2024 Fall Q & A Summary
Please note that our answers are based on the small amount of information presented. There could be issues where additional information, if available may change some of the answers provided.
General Questions
What if you cannot obtain a copy of your check from the bank. The Bank said the checks are e-checks and only get notices.
The bank statement for most banks now state the entity when the amount taken from the bank account. This would be evidence of payment but will not help the IRS identify to whom the payment was credited.
Have you had any experience with an energy credit exam? How much detail does the Service ask for?
Not yet, but I imagine the Information Document Request will include many of the issues mentioned under the law.
My client received a failure to deposit payroll taxes timely and was a monthly depositor. He was actually paying the deposits by the end of the payroll month instead of by the end of the following month. He is paying for them early. It seems like the IRS has somehow confused the month that the payroll tax deposits relate to. Would sending in Form 941, payroll dates and proof of EFTPS payments be all that is needed to resolve the issue?
Yes, that should do it. I assume they did not fill out Schedule B of the 941. Send in verification of deposits and date of the payroll time frame, which should fix the issue.
We amended 2020 1040 prior to the April 15, 2024, deadline due receipt of an amended K-1 for the ERC. IRS rejected the return saying it was past the amended return filing deadline. Why? Did the amended return need to be filed, within 3 years of the original filing date of the return?
Yes, the return should have been filed within the assessment date. The 2020 amended due should have been due by May 17, 2024. You should have had time to file an amended return. Any return filed before April 15, 2020, would have an April 15 statute date. Was there a problem with the ERC being valid? IRS may be wrong here.
Practice in Tax Court?
You have to take a test to be admitted in tax court or be an attorney or represent yourself. There are very few non attorneys who have been admitted to practice in Tax Court. A non-attorney applicant must, by means of a written examination given by the Court, satisfy the United States Tax Court that the applicant possesses the requisite qualifications to provide competent representation before the Court.
Do you have to be an attorney to petition tax court?
Yes, unless you have passed a test for admission, see above.
You may file a petition with the Tax Court even if you do not have a representative. You may also present your case to a Judge without being represented by a third party. If you decide to file a petition and to proceed to trial without a representative, you must pay close attention to all the Tax Court orders and notices you receive, and all the instructions provided. A petitioner who is not represented is still required to abide by the Tax Court Rules of Practice and Procedure (Rules).
https://www.ustaxcourt.gov/resources/forms/Admission_Nonattorney_Info.pdf
How do I update my address with the CAF unit for POAs? The POA lists my new address, but the IRS keeps mailing my letters to my old firm address.
Write a letter to the unit that you normally send your POA’s to requesting change of address on CAF documents. The three units are at the link above.
When do we renew our PTINs?
In Mid-October, the cost this year is $19.75.
Does IRS get information from Social Security about someone dying?
Yes, the funeral home will make notifications to the Social Security Administration who will then make notification to IRS.
Why Should We Not Use a Deposit Form for Banking Information?
The deposit slip often has a different routing number.
Has anyone heard if the IRS is going to require practitioners to submit a WISP while renewing your PTIN?
It would not surprising if the IRS has a check box asked whether your firm has a WISP in place before issuing you your PTIN? We have not heard that issue but will keep our ear to the ground.
Do they prosecute the false identity filer?
Depends on the facts and circumstances. Was it a one-time issue, probably not. If it was several hundreds of returns, yes if IRS can catch them and find them.
If USPS could not deliver check to address on file, then how does letter of returned check delivered by the postal service?
The postal service cannot distinguish between a social security check and a tax refund check as they are both sent in similar envelopes. A social security check cannot be forwarded, by law but a letter from IRS can. IRS may send out a notice concerning the undeliverable check, asking for address. If the address is correct, then IRS has to “cycle” the check to be issued once again. If IRS does not “cycle” the check just sits there, and a phone call will be necessary.
Will the employee business expenses be back? Mileage, uniforms, union dues etc.?
The TCJA will sunset, and the 2% Misc Itemized deductions will return UNLESS Congress makes future changes.
You close your tax business; can you shred all tax returns, as long as they are on your computer?
Yes, as long as you have necessary information.
If I filed an extension for a client in 2023 for a 2022 return and the client failed to bring me his information to complete the return, am I on the hook for them not filing?
No, taxpayer is responsible for filing of their return. Furthermore, they did not bring you all information to prepare a complete and accurate tax return.
Where can we find the 2024 draft forms and schedules in one place?
https://www.irs.gov/draft-tax-forms
Is the IRS up to date on putting the filings online? Non-Profit filings.
No, I am seeing gaps upon reinstatement of a tax-exempt entity and gaps with years filed.
Can a liquidating nonprofit with under $50,000 in assets file a 990 N in their final year?
An organization required to file an annual return or notice will indicate its termination on its annual return or notice as summarized below:
Return/report required | How to report |
Form 990-N (e-Postcard) | Answer yes to question asking whether organization has terminated or has gone out of business. |
Form 990 or 990-EZ | Check Terminated box in header of return (Item B) and provide the information described below. |
Form 990-PF | Check Final return box in header of return (Item G) and provide the information described below.
Note: For the purposes of this discussion, “termination” means a complete cessation of activities. For a discussion of the termination of private foundation status under section 507, see Termination of Private Foundation Status. |
If you were required to file an annual return or notice, and lost your tax-exempt status for failure to file a required return or notice for 3 consecutive years, you can provide notice to the IRS that you will terminate by following the procedure described for Organizations that did not file for tax-exempt status.
What is the best way to get a replacement ID PIN #. Clients complain they cannot get one.
Call 800-908-4490. They are usually good at helping get this resolved.
What was that number: Collection due process: Form 12153
Correct Form is 12153.
Where does prior (fired) client confidentiality end when the prior client is truly grossly & knowingly violating tax laws and should be reported to the IRS?
This one is difficult. I would document the firing, date, what led up to firing and other essential information. You would be responsible to all returns filed by you for the client, based on the information provided. IRS would look at the facts and circumstances of the issue when considering a tax preparer penalty.
What about if someone withdrew 100,000 to pay for their spouses long term care? The spouse that withdrew the money is still working.
This question was related to the new Inflation Reduction Act provisions where you could withdraw up to $2,500 annually to pay long term care expenses. This provision allows an individual under age 59 ½ to withdraw $2,500 annually from a retirement plan to pay for long term care insurance without incurring the 10% penalty.
So, this does not apply based on your question. Therefore, if a person was to take out $100,000 to pay for long-term care, they would receive a Form 1099 R which would be taxable. Any expenses not covered by insurance could be medical expenses and deductible on Schedule A.
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Gift Tax
Are payments made by a third party for day care costs, student loans or rent,
if paid by a third party considered gifts.
This question was originally answered wrong, and we e-mailed our gift tax individual for clarification on the issue. Yes, these would be considered gifts to the recipient. |
Is Crummey gifting still available?
Yes, the Crummey Trust continues to be a viable option for families wishing to make lifetime gifts to their beneficiaries while maintaining control over the assets and avoiding gift taxes.
