Joel C. Lewinson, CPA

Gary Shapley, who was named only days ago as the acting commissioner of the Internal Revenue Service, was removed by President Trump and replaced by Deputy Treasury Secretary Michael Faulkender amid a power struggle between Treasury Secretary Scott Bessent and Elon Musk.

The New York Times reported that Bessent was outraged that Shapley was named to head the IRS without his knowledge or approval and complained to Trump about it. Shapley was installed as acting commissioner on Tuesday, only to be ousted on Friday, when Bessent named Faulkender as the new acting commissioner.

The Internal Revenue Service's Income Verification Express Services e-fax system, or IVES, recently suffered "technical issues" that may require resubmitting requests.

The IRS said the problems first appeared on Saturday, Jan. 20.

"Some faxed requests that were successfully transmitted to the IRS experienced a routing issue as some batches were corrupted before entering the processing queue," the agency said in an announcement.

The issue was resolved by Feb. 13 at 8 a.m. Eastern Standard Time. Any original batches submitted before then that have not received an acknowledgement or received their results or rejection need to be re-submitted. Any disputes submitted to the dispute line before Feb. 7 at 4 p.m. EST that have not been processed will also need to be resubmitted.

Make sure re-submissions use the original cover sheet, batch content and batch number to prevent duplicate processing or billing issues, the IRS said.

Original submissions will need to be resubmitted to the normal processing line; any disputes will need to be resubmitted to the dispute line.

Chief Jim Lee of IRS Criminal Investigation will retire from federal service effective April 6. A replacement has not been named.

Lee has led CI since October 2020, overseeing a staff of more than 3,200 employees, including 2,200 special agents, who have investigated financial crimes involving tax violations, money laundering, public corruption, cybercrime, ID theft, narcotics trafficking, human trafficking and terrorism financing.

For those of you who own your own business and have to pay a monthly rental fee, you know that fee is deductible as an “Ordinary and Necessary Business Expense” (§162). So, how do I do I rent my house, boat, car, or ADU and not drive my CPA Cuckoo for Coco Puffs?

It is not quite as simple as cutting yourself a corporate check, deducting the amount at the corporate level, and ignoring the income at a personal level. First, to be ordinary and necessary the meetings need to be for legitimate purposes. Second, even if the meetings have a legitimate purpose, the rental amount must be ordinary. As I tell all my clients about any deductible expense, substantiation only counts if you end up in front of an IRS auditor. Failure to follow the rules can be very nasty and costly. So then, how do you substantiate the deduction? The real answer is that it depends on the IRS Revenue Agent, their experience, and what they had for breakfast.

Substantiation
You need a written plan. Such a plan demonstrates your intent. The plan should be supported by independent [comparables] within a 100-mile radius. A plan should include a professional appraiser to value the rental rate every three years. In an actual Tax Court Case, Judge Vasquez wrote (in part) “In determining whether the payments in issue are deductible under Section 162, the basic question is whether the payments were in fact rent and not something else disguised as rent. *** Only the portion of an expense that is reasonable qualifies for deduction under Section 162(a).” Not only should you have a plan, but you might want to have a professional review the plan, if for no other purpose, to protect other parts of your return from the auditor.

The IRS opens e-file on January 29

I’m sure you’ve heard, starting in 2024 the Corporate Transparency Act requires most small businesses to file a Beneficial Ownership report with FinCEN or face harsh penalties. Experts are estimating that around 18 million small businesses will request help with BOI filing from a professional advisor such as your firm. This is an opportunity for our firms to support their clients.

The Internal Revenue Service and the Treasury Department released guidance Friday on tax incentives for installing electric vehicle charging stations and other alternative fuel refueling stations under the Inflation Reduction Act and where they can be located.

The information can help households, businesses and other organizations considering such investments find out whether they're eligible for a tax credit of up to 30% for installing EV charging stations.

The guidance comes at a time when the cold winter weather in many parts of the country this past week has led to long lines at some EV charging stations as low temperatures can reduce the batteries' range.

The most notable and intrusive part of this – consistent with the government’s goal of obtaining visibility into the true owners of a business – is the need to provide copies of identification documents such as a passport or driver license to a new government database. The database is non-public, but available to law enforcement.

