Section 01
Edition notes and highlights
Last minute News:
Omnibus Bill with Massive Retirement Reforms Nears Passage
Consolidated Appropriations Act, 2023 spending bill.
In addition to financing the federal government for its 2023 fiscal year, the bill contains the SEUCRE 2.0 Act (the Act), which includes dozens of retirement-related provisions intended to build on reforms passed in late 2019.
Among the key retirement provisions in the Act are:
- Expanding automatic enrollment in retirement plans
- Increasing the age for required beginning date for mandatory distributions
- A higher catch-up Limit to Apply at Age 60, 61, 62, and 63
- Elimination of Additional Tax on Corrective Distributions of Excess Contributions
The Act also includes a number of smaller non-retirement tax provisions including changes to ABLE accounts under § 529A and modifications to the rules governing charitable conservation easements under § 170.
The House is expected to pass the bill and send it to the president for his signature by Friday.
Issue 1: Key Items to Remember
Issue 2: Exempt Organizations and Government Entities (TEGE) Have Published Three New Audit Technique Guides The updated and combine the IRS.gov Audit Technique Guides (ATG) are: TG 3-4 Exempt Purpose, Scientific Organizations 501(c)(3) TG 17 Supplemental Unemployment Benefit Trusts Issue 3: Where Are We at with Marijuana Law - Update |
After President Joe Biden’s pardon of Americans convicted of simple possession of marijuana on October 6, 2022, the outlook for marijuana legislation remains questionable. House and Senate Democrats have advanced proposals to decriminalize and tax marijuana at the federal level while Republicans remain largely opposed to these measures due to concerns about safety and the proposed taxes. Despite the disagreement over legislation, nearly every U.S. state has seen the adoption of recreational and medical marijuana programs, increasing the pressure from the banking industry and others for legislation that provides more clarity and certainty around marijuana laws and regulations. The SAFE Banking Plus Act, which would protect financial institutions from federal punishment should they work with regulated cannabis companies, has perhaps the most promise since there is a level of Republican support for the measure. Issue 4: IRS Hiring – A Step in the Right Direction for Customer Service In addition to the more than 4,000 people recently hired to fill critical customer service representative positions, the Internal Revenue Service is now seeking over 700 new employees to help taxpayers at Taxpayer Assistance Centers across the country. Most will assist with the 2023 tax season, but they will be fresh out of training. Training is generally basic tax law and some on-the-job Notice training. It generally takes 2-3 seasons for a Taxpayer Assistance Center (278 sites) or a Taxpayer Service representative to be well seasoned to address the vast majority of basic questions. 2023 will be the first time in a decade, IRS walk-in sites will be fully staffed. This increase in staffing is part of much wider IRS improvements enabled by the Inflation Reduction Act funding approved in August 2022. IRS employees collect nearly 96% of the nation’s revenue needed to fund nearly all federal government programs. Issue 5: Reminders When Closing a Business File a final tax return and related forms. The type of return to file and related forms depends on the type of business. The various types of business entities are: Sole Proprietorship A sole proprietor is the sole owner of an unincorporated business. These businesses report their income and expenses on Schedule C (Form 1040), Profit or Loss from a Business. In addition to Schedule C, when selling their business sole proprietors may also need to file: Form 4797, Sales of Business Property, if closing the business causes the business use of a Section 179 property to drop below 51%. Form 8549, Asset Acquisition Statement, must be filed by both the seller and the purchaser to report the sale of a business if: goodwill or going concern value attaches, or could attach, to such assets and the purchaser's basis in the assets is determined only by the amount paid for the assets. Partnership A partnership is a relationship between two or more partners to conduct a trade or business. Partnerships report their income and expenses on Form 1065, U.S. Return of Partnership Income. Partnerships must report the business's closure by filing a final Form 1065. On the final return, partnerships should: Report capital gains and losses from the sale on Schedule D (Form 1065). Check the "final return" box (it's near the top of the front page of the return, below the name and address). Check the “final return” box on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, Etc. Partnerships may also need to file Form 4797 and/or Form 8549 with their final return. Corporations A corporation, including S corporations, are separate taxpaying entities with at least one shareholder. Corporations that are closing down should file Form 966, Corporate Dissolution or Liquidation, after adopting a resolution or plan to dissolve the corporation or liquidate any of its stock. Corporations also need to file a final tax return (Form 1120, U.S. Corporation Income Tax Return or Form 1120-S, U.S. Income Tax Return for an S Corporation) for the year the business closes. Indicate the return is a final return by checking the "final return" box, which is near the top of the front page of the return, below the name and address. C corporations should report capital gains and losses from the sale on Schedule D (Form 1120). S corporations should report capital gains and losses from the sale on Schedule D (Form 1120-S). And check the "final return" box on Schedule K-1 (Form 1120-S), Shareholder's Share of Income, Deductions, Credits, Etc. Corporations may also need to file Form 4797 and/or Form 8549 with their final return. Note: A limited liability company (LLC) is a business entity organized under state law that can choose its classification for federal income tax purposes. An LLC can be a partnership, either type of corporation, or a disregarded entity. Take Care of Employees Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes. If the business has one or more employees, it must pay them any final wages and compensation owed. The business must also make final federal tax deposits and report employment taxes. Note: Failure to withhold and deposit employment taxes may result in the IRS assessing the Trust Fund Recovery Penalty. A business should file:
Note. Final Forms W-2 can be electronically filed with the Social Security Administration. Business with tipped employees should file Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, to report final tip income and allocated tips. A business that provides its employees with a pension or retirement benefit plan should consult, how to Terminate a Retirement Plan. Businesses that provide Health Savings Accounts or similar programs should see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Report payments to contract workers. Businesses that pay contractors at least $600 for services, including parts and materials, during the calendar year in which they go out of business, must report those payments. Businesses file Form 1099-NEC, Nonemployee Compensation, to report contractor payments. Cancel EIN and close IRS business account. Business owners should notify the IRS that the business has stopped doing business so the IRS can close the business's tax account. To cancel an employer identification number (EIN) and close a business's tax account, the business needs to send the IRS a letter that includes:
Note. The IRS won't close the business account until all necessary returns have been filed and all taxes owed are paid. So, a business that wants to close its tax account may need to pay any taxes before they are technically due. Keep business records. How long a business needs to keep records depends on what's recorded in each document. Generally, Records relating to property should be kept until the period of limitations expires for the year in which you dispose of the property. The period of limitations is the period in which the business can amend its tax return to claim a credit or refund, or the IRS can assess additional tax. All employment tax records should be kept for at least four years. |