Are payments made by grandparents for childcare paid directly to provider considered gifts?
Yes
Gifts to Anyone Except your employees? Correct?
That is correct, but you can give employees up to a $25.00 gift annually with no taxability. The $25.00 cannot be in any form that is easily converted to cash, like a gift card etc. Ex: Turkey or Ham during the holiday.
For 5-year gift splitting. Is it future gifts or past? What if the taxpayer dies after year one?
Only one year would apply. Check out slide 43 in the power point presentation. You would file each year for the 5-year period.
How old can appraisals be for gifts?
Based on what I can find in research, Appraisals completed prior to the actual donation of the gift are limited to the date of the report, and only considered valid by the IRS up to no more than 60 days prior to the date of donation.
Form 709, were you saying that the form should be filed even when any gifts for the year are within the exemption amount? Also, should a 709 be filed when a gift is from spouses’ joint account and is presumably from both people and is within the sum of their annual exemption amount?
If you stay within the annual $18,000 exemption no gift tax return is required. For a married couple it would be $36.000.
If the donor of the gift is married, gifts to donees made during a year can be treated as split between the spouses, even if the cash or gift property is actually given to a donee by only one of them.
By gift-splitting, therefore, up to $36,000 in 2024 can be transferred to each donee by a married couple because their two annual exclusions are available.
Thus, for example, a married couple with three married children can transfer a total of $216,000 in 2024 to their children and the children’s spouses ($36,000 for each of six donees).
I understand the exemption available. In your example, where the gifts are all within the exemption limits, would a 709 have to be filed?
Generally, no but in some we are more concerned about leaving a better trail.
If a client paid $50k in cash for college tuition is there a way she can get a credit for it?
It would be a gift and gift tax return would be required as it exceeds the $18,000 exclusion.
Is a marital deduction relevant in a marital property state?
Yes
Community income is income from:
- Community property;
- Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state; and
- Real estate that is treated as community property under the laws of the state where the property is located.
The marital deduction applies regardless of how the property or assets are passed on to the other spouse. This can include beneficiary designation, intestacy or any other method. However, there are other requirements that determine if the marital deduction applies.
Foremost is that the involved individuals are married. After that, you need a surviving spouse. Said spouse must inherit the property. This property must come from the decedent’s, or transferor’s, gross estate, and it has to be transferred directly. It cannot be a terminable interest.
An example of a terminable interest would be if the transferor left the assets to their surviving spouse but with a lifetime limit. That would turn the property into a life estate, which the beneficiary cannot leave to anyone after their own passing.
However, an exception to the outright transfer is qualified terminable interest property (QTIP). A QTIP is an irrevocable trust that allows the grantor to provide for the spouse but still ensure that the assets pass on to certain beneficiaries following the surviving spouse’s death.
You should take note that if you intend to use the marital deduction, your partner’s lifetime exemption will be lost. That is because it cannot be transferred to the surviving spouse. And this can create a problem for larger estates since the surviving spouse only has their own exemption value to protect the combined assets.
Will the kids have to pay taxes if they are gifted funds from the parents?
No, the recipient of the gift does not pay tax.
Can I elect to pay GST on a gift tax return, even if the annual exemption covers the gift up?
No GST tax applies, and you typically do not need to file 709 if within annual exclusion, you can elect to apply a portion of your GST exemption to the gift, even if it falls within the annual exclusion limit. This election can be beneficial for managing your GST exemption and minimizing future tax liabilities.
Client creates a will/trust and sets the farm sale price to heir/beneficiary at a set price – usually below market. What is the tax consequence to the estate/trust for selling the farm for less than FMV at death?
If truly a gift, basis would be cost at time of sale even after death. If gifting, you will lose the step-up basis. Basis will be lower of Cost or FMV at time of gift. This number will be your basis at time of sale, even after death, if it was a true gift and transfer of title.
How about if my client uses up $8 million dollars of the 13.6 million exemption and the US reduces the exemption to $7 million, will my prior gift burn into the new $7 million exemption?
No, in 2019, the IRS created the No Claw-Back Rule that says the higher exclusion amount will remain in effect if death happens after 2025. This is current law, but Congress could change at any given time.
There are exceptions to the treatment provided for in the new proposed claw back regulations:
- First, transfers where the value of the taxable portion of the transfer did not exceed 5 percent of the total transfer are ignored under the new proposed claw back regulations and such transfer receives the preferential treatment under the 2019 regulations.2 For example, this de minimis rule likely applies to grantor retained annuity trusts (GRATs) or other lifetime transfer where the taxable portion of the gift is 5 percent or less of the amount transfer and the donor does not survive the term. Suppose, for example, a client creates a $10 million GRAT with a taxable portion of $500,000 or less, this transfer would qualify under the de minimis rule.
- Second, the preferential treatment under the 2019 regulations continues to apply to transfers, relinquishments, or eliminations that occur within 18 months of the date of the donor’s death effectuated by the termination of the durational period described in the original instrument of transfer by either the mere passage of time or the death of any person.
A tax claw back agreement is an arrangement whereby the tax benefits received from a given venture are reinvested into that venture to cover cash shortages. A tax claw back is just one of many similar arrangements that cover various distributions such as profits, dividends, or even stock distributions.
If mom and dad make a gift to a child in excess of the annual exclusion, do both the mom and dad have to file gift tax returns, or is only one gift tax return required for both mom and dad?
Depends on if they select gift splitting or each want to make their own gift.
If splitting, they only need to file one Form 709. If not, each would file their own return.
How about a parent paying for their daughter’s wedding?
Effectively it is technically a gift if over $18,000 or $36,000 if electing joint consent with spouse.
If no gift tax return has been filed, what proof would be needed to claim full gift tax exclusion by the other spouse?
Not sure what you are asking here. Penalties from the IRS could happen if they found out a 709 should have been filed and was not. I would suggest filing a 709 just to get caught up. If no excess is gifted, then whatever the full amount for that individual is used. If DSUE is needed, 706 must be filed to get the carryover amount.
Why do people do gift splitting?
So, they can double the amount gifted without writing separate checks for the separate amounts.
Gift limitation when parents give to their children.
2024, $18k per parent per kid without having to file Form 709.
How does the GST gift tax differ from the regular gift tax?
The GST tax is separate from, and in addition to, the estate tax. The tax is calculated at a flat rate of 40% (equal to the estate and gift tax rate) on transfers above the lifetime GST tax exemption amount ($13.61 million per individual in 2024).
What is the basis of depreciated gifted property? Does the depreciation taken by the donor effect basis to the donee.
Depreciation Basis is the lower of Donors Cost or FMV at time of Gift.
I have a question that is a bit advanced so feel free to answer after the webinar if you happen to have advice. We need to amend a 2021 gift tax return to include a gift to a SLAT that was not originally recorded. The return was filed but this specific gift was mistakenly excluded. We are unsure of the effect this has on the automatic election of GST exemption. Is this considered a late allocation of GST exemption and therefore we must increase the trust value to the value on the date we file the return? Or can we simply amend the return and include the gift at its original value?
