Document summaries for the week of Nov. 8, 2021

Tax document summaries for the week of Nov. 8–12, 2021, covering employee benefits, individuals and IRS procedure.

EMPLOYEE BENEFITS

Relocation benefits are exempt under the Railroad Retirement Tax Act

The Eleventh Circuit held that relocation benefits provided by a railroad to its employees are exempt under the Railroad Retirement Tax Act as "bona fide and necessary expenses incurred [by the employee] . . . in the business of the employer" under Sec. 3231(e)(1)(iii). CSX Corp., No. 20-12494 (11th Cir. 11/10/21).

 

INDIVIDUALS

Couple with $72,000 of income did not qualify for premium tax credit

The Tax Court held that a married couple did not qualify for the Sec. 36B premium tax credit (PTC) for their 2015 tax year and were liable for advance PTCs paid on their behalf during the year. The court found the couple's modified adjusted gross income, which included $53,813 in Social Security benefits excluded from taxable income, was $72,444, more than 400% of the federal poverty line. The court stated it was sympathetic to the couple's plight, however, and directed the IRS's counsel to include alternative payment possibilities for the deficiency in any subsequent correspondence with the couple. Knox, T.C. Memo. 2021-126 (11/9/21).

IRS addresses tax implications of Homeowner Assistance Fund payments

The IRS issued a revenue procedure that addresses the federal 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). The HAF was established under Section 3206 of the American Rescue Plan Act of 2021, P.L. 117-2, in response to the coronavirus pandemic. Rev. Proc. 2021-47 (11/9/21) (see related news story).

Updated FAQs address advance child tax credit

The IRS updated its frequently asked questions (FAQs) regarding the advance child tax credit, telling taxpayers how to estimate and update their projected 2021 modified adjusted gross income (MAGI) on the online Child Tax Credit Update Portal and explaining how MAGI affects eligibility for, and the amount of, the child tax credit and advance payments. Fact Sheet 2021-13 (11/9/21) (see related news story).

IRS hotline advice to the contrary, taxpayer was taxable on retirement plan distributions

The Tax Court held that a taxpayer who received more than $14,000 in 2017 distributions from three pension or retirement plans had to include those distributions in his 2017 taxable income. The court noted that, while the taxpayer's conversations with IRS hotline personnel may have indicated he was not taxable on the distributions, all of the plans had sent the taxpayer a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., which reflected that the distributions were taxable and that each distribution was a normal distribution. Peak, T.C. Memo. 2021-128 (11/10/21).

 

IRS PROCEDURE

IRS issues annual inflation-adjusted items for 2022

The IRS released the annual inflation-adjusted items for 2022 for various provisions of the Internal Revenue Code. To the extent amendments to the Code are enacted for 2022 after Nov. 10, 2021, the IRS advises that taxpayers consult additional guidance to determine whether these adjustments remain applicable. Rev. Proc. 2021-45 (11/10/21) (see related news story).

Taxpayer's arguments were frivolous

The Fifth Circuit affirmed a Tax Court order granting summary judgment to the IRS because the taxpayer's argument that his income was nontaxable was frivolous and without merit. The court also upheld a $2,500 penalty. Sauter, No. 21-60397 (5th Cir.11/10/21).

IRS updates FAQs on unemployment income exclusion

The IRS issued updated FAQs on the exclusion of 2020 unemployment benefits from income. FS-2021-14 (11/12/21) (see related news story).

Tax Insider Articles

DEDUCTIONS

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.

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.