April 19, 2017
The Treasury and the IRS recently released Notice 2017-23 providing interim guidance related to the payroll tax credit for research expenditures by qualified small businesses under Code § 3111(f). (See prior coverage.) Specifically, the notice provides interim guidance on the time and manner of making the payroll tax credit election and claiming the credit, and on the definitions of “qualified small business” and “gross receipts.” Comments are requested by July 17, 2017.
Code § 41(a) provides a research tax credit against federal income taxes. Effective for tax years beginning after December 31, 2015, Code §§ 41(h) and 3111(f) allow a “qualified small business” to elect to apply a portion of the § 41(a) research credit against the employer portion of the social security tax under the Federal Insurance Contributions Act. … Read More
OECD Issues Array of Guidance on Country-by-Country Reporting and Automatic Exchange of Tax Information
April 11, 2017
In an effort to help jurisdictions implement consistent domestic rules that align with recent guidance issued by the Organization for Economic Co-operation and Development (OECD), the OECD issued a series of guidance to further explain its country-by-country (CbC) reporting, most importantly by clarifying certain terms and defining the accounting standards that apply under the regime. Each of these efforts relate to Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) project, which applies to tax information reporting of multinational enterprise (MNE) groups. CbC reporting aims to eliminate tax avoidance by multinational companies by requiring MNE groups to report certain indicators of the MNE group’s economic activity in each country and allowing the tax authorities to share that information with one another. … Read More
April 7, 2017
Since our last monthly FATCA update, we have addressed the following recent FATCA developments:
- The IRS updated the list of countries subject to bank interest reporting requirements (see prior coverage).
- The IRS released new FATCA FAQs addressing date of birth and foreign TIN requirements for withholding certificates (see prior coverage).
- The IRS extended the deadline for submitting qualified intermediary agreements and certain other withholding agreements from March 31, 2017 to May 31, 2017 (see prior coverage).
Recently, the IRS released the Competent Authority Agreement (CAA) implementing the Model 1B Intergovernmental Agreement (IGA) between the United States and the Bahamas entered into on November 3, 2014.… Read More
April 7, 2017
The IRS has issued Revenue Procedure 2017-31 to supplement the list of countries to subject to the reporting requirements of Code section 6049, which generally relate to reporting on bank interest paid to nonresident alien individuals. This was an expected move, as this list of countries, originally set forth in Revenue Procedure 2014-64 and modified a handful of times since, will likely continue to expand as more countries enter into tax information exchange agreements with the U.S. in order to implement the Foreign Account Tax Compliance Act (FATCA). Specifically, Revenue Procedure 2017-31 adds Belgium, Colombia, and Portugal to the list of countries with which Treasury and the IRS have determined the automatic exchange of information to be appropriate. … Read More
April 7, 2017
Yesterday, the IRS added three new FAQs to its list of frequently asked questions on compliance with the Foreign Account Tax Compliance Act (“FATCA”). The questions address the need for withholding agents to obtain foreign TINs or dates of birth for nonresident alien or foreign entity on beneficial owner withholding certificates, e.g., Forms W-8BEN and W-8BEN-E. The FAQs address the requirement under temporary regulations published in the Federal Register on January 6, 2017, that a beneficial owner withholding certificate contains a foreign TIN and, in the case of an individual, a date of birth in order to be considered valid.… Read More
April 6, 2017
The IRS recently laid out reporting procedures for employers and payroll service providers that have fallen victim to various Form W-2 phishing scams. In many of these scams, the perpetrator poses as an executive in the company and requests Form W-2 and Social Security Number (SSN) information from an employee in the company’s payroll or human resources departments (see prior coverage). If successful, the perpetrator will immediately try to monetize the stolen information by filing fraudulent tax returns claiming a refund, selling the information on the black market, or using the names and SSNs to commit other crimes. Thus, time is of the essence when responding to these data breaches.… Read More
March 31, 2017
In a Q&A on its list of questions and answers for qualified intermediaries (QIs), foreign withholding partnerships (WPs), and foreign withholding trusts (WTs) (see Q&A-22), the IRS today extended the deadline for submitting QI, WP, and WT agreement renewal requests from March 31, 2017, to May 31, 2017. Applications submitted by the deadline will be granted a QI, WP, or WT agreement (as applicable) with an effective date of January 1, 2017. This delay gives entities additional time to comply with the new application system (discussed in a prior post) and gather the necessary information to submit renewal requests.… Read More
March 30, 2017
A recent IRS Field Attorney Advice (FAA) memorandum highlights the risk of poorly designed employee discount plans. In FAA 20171202F, the IRS Office of Chief Counsel determined that an employer was liable for failing to pay and withhold employment taxes on employee discounts provided under an employee discount plan that failed to satisfy the requirements for qualified employee discounts under Code section 132(c). The FAA also suggests that had the employer either kept or provided better records of the prices at which it provided services to select groups of customers, the result may have been different. In the FAA, the IRS applied the fringe benefit exclusion for qualified employee discounts to an employer whose business information was largely redacted. … Read More
March 28, 2017
A recent Internal Revenue Service Office of Chief Counsel field attorney advice memorandum (FAA 20171201F) sounds a cautionary note for employers making use of a professional employer organization (PEO). The FAA holds a common law employer ultimately liable for employment taxes owed for workers it leased from the PEO. Under the terms of the employer’s agreement with the PEO, the PEO was required to deposit employee withholdings with the IRS and pay the employer share of payroll taxes to the IRS. Alas, that was not what happened.
The taxpayer did not dispute that it had the right to direct and control all aspects of the employment relationship and was thus was the common law employer with respect to the employees, but asserted that it was not liable for the unpaid employment taxes.… Read More
March 24, 2017
Facing likely defeat, Republicans have pulled the American Health Care Act, which would have made numerous changes to the information reporting provisions and employment tax provisions of the Affordable Care Act (ACA) (earlier coverage). The legislation would have also created a new information reporting requirement by adding Section 6050X to the Code. The House was scheduled to vote on the legislation this afternoon, but Republicans have struggled to appease both conservative Republicans, who wanted a more completed repeal of the ACA, and moderate Republicans, who were concerned about the potential loss of coverage that could result from the legislation.… Read More