You are sending this information to Claudine, and we will respond directly to you.
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Rejects
Partnership and S-Corp returns get 10 days to resubmit or paper-file.
Based on research this is correct, but in reviewing Publication 4163 the reject procedures are not as clearly stated. Publication 4163 appears to be for business and Publication 4164 appears to be for Individual returns.
When a return is rejected the tax preparer is allowed a fixed number of days to retransmit the return once corrections have been made. Any taxpayer who receives a rejected e-filed tax return in the 1040 series has a rejection grace period of 5 calendar days after the official filing deadline (usually April 15) to retransmit the return or extension.
Form | E-filed returns | E-filed extensions |
1040 | 5 calendar days | 5 calendar days |
1041 | 5 calendar days | 5 calendar days |
1120* | 10 calendar days | 5 calendar days |
1065* | 10 calendar days | 5 calendar days |
990 | 10 calendar days | 5 calendar days |
5500 | N/A** | N/A** |
I only provided the general 5 days information in the session, my mistake and did not check the business publication. Publication 4163 (Business Returns) states:
Resubmission of Rejected Applications for Filing Extensions
If the IRS rejects the application for a filing extension, and the rejection cannot be corrected and retransmitted, the Provider must take reasonable steps to inform the taxpayer of the rejection within 24 hours of receiving the acknowledgement.
When the Provider advises the taxpayer that the extension has not been accepted, they must provide the taxpayer with the Business Rule explanation.
- If the electronic application for a filing extension can be re-transmitted, it must be filed by the due date of the return or five calendar days after the date the IRS gives notification the application for extension was rejected, whichever is later.
- If the electronic application for a filing extension cannot be accepted for processing electronically, the taxpayer must file a paper application for an extension. In order to be considered timely, the paper application must be filed by one of the two, whichever is later:
- The due date of the filing extension, or five calendar days after the date the IRS gives notification the extension was rejected.
- The paper application for a filing extension should include an explanation of why it is being filed after the due date and include a copy of the electronic rejection notification.
Business Returns 1120 and 1065 as well as 990
When a return is rejected, there is a 10-day Transmission Perfection Period to perfect that return for electronic re-transmission. The perfection period will be ten calendar days for any business return. For Form 7004 and 8868, which are applications for filing extensions, the perfection period is five calendar days.
Individual Returns 1040 and 1041 – Publication 4164
The following transmission dates pertain to individual returns:
- April 20, 2024 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with effectively connected income)
- June 22, 2024 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with non-effectively connected income) and/or Form 4868 extensions to meet overseas exception and Form 2350
- October 20, 2024 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with effectively connected income) on extension from Form 4868.
Resubmission of Rejected Tax Returns
If the IRS rejects the electronic portion of a taxpayer’s individual income tax return for processing, and the ERO cannot fix the reason for the rejection, the ERO must take reasonable steps to inform the taxpayer of the rejection within 24 hours.
When the ERO tells the taxpayer that it has not filed the return, the ERO must provide the taxpayer with the business rule(s) accompanied by an explanation. If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the IRS, or if the IRS cannot accept the return for processing, the taxpayer must file a paper return.
To timely file the return, the taxpayer must file the paper return by the later of the due date of the return or ten calendar days after the date the IRS gives notification that it rejected the electronic portion of the return or that the return can’t be accepted for processing.
Taxpayers should include an explanation in the paper return as to why they are filing the return after the due date.
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BOI Issues – Corporate Transparency Act – www.FinCen.gov
Our office has notified our clients who we are aware need to comply with Corporate Transparency Act B.O.I. Will I.R.S. send letters to notify taxpayers new to our office that we may not be know, need to comply with B.O.I.?
Remember this is FinCen not IRS. I know of no plans for FinCen at this time to do any notifications via letter.
If I use my driver’s license for BOI, do I have to update the number when the license renews?
Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.”
If we provided a letter to our clients inform them of this requirement but are not doing it for them, can we be held liable if the client fails to follow through?
- CTA is administered by FinCEN and establishes a database of companies’ beneficial ownership information to be used for law enforcement purposes.
- Professional liability claims related to CTA may be severe as the statutory penalties for noncompliance with CTA can be significant.
- Even if a tax professional is not engaged or has affirmatively declined to provide services related to CTA, they should be careful not to provide off-the-cuff advice on which the client may rely to their detriment.
- Unless specifically engaged to provide CTA assistance under a separate engagement letter, include a provision in all engagement letters, regardless of service, disclaiming a responsibility to do so. Sample below.
Corporate Transparency Act/Beneficial Ownership Reporting
Assisting you with your compliance with the Corporate Transparency Act (“CTA”), including beneficial ownership information (“BOI”) reporting, is not within the scope of this engagement. You have sole responsibility for your compliance with the CTA, including its BOI reporting requirements and the collection of relevant ownership information. We shall have no liability resulting from your failure to comply with CTA. Information regarding the BOI reporting requirements can be found at https://www.fincen.gov/boi. Consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant ownership information.
Why is this provision important to include in all engagement letters? A client may face many risks arising from their noncompliance with CTA beyond fines and penalties, some of which may be unforeseeable, and the client may blame the tax professional for not advising them of these risks. Including a disclaimer such as this can help make it clear to the client that they should not expect advice on this topic.
- Tax Professionals should evaluate what, if any, assistance their firm may provide related to a client’s CTA compliance and understand the related risks, including how the firm’s professional liability policy may respond to claims stemming from CTA services.
- Caution should be exercised before agreeing to provide any services related to CTA. If a CPA decides to provide CTA services, professional liability risks associated with assisting a client with their CTA reporting requirements may depend on the nature or depth of the assistance provided.
- Managing your professional liability risk should include a combination of technical competence, thorough client vetting and acceptance, a strong, concise engagement letter, documenting client discussions, and consultation with knowledgeable professionals.
If a company closed in 2024, do we need to file the BOI?
You would need to file a final return, for 2024, the year the business closes.
Since it did conduct business in 2024/existence in 2024 they would have to file.
FinCEN launched the BOI E-Filing website for reporting beneficial ownership information (https://boiefiling.fincen.gov) on January 1, 2024.
- A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial BOI report.
- A reporting company created or registered in 2024 will have 90 calendar days to file after receiving actual or public notice that its creation or registration is effective.
- A reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
If a reporting company created or registered in 2024 or later winds up its affairs and ceases to exist before its initial BOI report is due to FinCEN, is the company still required to submit that initial report?
Yes. Reporting companies created or registered in 2024, no matter how quickly they cease to exist thereafter, must report their beneficial ownership information to FinCEN within 90 days of receiving actual or public notice of creation or registration.
Reporting companies created or registered in 2025 or later, no matter how quickly they cease to exist thereafter, must report their beneficial ownership information to FinCEN within 30 days of receiving actual or public notice of creation or registration.
