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NEW YORK—The Internal Revenue Service needs to find ways to better communicate how it is handling technology modernization and transformation, including in areas such as the use of artificial intelligence in its processes, agency Office of Internal Consulting Chief Joseph Zeigler said.
NEW YORK—The Internal Revenue Service needs to find ways to better communicate how it is handling technology modernization and transformation, including in areas such as the use of artificial intelligence in its processes, agency Office of Internal Consulting Chief Joseph Zeigler said.
Speaking during a plenary session August 18, 2026, at the IRS Nationwide Tax Forum, Zeigler said it is his “hope that the IRS is going to a better job of telling this story” about how the agency is using technology to help improve its operations and make lives easier for taxpayers and the tax professionals who assist them.
As an example, Zeigler specifically highlighted some of the work the agency is doing with AI.
“When we talk about AI, AI is not meant to replace bodies or people and computers doing the work and there is no human input,” he said. Rather it is about how the IRS “can give our employees tools and resources [and] technology to make them better, more efficient” and improve the quality of their work. “All of those things is what I believe that AI and technology were meant for.”
He continued: “It’s taking our world-class employees and putting them on steroids, giving them the ability to come to the right answer sooner.”
And at the end is the ultimate goal of making the taxpayer experience that much better and more in line with what they expect from their customer interactions with the private sector.
“If we can come to an answer that right the first time, and we can come to it quick, and we can report it to the taxpayer [and say] here’s what’s going on,” he said. “All those things are at our fingertips.”
The IRS issued guidance in the form of sample forms and proposed rollover procedures to simplify, standardize, and expedite the completion of direct rollovers to or from a retirement plan. The guidance is designed to comply with Section 324 of the SECURE 2.0 Act (P.L. 117-328). Use of the sample forms and proposed rollover procedures is optional.
The IRS issued guidance in the form of sample forms and proposed rollover procedures to simplify, standardize, and expedite the completion of direct rollovers to or from a retirement plan. The guidance is designed to comply with Section 324 of the SECURE 2.0 Act (P.L. 117-328). Use of the sample forms and proposed rollover procedures is optional.
The IRS indicates that these sample forms are not inftended to be used for rollovers and transfers between IRAs. According to reports made by the Government Accountability Office and the IRS's conversations with IRA stakeholders, IRA-to-IRA transfers are already completed through an electronic transfer system that is considered uniform and efficient.
The guidance includes:
(1) a proposed rollover procedure;
(2) the participant's rollover request form;
(3) the receiving plan's request to the distributing plan;
(4) the distributing plan's rollover certification; and
(5) the receiving plan's rollover acceptance.
The IRS is considering additional guidance to facilitate rollovers. Guidance under consideration includes: (1) eliminating the safe harbor that allows plans to send paper checks to participants to complete a direct rollover; (2) requiring administrators and trustees to complete rollovers via electronic transfers or paper checks sent directly to the receiving plan; and (3) providing for new safe harbors based on the use of sample forms.
The IRS and Treasury have announced their intension to propose regulations relevant to Code Sec. 6433 and the SECURE 2.0 Act of 2022 (P.L. 117-328). For tax years beginning after December 31, 2026, Code Sec. 6433 allows certain low- and moderate-income individual taxpayers who have made qualified retirement savings contributions to receive matching contributions of up to $1,000 as saver’s match contributions.
The IRS and Treasury have announced their intension to propose regulations relevant toCode Sec. 6433and the SECURE 2.0 Act of 2022 (P.L. 117-328). For tax years beginning after December 31, 2026,Code Sec. 6433allows certain low- and moderate-income individual taxpayers who have made qualified retirement savings contributions to receive matching contributions of up to $1,000 as saver’s match contributions.
Background
On April 30, 2026, President Trump issued an executive order to (1) increase public awareness of saver’s match contributions; (2) facilitate participation in eligible retirement savings vehicles; and (3) establish a website that informs about high-quality, low-cost IRAs and taxpayers without an employer-sponsored retirement plan. These taxpayers include independent contractors.
Saver’s Match Contributions vs Saver’s Credit
For tax years beginning after December 31, 2026, Saver’s Match contributions would replace the Saver’s Credit underCode Sec. 25B. This would apply to elective contributions, qualifying retirement plans and IRAs.
