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Ext. PublicationThe Tax Navigator – Tax Legislation Updates and Year-End Tax Reminders
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Join Sean Muller, The Tax Navigator, as he discusses new international tax provisions and rules effective in January as well as important year-end reminders for required minimum distributions (RMDs) and donor-advised fund contributions.
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Detailed Description of The Tax Navigator – Tax Legislation Updates and Year-End Tax Reminders
00:00:00
Sean: Alright. So last week was a busy week for notices.
It used to be the notices would tell you what the IRS was interested in or what was the concern of them. And now it seems they’re using the notices to either tell you what’s coming out or defining it.
00:00:14
Sean: So, there were three notices last week on international tax provisions all related to what we talked about last week with a change in year-end.
00:00:23
Sean: One, the one-month year-end change. And then the other piece is, it used to be if you owned a controlled foreign corporation that you had to pick up the income from the CFC at year-end. So, whoever owned it at year-end had to do it, and they changed those rules to be ratable.
00:00:37
Sean: So now they’re coming out with different rules around how dividends are treated and your subpart F pay, comp, etc. So, lots of international provisions that we’ll get to later because all those rules become effective in January.
00:00:49
Sean: Another piece is partnership basis shifting rules. There were concerns under President Biden’s administration that lots of taxpayers were moving basis around the related parties.
00:01:01
Sean: So, they were coming out with some partner basis shifting rules. We had proposed regs that became final in January, and then they were taken back in April, and now they’re going to be completely canceled.
00:01:14
Sean: So, you know, Democrats are claiming it’s because Trump and all his advisers have gotten to him and said it affects him. And then the Republicans are saying the rules were too complicated and we couldn’t comply with them. But those rules are being taken away.
00:01:28
Sean: So, the big issue there was they’re basically taking any sort of transaction that were specifically identified shifting basis, and they were going to make the adviser disclose that or be fined. So, it wasn’t just a taxpayer issue at all.
00:01:42
Sean: Other piece last week, there were two bills that actually got signed. The two bills actually were taxpayer-friendly. One bill deals with tax court and how taxpayers are treated.
00:01:52
Sean: Tax courts are the only court where you can actually file a claim and not pay your tax ahead of time. Well, according to the bill, the IRS was taking advantage in tax court against the taxpayers, so they’ve actually righted that ship.
00:02:06
Sean: There is also another bill that got passed that requires the IRS when they make a mathematical correction. And Trump actually signed this bill last week. It’s the math bill that the IRS actually has to provide details about how they changed your tax calculations.
00:02:22
Sean: Historically, or not historically, the last few years, they’ve actually put in, “We’ve changed your tax return for a variety of reasons. It could be one, two, three, four, five, or six.” And this, they have to specifically tell you what they’re going to do there.
00:02:35
Sean: As we approach year-end, if you’re planning on making a donor-advised fund contribution to take advantage of the charitable contribution changes, you really need to do that quickly. Administrators are getting filled up because everybody’s trying to set up DAFs before year-end and you’ve only got a few weeks left to do that piece.
00:02:52
Sean: If you’re 73 years old and have to take required minimum distributions, or RMDs, there was lots of concern about how those rules were going to work. Those got finalized last December.
00:03:04
Sean: And so, you may have to take an RMD by this December, and if not December, then April. So please check with your administrator to make sure you’re taking your proper RMDs for that.
00:03:14
Sean: And sort of news of the weird for this as we approach the holiday season, there was a sales manager at Lighting Inc. who decided to try to take tax credits for him selling light plants, so he was selling lighting.
00:03:27
Sean: And he was taking a tax credit because he said he was a material designer of these deals. And plus, he was taking a lot of business expenses and depreciation related to his business.
00:03:37
Sean: All that got thrown out because he wasn’t a material participant in the lighting deal. He was just a salesperson. And the company policy actually had an expense reimbursement plan.
00:03:49
Sean: And the fact that he didn’t apply for expense reimbursement, then he wasn’t eligible, and then he had no other sales trade or business outside of being an employee.
00:03:57
Sean: So, he got all of his expenses thrown out. But he went for the gamut. He took all these expenses to get their earned income tax credit and get all his withholding back. Plus, he wanted to get money back from the government, and the IRS won that case and took all of it back.
00:04:11
Sean: So that was about it for the week. It was a busy week, but more rulings to come.
This episode of The Tax Navigator was recorded prior to publication. Some references or updates discussed may reflect information current as of the recording date.
