Document summaries for the week of Nov. 1, 2021
Tax document summaries for the week of Nov. 1–5, 2021, covering individuals, IRS procedure, Legislation, and more.
IRS issues pension and retirement cost-of-living adjustments for 2022
This IRS issued its annual guidance on the 2022 inflation-adjusted ceilings and thresholds for a wide range of qualified retirement plans and accounts, including traditional individual retirement arrangements (IRAs) and Roth IRAs. Among the notable changes are (1) the limitation on deferrals for Sec 401(k), Sec. 403(b), and most Sec. 457 plans are increased to $20,500 for 2022, up from $19,500 in 2021; (2) the limitation on the annual benefit under a defined benefit plan under Sec. 415(b)(1)(A) is increased from $230,000 to $245,000; and (3) the limitation for defined contribution plans under Sec. 415(c)(1)(A) is increased from $58,000 to $61,000. Notice 2021-61 (11/4/21) (see related news story).
ESTATES, TRUSTS & GIFTS
Language of transfer documents determines tax treatment of gifts
The Fifth Circuit held that two transfer documents executed as part of a couple's estate plan transferred specific percentages of a limited partnership rather than fixed dollar amounts, resulting in a gift tax deficiency by the couple. Nelson, No. 20-61068 (5th Cir. 11/3/21).
Couple liable for tax and penalties for failing to repay advance premium tax credit
The Tax Court held that a couple who filed a joint tax return for 2018 on which they reported $181,183 of modified adjusted gross income were liable for tax deficiencies for failing to repay an advance premium tax credit as required under Sec. 36B. The court rejected the couple's argument that the repayment provisions of Sec. 36B violate the Constitution and upheld the IRS's assessment of penalties. Amburgey, T.C. Memo. 2021-124 (11/1/21).
IRS provides more Hurricane Ida relief
The IRS announced that victims of Hurricane Ida in parts of Connecticut now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments. IR-2021-213 (11/3/21).
Chief Counsel addresses start date for overpayment interest on withholding tax refund
The IRS Office of Chief Counsel addressed a question involving when overpayment interest begins to accrue for an overpayment of withholding tax claimed on a taxpayer's year 1 Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, the original due date of which was June 15, year 2. The Chief Counsel's Office advised that (1) if the corporation knew that its full withholding, at the time it occurred, would result in an overpayment for which it would seek a refund and the corporation timely filed its income tax return, overpayment interest accrues from June 15 of year 2; or (2) if the corporation's income tax return was not timely filed, overpayment interest accrues from the date the corporation filed a processible return. The Chief Counsel's Office also advised that if the corporation did not know that its full withholding, at the time it occurred, would result in an overpayment for which it would seek a refund, its overpayment interest would accrue from June 15 of year 2. CCA 202144027 (11/5/21).
IRS complied with supervisory approval requirement by assessing penalties against appraiser
The Tax Court held that the IRS complied with Sec. 6751(b)(1) with respect to penalties it assessed against a partnership after disallowing the partnership's deduction for a conservation easement deduction. The court rejected the partnership's argument that the supervisory approval for the penalties came too late and agreed with the IRS's argument that the initial determination of the penalties occurred four months before the final partnership administrative adjustment was issued when the IRS assessed penalties against the partnership's appraiser under Sec. 6695A(a). Excelsior Aggregates, LLC, T.C. Memo. 2021-125 (11/4/21).
Infrastructure bill contains various tax provisions
The House of Representatives passed the Infrastructure Investment and Jobs Act, sending it to President Joe Biden for signature. The bill contains some important tax changes, including an early end to the employee retention credit. H.R. 3684 (11/6/21) (see related news story).
IRS posts guidance on carried interest reporting
The IRS posted FAQs on its website with reporting directions for certain passthrough entities and taxpayers reporting of partnership interests held in connection with the performance of services. IR-2021-215 (11/3/21) (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.