paper and electronic individual refund returns received prior to April 2021 have been processed if the return had no errors or did not require further review. As of May 20, 2022, the IRS had 9.8 million unprocessed individual returns, which include returns received before 2022, and new tax year 2021 returns. Of these, 2 million returns require error correction or other special handling, and 7.8 million are paper returns waiting to be reviewed and processed. This work does not typically require the IRS to correspond with taxpayers but does require special handling by an IRS employee. In these instances, it’s taking the IRS more than 21 days to issue any related refunds; in some cases, this work could take 90 to 120 days. If a correction is made to a refundable tax credit claimed on the return, the IRS will send taxpayers an explanation. Status of processing Form 1040-X As of May 21, 2022, the IRS had 2.1 million unprocessed Forms 1040-X and are processing these returns in the order received. The current time frame can be more than 20 weeks instead of up to 16. The IRS requests that taxpayers don’t file a second tax return or contact the IRS about the status. Taxpayers should continue to check Where’s My Amended Return? for the most up-to-date processing status available. Status of unemployment compensation exclusion corrections The IRS continues to review tax year 2020 returns and process corrections for taxpayers who paid taxes on unemployment compensation to exclude the compensation from income, if the taxpayer is eligible. To date, the IRS has issued over 11.8 million refunds totaling $14.5 billion. The IRS is now concentrating on more complex returns. Some taxpayers will receive refunds, while others will have their overpayment applied to taxes due or other debts. The IRS will mail a letter to affected taxpayers to inform them of the corrections, generally within 30 days from when the corrections were completed. Status of processing Form 941 As of May 25, 2022, the IRS had 3.7 million unprocessed Forms 941. If you filed electronically and received an acknowledgment, you don’t need to take further action other than promptly responding to any requests for information. As of May 25, 2022, the total inventory of unprocessed Forms 941-X was approximately 241,000, some of which cannot be processed until the related Forms 941 are processed. While not all these returns involve a COVID credit, the inventory is being worked at two sites (Cincinnati and Ogden) that have trained staff to work possible COVID credits.   Applicable Federal Rates for July 2022 Released (Rev. Rul. 2022-12) (Jun. 16, 2022) | via Wolters Kluwer IntelliConnect* The IRS has released the applicable federal interest rates for July 2022. The AFRs are based on the average yield on outstanding marketable obligations of the United States government. Annual Federal Interest Rates for July 2022 The annual interest rates are: Short-term rate is 2.37 percent Mid-term rate is 2.99 percent Long-term rate is 3.22 percent Semiannual Rates The semiannual interest rates are: Short-term rate is 2.36 percent Mid-term rate is 2.97 percent Long-term rate is 3.19 percent Quarterly Rates The quarterly interest rates are: Short-term rate is 2.35 percent Mid-term rate is 2.96 percent Long-term rate is 3.18 percent Monthly Rates Finally, monthly interest rates are: Short-term rate is 2.35 percent Mid-term rate is 2.95 percent Long-term rate is 3.17 percent Code Sec. 1288(b) Rates The Code Sec. 1288(b) interest rates, when using annual compounding, are: Short-term rate is 1.80 percent Mid-term rate is 2.27 percent Long-term rate is 2.43 percent Additionally, the Code Sec. 382 adjusted federal long-term rate is 2.43 percent and the long-term tax-exempt rate is 2.43 percent. Code Sec. 42(b)(1) Percentage The appropriate interest rate for the low-income housing credit is: 7.72 percent for the 70-percent present-value, low-income housing credit, and 3.31 percent for the 30-percent present-value, low-income housing credit Code Sec. 7520 AFR The interest rate is 3.60 percent for determining: the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest. Blended Annual Rate for 2022 Code Sec. 7872(e)(2) blended annual rate for 2022 is 1.40 percent. Rev. Rul. 2022-12 *Access news updates by signing up for CCH Tax Aware, a complimentary benefit of being an MSATP member! Visit the perks page of your profile for information on how to sign up.

On this week’s episode of MSATP TV, Jonathan Pocius gave a full rundown of Maryland’s Mandatory Retirement Pilot which stems from a 2016 piece of legislation that requires a mandatory retirement program offering for all Maryland businesses. Jonathan discussed how he can help with this new change, tune in to learn more!

Watch on YouTube.

Coming Up: On Thursday, March 10th at 12 p.m. Rob Smith of Liscio will join us for the 3rd episode of his Lunch & Learn series where he will discuss how to manage tasks in OneNote. In this Lunch & Learn series, you can now view our episodes live on LinkedIn, Facebook, YouTube, and Twitter! If you have questions for the speaker, you can ask them directly in the comments section of the stream on all platforms. Be sure to follow us on all of our social media to enjoy our upcoming events and stay up to date on the latest news!

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IRS Offers Details on K-2 and K-3 Relief | Notice 2021-39

The IRS has provided further details on additional transition relief for certain domestic partnerships and S corporations preparing the new schedules K-2 and K-3 to further ease the change to these new schedules. Those eligible for the relief will not have to file the new schedules for tax year 2021.