However, the Saver’s Credit would continue to be available after December 31, 2026, with respect to contributions made to ABLE accounts under Code Sec. 529A. Saver’s match contributions would be claimed on a new (unpublished) Form 8880-A, Saver’s Match for Qualified Retirement Savings Contributions.
Eligibility
Individual taxpayers who make qualified retirement savings contributions could be eligible for a Saver's Match contribution based on those contributions. The contributions to a new or already-existing IRA after the end of a tax year could be made until the tax filing deadline. The contributions should be designated as being made for the prior tax year.
Tax Status
An eligible individual taxpayer’s saver’s match contribution directly paid by the Treasury to a retirement plan is generally treated as an elective deferral made by the individual taxpayer. The contribution is not taken into account for any elective deferral and catch-up limitations that apply to Code Secs.401(k),403(b), or governmental457(b)plans.
Comments Requested
The Treasury Department and the IRS request comments on the issues addressed on or before October 5, 2026. Comments can be submitted electronically via the Federal eRulemaking Portal atwww.regulations.gov.
The Treasury Department and IRS have issued initial guidance on the employer credit under Code Sec. 45S for premiums paid on family and medical leave insurance as provided by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). Beginning in 2026, an employer may elect to determine the credit based on premiums paid or incurred during the tax year with respect to an insurance policy that provide such leave instead of based on wages paid to a qualifying employee during paid family and medical leave. The Treasury intends to issue proposed regulations that include this guidance.
The Treasury Department and IRS have issued initial guidance on the employer credit underCode Sec. 45Sfor premiums paid on family and medical leave insurance as provided by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21). Beginning in 2026, an employer may elect to determine the credit based on premiums paid or incurred during the tax year with respect to an insurance policy that provide such leave instead of based on wages paid to a qualifying employee during paid family and medical leave. The Treasury intends to issue proposed regulations that include this guidance.
Premium Method for Credit
The credit may be claimed under the premium method beginning in 2026 only to the extent the insurance premium funds a benefit that would be creditable under the wage method. Thus, the premium must be for insurance coverage with respect to leave that is:
paid family and medical leave as defined under the Family Medical Leave Act (FMLA), or required by state local law or paid for by a state or local government,
payable to an individual who is a qualifying employee of the employer at the time the premium is paid or incurred, and
provides a benefit that would constitute wages to the employee.
In the case of a premium paid or incurred for an insurance policy that provides both creditable coverage and noncreditable coverage, the employer must allocate the premium between the creditable coverage and the noncreditable coverage using any reasonable method. For example, a blended premium would be a premium for coverage that provides both qualifying paid family and medical leave and other types of leave, or coverage for qualifying employees and nonqualifying employees.
An employer may calculate the tax credit using both the wage method with respect to certain leave and the premium method with respect to other leave. However, an employer may not use the wage method to claim a credit for wages paid to the extent that the employer claims a credit using the premium method for creditable coverage that funds such benefits (or vice versa).
The IRS updated frequently asked questions (FAQs) for qualified overtime compensation. The FAQs update guidance on (1) the qualified overtime compensation deduction; (2) coverage and exemptions under the Fair Labor Standards Act (FLSA); (3) Form W-2, Form 1099-MISC, and Form 1099-NEC requirements; and more.
The IRS updated frequently asked questions (FAQs) for qualified overtime compensation. The FAQs update guidance on (1) the qualified overtime compensation deduction; (2) coverage and exemptions under the Fair Labor Standards Act (FLSA); (3) Form W-2, Form 1099-MISC, and Form 1099-NEC requirements; and more.
Qualified Overtime Compensation Deduction
The deduction is up to $12,500 of qualified overtime compensation earned for the year per individual tax return. It is $25,000 for joint return. The deduction is reduced if a taxpayer’s modified adjusted gross income (MAGI) for the tax year exceeds $150,000, and $300,000 for joint filers.
