The past year featured a large number of tax developments, some of which got extensive coverage in the media, and many of which got less coverage but affect almost all taxpayers and practitioners. As we get ready to welcome a new year, here’s a look back at the most important
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IRS Practice & Procedure
IRS Announces Automation of Taxpayer Resources, Start of Business Filing Season
The IRS announced on its website that, beginning in 2014, it will stop providing a number of taxpayer assistance services in person or over the phone and will shift those services online.
Senate Confirms John Koskinen as IRS Commissioner
The Senate on Friday voted 59–36 to confirm the nomination of John Koskinen to be the next IRS commissioner.
2014 Filing Season to Start Jan. 31
The IRS has finally announced an official start date for the 2014 filing season: It will start accepting returns on Jan. 31. This date is 10 days later than the originally planned starting date of Jan. 21.
Final Rules Permit Agents to Withhold FUTA for Home Care Service Recipients
The IRS issued final regulations permitting an agent authorized by the IRS under Sec. 3504 to perform certain acts normally required of employers to withhold FUTA taxes owed by home care service recipients.
Numerous Provisions Expire at Year End
Practitioners should be aware that dozens of credits and other tax incentives are expiring Dec. 31 and should prepare their clients accordingly.
Supreme Court Resolves Circuit Split on 40% Gross Valuation Misstatement Penalty
The Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero.
Six-Year Statute of Limitation for Substantial Omissions of Income
The IRS has indicated that an estimated amount of flowthrough S corporation K-1 income did not constitute proper disclosure and therefore the taxpayer’s return was subject to an extended six-year statute of limitation due to a substantial omission of income.
Post-Windsor FICA Refund Procedures
The IRS announced procedures employers should follow for filing refund claims for overpaid FICA and income taxes paid on employer-provided benefits for same-sex spouses that, because of the Windsor decision, are now tax free.
Heightened Emphasis on Worker Classification
Worker classification has been a major concern for many years. While it is clear that government agencies recognize that worker misclassification is a significant problem, how to classify workers remains unclear.
IRS Abused Discretion by Not Considering Taxpayer’s Offer-in-Compromise
The Tax Court held that the IRS had abused its discretion by closing a taxpayer’s case one day after a deadline passed for him to furnish certain documents related to his proposed offer-in-compromise.
TIGTA Report Says IRS Should Do a Better Job Protecting Taxpayer Data
The IRS does not do a good job of correcting security weaknesses, thereby failing to protect taxpayer data, TIGTA concluded in a report released Thursday.
For Penalty Calculation, Amount of Tax Shown on Return Reduced by Credits, Tax Court Holds
The Tax Court held that the amount of tax shown on the taxpayers’ return was reduced by refundable credits, but not below zero, for purposes of calculating the Sec. 6662(a) accuracy-related penalty.
Tax Return Preparers Suspected of Filing Inaccurate EITC Claims to Be Targeted by IRS
The IRS announced in an email to tax practitioners that it will send letters in November and December to return preparers “suspected of filing inaccurate EITC claims.”
Permanent Injunction Closes Large Tax Preparation Firm
A federal district court in Ohio has issued a permanent injunction ordering ITS Financial LLC, the parent company of Instant Tax Service tax franchiser, to cease operations.
IRS Extends Fast-Track Settlement to Smaller Businesses Nationwide
Formerly available only to large and midsize businesses and in a geographically limited pilot program for smaller entities, the IRS’s Fast Track Settlement program is now available to smaller businesses nationwide, the IRS announced.
IRS Will Recognize All Legal Same-Sex Marriages
The Treasury Department and IRS announced that “same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.”
“Credit Ratings” Removed From Regulations
The IRS issued final regulations that remove all references to and all requirements of reliance on “credit ratings” from Treasury regulations.
User Fees for Installment Agreements and Offers in Compromise to Go Up
The IRS issued proposed regulations to raise user fees for installment agreements and for offers in compromise.
IRS Oversight of CPAs Who Provide Valuation Services
With the enactment of Sec. 6695A, the IRS was given new responsibilities to ensure the quality of appraisals and appraisers who provided information in support of a taxpayer’s federal tax filings.
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