These obligations remain applicable to reporting companies that cease to exist as legal entities—meaning wound up their affairs, ceased conducting business, and entirely completed the process of formally and irrevocably dissolving—before the expiration of the 30- or 90-day period reporting companies have to report their beneficial ownership information to FinCEN.
If a reporting company files an initial beneficial ownership information report and then ceases to exist before the expiration of the 30- or 90-day period reporting companies have to report their beneficial ownership information to FinCEN, then there is no requirement for the reporting company to file an additional report with FinCEN noting that the company has ceased to exist.
Can we request late filing BOI filing penalty abatements?
As for whether First Time Penalty Abatement applies to BOI reporting – we are reporting to FinCen not the IRS. We will have to see how FinCen will handle late filings.
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. FinCen will have to prove willfulness.
With respect to CTA, what is the filing due date if the business was formed during 2024.
If a business was formed during 2024 under the Corporate Transparency Act (CTA), the filing due date for their initial Beneficial Ownership Information Report (BOIR) is within 90 days of the date of formation or registration.
One other question regarding the CTA, isn’t it true that the filing requirement do not apply to sole proprietorships?
Yes, that is true. Unless a sole proprietorship was created (or, if a foreign sole proprietorship, registered to do business) in the United States by filing a document with a secretary of state or similar office.
An entity is a reporting company only if it was created (or, if a foreign company, registered to do business) in the United States by filing such a document.
Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company.
If the Sole Proprietorship is an LLC – they have a BOI reporting requirement.
Please Note: If a domestic corporation or limited liability company is not created by the filing of a document with a secretary of state or similar office, is it a reporting company?
No. While FinCEN’s BOI reporting regulations define a domestic reporting company as including a corporation or limited liability company, the inclusion of those entities is based on an understanding that domestic corporations and LLCs are generally created by the filing of a document with a secretary of state or similar office. In an unusual circumstance where a domestic corporation or limited liability company is created, but not by the filing of a document with a secretary of state or similar office, such an entity is not a reporting company.
Is SM LLC set up in 2024 to be reported on Sch C required to file BOI report?
Yes, with 90 days of formation.
On the same line, is a 100% owned LLC by S Corp supposed/required to file BOI report?
Yes
Do we need to update BOI to add another shareholder? File a new BOI including all shareholder?
Yes, update the new shareholder and remove any non-shareholders.
If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.
A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant.
The following are some examples of the changes that would require an updated beneficial ownership information report:
- Any change to the information reported for the reporting company, such as registering a new business name.
- A change in beneficial owners, such as a new CEO, or a sale that changes who meets the ownership interest threshold of 25 % (see Question D.4 for more information about ownership interests).
- Any change to a beneficial owner’s name, address, or unique identifying number previously provided to FinCEN. If a beneficial owner obtained a new driver’s license or other identifying document that includes a changed name, address, or identifying number, the reporting company also would have to file an updated beneficial ownership information report with FinCEN, including an image of the new identifying document.
Is an updated BOI report required when the type of ownership interest a beneficial owner has in a reporting company change?
No. A change to the type of ownership interest a beneficial owner has in a reporting company—for example, a conversion of preferred shares to common stock—does not require the reporting company to file an updated BOI report because FinCEN does not require companies to report the type of interest. Updated BOI reports are required when information reported to FinCEN about the reporting company or its beneficial owners changes.
If a reporting company needs to update one piece of information on a BOI report, such as its legal name, does the reporting company have to fill out an entire new BOI report?
Updated BOI reports will require all fields to be submitted, including the updated pieces of information. For example, if a reporting company changes its legal name, the reporting company will need to file an updated BOI report to include the new legal name and the previously reported, unchanged information about the company, its beneficial owners, and, if required, its company applicants.
A reporting company that filed its prior BOI report using the fillable PDF version may update its saved copy and resubmit it to FinCEN. If a reporting company used FinCEN’s web-based application to submit the previous BOI report, it will need to submit a new report in its entirety by either accessing FinCEN’s web-based application to complete and file the BOI report, or by using the PDF option to complete the BOI report and upload to the BOI e-Filing application.
Can a filer submit a late updated BOI report?
An updated BOI report can be submitted to FinCEN at any time. However, the reporting company is responsible for ensuring that updates are filed within 30 days of a change occurring. If a reporting company has engaged a third-party service provider to file BOI reports and updates on its behalf, then it should communicate any changes to its beneficial ownership information to the third-party service provider with enough time to meet the 30-day deadline.
I thought I read in the FinCen Q&A, that you did need to file a final BOI when you ended your entity. Need to indicate that your now exempt.
FinCEN does not require the Reporting Company to file an additional report noting that the company has ceased to exist.
When Does a Company ‘Cease to Exist’?
Although FinCEN defers to the laws of the jurisdiction where the company was created or registered, a company ceases to exist when it has entirely completed the process of formally and irrevocably dissolving.
Although state or Tribal law may vary, some examples of a completed dissolution process include:
– Filing dissolution paperwork with the jurisdiction of creation or registration;
– Receiving written confirmation of dissolution;
– Paying related taxes or fees;
– Ceasing to conduct any business; and
– Winding up all affairs (i.e., fully liquidating the company and closing all bank accounts).
Companies that are administratively dissolved or suspended generally do not cease to exist as a legal entity unless the dissolution or suspension becomes permanent.
- 13. Is a company required to report its beneficial ownership information to FinCEN if the company ceased to exist before reporting requirements went into effect on January 1, 2024?
A company is not required to report its beneficial ownership information to FinCEN if it ceased to exist as a legal entity before January 1, 2024, meaning that it entirely completed the process of formally and irrevocably dissolving. A company that ceased to exist as a legal entity before the beneficial ownership information reporting requirements became effective January 1, 2024, was never subject to the reporting requirements and thus is not required to report its beneficial ownership information to FinCEN.
Although state or Tribal law may vary, a company typically completes the process of formally and irrevocably dissolving by, for example, filing dissolution paperwork with its jurisdiction of creation or registration, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business, and winding up its affairs (e.g., fully liquidating itself and closing all bank accounts).
If a reporting company (see Question C.1) continued to exist as a legal entity for any period of time on or after January 1, 2024 (i.e., did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024), then it is required to report its beneficial ownership information to FinCEN, even if the company had wound up its affairs and ceased conducting business before January 1, 2024.
Similarly, if a reporting company was created or registered on or after January 1, 2024, and subsequently ceased to exist, then it is required to report its beneficial ownership information to FinCEN—even if it ceased to exist before its initial beneficial ownership information report was due.
For specifics on how to determine when a company ceases to exist as a legal entity, consult the law of the jurisdiction in which the company was created or registered. A company that is administratively dissolved or suspended—because, for example, it failed to pay a filing fee or comply with certain jurisdictional requirements—generally does not cease to exist as a legal entity unless the dissolution or suspension becomes permanent.
What penalties do individuals face for violating BOI reporting requirements?
As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591.
A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.
What is the chance that CTA/BOI will be repealed with current legislation in Congress?
Not at this time.
Why didn’t they get permission to ask the FinCen questions directly on the annual tax returns? would have been easier?