Coverage and Exemptions Under FLSA
The IRS noted that overtime under the FLSA must be paid to individual taxpayers who are (1) covered by the FLSA; and (2) not exempt from the FLSA’s overtime requirement. Ineligible taxpayers would not receive qualified overtime compensation regardless of other laws or circumstances. Employees who are exempt from the FLSA’s overtime requirement include teachers, academic administration personnel, employees of certain seasonal amusement or recreational establishments and more.
Employee-owners of businesses are not FLSA overtime-eligible employees. An employee who owns at least a bona fide 20-percent equity interest in the enterprise in which they are employed is ineligible.
Reporting Requirements
Starting in tax year 2026, payors and employers are required to separately report qualified overtime compensation on a Form 1099-MISC, Form 1099-NEC or Form W-2. Independent contractors would only report qualified overtime compensation on a Form 1099- MISC or Form 1099-NEC.
The Fifth Circuit Court of Appeals held that the original public meaning of "limited partner" in Code Sec. 1402(a)(13) is a partner who plays no significant role in managing or running a business. The court rejected the "passive investor" rule followed by the IRS and the Tax Court in Soroban Capital Partners LP (Dec. 62,310). The Fifth Circuit also withdrew its prior opinion in Sirius Solutions, L.L.L.P. (this was the prior name of the limited liability limited partnership in this litigation).
The Fifth Circuit Court of Appeals held that the original public meaning of"limited partner"inCode Sec. 1402(a)(13)is a partner who plays no significant role in managing or running a business. The court rejected the"passive investor"rule followed by the IRS and the Tax Court inSoroban Capital Partners LP(Dec. 62,310). The Fifth Circuit also withdrew its prior opinion inSirius Solutions, L.L.L.P. (this was the prior name of the limited liability limited partnership in this litigation).
Background
A limited liability limited partnership operated a business consulting firm, and was owned by several limited partners and one general partner. For the tax years at issue, the limited partnership allocated all of its ordinary business income to its limited partners. Based on the limited partnership tax exception inCode Sec. 1402(a)(13), the limited partnership excluded the limited partners’ distributive shares of partnership income or loss from its calculation of net earnings from self-employment during those years, and reported zero net earnings from self-employment.
The IRS adjusted the limited partnership's net earnings from self-employment, and determined that the distributive share exception inCode Sec. 1402(a)(13)did not apply because none of the limited partnership’s limited partners counted as "limited partners" for purposes of the statutory exception. The Tax Court upheld the adjustments, stating it was bound bySoroban.
Limited Partners and Self Employment Tax
Code Sec. 1402(a)(13)excludes from a partnership's calculation of net earnings from self-employment the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments inCode Sec. 707(c)to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services.
InSoroban,the Tax Court determined that Congress had enactedCode Sec. 1402(a)(13)to exclude earnings from a mere investment, and intended for the phrase"limited partners, as such"to refer to passive investors. Thus, the Tax Court there held that the limited partner exception ofCode Sec. 1402(a)(13)did not apply to a partner who is limited in name only, and that determining whether a partner is a limited partner in name only required an inquiry into the limited partner's functions and roles.
No Significant Role in Management
The Fifth Circuit stated that the backdrop against which Congress enactedCode Sec. 1402(a)(13)in 1977 suggested that some participation is allowed, so long as the partners do not exercise control over the business, and that the plain text of the statute points towards this conclusion. The court observed that all relevant sources suggested that when the statute was enacted, the ordinary public meaning of"limited partner"included a partner who did not play a significant role in managing or running the business.
The Fifth Circuit rejected the Tax Court’sSorobandecision, which held that that the term"limited partner"could refer only to passive investors. The court stated that the Tax Court had selected a rule that was divorced from statutory text and that appeared to prohibit even the most minor involvement in corporate affairs. In the Fifth Circuit's view, it would have been understood at the time Congress enactedCode Sec. 1402(a)(13)that a limited partner could not manage the partnership, but perhaps could participate in certain nonmanagerial aspects of the business.
The court also stated that theSorobandecision could not be squared with decades of IRS-approved guidance insisting that what mattered was limited liability alone. The court characterized the IRS's position to be that it could change the meaning of "limited partner" from "limited liability alone" to the"passive investor"standard with no action from Congress to amend the text ofCode Sec. 1402(a)(13). Even assuming that the IRS could unilaterally effectuate such changes through tax instructions, the court stated that the IRS's instructions must comport with the original public meaning of the text enacted by Congress.
