September 28 Deadline Approaches For Work Opportunity Tax Credit Certification

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September 27, 2016

The IRS recently reminded employers to certify certain new hires by September 28 to qualify for the newly expanded Work Opportunity Tax Credit (WOTC).  The WOTC is a federal tax credit available to employers who hire eligible workers—e.g., certain veterans, public assistance recipients—who have consistently faced significant barriers to employment.  Congress enacted the Protecting Americans from Tax Hikes (PATH) Act last December, which retroactively extended the WOTC for nine categories of eligible workers hired on or after January 1, 2015, and adding a tenth category for certain long-term unemployment recipients hired on or after January 1, 2016.  Accordingly, the ten categories of eligible workers include:

  • Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients;
  • Unemployed veterans, including disabled veterans;
  • Ex-felons;
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties;
  • Vocational rehabilitation referrals;
  • Summer youth employees living in Empowerment Zones;
  • Food stamp (SNAP) recipients;
  • Supplemental Security Income (SSI) recipients;
  • Long-term family assistance recipients;
  • Qualified long-term unemployment recipients (who begin work after 2015).
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Another Attempt to Repeal FATCA Is Introduced to Congress

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September 12, 2016

New legislation, H.R. 5935, has been introduced in Congress to repeal the Foreign Account Tax Compliance Act (FATCA), on the basis that FATCA violates Americans’ Fourth Amendment privacy rights.  Rep. Mark Meadows (R-NC) introduced the bill to the House on September 7, along with two original cosponsors.  The alleged privacy violations stem from requirements in FATCA that force foreign financial institutions to report all account holdings and assets of U.S. taxpayers to the IRS, or else face potential penalties in the form of 30% withholding on all U.S. source income.  According to Rep. Meadows’s press release, FATCA “requires a level” of disclosure that violates the Fourth Amendment, though Rep.… Read More

Israeli Court Threatens to Undermine FATCA Agreement

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September 8, 2016

Israel was nearing completion of the steps required to comply with the Foreign Account Tax Compliance Act (FATCA), but its attempt to comply may be in sudden jeopardy thanks to a recent Israeli court decision.  FATCA exchanges were to begin on September 1, but Justice Hanan Meltzer issued a temporary injunction that day that prevents FATCA-related regulations that would have permitted the exchange of information with the United States from going into effect.  The injunction was issued in response to a request filed August 8 by a group named Republicans Overseas Israel.  An emergency hearing is scheduled for September 12.… Read More

First Friday FATCA Update

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September 2, 2016

Recently, the Treasury released the Model 1A Intergovernmental Agreement (IGA) entered into between the United States and Trinidad and Tobago.

The IRS also released the Competent Authority Agreements (CAAs) implementing the IGAs between the United States and the following treaty partners:

  • Cambodia (Model 1B IGA signed on September 14, 2015);
  • United Arab Emirates (Model 1B IGA signed on June 17, 2015);
  • Turks and Caicos Islands (Model 1B IGA signed on December 1, 2014).

Under FATCA, IGAs come in two forms: Model 1 or Model 2.  Under a Model 1 IGA, the foreign treaty partner agrees to collect information of U.S. accountholders in foreign financial institutions (FFIs) operating within its jurisdiction and transmit the information to the IRS. … Read More

IRS Provides Guidance on Calculating Intentional Disregard Penalties for Paper Filings

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August 26, 2016

Earlier this month, the IRS announced in interim guidance that it would amend Section 20.1.7 of the Internal Revenue Manual to provide a methodology for the calculation of intentional disregard penalties under Section 6721 for filers who fail to file information returns electronically when required.  In general, filers of more than 250 information returns are required to file such returns electronically with the IRS.  For this purpose, each type of information return is considered separately, so that a filer who files 200 Forms 1099-DIV and 200 Forms 1042-S is not required to file electronically.  In contrast, if the filer was required to file 300 Forms 1099-DIV and 200 Forms 1042-S, it must file the Forms 1099-DIV electronically, but may file Forms 1042-S on paper.… Read More

Court Decision Underscores Need for Due Diligence When Using Payroll Service Providers

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August 24, 2016

A recent decision of the U.S. District Court for the Central District of California should remind employers to regularly verify the actions of payroll service providers regardless of the provider’s reputation and the longevity of the relationship.  In particular, employers should open an e-Services account with the IRS and verify that all deposits are in fact hitting their payroll accounts timely.  This check should be performed weekly.  If deposits are not timely reflected on accounts, it is incumbent on employers to promptly determine the nature of the problem.  The IRS does not police payroll service companies, and the Department of Justice has prosecuted a number of people for embezzlement of payroll taxes over the years.… Read More

IRS Pushes Bad Position in Penalty Case and Loses on Reasonable Cause Grounds

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August 17, 2016

The U.S. Tax Court recently held that an individual taxpayer was not liable for failure-to-file and failure-to-pay penalties under Code Sections 6651(a)(1) and 6651(a)(2), respectively, due to reasonable cause.  In Rogers v. Commissioner, a 2007 fire nearly destroyed Rogers’ home, resulting in losses exceeding $150,000 and essentially leaving her homeless.  Rogers did not deduct the losses on her 2007 or 2008 return, believing that she could claim the deduction only in the year the insurance company resolved her claim.  In 2009, the insurance company paid her $43,964, and she did not file an income tax return or pay the related taxes because she believed that her casualty losses (to the extent not compensated by insurance) fully offset her 2009 income.… Read More

IRS Implements New Voluntary Certification Program for PEOs

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August 15, 2016

Through a flurry of guidance this summer, the IRS has finally implemented the long-anticipated voluntary certification program for professional employer organizations (PEOs).  In 2014, Congress enacted Code Sections 3511 and 7705, which brought about a sea-change in the payroll tax world by creating a new statutory employer: An IRS‑certified PEO (CPEO).  This change is significant because a common law employer (customer) who is otherwise liable for payroll taxes on wages that its PEO pays its employees may shift this payroll tax liability to a CPEO.  In May 2016, the IRS released temporary and proposed Treasury Regulations and Revenue Procedure 2016-33, providing tax and CPEO-certification rules under Sections 3511 and 7705. … Read More

IRS Certified PEO Program Leaves Unresolved Qualified Plan and ACA Issues

The IRS recently implemented the voluntary certification program for professional employer organizations (PEOs) (discussed in a separate blog post).  Earlier this summer, the IRS released temporary and proposed Treasury regulations and Revenue Procedure 2016-33 pursuant to Code Sections 3511 and 7705, which created a new statutory employer for payroll-tax purposes: an IRS-certified PEO (CPEO).  Last week, the IRS released Notice 2016-49, which relaxed some of the certification requirements set forth in the regulations and Revenue Procedure 2016-33.

Although a significant change in the payroll tax world, the new CPEO program does not clarify the issue of whether a PEO or its customer, the worksite employer, is the common law employer for other purposes. … Read More

IRS Releases New Form on Which Small Businesses Should Claim Payroll Tax Credit for R&D Expenditures

The IRS released draft Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, which qualified small business (i.e., start-up businesses) will use to claim the new payroll tax credit available to start-up businesses for qualified research and development (R&D) expenses up to $250,000.  As we explained in a prior post, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) allowed start-up businesses to take advantage of the R&D tax credit by allowing them to offset the employer portion of the Social Security tax—the credit was previously only available to companies that could offset such expenditures against taxable income.  … Read More

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