Lately on the Hill
With elections only days away, both parties are starting to talk more actively about what the rest of this Congressional session is going to look like post-elections.
The New Democrat Coalition wrote a letter to House leadership urging them to prioritize the enhanced Child Tax Credit (CTC) in any year-end package. The American Rescue Plan increased the CTC from $2,000 to $3,600 for qualifying children under 6 years old and $3,000 for children 6 and older but under age 18. However, this expanded CTC expired at the end of 2021. Renewing this expanded CTC has been a major priority for Democrats; however, despite multiple efforts to include this provision in Build Back Better negotiations, the party has been unsuccessful on this front.
This letter also asked leadership to fix the research and development (R&D) expensing change that became effective for years beginning after December 31, 2021 which now requires businesses to capitalize and amortize R&D expenses over five years (15 years for non-U.S. R&D expenses), instead of deducting the expenses in the first year.
Congress returns in mid-November for a few legislative days to close out this legislative session for the year. In addition to likely taking on these two issues, government funding expires December 16, so Congress will need to pass another round of spending bills before heading home for the holidays.
IN CASE YOU MISSED IT
- Republicans on the House Ways and Means Committee are requesting that the IRS preserve communications and documents related to the agency’s destruction of 20 million paper-filed information returns in March 2021.
- House Republicans are also requesting documents from the Treasury Department on the alleged misuse of funds appropriated under the American Rescue Plan. According to the letter, the Ways and Means Committee wants to know the exact number and amount of stimulus checks sent to undocumented immigrants, incarcerated individuals, and anyone who died before January 1, 2021.
- The House Republicans on the Ways and Means Committee also want an update from the Treasury’s investigation into how confidential taxpayer information was leaked to ProPublica in June 2021. The Treasury Department has until November 10 to respond.
- The IRS is reminding taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party network transactions of more than $600 per year. Prior to 2022, this threshold was $20,000.
- The IRS has hired 4,000 new customer service representatives ahead of the 2023 tax filing season. These new hires will be tasked with answering phones and providing other services.
- The IRS released draft 2022 instructions for filing Schedules K-2 and K-3 (Form 1065), which include an exception from filing Schedules K-2 and K-3 for purely domestic partnerships (the “domestic filing exception”). There are partner notification requirements placed on these eligible domestic partnerships, so it is not a total free pass, but it is a good compromise.
- The IRS is also working on several guidance projects including the Inflation Reduction Act tax provisions, opportunity zones, partnership terminations, Section 707 “disguised sales,” and carried interest.
- President Biden named IRS Deputy Commissioner of Services and Enforcement, Douglas O’Donnell, as Acting Commissioner of the IRS. He will take over for current Commissioner Charles Rettig whose term will end November 12.
- The IRS Small Business/Self-Employed Division has trained 300 auditors to examine claims involving employee retention credits (ERC), and criminal tax investigators are looking at enablers and promoters of the credits.
- Knowing the difference between a hobby and a business has often been described as more art than science. The IRS has released a fact sheet, FS-2022-38, titled “Know the difference between a hobby and a business.” While the title may imply making the distinction is an objective exercise, a quick read of the fact sheet leads one quickly back to the art versus science description.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.