WithdrawingSirius Solutions, L.L.L.P., CA-5,2026-1ustc¶50,109, and vacating and remanding an unreported Tax Court opinion.
The IRS has issued final regulations that clarify when backup withholding applies to payments made in settlement of third party network transactions. The final rules reflect amendments to Code Secs. 6050W and 3406 made by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21), and apply to payments made in calendar years beginning after December 31, 2024.
The IRS has issued final regulations that clarify when backup withholding applies to payments made in settlement of third party network transactions. The final rules reflect amendments toCode Secs. 6050Wand3406made by the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21), and apply to payments made in calendar years beginning after December 31, 2024.
Under thede minimispayment rule ofCode Sec. 6050W(e)for information reporting purposes, a third party settlement organization (TPSO) must report payments made in settlement of third party network transactions to a payee only if the payments exceed $20,000 and 200 transactions in a calendar year. The final regulations align the backup withholding obligations underCode Sec. 3406with this reporting threshold.
A payment will be considered a reportable payment subject to backup withholding only if both the $20,000 and 200 transaction thresholds are exceeded during the calendar year. The amount subject to backup withholding includes the entire amount of the transaction that causes either threshold to be breached, whichever occurs later, and the amount of any subsequent transactions made to the payee during the same calendar year. Further, if the TPSO made payments in settlement of third party network transactions to the payee in the previous calendar year that were reportable payments under the backup withholding rules, thede minimisexception to backup withholding would not to payments made to that payee in the current calendar year.
Participating Payees
In the preamble to the Treasury Decision, the Treasury Department and the IRS used the opportunity to clarify thatde minimisTPSO reporting and the backup withholding thresholds apply with respect to each participating payee, as defined byCode Sec. 6050W(d)(1).
The Financial Crimes Enforcement Network (FinCEN) has issued a final rule that permanently removes the requirement that U.S. companies and U.S. persons must report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. The final rule adopts, with limited changes, an interim final rule issued on March 26, 2025, that narrowed the BOI reporting requirements.
The Financial Crimes Enforcement Network (FinCEN) has issued a final rule that permanently removes the requirement that U.S. companies and U.S. persons must report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. The final rule adopts, with limited changes, an interim final rule issued on March 26, 2025, that narrowed the BOI reporting requirements.
The Corporate Transparency Act (CTA) was enacted in 2021 as part of the broader Anti-Money Laundering Act of 2020. Its reporting requirement had been characterized as an important step in the fight against money laundering, financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption.
In late 2024 and early 2025, however, several federal district courts preliminarily enjoined FinCEN from implementing and enforcing the reporting rule. The Treasury Department announced in March 2025 that it was suspending enforcement of the CTA and its reporting requirements against U.S. citizens, domestic reporting companies, and their beneficial owners, and issued the interim final rule.
BOI Reporting Exemptions
The final rule:
adopts exemptions that make the rollback of beneficial ownership reporting by U.S. companies permanent,
exempts foreign pooled investment vehicles registered in the United States from reporting the BOI of a U.S person in control of the investment vehicle, and
confirms that FinCEN will delete information about any individual that it reasonably believes is a U.S. person (for example, information that is linked to a U.S. passport or U.S. driver's license).
The final rule also makes substantive changes that expand on the relief in the interim final rule, by:
exempting foreign companies from the requirement to report U.S. person “company applicants” (i.e., the individuals who helped those foreign companies register to do business in the United States), and
exempting U.S. persons who have applied for FinCEN Identifiers (FinCEN IDs) from having to update or correct the information they provided to FinCEN when they applied.
Foreign entities that are reporting companies are still required under the final rule to report BOI for foreign individuals.
Department of the Treasury Secretary Janet Yellen said there are no plans to extend the Beneficial Ownership Information reporting deadline.
Department of the Treasury Secretary Janet Yellen said there are no plans to extend the Beneficial Ownership Information reporting deadline.
