Document Summaries for the week of May 16, 2022
Tax document summaries for the week of May 16–20, 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, this 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 2022-25 (5/19/22).
IRS addresses tax treatment of employer donation programs relating to Ukraine war
The IRS issued a notice providing guidance on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the Russian invasion of Ukraine. The notice provides that (1) employer leave-based donation payments made by an employer before Jan. 1, 2023, to Sec. 170(c) organizations to aid victims of the Russian invasion of Ukraine (i.e., qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer, and (2) employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable). Notice 2022-28 (5/19/22) (see related news story).
No alimony deduction allowed where taxpayer was not required to pay his ex-wife
The Tax Court held that payments totaling $50,000 by a taxpayer to his ex-wife were not deductible as alimony on his 2017 tax return because the couple's divorce agreements as well as the divorce court's judgment stated that the taxpayer and the ex-wife would not make maintenance payments to each other. The court also upheld the IRS's imposition of an accuracy-related penalty after concluding that the taxpayer failed to show he had substantial authority for taking the alimony deduction. Ibrahim, T.C. Summ. 2022-7 (5/16/22).
Taxpayer's disability benefits are includible in taxable income
The Tax Court held that a taxpayer was required to include $88,391 of disability benefits received during 2011 in income because the benefits were a replacement for wages and were taxable as such because the premiums for the disability policy were paid with pretax, and not after-tax, dollars. The court also upheld IRS penalties assessed because of the taxpayer's failure to file his return and timely pay the tax due for the year at issue. Caldwell, T.C. Memo. 2022-51 (5/18/22).
IRS issues applicable federal rates for June 2022
The IRS issued a ruling providing tables of prescribed rates for federal income tax purposes for June 2022. Table 1 contains the short-term, midterm, and long-term applicable federal rates (AFRs) for purposes of Sec. 1274(d); Table 2 contains the short-term, midterm, and long-term adjusted AFRs for purposes of Sec. 1288(b); and 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 June 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. 2022-10 (5/16/22).
IRS issues third quarter interest rates for tax overpayments and underpayments
The IRS issued the rates for interest on tax overpayments and underpayments for the third calendar quarter of 2022, beginning July 1, 2022. The interest rates will be 5% for overpayments (4% in the case of a corporation), 5% for underpayments, 2.5% for the portion of a corporate overpayment exceeding $10,000, and 7% for large corporate underpayments. Rev. Rul. 2022-11 (5/20/22).
Chief Counsel provides guidance on Form 8821 and taxpayer authorizations
The Office of Chief Counsel advised that statutory notices of deficiency issued under Sec. 6212 can and should be released per the taxpayer's authorization on a Form 8821, Tax Information Authorization. The Chief Counsel's Office also noted that a taxpayer can designate an entity as their designee on Form 8821. CCA 202220015 (5/20/22).