Document Summaries for the week of June 20, 2022
Tax document summaries for the week of June 20–24, 2022, covering employee benefits, international, and more.
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 2022-29 (6/21/22).
E-filing expanded to more Form 1040 series amended returns
The IRS announced that taxpayers are now able to file amended returns electronically in more of the Form 1040 series, including Form 1040-NR, U.S. Nonresident Alien Income Tax Return. IR-2022-130 (6/23/22) (see related news story).
US government contractor in Saudi Arabia entitled to foreign earned income exclusion
The Tax Court held that a U.S. taxpayer, who worked as a government contractor in Saudi Arabia but owned a home in the United States, was entitled to exclude from gross income his foreign earned income up to the applicable limitations for the 2016 tax year. The court found that the following facts supported its conclusion that the taxpayer's domestic ties in Saudi Arabia were stronger than those in the United States: (1) He continued to be employed in Saudi Arabia; (2) his employer recently described him as "highly valued," his performance as "excellent," and his role as "essential"; and (3) he has a fiancée in Saudi Arabia, who has been in Saudi Arabia for 30 years and is the manager of a local beauty salon. Morgan, T.C. Summ. 2022-10 (6/23/22).
Court imposes $5,000 penalty on taxpayer taking frivolous positions concerning not filing returns or paying taxes
The Tax Court upheld IRS deficiencies assessed against a taxpayer for failing to file returns for tax years 1989 through 2010 and failing to pay taxes for those years. The court also assessed a $5,000 penalty under Sec. 6673 for advancing frivolous arguments despite being warned by the court not to do so. Gilmartin, T.C. Memo. 2022-64 (6/23/22).
Court declines to impose penalty on recent converts to frivolous tax arguments
The Tax Court sustained IRS determinations of tax deficiencies against a couple who filed a joint return and failed to report any taxable income from the wife's employment. The court noted that while the couple pursued frivolous or groundless positions for not paying tax on the wife's income, the couple seemed to be "recent converts to the false faith of frivolous tax positions," and thus the court did not impose a penalty on them this time but did warn of future impositions of such penalties if the couple persisted with promoting frivolous positions for not paying taxes. Giannini, T.C. Memo. 2022-65 (6/23/22).
Supreme Court to decide whether FBAR penalty applies per form or per account
The Supreme Court granted certiorari to a case on appeal from the Fifth Circuit in which the appeals court had held that the maximum civil penalty per nonwillful violation of the requirement to file an FBAR is applied per unreported foreign account per year. A Ninth Circuit case had previously held the penalty applies per FBAR, not per account. Bittner, No. 21-1195 (U.S. 6/21/22) (cert. granted) (see related news story).
US corporations have FBAR filing requirement
The IRS Office of Chief Counsel advised that corporations have a foreign bank account report (FBAR) filing requirement. According to the Chief Counsel's Office, under 31 C.F.R. Section 1010.350(b) and Internal Revenue Manual Section 126.96.36.199.1, entities created, organized, or formed under U.S. laws have an FBAR filing requirement. CCA 202225008 (6/24/22).
IRS will not rule on Sec. 4980(c)(2) employer reversions
The IRS issued a revenue procedure stating that the IRS will not issue letter rulings on whether certain transactions result in an employer reversion within the meaning of Sec. 4980(c)(2). The procedure amplifies Rev. Proc. 2022-3, which sets forth areas of the Internal Revenue Code relating to issues on which the IRS will not issue letter rulings or determination letters. Rev. Proc. 2022-28 (6/21/22).
Tax Court finds that IRS timely rejected taxpayer's OIC
The Tax Court held that a taxpayer's offer in compromise (OIC) was rejected by the secretary of Treasury in November 2018 when an IRS collection specialist closed the file and returned the OIC to the taxpayer. According to the Tax Court, because the taxpayer's OIC was rejected by the secretary of Treasury within 24 months of submission, it was not deemed accepted under Sec. 7122(f), as the taxpayer had argued. Brown, 158 T.C. No. 9 (6/23/22).
National Taxpayer Advocate issues report to Congress
National Taxpayer Advocate Erin Collins issued her midyear report to Congress for fiscal year 2023. Objectives Report to Congress (6/22/22) (see related news story).
IRS posts Superfund excise tax FAQs
The IRS issued FAQs regarding the reinstated Sec. 4671(a) Superfund chemical excise tax, discussing what the tax is, how it is computed, and who may be liable for it. FS-2022-31 (6/24/22).
Superfund excise tax rates issued
The IRS announced the prescribed tax rates for 121 taxable substances that are subject to the Sec. 4671(a) Superfund chemical excise tax. IR-2022-132 (6/24/22).
IRS revokes organization's tax-exempt status
The IRS announced the revocation of an organization's tax-exempt status under Sec. 501(c)(3) for failure to meet the applicable Internal Revenue Code requirements. The IRS stated that contributions made to the organization by individual donors are no longer deductible under Sec. 170(b)(1)(A). Announcement 2022-12 (6/21/22).
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.