Probably but it was a “control” issue.
Does an HOA filing an 1120-H, an Iowa not for profit corporation, required to file with FinCen for CTA? I thought tax exempt entities were exempt from CTA reporting.
An HOA is not an Official tax-exempt entity. It is organized under § 528. They have to file CTA unless they have applied for exempt status under § 501/
I am reading that HOA and Condo Boards must also complete this. Can you confirm?
That is correct, below is the two questions on the FinCen website to address this issue. As most of HOA are not under § 501 so they are not a non-profit status, they need to file. Check the determination letter.
- 10. Are homeowners associations reporting companies?
It depends. Homeowners associations (HOAs) can take different forms. As with any entity, if an HOA was not created by the filing of a document with a secretary of state or similar office, then it is not a domestic reporting company.
An incorporated HOA or other HOA that was created by such a filing also may qualify for an exemption from the reporting requirements.
For example, HOAs recognized by the IRS as section 501(c)(4) social welfare organizations (or that claim such status and meet the requirements) may qualify for the tax-exempt entity exemption. An incorporated HOA that is not a section 501(c)(4) organization, however, may fall within the reporting company definition and therefore be required to report BOI to FinCEN.
[Updated June 10, 2024]
- 13. Who is the beneficial owner of a homeowners association?
A homeowners association (HOA) that meets the reporting company definition and does not qualify for any exemptions must report its beneficial owner(s). A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company.
There may be instances in which no individuals own or control at least 25 percent of the ownership interests of an HOA that is a reporting company. However, FinCEN expects that at least one individual exercise’s substantial control over each reporting company. Individuals who meet one of the following criteria are considered to exercise substantial control over the HOA:
- the individual is a senior officer;
- the individual has authority to appoint or remove certain officers or a majority of directors of the HOA;
- the individual is an important decision-maker; or
- the individual has any other form of substantial control over the HOA.
Is a 501(c)(3) required to report under CTA.
Given the exemption criteria mentioned above, it is likely that most HOAs will fall under the reporting requirements, as they usually do not fall into the exempt categories, such as banks or formally recognized tax-exempt organizations.
Although most HOAs operate as nonprofit corporations, they do not qualify as charitable organizations under Section 501(c)(3) of the Tax Code. Unless a HOA is specifically registered as a qualifying non-profit with the IRS, it is generally best practice for them to comply with the CTA reporting requirements.
Is there a link to the states which have ruled on this?
This question was a follow up to our mentioning state matching with FinCen concerning BOI reports. States are working with FinCen on the issue of BOI. The issue is that some states have determined that filing a BOI report is a legal issue and one must be an attorney to file these reports. IRS has previously stated that anyone can file the reports. There is no list that I am aware of that lists state who have made a decision on how to handle.
I think accounting and insurance are exempt from this reporting, aren’t they?
If there is SEC and other government reporting that requires the same info, then BOI is not required. But accountants must file. See below.
For Beneficial Ownership Information (BOI) purposes, public accounting firms that are registered in accordance with the Sarbanes-Oxley Act of 2002 are exempt from BOI reporting requirements.
Insurance is exempt but many accounting firms are not.
23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.
Can a reporting company report a P.O. box as its current address?
No. The reporting company address must be a U.S. Street address and cannot be a P.O. box.
So, what should you do if someone filed an LLC, and it was at the beginning of this year, and this is way past the 90 days.
Yes, that company that formed in 2024 should file just file ASAP should be OK.
So just to clarify if an LLC dissolves during 2024, they are not required to file the BOI?
They must file. If LLC was in effect as of 01/01/2024, than they must file a final return and will have BOI reporting requirement, even if dissolved during 2024.
If someone filed their LLC filing on 12.28.23 but it became effective 1.1.24, did they have 90 days then or till the end of the year?
It is the effective date, hence 90 days to file initial report.
LLC involuntary dissolution by state have to file a BOI report.
If company was register with state as of 01/01/2024 than they will have filing requirement.
Involuntary dissolution prior to 2024
If dissolved by state on or before 12/31/2023 and not filing returns, then no filing requirement.
Does the CTA requirement include trusts?
If they were registered in the state per state law, then it appears they would have to be. Most trusts probably don’t have this requirement. Review the state laws on this. FinCEN plans on issuing separate FAQs for Trusts. However, the answer to this question is generally NO.
- 3. Are certain corporate entities, such as statutory trusts, business trusts, or foundations, reporting companies?
It depends. A domestic entity such as a statutory trust, business trust, or foundation is a reporting company only if it was created by the filing of a document with a secretary of state or similar office. Likewise, a foreign entity is a reporting company only if it filed a document with a secretary of state or a similar office to register to do business in the United States.
State laws vary on whether certain entity types, such as trusts, require the filing of a document with the secretary of state or similar office to be created or registered.
- If a trust is created in a U.S. jurisdiction that requires such filing, then it is a reporting company, unless an exemption applies.
Similarly, not all states require foreign entities to register by filing a document with a secretary of state or a similar office to do business in the state.
- However, if a foreign entity has to file a document with a secretary of state or a similar office to register to do business in a state, and does so, it is a reporting company, unless an exemption applies.
Entities should also consider if any exemptions to the reporting requirements apply to them. For example, a foundation may not be required to report beneficial ownership information to FinCEN if the foundation qualifies for the tax-exempt entity exemption.
- 4. Is a trust considered a reporting company if it registers with a court of law for the purpose of establishing the court’s jurisdiction over any disputes involving the trust?
No. The registration of a trust with a court of law merely to establish the court’s jurisdiction over any disputes involving the trust does not make the trust a reporting company.
Does a nonprofit cemetery association that has to file with its state constitute a reporting company?
If the Nonprofit is truly a Tax-Exempt Entity under 501(c)(3) than yes it will be exempt from reporting.
Does a CTA update need to be filed if one of the beneficial owners changes their address?
Yes, and update will need to be done.
Did I read it correctly that Insurance Agencies do not need to file – as they have their own filing requirements?
We need to be careful here. Some large insurance companies that have other reporting requirements to government entities like the Security and Exchange Commission do not have to file a BOI report.
But you everyday insurance agent who is in business providing services to their clients may have a reporting requirement depending on their “entity.”
For FinCen reporting how do we handle the BOI for one LLC investing in another LLC. Do we use both to identify the individuals to be reported.
As a follow up per response, it is clear that we show the BOI for controlled or 25% people. But for LLC #2 that LLC #1 is the member, what do we report on the BOI for LLC #2?
Here are some Q and A from the FAQ’s which may help – access the BOI FAQ’s for more information. https://www.fincen.gov/boi-faqs#D_1
Who is a beneficial owner of a reporting company?
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control (see Question D.2) over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests (see Question D.4). Because beneficial owners must be individuals (i.e., natural persons), trusts, corporations, or other legal entities are not considered to be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about a beneficial owner (see Question D.12).
