Stay informed on the latest tax news and developments, including legislation and rule changes, for effective tax planning and compliance.
Certain monetized installment sales are identified as listed transactions by proposed regulations from the Treasury and the IRS
To designate some monetized installment sale transactions as listed transactions, which are considered to be abusive tax transactions and need to be reported to the IRS, the Department of the Treasury and the Internal Revenue Service (IRS) have released proposed regulations. In order to avoid penalties, advisors and participants in the aforementioned transactions must file disclosures.
In monetized installment sale transactions, the seller of an appreciating asset typically enters into a contract to sell the asset through a third party while securing a loan with conditions identical to the installment obligation. The seller then declares the transaction on their federal income tax return as an installment sale, delaying the recognition of gain until they get the principle payment.
The IRS has compiled a list of the "Dirty Dozen" popular tax frauds and schemes, which includes these transactions. A public hearing is scheduled for October 12, 2023, and public comments on the proposed regulations may be made up to October 3, 2023.
Security Summit: Tax professionals should be on the lookout for phishing emails and other cloud-based threats
The IRS, state tax authorities, and other partners of the Security Summit have warned tax professionals about the rise of phishing scams and cloud-based schemes designed to steal private information about taxpayers. To steal financial and tax information from their clients, these hacks target tax experts.
IRS Commissioner Danny Werfel underlined the necessity for ongoing watchfulness since con artists are constantly coming up with new, sometimes deceptive and clever, ways to fool tax professionals.
The Security Summit's five-part "Protect Your Client; Protect Yourself" series, with its third warning, aims to safeguard the tax system from fraud and identity theft. This awareness campaign has been carried out by the Security Summit for eight years.
The three types of attacks that tax professionals are most frequently exposed to are phishing, spear phishing, and whaling. The basic goal of each scam, which has unique traits, is to trick the target into providing personal information.
The Security Summit also issues a strong recommendation for the adoption of multi-factor authentication for systems that store data or operate tax preparation software and cautions against the risks associated with cloud-based methods. By adding a second layer of security, this step makes it more difficult for identity thieves to access important data.
The IRS Commissioner announces a new phase of the Employee Retention Credit project; after the backlog is cleared, more processes will be implemented to address the rising fraud risk
The IRS is shifting focus from clearing valid Employee Retention Credit (ERC) claims to scrutinizing dubious submissions, following an increase in aggressive marketing and potential fraud. Commissioner Danny Werfel warned against misleading marketing, emphasizing the risk it poses for businesses. Despite the ERC program officially ending in 2021, claims can still be filed until 2025, raising concerns about future fraud. The IRS is responding by intensifying audits and criminal investigations into suspicious claims. Businesses are urged to work with trusted tax professionals, carefully review eligibility requirements, and be aware of repayment obligations if the credit is improperly claimed.
IRS initiates push for electronic processing
The IRS is initiating a paperless processing system that will eliminate approximately 200 million pieces of paper annually and significantly reduce processing times. Enabled by the Inflation Reduction Act resources, this plan aims to digitize all paper-filed returns by 2025. By the 2024 filing season, taxpayers can choose to go paperless, and by the following year, the IRS plans to process all paper-filed tax returns digitally. The digitization process will reduce errors, improve customer service, and save storage costs. In addition to expedited refunds, the initiative will enable data scientists to use advanced analytics to detect tax evasion.