"I don't think it's going to be necessary to extend the timeframe,"she testified during a July 9, 2024, House Financial Services Committeehearing, highlighting ongoing outreach and what the agency considers a good amount of reporting so far.
During the hearing, a number of committee members noted that there are still a lot of small business owners who do not know that they have this BOI reporting requirement from the Financial Crimes Enforcement Network and could be facing significant financial penalties that might create a financial hardship if they miss the deadline to report BOI by the end of the year.
However, Secretary Yellen does not expect this to be an issue, relying on specific wording of the reporting regulations that will help small business owners who may not be aware they have to file that could protect from the $250,000 fine associated with not filing a BOI report.
"The fine is for a ‘willful’ violation,"she said, although when pressed, she could not provide a clear definition of what constitutes a willful violation. Yellen added that"FinCEN is not going to prioritize going after small businesses."
She also noted that FinCEN is engaged in extensive and ongoing outreach to make sure small business owners are aware of and educated on the requirement to file a BOI report.
The Financial Crimes Enforcement Network (FinCEN) has published a SmallEntityComplianceGuide (Guide) to provide an overview of the Beneficial Ownership Information Access and Safeguards Rule (Access Rule) requirements for smallentities that obtain beneficial ownership information (BOI) from FinCEN.
TheFinancial Crimes Enforcement Network(FinCEN) has published aSmallEntityComplianceGuide(Guide) to provide an overview of theBeneficial Ownership InformationAccess and Safeguards Rule (Access Rule) requirements forsmallentitiesthat obtainbeneficial ownership information(BOI) fromFinCEN. Under theAccess Rule, issued in December 2023,BOIreported toFinCENis confidential, must be protected and may be disclosed only to certain authorized federal agencies; state, local, tribal and foreign governments; and financial institutions. Theguideincludes sections summarizing the Access Rule’s requirements that pertain tosmallfinancial institutions’ access toBOI.
Further,FinCENintends to provide access to certain categories of financial institutions with obligations under the current Customer Due Diligence (CDD) Rule. Therefore, thisGuideincludes sections summarizing the Access Rule’s requirements that pertain to thesesmallfinancial institutions only
Department of the Treasury Secretary Janet Yellen touted the corporate transparency that will come with the new beneficial ownership reporting requirements, which went into effect at the start of 2024.
Department of the Treasury Secretary JanetYellentouted the corporate transparency that will come with the new beneficial ownershipreportingrequirements, which went into effect at the start of 2024.
"“Thebenefitsof increasing corporate transparency through gatheringbeneficial ownership information– put simply, knowing who owns what – start with with protecting our national security,”"shesaidJanuary 8, 2024, at the Financial Crimes Enforcement Network office in Vienna, Va."Information on beneficial ownership will support our law enforcement colleagues in making arrests, prosecuting offenders, and seizing ill-gotten assets."
She added that it will also"inform strategic, targeted actions, such as sanctions. Corporate transparency can bring economicbenefitsas well: protecting our financial system, reducing due diligence costs, enabling fair business competition, and increasing tax revenue."
More than 100,000 filings ofBOIreportshave been made in the first week of thereportingrequirement, Sec.Yellensaid.
She also emphasized that the systems that support the filing of thereports"have been designed with data security as a core priority. Companies will use a filing system through FinCEN’s website and FinCEN will store the information it received in a non-public database with rigorous controls."
Yellenalso noted that that the process to file aBOIreportis simple and small businesses should not need to hire any outside help toreportthe required information.
"A small business shouldn’t need a certified public accountant or lawyer"to file, she said.
The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department today released for publication in the Federal Register final regulations [PDF 276 KB] extending the filing deadline for initial beneficial ownership information (BOI) reports under regulations becoming effective January 1, 2024, that require certain corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to reportbeneficial ownership information to FinCEN (i.e., information on the persons who ultimately own or control the company). Read TaxNewsFlash
The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department today released for publication in the Federal Registerfinal regulations[PDF 276 KB] extending thefiling deadlinefor initialbeneficial ownership information(BOI)reportsunder regulations becoming effective January 1, 2024, that requirecertaincorporations, limited liability companies, and other similar entities created in or registered to do business in the United States toreportbeneficial ownership informationto FinCEN (i.e., information on the persons who ultimately own or control the company). ReadTaxNewsFlash
Under the current regulations, entities created or registered on or after the January 1, 2024 effective date must file initialBOIreportswith FinCEN within 30 days of notice of their creation or registration.