As you can appreciate, this is a major undertaking for U.S. companies and is being done in two stages:
1. Companies formed during calendar year 2024 are required to comply with the new information requirements within 90 days of their formation. Due to the need to gather copies of identification documents and other information, company formation will require greater lead time than previously.
2. Companies formed prior to calendar year 2024 are required to comply by January 1, 2025. Again, this will require gathering the necessary information and determining beneficial ownership. We will have additional communications during the year to address this stage.

Additionally, companies are required to keep the government informed of any changes to their beneficial ownership or any other required information (for example, changes to the name or address of the company). Companies have 30 days to provide updated information.

Possible penalties for noncompliance with the CTA include both (a) criminal penalties, in the form of a fine of up to $10,000, up to two years in prison, or both, and (b) civil penalties, including a fine of up to $500 per day.

On January 1, 2024, the federal Corporate Transparency Act (“CTA”) went into effect, impacting millions of businesses across the U.S. The CTA is intended to combat illicit activities such as tax fraud and money laundering by making it harder for bad actors to use shell companies or other opaque ownership structures to hide or benefit from their ill-gotten gains.

Generally, the CTA requires U.S. companies to report information about the individuals who ultimately own or control the company.

Under the CTA, a beneficial owner is any individual who, directly or indirectly, either (a) owns or controls at least 25% of the company, or (b) exercises substantial control over the company. Beneficial ownership and control are broadly defined and include convertible securities and any contractual relationship providing control.

While there are a number of exemptions, including for large operating companies (i.e., companies with over 20 full time employees and over $5 million in annual gross receipts or sales), the analysis is not clear cut and is fact intensive. For example, while gross receipts/sales are determined based on a consolidated tax return, the requirement to have more than 20 employees is on a company-by-company basis and cannot be satisfied by aggregating employee count across multiple affiliated entities. And, all of this is a developing story where the guidance continues to evolve.

The official start date of tax season for individual taxpayers will be on Jan. 29, but the Internal Revenue Service plans to accept business tax returns as soon as Jan. 16.

On Wednesday, the IRS said in an email to tax professionals that it will begin accepting all business tax returns at 9:00 a.m. Eastern time on Tuesday, Jan. 16, 2024.

However, due to a number of legislation changes, the agency will not accept a number of forms for tax year 2023 until Monday, Jan. 29, 2024, which is when tax season for individuals will start:

Ahead of the year-end deadline for retirement-account holders aged 73 or older to take their required minimum distributions or pay a hefty tax penalty, many are waiting until the last minute.

As of late last month, about 20% of RMD-eligible holders of individual retirement accounts with Fidelity Investments had not withdrawn any amount toward fulfilling their 2023 obligation, and another 31% had extracted only a portion, according to figures released last week by the giant brokerage, custodian and asset management firm. The data highlighted the importance of a perennial topic of conversation around this time of year with clients, as well as the shifting rules under the Secure 2.0 Act for current holders and those inheriting retirement accounts.

On Jan. 1, 2024, a new reporting regime will require limited liability companies (LLCs), corporations and other entities to file beneficial ownership information reports with the U.S. government. The new reporting requirement is imposed by a statute called the Corporate Transparency Act (CTA). The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued regulations providing details on who must file a report, what information has to be reported and when reports must be filed. Every owner of an LLC, corporation or other business entity should know about this new requirement because noncompliance can result in significant penalties. Notably, exemptions exist for certain highly regulated entities and other “low-risk” entities, as described in our FAQs (see link below). Many tax-exempt organizations, such as 501(c)(3) organizations, are exempt and, thus, excluded from CTA reporting requirements.

Key Takeaways:
Entities created or registered before 2024 must file their initial reports by Jan. 1, 2025. Entities created or registered in 2024 must file within 90 days of creation or registration. Entities created or registered on or after Jan. 1, 2025, must file within 30 days of creation or registration.
The requirements will apply to privately held LLCs, corporations and other entities formed or registered to do business in any U.S. state (or with any American Indian tribe) for any purpose, including for estate, investment, real estate, tax, privacy or other personal planning.
While most trusts used for estate planning would not be considered reporting companies under these requirements, information about a trust’s beneficial owners (settlors, beneficiaries, trustees, etc.) may be reportable if the trust directly or indirectly owns an interest in an entity qualifying as a reporting company.
The beneficial ownership information will be reported to FinCEN. It will be accessible to authorized government entities but will not be part of any publicly accessible database.