The new schedules K-2 and K-3 improve reporting by standardizing international tax information to partners and flow-through investors, making it easier for them to report these items on their tax returns. In addition, the changes ease flow-through return preparation compliance by clarifying obligations and standardizing the format for reporting.

For more information, click here.

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Understanding the Child and Depedent Care Credit | Tax TIp 2022-23

Taxpayers who are paying someone to take care of their children or another member of household while they work, may qualify for child and dependent care credit regardless of their income.

For tax year 2021, the maximum eligible expense for this credit is $8,000 for one child and $16,000 for two or more. Depending on their income, taxpayers could write off up to 50% of these expenses.

For more information, click here.

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Changes to the Earned Income Tax Credit for the 2022 Filing Season | COVID Tax Tip 2022-31

The EITC is one of the federal government’s largest refundable tax credits for low-to moderate-income families. The recent expansion of this credit means that more people may qualify to have some much-needed money put back in their pocket.

The IRS urges people to check to see if they qualify for this important credit. While people with income under a certain amount aren’t required to file a tax return because they won’t owe any tax, those who qualify for EITC may get a refund if they file a 2021 tax return.

For more information, click here.

 

Rob Smith of Point7Seconds joins us to tell us about his upcoming OneNote classes on December 6 and 16th. Save the dates as we will announce further details soon!

Watch on YouTube.

Coming Up: We have two special MSATP TV episodes airing next week. On Tuesday, November 16 at 10 a.m., Julie Weaver of the Maryland Council on Economic Education joins us to discuss their initiatives on financial literacy. On Thursday November 18 at 10 a.m., Tammy Nickels from Wolters Klower will join us to tell us about CCH TaxAware which is a benefit for all MSATP members!

Be sure to Like/Follow us on Facebook so you can catch MSATP TV live every week!

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IRS Provides Tax Inflation Adjustments for Tax Year 2022 |IR-2021-219

The IRS announced the tax year 2022 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2021-45 provides details about these annual adjustments.

For more information, click here.

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Homeowners Assistance Fund Payments | Rev. Proc. 2021-47

Rev. Proc. 2021-47 provides guidance on the income tax treatment and information reporting requirements for payments made to or on behalf of financially distressed individual homeowners by certain entities with funds allocated from the Homeowner Assistance Fund (HAF), which was established under section 3206 of the American Rescue Plan Act of 2021, Pub. L. No. 117-2, 135 Stat. 4 (March 11, 2021) (ARP), in response to the coronavirus disease (COVID-19) pandemic.

For more information, click here.

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The IRS Financial Report Available on IRS.gov | IR-2021-220

The IRS  published its Financial Report on IRS.gov. This new report provides the American people with a comprehensive view of the IRS’s financial activities as well as the accomplishments of its finance management community.

In fiscal year 2021, the IRS managed more than $4.1 trillion in tax revenue, $1.1 trillion in refunds and $658 billion in unpaid assessments, as well as the resources that support its mission. In addition, Congress and both Administrations entrusted the IRS with $2.4 billion in supplemental funding to support the nation’s recovery from the COVID-19 pandemic.

For more information, click here.

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Families Can Now Report Income Changes Using the Child Tax Credit Update Portal | COVID Tax Tip 2021-167

The IRS recently launched a new feature in its Child Tax Credit Update Portal, allowing families receiving monthly advance child tax credit payments to update their income.

Families should enter changes by November 29, so the changes are reflected in the December payment. Once the update is made, the IRS will adjust the payment amount to ensure people receive their total advance payment for the year. For married couples, if one spouse makes the income update, it will apply to both spouses and could impact both spouses’ future monthly advance payments of the child tax credit.

For more information, click here.

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Here’s How Businesses Can Deduct Startup Costs from Their Federal Taxes | Tax Tip 2021-166

When starting a business, owners should treat all eligible costs incurred before beginning to operate the business as capital expenditures that are part of their basis in the business. Generally, the business can recover costs for assets through depreciation deductions.

For costs paid or incurred after September 8, 2008, the business can deduct a limited amount of start-up and organizational costs. They can recover the costs they cannot deduct currently over a 180-month period. This recovery period starts with the month the business begins to operate active trade or as a business.

For more information, click here.

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Get Ready for Taxes: Easy Steps Taxpayers Can Take Now to Make Tax Filing Easier in 2022 | IR-2021-217

The IRS encouraged taxpayers, including those who received stimulus payments or advance Child Tax Credit payments, to take important steps this fall to help themselves file their federal tax returns in 2022.

Planning ahead can help people file an accurate return and avoid processing delays that can slow tax refunds.

For more information, click here.

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IRS Updates 2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently Asked Questions | IR-2021-218

The IRS updated frequently-asked-questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit Payments to describe how taxpayers can now provide the IRS an estimate of your 2021 income using the Child Tax Credit Update Portal (CTC UP).

These FAQs update the Advance Child Tax Credit Topic A FAQs by adding a new question, question 17 and Topic F FAQs by adding new questions, questions 2 through 6.

For more information, click here.