FinCEN’s Small Entity Compliance Guide provides checklists and examples that may assist in identifying beneficial owners (see Chapter 2.3 “What steps can I take to identify my company’s beneficial owners?”).
[Updated April 18, 2024]
- How many beneficial owners can a reporting company have?
An individual might be a beneficial owner through substantial control, ownership interests, or both. A reporting company can have multiple beneficial owners; there is no maximum number of beneficial owners who must be reported.
[Issued October 3, 2024]
- What if a reporting company does not have any individuals who own or control at least 25 percent?
FinCEN expects that every reporting company will be substantially controlled by one or more individuals, and therefore that every reporting company will be able to identify and report at least one beneficial owner to FinCEN.
- 7. What information should a reporting company report about a beneficial owner who holds their ownership interests in the reporting company through multiple exempt entities?
If a beneficial owner owns or controls their ownership interests in a reporting company exclusively through multiple exempt entities, then the names of all of those exempt entities may be reported to FinCEN instead of the individual beneficial owner’s information.
- Note that this special rule does not apply when an individual owns or controls ownership interests in a reporting company through both exempt and non-exempt entities. In that case, the reporting company must report the individual as a beneficial owner (if no exception applies), but the exempt companies do not need to be listed.
FinCEN’s Small Entity Compliance Guide includes more information about this special reporting rule in Chapter 4.2, “What do I report if a special reporting rule applies to my company?”
- 12. Who does a reporting company report as a beneficial owner if a corporate entity owns or controls 25 percent or more of the ownership interests of the reporting company?
Ordinarily, such a reporting company reports the individuals who indirectly either (1) exercise substantial control over the reporting company or (2) own or control at least 25 percent of the ownership interests in the reporting company through the corporate entity. It should not report the corporate entity that acts as an intermediate for the individuals.
For an example of how to calculate the percentage of ownership interests an individual owns or controls in a reporting company if the individual’s ownership interests are held through an intermediate entity, please review example 4 in Chapter 2.3, “What steps can I take to identify my company’s beneficial owners?” of FinCEN’s Small Entity Compliance Guide.
Two special rules create exceptions to this general rule in very specific circumstances:
- A reporting company may report the name(s) of an exempt entity or entities in lieu of an individual beneficial owner who owns or controls ownership interests in the reporting company entirely through ownership interests in the exempt entity or entities; or
- If the beneficial owners of the reporting company and the intermediate company are the same individuals, a reporting company may report the FinCEN identifier and full legal name of an intermediate company through which an individual is a beneficial owner of the reporting company.
FinCEN’s Small Entity Compliance Guide includes additional information about these special reporting rules (see Chapter 4.2, “What do I report if a special reporting rule applies to my company?”).
Where are the CTA FAQ accessed?
Is there a way to confirm if a client has filed the report? If a client doesn’t remember if they filed the BOI and has no confirmation, do we just file again?
You should receive a confirmation number. Try to file again, the system will tell if a duplicate is occurring.
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Retirement Plans and RMD’s
When non-spouse beneficiaries take RMDs are they calculated based on beneficiary’s age or decedent’s age?
When calculating required minimum distributions (RMDs) for non-spouse beneficiaries of an IRA, the calculation depends on whether the original account owner was required to take RMDs before they passed away:
Account owner was not required to take RMDs: The RMD is based on the beneficiary’s life expectancy.
Account owner was required to take RMDs: The RMD is based on the longer of the beneficiary’s or the account owner’s life expectancy.
To clarify, a RMD is required every year during the 10-year period for the non-designated beneficiary?
Yes, they must at least take the RMD amount – they can take more but that does not count forward to take less in a future year.
To clarify – if a person takes a QCD at age 70 1/2 – they are eligible for up to $105K of QCD that year.
That is correct $105,000 for 2024 – that amount will be adjusted for inflation going into future years. Your software will note this and requires some special areas in the software to be completed.
Once they start taking their RMD, the QCD is eligible up to the RMD only. Is that correct?
Your QCD counts towards satisfying your RMD once you reach RMD age. Max amount once can QCD is 105,000 for 2024.
As a follow up to my QCD question – a taxpayer can do QCD’s in excess of the RMD each year?
Yes, as long as they do not exceed to allowed QCD amount each year.
Do non-elective additional contributions to SIMPLE plan have to be nondiscriminatory?
For tax years beginning after Dec. 31, 2023, employers may make additional nonelective contributions to a SIMPLE IRA plan.
Contributions must be made in a uniform manner and may not exceed the lesser of up to 10% of compensation (limited by the Sec. 401(a)(17) limit) or $5,000 (indexed for inflation after 2024) (Sec. 408(p)(2)(A)(iv)).
Employee contribution limits are also increased. For employers with no more than 25 employees, annual elective deferral and catch-up contribution amounts are increased by 10%, as compared with the limit that would otherwise apply. For employers with 26 to 100 employees, higher elective deferral limits are allowed if the employer contributes either 3% of compensation or 4% of an employee’s elective deferrals (Sec. 408(p)(2)(E)(i)).
No other contributions can be made to the SIMPLE IRA plan. Employers must make their matching contributions by the due date (including extensions) of the tax return for the year to which the contributions relate.
Contributions to a SIMPLE IRA plan are deductible by the employer and excluded from the employee’s income (Sec. 402(k)). An employee’s elective salary-deferral contributions are wages for Federal Insurance Contributions Act (FICA) tax purposes, but employer matching contributions are not. Both employee and employer contributions are fully vested when made.
For tax years beginning after Dec. 31, 2022, employees may elect to designate the SIMPLE IRA as a Roth IRA. If this election is made, the contribution is not excludable from income, but later distributions will be tax-free if all other requirements are met (Secs. 402(h)(1) (C) and 408(p)(12)).
- Wide access — Available to employers with 1 to 100 employees.
- Easy plan setup and administration — A third-party recordkeeper, third-party administrator, and annual 5500 and discrimination testing are not required.
- Lower cost — Plan setup and annual fees are typically lower than those of 401(k) plans.
- Tax benefits — For employers, contributions are tax deductible. For participants, pretax contributions and earnings are not taxed until withdrawn. Roth contributions grow tax-free, and earnings are tax-free for qualified withdrawals.
New plans may be eligible for an annual tax break of $500 to $5,000 for 3 years. - Higher contributions limits than a traditional IRA; employers have a choice of dollar-for-dollar matching contributions up to 3% of compensation or non-elective contributions of 2% of gross pay.
Are RMD’s for BENEFICIARY ROTH IRA’s required for non-designated beneficiary during the 10-year period?
No, non-designated beneficiaries of an inherited Roth IRA are not required to take required minimum distributions (RMDs) during the first nine years after the account owner’s death. This is due to the 10-year rule, which states that the account must be liquidated by the end of the tenth year after the account owner’s death.
The 10-year rule applies to all inherited Roth IRAs, regardless of the account owner’s age. This is because the account owner is considered to have died before their required beginning date, since there is no required beginning date for Roth IRAs while the owner is alive.
