ERC claim revisions, CAMT guidance and other IRS updates

October 8, 2024 6:00 AM

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Another month brings another host of changes out of the Internal Revenue Service, ranging from revised accounting methods for research costs to proposed rules on tribal general welfare benefits.

Since the enactment of the Inflation Reduction Act more than two years ago, the IRS has used available funding to strengthen its suite of digital capabilities, reorganize senior leadership, crack down on large partnerships through increased audits and more.

"Two years into the historic work made possible by the Inflation Reduction Act, the IRS has made significant progress in the 10-year journey to improve taxpayer service, upgrade technology and ensure more fairness in compliance efforts," said IRS Commissioner Danny Werfel in a statement.

Part of that funding was used to fuel a February 2023 IRS campaign targeting more than 125,000 delinquent taxpayers who earned more than $400,000 per year, but had not filed any returns in roughly seven years. The campaign, which used W-2s and 1099 to identify taxpayers, has brought in more than $1.3 billion since its launch.

Similar improvements, while not tied directly to IRA funding, include the agency's Whistleblower Office, which paid out $74 million last month as part of a years-long case.

"We've done a lot of work around systems and processes to improve identification of high-value claims," John Hinman, director of the IRS Whistleblower Office, said in an interview with Bloomberg. "We're continuing to collaborate with whistleblower practitioners."

But critics of the IRS say the regulator still has work to do.

In two separate reports filed by the Treasury Inspector General for Tax Administration last month, the inspector general critiqued the IRS for cybersecurity shortcomings in its Compliance Data Warehouse and framework for cloud security oversight. Also included in the reports were recommendations for addressing the issues.

Tom O'Saben, director of tax content and government relations at the National Association of Tax Professionals, said preparers should already be thinking about filing concerns such as changes in tax laws, retirement contributions and more as we approach the end of the year."After election day in November, we must be diligent and on the lookout for potential tax legislation that emerges in the post-election, late-year sessions," O'Saben said.

Of the IRS's recent changes, a supplemental process for addressing incorrect Employee Retention Credit claims and proposed guidance on the Corporate Alternative Minimum Tax are two that stand out among the rest, O'Saben noted.

As the Oct. 15 filing deadline fast approaches, preparers are hard at work to ensure clients know what documents and other information they need, said Neil Fishman, former president of the National Conference of CPA Practitioners and owner of Fishman Associates CPAs.

Read on for insight into some of the agency's new rules, both enacted and proposed, to learn more about the shifts coming to the tax landscape.

IRS introduces supplemental process for addressing bad ERC claims

The IRS is planning to launch a new claim process for third-party payers seeking to resolve incorrect Employee Retention Credit claims on behalf of their clients.

The supplemental claim process allows third-party payers with prior claims on behalf of several clients to "withdraw" those with ineligible claims while retaining those who qualify. Supplemental claims, as defined by the IRS, are adjusted employment tax returns "that allow a third-party payer to correct and/or consolidate previous claims that they filed on or before Jan. 31, 2024, if those claims have not yet been processed by the IRS," according to the agency.

Applicable third parties include those with one or more claims that aggregate ERCs for themselves or clients using the payer's EIN, as well as other factors.

Read more:

IRS debuts new process for third parties with bad ERC claims

Modified travel per diem rates begin this month

Starting Oct. 1, travelers can begin using new special per diem rates instead of actual expense amounts under the agency's Rev. Proc. 2019-48 to account for lodging, meals and incidental expenses when away from home.

Travelers are not required to institute per diem rates, and can use calculations of actual allowable expenses provided they have ample evidence to support the figures. Those opting to substitute actual expenses for a per diem rate can do so using the federal rates published by the General Services Administration each year.

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Special travel per diem rates begin next month

Regulators issue proposed guidance on CAMT

The IRS and the Treasury Department released tentative regulations last month that aim to provide further clarity into the Corporate Alternative Minimum Tax.

The guidance includes rules and explanations for how to properly identify adjusted financial statement income, in addition to determining whether or not a corporation is subject to CAMT.

"The proposed rules released by Treasury … are an important step toward realizing Congress' efforts to address the most egregious U.S. corporate tax avoidance and ensure the largest and most profitable corporations in the country cannot pay little to no taxes," Treasury Secretary Janet Yellen said in a statement.

Read more:

IRS and Treasury propose guidance on CAMT

IRS, Treasury propose regulations on Alternative Refueling Property Credit

Newly proposed guidance for the Alternative Fuel Vehicle Refueling Property Credit aims to help determine the eligibility status of a population census tract, calculate the credit, the treatment of dual-use property and more.

Chief characteristics of the credit include covering 30% of the cost of qualifying non-depreciating property and 6% of the cost of qualifying depreciable property for taxpayers, as well as limits of $1,000 and $100,000 for each item of non-depreciating and depreciable property respectively.

Read more:

Proposed regs issued on Alternative Refueling Property Credit

IRS finalizes rules on basis reporting for estates

The IRS released final regulations on consistent basis reporting between an estate and a person acquiring property from a decedent on Sept. 16, providing accounting professionals with welcomed clarity.

The rules provide insight into the requirement that the basis upon which a person receives property from a decedent must be in line with the final value of the property determined for federal estate tax purposes.

Affected individuals include those inheriting property from a decedent that stands to have an increased federal estate tax liability, provided that including the value of the property in the gross estate causes the increase.

Read more:

IRS finalizes rules on basis reporting for estates