Today's final regulations extend thatfiling deadlinefrom 30 days to 90 days for entities created or registered on or after January 1, 2024, and before January 1, 2025, to give those entities additional time to understand the newreportingobligation and collect the necessary information to complete the filing.
Entities created or registered on or after January 1, 2025, will continue to have 30 days to file theirBOIreportswith FinCEN, as generally required under the current regulations.
The Financial Crimes Enforcement Network (FinCEN) has published its first set of guidance materials to aid the public, and especially the small business community, in understanding the beneficial ownership information (BOI) reporting requirements which will take effect on January 1, 2024.
TheFinancial Crimes Enforcement Network(FinCEN) has published its first set ofguidancematerials to aid the public, and especially the small business community, in understanding thebeneficial ownership information(BOI)reportingrequirements which will take effect on January 1, 2024.
The Corporate Transparency Act (CTA) established uniformBOIreportingrequirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States. NewFinCENregulations require these entities toreporttoFinCENinformation about their"beneficial owners"—the persons who ultimately own or control the company.
In an effort to make the process as simple as possible, particularly for small businesses who may have never heard of or interacted withFinCENbefore,FinCENhas placed several items on itsBOIreportingwebpage (https://www.fincen.gov/boi), including:
The Financial Crimes Enforcement Network (FinCEN) has issued a Notice of Proposed Rulemaking (NPRM) that would implement the beneficial ownership information provisions of the Corporate Transparency Act (CTA) that govern access to and protection of beneficial ownership information.
The Financial Crimes Enforcement Network (FinCEN) has issued a Notice of Proposed Rulemaking (NPRM) that would implement the beneficial ownership information provisions of the Corporate Transparency Act (CTA) that govern access to and protection of beneficial ownership information. The proposed regulations address the circumstances under which beneficial ownership information may be disclosed to certain governmental authorities and financial institutions, and how that information must be protected.
The proposed regulations would—
specify how government officials would access beneficial ownership information in support of law enforcement, national security, and intelligence activities;
describe how certain financial institutions and their regulators would access that information to fulfill customer due diligence requirements and conduct supervision; and
set high standards for protecting this sensitive information, consistent with CTA goals and requirements.
The NPRM also proposes amendments to the final reporting rule issued on September 30, 2022, effective January 1, 2024, to specify when reporting companies may report FinCEN identifiers associated with entities.
Limiting Access to Beneficial Ownership Information
The NPRM follows the final reporting rule which requires most corporations, limited liability companies, and other similar entities created in or registered to do business in the United States, to report information about their beneficial owners to FinCEN. Per CTA requirements, the proposed regulations limit access to beneficial ownership information to—
federal agencies engaged in national security, intelligence, or law enforcement activities;
state, local, and Tribal law enforcement agencies, if authorized by a court of competent jurisdiction;
financial institutions with customer due diligence requirements, and federal regulators supervising them for compliance with those requirements;
foreign law enforcement agencies, judges, prosecutors, central authorities, and other agencies that meet specific criteria, and whose requests are made under an international treaty, agreement, or convention, or via law enforcement, judicial, or prosecutorial authorities in a trusted foreign country; and
U.S. Treasury officers and employees whose official duties require beneficial ownership information inspection or disclosure, or for tax administration.
The proposed regulation would subject each authorized recipient category to unique security and confidentiality protocols that align with the scope of the access and use provisions.
Proposed Effective Date
FinCEN is proposing an effective date of January 1, 2024, to align with the date when the final beneficial ownership information reporting rule becomes effective.
Request for Comments
Interested parties can submit written comments on the NPRM by or before February 14, 2023 (60 days following publication in the Federal Register). Comments may be submitted by the Federal E-rulemaking Portal (regulations.gov), or by mail to Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-2021-0005 and RIN 1506-AB49/AB59.