The 10-year rule does not apply to eligible designated beneficiaries, which include:
- The surviving spouse of the account holder
- A child under age 21 of the account holder
- A disabled or chronically ill person
- A person who isn’t more than 10 years younger than the account holder
Roth IRAs treated upon the death of the owner as NEVER reaching their RBD. Perfect rule to remember.
Besides income limitations, can one do a backdoor IRA if you’re a participant in an employer’s retirement plan?
Yes, a backdoor IRA is still possible within the limitations.
If you receive a CP14i, what do you do in order to answer and make correct?
Address the RMD issue and show the withdrawal once corrections have been made. Excise tax may apply. File Form, 5329 to fix and pay.
Does the beneficiaries of a Roth IRA have the same 10 years limitation?
Yes
What does RBD stand for?
Required Beginning Date for RMD purposes.
If a taxpayer puts their ROTH contributions in different companies over the years – Can they take the total ROTH contribution money out of one mutual fund company instead of out of each of the companies?
It depends on what the rules are for each fund. You have to know the rules of each plan to be able to answer that question. That is why all these hybrid plans make this somewhat complicated and not easy to answer.
A client contributed more than allowed to a 401A, cash balance plan but realized it within 60 days and the money was refunded back to the partners and will file an amended return on personal. Is there an exception to the excess contribution penalty?
Form 5329 has section IX where reasonable cause might be an option to request to subtract the additional tax.
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Difficulty of Care Payments
If the relative provider is receiving difficulty of care payments, can they claim them as a dependent?
It depends on whether this person is their child or not.
The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.
The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly); (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly); or (c) any age if permanently and totally disabled.
The child must have lived with you for more than half of the year.
The child must not have provided more than half of the child’s own support for the year.
The child must not be filing a joint return for the year (unless that joint return is filed only to get a refund of income tax withheld or estimated tax paid).
Difficulty of Care Payments are considered foster care payments and expenses. Payments you receive for the support of a foster.
CAUTION! child from a child placement agency are considered support provided by the agency.
Similarly, payments you receive for the support of a foster child from a state or county are considered support provided by the state or county.
If you aren’t in the trade or business of providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster child were mainly to benefit an organization qualified to receive deductible charitable contributions, the expenses are deductible as charitable contributions but aren’t considered support you provided.
We must look at the facts and circumstance that arise with whether the child is receiving more support than the parents.
What type of form will be given to the care provider for these Medicaid waiver payments?
The state regulates what type of forms are required. They may not receive any tax form but will get payment summaries and have documents that show they will not receive a W-2 or other taxable income form. In the beginning after the 2014 Notice, they received a W-2 with the 2014-7 box checked to indicate the income was not taxable.
What if the personal care provider receives a W-2 for Medicare Waiver payments. How do back the income out?
I would back it out on Schedule 1, 24z to reduce their income by that amount.
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Clean Vehicle and Home Energy Credits
How can buyer of electric vehicle tell if dealer is registered?
We are unsure at this time.
For the residential energy credit with the carryforward, how many years do you have to carryforward?
The carryforward period for the Residential Energy Efficient Property Credit is 20 years.
If I am a used car dealer, and want to have my customers get the Clean Vehicle credit do I sign them up, or do they have to do that themselves? I think it goes through ID Me.
You are correct that ID. Me will be involved. The dealership needs to sign up, as you may not have all the information needed. I am not familiar with the sign-up process but would advise dealer to do this on their own.
So how do my car dealers register with the IRS to do the Clean Vehicle Report? Is there an app form for the dealer?
Irs.gov and key word search “Register our dealership to enable credits for clean vehicle buyer” or here is the link:
Are energy credits available for new construction that will eventually be the primary residence but is not now?
My understanding is that if the client doesn’t qualify right now, then the home builder might qualify and be able to pass that reduction to the client. If it is not a new home build, then I don’t believe it qualifies until it becomes a personal residence, and the client would have to meet the qualifications at that time. New Construction = No Energy Credits for the Homeowners. Contractors have certain credits for building, but homeowner is no.
Under the Energy Efficient Home Improvement Credit: a taxpayer can claim the credit only for qualifying expenditures incurred for an existing home or for an addition to or renovation of an existing home, and not for a newly constructed home.
Under the Residential Clean Energy Property Credit: a taxpayer can claim the credit for qualifying expenditures incurred for either an existing home or a newly constructed home.
What is the credit for waterproofing your basement?
Zero, based on what I read, water proofing is NOT considered insulation.
I have a client who installed solar panels on their home in 2020. On their 2020 Form 1040 we attached Form 5695 residential energy credit, credit was calculated, all is well. They could not use 100% of the credit in 2020, so the credit carried forward to 2021 and 2022. In 2023 they sold the home. Does the CF credit stop in 2023 since they sold the house? Or does the CF credit continue on even though they no longer own the home?
Selling the home before using the credit does not impact your ability to use the credit carryforward.
So, is the Clean Vehicle Credit refundable or non?
The federal EV tax credit, worth up to $7,500, is a nonrefundable tax credit that has been an effective way to lower the cost of EV ownership for taxpayers. The Inflation Reduction Act of 2022 changed this tax credit by extending its life through 2032 and expanding it to cover more vehicles.
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Recordkeeping
As an accountant, how long do you recommend we keep clients for?
Our Firm has a 7-year statute. That seems safe.
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Penalties
I have a client that was assessed a trust fund penalty. She is the principal officer of a corporation that had a delinquent payroll tax liability that was transferred to her personally in the form of a trust fund penalty. The corporation’s delinquent payroll tax liability has now been paid in full and all liens against the corporation have been released. However, I am having a difficult time getting the trust fund penalty removed from her personal account. I have provided the IRS proof of the payments made to settle the debt of the corporation and also proof of the release of the corporation’s tax lien. However, the trust fund penalty still remain on my client’s personal account. My next move is to contact the Taxpayer Advocate division of the IRS. Do you have any other suggestions?
If they were delinquent and then paid the tax, the penalties will still apply as the payments were late. You would have to ask for penalty abatement or just pay the penalty.
Are penalties assessed due to the failure to file Form 1120S timely qualify for the one-time abatement?
I previously asked about the abatement of the penalty for failure to file Form 1120S. What I meant to ask was does the late filing penalty due to late filing of Form 1120S qualify for the 1st time penalty abatement?
Penalties eligible for First Time Abate include:
Failure to File when the penalty is applied to:
Tax returns § 6651(a)(1)
Partnership returns § 6698(a)(1)
S Corporation returns § 6699(a)(1)
Failure to Pay when the tax shown on the return is not paid by the due date § 6651(a)(2)
Payment required to be shown on a return, but was not, and that tax was not paid by the date stated in the notice or demand for payment under § 6651(a)(3)
Failure to Deposit when the tax was not deposited in the correct amount, within the prescribed time period, and/or in the required manner § 6656
You may receive relief from one or more of these penalties on a tax return during a single tax period. IRS considers First Time Abate relief regardless of the penalty amount.
Can the First Time Abatement for penalty be used more than once? I thought I read somewhere that you could use it once every three years.
