Document summaries for the week of Feb. 14, 2022
Tax document summaries for the week of Feb. 14–18, 2022, covering individuals and IRS procedure.
IRS updates weighted average interest rates, yield curves, and segment rates
The IRS issued a notice that provides 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 notice provides 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 2022-9 (2/17/22).
Divorce-related court order does not override tax law
The Tax Court held that a taxpayer was not entitled to a dependency deduction and other tax-related benefits with respect to one of his children because he did not meet applicable requirements in the Code. The court rejected the taxpayer's argument that a divorce-related state court order allowed him to take the child-related tax benefits, stating that the state court order did not override the Code provisions. Ola-Buraimo, T.C. Summ. 2022-2 (2/14/22).
Court allows partial deduction of unreimbursed employee business expenses
The Tax Court held that a married couple who deducted the husband's unreimbursed employee business expenses incurred while he was working away from home adequately substantiated a portion of meal expenses for 2015–2017, lodging expenses for 2016 and 2017, and vehicle expenses for 2015–2017 but had to reduce the expenses for reimbursed amounts. Also, because the taxpayer testified he was unsure whether one of his employers had an employee reimbursement policy, the court held that he could not deduct the expenses incurred while working for that employer. Harwood, T.C. Memo. 2022-8 (2/15/22).
Musician's expenses disallowed as both personal and unsubstantiated
The Tax Court held that a taxpayer, who was in the music business and incurred expenses relating to traveling and performing on stage, was not entitled to numerous deductions taken on his Schedule C because he failed to substantiate the amount expended and/or failed to provide or establish any basis that would entitle him to a deduction in excess of what the IRS had already allowed. Among the expenses disallowed were costs relating to meals and entertainment, nail salon services, a fitness membership, health supplements, shoes and clothes worn on stage that were suitable for general wear, catering expenses, hair styling products, and subscriptions to Netflix, Apple Music, and Spotify. Sonntag, T.C. Summ. 2022-3 (2/17/22).
IRS issues applicable federal rates for March 2022
The IRS issued a ruling providing tables of various prescribed rates for federal income tax purposes for March 2022. Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFRs) for purposes of Sec. 1274(d); Table 2 contains the short-term, mid-term, and long-term adjusted AFRs for purposes of Sec. 1288(b); Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in Sec. 382(f); Table 4 contains the appropriate percentages for determining the low-income housing credit described in Sec. 42(b)(1) for buildings placed in service during March 2022 (although under Sec. 42(b)(2), the applicable percentage for non–federally subsidized new buildings placed in service after July 30, 2008, is not less than 9%); and Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of Sec. 7520. Rev. Rul. 2022-4 (2/15/22).
Voluntary disclosure preclearance request updated to focus on cryptoassets
The IRS issued a revised version of the form taxpayers use to make a preclearance request for the IRS to determine their eligibility to use the voluntary disclosure practice, a set of procedures by which they may avoid criminal prosecution for willful violation of tax laws by making a full and timely disclosure to IRS Criminal Investigations. The new form has an expanded reporting section and detailed instructions for reporting virtual currency, among other changes. Form 14457 (2/15/22) (see related news story).
PARTNERS & PARTNERSHIPS
IRS provides Schedule K-2 and K-3 relief for 2021
The IRS provided transition relief under which eligible passthrough entities will not have to file new Schedules K-2, Partners' Distributive Share Items — International, and K-3, Partner's Share of Income, Deductions, Credits, etc. — International, for tax year 2021. IR-2022-38 (2/16/22) (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.