Document summaries for the week of Sept. 28, 2020

Tax document summaries for the week of Sept. 28–Oct. 2, 2020, covering employee benefits, individuals, and more.

EMPLOYEE BENEFITS

Final regs. govern withholding on periodic retirement and annuity payments

The IRS issued final regulations providing rules for federal income tax withholding on certain periodic retirement and annuity payments to implement an amendment made by the law known as the Tax Cuts and Jobs Act, P.L. 115-97. T.D. 9920 (9/28/20).


EMPLOYMENT TAXES

Final regs. give guidance on income tax withholding from wages

The IRS issued final regulations regarding the amount of federal income tax to withhold from employees’ wages. T.D. 9924 (9/30/20) (see related news story).
 

INDIVIDUALS

Failure to prove material participation precludes real estate loss deductions

The Tax Court held that, because a couple failed to show that the husband’s participation in short-term-rental activities relating to a rental property they owned exceeded the participation of any other individuals in either of the years in issue, the couple did not meet their burden of proving that the husband materially participated in the rental activities. As a result, the court concluded that the couple’s real estate losses were passive activity losses for purposes of Sec. 469 and that they could therefore not deduct their real estate losses in 2014 and 2015. Lucero, T.C. Memo. 2020-136 (9/29/20).

Taxpayer’s whistleblower allegations lacked credibility

The Tax Court granted summary judgment to the IRS after holding that the IRS Whistleblower Office did not abuse its discretion in rejecting a taxpayer’s whistleblower claim on the ground that the taxpayer had not provided credible information regarding a federal tax violation. The court found that the taxpayer’s allegations lacked credibility because the taxpayer did not identify a particular tax year, did not identify a discernible federal tax issue, and did not supply any source documents. Stevenson, T.C. Memo. 2020-137 (9/30/20).

Final regs. on meals and entertainment expenses

The IRS issued final regulations implementing provisions of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, that disallow a business deduction for most entertainment expenses. The regulations also clarify the treatment of business deductions for food and beverages that remain deductible, generally limited to 50% of qualifying expenditures, and how taxpayers may distinguish those expenditures from entertainment. T.D. 9925 (9/30/20) (see related news story).

Final regs. issued on ABLE accounts

The IRS issued final regulations providing guidance to eligible individuals with a disability who are the owners and designated beneficiaries of ABLE accounts on a wide variety of issues involving the requirements for Sec. 529A ABLE accounts. T.D. 9923 (10/1/20) (see related news story).

 

INTERNATIONAL

Final regs. on source of income from sales of personal property

The IRS issued final regulations that modify the rules for determining the source of income from sales of inventory produced within the United States and sold outside the United States, or vice versa. They also contain new rules for determining the source of income from sales of personal property (including inventory) by a nonresident where those sales are attributable to an office or other fixed place of business that the nonresident maintains in the United States. The regulations also modify certain rules for determining whether foreign-source income is effectively connected with the conduct of a trade or business within the United States. T.D. 9921 (9/29/20).

Final regs. on tax credit allocation and apportionment rules

The IRS issues final regulations on how to allocate and apportion deductions and creditable foreign taxes and on other issues relating to foreign tax and the foreign tax credit. T.D. 9922 (9/29/20)  (see related news story).

Foreign tax credit proposed regulations issued

The IRS issued proposed regulations regarding the foreign tax credit. REG-101657-20 (9/29/20) (see related news story).


IRS PROCEDURE

IRS modifies list of returns exempt from certain electronic filing requirements

The IRS modified Notice 2011-26 to generally remove Form 1040-NR, U.S. Nonresident Alien Income Tax Return, from the list of returns that are administratively exempt from the electronic filing requirement imposed on specified tax return preparers by Sec. 6011(e)(3) and to provide the circumstances under which the Form 1040-NR remains subject to the exemption. According to the IRS, future updates to the list of returns in Notice 2011-26 that are administratively exempt from the electronic filing requirement due to IRS e-file limitations will be set forth in IRS Publication 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters. Notice 2020-70 (10/1/20).

Health coverage reporting deadline extended

The IRS has extended the due dates from Jan. 31, 2021, to March 2, 2021, for insurers, self-insuring employers, applicable large employers, and certain other providers of minimum essential coverage to furnish to individuals the 2020 Form 1095-B, Health Coverage, and the 2020 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. The IRS is also extending its relief from certain penalties. Notice 2020-76 (10/2/20) (see related news story).  

Newsletter Articles

50th ANNIVERSARY

50 years of The Tax Adviser

The January 2020 issue marks the 50th anniversary of The Tax Adviser, which was first published in January 1970. Over the coming year, we will be looking back at early issues of the magazine, highlighting interesting tidbits.

TAX RELIEF

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.