Document summaries for the week of Jan. 10, 2022
Tax document summaries for the week of Jan. 10–14, 2022, covering individuals, IRS procedure, and more.
Best way to extend certain Form 5500 cases is to use standard Form 872-H and Form 56
The Office of Chief Counsel advised that, after careful consideration, it determined that the best way to extend the statute-of-limitation period in certain cases involving Form 5500, Annual Return/Report of Employee Benefit Plan, is to use the standard Form 872-H, Consent to Extend the Time to Assess Tax on a Trust, and Form 56, Notice Concerning Fiduciary Relationship. According to the Chief Counsel's Office, the forms should be signed by the signatories of the relevant Forms 5500, the name listed as the trust name should be the name of the trust as it appears on the Form 5500, and the signatory just needs to be an entity of the trust listed on the Form 5500. CCA 202202012 (1/14/22) (see the clarification immediately below).
Chief Counsel clarifies prior response
In a short one-sentence clarification of a prior communication, the Office of Chief Counsel advised that Forms 872-H, Consent to Extend the Time to Assess Tax on a Trust, and Form 56, Notice Concerning Fiduciary Relationship, would be filled out "as typical," and no signature from the special trustee or mention of a subtrust is needed. CCA 202202013 (1/14/22).
Employer cannot recoup income taxes paid to IRS and considered withheld from employee
The Office of Chief Counsel was asked to advise on whether an employer is eligible to receive a refund of income tax withholding paid on behalf of an employee on a foreign assignment in a year after the calendar year in which the employer paid remuneration to which the income taxes are attributable, in a situation where the employer uses a tax equalization program to adjust the employee's pay so that the employee will have no net economic gain or loss with respect to tax liability because of the foreign assignment, and pays the income tax withholding attributable to the employee's adjusted pay. The Chief Counsel's Office concluded that, when an employer pays an employee on a foreign assignment a stated amount of remuneration that is subject to income tax withholding under Sec. 3402, and pays the income tax withholding attributable to the remuneration on behalf of the employee, then the income taxes the employer pays to the IRS are considered withheld from the employee and thus may not be refunded to the employer after the calendar year in which the wages were paid. CCA 202202010 (1/14/22).
ESTATES, TRUSTS & GIFTS
Chief Counsel addresses timing of statute of limitation on a delinquent Form 706
The Office of Chief Counsel was asked to advise on when the statute of limitation for a delinquent Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, begins to run. The Chief Counsel's Office noted that, under the holding in Winnett, 96 T.C. 802 (1991), the assessment statute would not begin until the delinquent Form 706 has been received by the Kansas City Service Center consistent with the instructions on IRS.gov; but the Chief Counsel's Office also noted that it is possible a court could find the running of the assessment statute to have begun when the return is filed in accordance with the Form 706 instructions. CCA 202202011 (1/14/22).
IRS updates child tax credit FAQs
The IRS updated the frequently asked questions on its website concerning the child tax credit and advance payments of the credit. 2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently Asked Questions (1/11/22) (see related news story).
Doctor's condo failed to qualify for office expense deduction
The Tax Court held that an emergency room doctor could not deduct 50% of his condominium expenses as office expenses because (1) his office was not a separate structure from his dwelling unit; (2) the doctor did not meet with patients in his office; (3) the only home office meetings the doctor had were with IRS agents; and (4) the doctor did not submit any contracts from the hospital showing he did not have office space or submit any other documentation that office space was needed for his job. The court also found that the doctor was not entitled to deductions for travel, including a trip to Cairo for a seminar, and car and truck expenses because those deductions failed to meet the strict substantiation requirements of Sec. 274(d). Elbasha, T.C. Memo. 2022-1 (1/12/22).
FAQs address calculation and reconciliation of recovery rebate credit
IRS provides additional relief from certain residential housing project requirements
The IRS issued guidance that provides temporary relief from certain requirements under Sec. 42 for qualified low-income housing projects and under Sec.142(d) and Sec. 147(d) for qualified residential rental projects. In response to the continuing COVID-19 pandemic and precautions necessitated by new disease variants, the guidance provides new relief and extends the temporary relief for certain requirements addressed in Notice 2021-12. Notice 2022-5 (1/11/22).
IRS announces start of tax season
National Taxpayer Advocate issues annual report
The National Taxpayer Advocate released her 2021 annual report, assessing the IRS's performance in serving taxpayers and protecting their rights, identifying the most serious problems in federal tax administration, and highlighting the Taxpayer Advocate Service's operations. Annual Report to Congress (1/12/22) (see related news story).
Penalty approved by IRS examiner's immediate supervisor meets Sec. 6751 criteria
The Tax Court held that the IRS complied with Sec. 6751 in assessing penalties on a taxpayer with respect to disallowed charitable contribution deductions relating to a conservation easement. According to the court, even if the individual who signed off on the penalty somehow lacked authority to serve as the IRS examiner's "acting team manager," she properly approved the penalty determinations as his "immediate supervisor." Long Branch Land, LLC, T.C. Memo. 2022-2 (1/13/22).
IRS establishes fast-track program for certain private letter rulings
The IRS issued a revenue procedure that establishes an 18-month pilot program to provide an opportunity for fast-track processing of certain requests for letter rulings solely or primarily under the jurisdiction of the Associate Chief Counsel (Corporate). According to the IRS, if a request for fast-track processing is granted, the IRS will endeavor to complete processing of the letter ruling request and, if appropriate, to issue the letter ruling within the time period specified by the branch reviewer (specified period), and that specified period will be 12 weeks unless a shorter or longer period is requested and granted pursuant to the revenue procedure. Rev. Proc. 2022-10 (1/14/22).
Chief Counsel offers assistance on statute-of-limitation issue
The Office of Chief Counsel advised that, following the end of the period during which Sec. 7507(a) bars assessment because a bank was insolvent, the IRS has the number of days remaining in the assessment period before the bar on assessment became effective, plus the additional 90-day suspension of the limitation period specified in Sec. 7507(c)(4), to assess the tax previously barred from assessment. According to the Chief Counsel's Office, if Sec. 7507(a) barred assessment as of the deemed filing date of the return, then beginning when assessment becomes allowed, the IRS has the full three years under Sec. 6501(a) plus the 90 days under Sec. 7507(c)(4) to assess. CCA 202202014 (1/14/22).