Once the FTA penalty drops off the computers as only the period 3 years can be seen, sometimes another abatement is allowed. Depends on whether the person assigned the case looks beyond the 3 years when researching.
If request for reasonable cause is rejected, can one than request FTA for the same (late-filing) penalty?
Absolutely, yes.
Wouldn’t first time penalty claim on a letter showing cause be overdoing it and eliminating the first-time penalty claim possibility when the cause was sufficient?
I have had a lot of success with my abatements – most people do not know if a penalty has been abated before, saves getting a POA and access accounts. Just the way I do it, you do not have to follow. Plus, IRS is supposed to consider reasonable cause if First-Time Abatement is not granted. If there is nothing on reasonable cause in the letter it often requires another letter.
Also, be careful with First Time Abatement – it is what it is “First” maybe your penalty that is “First” is small and a greater penalty may be assessed for another issue. I want to use my First Time Abatement for something that is substantial.
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Miscellaneous Issues
Can the owner of a private S-Corp owner transfer ownership of the company to the kids? How is the value of S-Corporation stock determined?
Valuation of the S Corporation is a legal issue, not generally something a tax professional could value as it could generate a conflict of interest.
Not to do with the materials but I’ll ask. For 1099 electronic filing requirement, I used IRIS in January, and it was difficult to submit the 1099s, the website as not responsive. What platform, other than IRIS, are people using to submit 1099s?
There are several listed on the internet – we us a payroll system that provides for 1099’s.
When researching cases. I find I need to use the case date and compare that to the code used and the current code since during the last ten years. At least. The code changes so often. Is there a quick way to do that research without going a little crazy?
Research is an art I have found. In my nearly 38 years I have not found an easy way. I use a combo, of the “written” code, Checkpoint (subscription service,” internet with caution.
When Medicare had its breach in April, is it possible clients had their banking information breached if they had direct deposit?
Unknown at this time.
Is there guidance for determining whether an individual is eligible for an OIC?
Yes, Publication 656.
Form 1099 -K – Since gross receipts might include sales tax, should the gross amount be reported and the sales tax separately reported as an expense?
That is correct.
My client received a CP05A requesting additional documentation of taxes withheld. Why would this be issued?
Depending on the issue, IRS may not have received a copy of the W-2. From SSA, therefore they are unable to match correctly with the submitted return.
Estimated tax for Farmers, how does it work with the filing deadlines?
Calendar year farmers and fishermen. If you’re a calendar year taxpayer and at least two-thirds of your gross income for 2023 or 2024 is from farming or fishing, you have only one payment due date for your 2024 estimated tax, January 15, 2025. The due dates for the first three payment periods don’t apply to you.
Farmers and fishers. If at least two-thirds of your gross income for 2023 or 2024 is from farming or fishing, your required annual payment is the smaller of: 1. 662/3% (0.6667) of your total tax for 2024, or 2. 100% of the total tax shown on your 2023 return. (Your 2023 tax return must cover all 12 months.)
If you file your 2024 Form 1040 or 1040-SR by March 3, 2025, and pay all the tax you owe at that time, you don’t need to make an estimated tax payment.
Fiscal year farmers and fishers. If you are a farmer or fisher, but your tax year does not start on January 1, you can either: • Pay all your estimated tax by the 15th day after the end of your tax year, or • File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year.
I have a multi-layer to this “estimated payment” question. I have one client whose tax preparer made a mistake on their taxes to wit they now have estimated payments even though they should not have owed last year. The part two to this is what about all my clients who have employers WHO ARE NOT WITHOLDING WHAT THEY SHOULD during the year, so the client owes, so then they are paying Estimated Payment penalties?
To determine if employer is not withholding correctly – are you sure the W-4 completed and given to employer. Many elect to take large allowances to avoid a lot of tax withheld. Have the employee discuss with the employer.
When did calling IRS for a deceased spouse on Married Joint return be required to call IRS? I have not experienced that being required.
It is becoming issue with freezing refunds for deceased taxpayers, as Identity Thieves often use a deceased persons identity to file a fraudulent return.
I had a client who owed in April, paid via IRS.gov. They received a notice for nonpayment. When spouse made payment, she used her social not taxpayer and payment was sitting in limbo because they “didn’t know where to apply payment”. I did get it resolved penalties and fees were removed. Just wanted to share since we are talking about notices.
This is a good reminder that any payment will be credited to the social security number provided. When filing jointly, one should make payment under the primary taxpayer number – first name on the return.
Is there an easy way to verify if an entity is classified as an 1120S? New client receiving IRS notices for 2020 and 2021, 1120 but client had elected an S election 1/1/20. Client filed 1120S for 2020 and 2021. Concerned they may not have elected an S election properly.
Use that telephone tree or letter to request a S corporation verification see slides 41 and 42-43.
Is the EFTPS for everyone or just over a certain dollar amount, as I have others that we still pay in on the 941.
Anyone who owes taxes can use EFTPS. EFTPS is available for businesses, financial institutions, payroll companies, tax practitioners and individuals. To participate in EFTPS, you must enroll by calling EFTPS Customer Service to get an enrollment form and instructions.
Corporations must generally use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). For more information on EFTPS and enrollment, visit www.eftps.gov.
If you are required to make deposits electronically but do not wish to use the EFTPS® tax payment service yourself, ask your financial institution about ACH Credit or same-day wire payments, or consult a tax professional or payroll provider about making payments for you.
What is the current status of IRS ERC Audits/Enforcement?
This link has the most current information. https://www.irs.gov/newsroom/irs-moves-forward-with-employee-retention-credit-claims-agency-accelerates-work-on-complex-credit-as-more-payments-move-into-processing-vigilance-monitoring-continues-on-potentially-improper-claims
If I have an estate and it makes Charitable Donations to valid charities, do I need income in the estate to be able to take the donation deductions?
Yes. The estate had a savings account and checking account with monies. Hence donations of $45000 paid out of Corpus. No income.
Is there a way to contact the CAF unit for updates via phone? Numerous POAs have been sent with the address update box checked, a letter was sent in, but when asking for the PIN for setting up a tax pro account it never arrives.
You can call PPS @ 866-860-4259, and they can assist.
Can I use form 2848, power of attorney, if I did not prepare the return, not any of the options a-g. Can I use Option H or is there another form to use?
8821 can authorize an individual to inspect and or receive your confidential tax return, Form 2848 you must be one of the authorize individuals listed on the POA form.
What recourse does a client have if she received a $2700 sign-on bonus in 2023, paid the taxes on it but had to pay the bonus back in 2024. She does not have enough to itemize and since it is under $3000 Form 1341 does not apply.
Since the Tax Cuts and Jobs Act suspended Miscellaneous Itemized Deductions, there is no way to receive a credit.
Is there a good place to find codes for military W-2s? Seems like they have coding that does not follow these guidelines.
Pub 15 or Form W-2 instructions.
Is it possible to change the name of a 501c-3? If so, what form is used?
990 for 990 EZ
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