Document summaries for the week of Aug. 17, 2020
Tax document summaries for the week of August 17–21, 2020, covering employee benefits, individuals, and more.
Prop. regs. on qualified plan loan offsets
The IRS issued proposed regulations explaining the extended rollover period that applies to qualified plan loan offsets after the rules were amended by the law known as the Tax Cuts and Jobs Act. REG-116475-19 (8/18/20) (see related news story).
IRS issues monthly corporate yield curve and segment rates
The IRS issued guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3), and the 24-month average segment rates under Sec. 430(h)(2). In addition, the IRS provided guidance as to the interest rate on 30-year Treasury securities under Sec. 417(e)(3)(A)(ii)(II), as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Sec. 431(c)(6)(E)(ii)(I). Notice 2020-64 (8/17/20).
Some employers receive erroneous failure-to-deposit penalty notices
The IRS announced that some employers that reduced their tax deposits in anticipation of claiming the sick and family leave credits available under the Families First Coronavirus Response Act, P.L. 116-127, or the employee retention credit, may have in error received a notice stating there was a failure-to-deposit penalty applicable to the Form 941 on which the credits were claimed. Failure to Deposit Penalties on Some Employers Claiming New Tax Credits (8/21/20) (see related news story).
IRS begins accepting e-filed Forms 1040-X
The IRS announced that it has begun accepting Forms 1040-X, Amended U.S. Individual Income Tax Return, electronically. IR-2020-182 (8/18/20) (see related news story).
Taxpayer liable for penalty for failing to report over $2.9 million of income
The Tax Court held that a taxpayer, who had failed to report on Schedule E, Supplemental Income and Loss, more than $2.9 million of flow-through income from a limited liability company of which he was the sole member, was liable for the accuracy-related penalty under Sec. 6662 for an underpayment attributable to a substantial understatement of income tax. Babu, T.C. Memo. 2020-121 (8/17/20).
Real estate developer can deduct contributions of property made to town
The Tax Court held that a real estate developer, who donated land to a town which ultimately granted him approval for an affordable housing project, had substantially complied with the qualified appraisal requirements of Sec. 170(f)(11)(C) and was entitled to deduct as charitable contributions the property contributions reported on his 2008 and 2009 tax returns. The court rejected the IRS’s argument that the taxpayer used the donations as a bargaining chip to induce the town to allow the construction project to move forward and thus determined that the contributions were not part of a quid pro quo arrangement. Emanouil, T.C. Memo. 2020-120 (8/17/20).
Court sustains levy action against delinquent taxpayer
The Tax Court sustained a determination by the IRS Appeals Office to proceed with a levy on a taxpayer who had unpaid tax liabilities relating to a timely filed income tax return for 2009 and to IRS-prepared substitute for returns for tax years 2010 and 2011. The court concluded that the IRS did not abuse its discretion in sustaining the proposed collection action and noted that the taxpayer did not provide a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or copies of the financial information requested by the Appeals Office and also did not request a collection alternative such as an offer-in-compromise or an installment agreement and did not submit any specific offer or propose any specific terms. Porporato, T.C. Summ. 2020-24 (8/18/20).
IRS sending interest payments on tax refunds
The IRS announced that it is sending interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds. The IRS is required, by law, to pay interest, calculated from the original April 15 filing deadline, as long as the individual filed a 2019 federal income tax return by the postponed July 15 deadline. The IRS reminds taxpayers that these interest payments are taxable. IR-2020-183 (8/18/20).
Couple liable for 20% penalty for taking unsubstantiated deductions and failing to report income
The Tax Court held that a married couple (1) were not entitled to various unsubstantiated deductions taken for years 2009 through 2011; (2) failed to report Schedule C receipts for 2011; (3) failed to report certain wage income for 2010; and (4) were liable for additions to tax for the years at issue. In addition, the court found the couple liable for the Sec. 6662(a) 20% accuracy-related penalty because, while their returns were prepared by a paid income tax return preparer, the couple did not establish that they provided the return preparer with source documents underlying their tax returns’ deductions and thus failed to establish that their reliance upon the return preparer constituted reasonable cause and good faith with respect to the tax underpayments. Brashear, T.C. Memo. 2020-122 (8/19/20).
IRS issues September 2020 applicable federal rates
The IRS issued a ruling that prescribes the applicable federal rates for September 2020. The ruling provides various prescribed rates under Sec. 1274 for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. Rev. Rul. 2020-16 (8/17/20).
Many ITINs will expire at year end
The IRS reminded taxpayers that more than 1 million individual taxpayer identification numbers (ITINs) are set to expire Dec. 31, 2020. Expiring ITINs include those with middle digits 88 and those with middle digits 90, 91, 92, 94, 95, 96, 97, 98, or 99 that were assigned before 2013 and have not already been renewed. IR-2020-181 (8/17/20).
Prop. regs. on air transportation excise taxes
The IRS issued proposed regulations relating to the excise taxes imposed on certain amounts paid for transportation of persons and property by air. REG-112042-19 (8/17/20).
IRS temporarily stops mailing notices with balances due
The IRS announced that it has suspended the mailing of three notices — the CP501, the CP503, and the CP504 — that go to taxpayers who have a balance due on their taxes. IRS Temporarily Stops Mailing Notices to Taxpayers With Balances Due (8/21/20) (see related news story).
Business meal deductions after the TCJA
This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.
Quirks spurred by COVID-19 tax relief
This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.