The Financial Crimes Enforcement Network (FinCEN) has issued a final rule implementing the beneficial ownership information reporting provisions under the Corporate Transparency Act (CTA), which was enacted as part of the National Defense Authorization Act for Fiscal Year 2021 ( P.L. 116-283). The CTA amended the Bank Secrecy Act by adding a new provision on beneficial ownership reporting ( 31 USC §5336).
The Financial Crimes Enforcement Network (FinCEN) has issued a final rule implementing the beneficial ownership information reporting provisions under the Corporate Transparency Act (CTA), which was enacted as part of the National Defense Authorization Act for Fiscal Year 2021 ( P.L. 116-283). The CTA amended the Bank Secrecy Act by adding a new provision on beneficial ownership reporting ( 31 USC §5336).
The rule is intended to (1) enhance the ability of FinCEN and other agencies to protect U.S. national security and the U.S. financial system from illicit use, and (2) provide essential information to national security, intelligence, and law enforcement agencies, state, local, and tribal officials, and financial institutions, to help prevent illicit actors from laundering or hiding money and other assets in the United States.
The rule requires reporting companies to file reports with FinCEN that identify the beneficial owners of the entity and the entity’s company applicants. The rule also describes who must file a report, what information must be reported, and when a report is due.
Reporting Companies
There are two types of reporting companies: domestic and foreign. A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by filing a document with a secretary of state or any similar office under state or tribal law. A foreign reporting company is an entity formed under the law of a foreign country that is registered to do business in a state or tribal jurisdiction by filing a document with a secretary of state or any similar office.
FinCEN expects limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships to be reporting companies. FinCEN also expects companies with simple management and ownership structures to be the majority of reporting companies.
Twenty-three types of entities are exempt from “reporting company” treatment, including certain governmental authorities, tax-exempt organizations, banks, broker or dealers, investment companies, insurance companies, accounting firms, and others.
An entity that is a “large operating company” is not a reporting company if it:
employs more than 20 full time employees in the United States;
has an operating presence at a physical office within the United States; and
filed a federal income tax or information return in the United States for the previous year demonstrating over $5,000,000 in gross receipts or sales (excluding gross receipts or sales from sources outside the United States).
Other legal entities, including certain trusts, are also excluded to the extent that they are not created by filing a document with a secretary of state or similar office.
Beneficial Owners
A beneficial owner includes any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company. The rule defines “substantial control” and “ownership interest.”
A beneficial owner does not include a minor child; an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual; a reporting company employee (but not a senior officer) whose substantial control over or economic benefits from the entity are derived solely from his or her employment status; an individual whose only interest in a reporting company is a future interest through right of inheritance; or a creditor of a reporting company.
Company Applicants
A company applicant is: (1) the individual who directly files the document that creates the entity (for a foreign reporting company, the document that first registers the entity to do business in the United States); and (2) the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.
Reporting companies existing or registered on the effective date of the rule are not required to identify and report on their company applicants. Reporting companies formed or registered after the effective date must report company applicant information but do not need to update it.
Beneficial Ownership Information Reports
In the report filed with FinCEN, a reporting company must identify itself and report four pieces of information about each of its beneficial owners: name, birth date, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of that document). Reporting companies created after January 1, 2024, must also provide this information and document image for company applicants.
An individual who provides his or her information to FinCEN directly can obtain a unique identifying number assigned by FinCEN (“FinCEN identifier") which can then be provided to FinCEN on a report instead of the required information about the individual.
Effective Date and Reporting Deadlines
The rule is effective January 1, 2024. Reporting companies created or registered before the effective date have until January 1, 2025, to file their initial reports. Reporting companies created or registered after the effective date have 30 days after receiving notice of their creation or registration to file their initial reports.
A reporting company has 30 days to report changes to the information in its previously filed reports. It also must correct inaccurate information in previously filed reports within 30 days of when it becomes aware or has reason to know of the inaccuracy.
FinCEN has provided afact sheetwhich summarizes the new rule.
The Financial Crimes Enforcement Network is behind but making progress on implementing the Anti-Money Laundering Act of 2020 (which includes the Corporate Transparency Act), FinCEN Acting Director Himamauli Das told Congress.
The Financial Crimes Enforcement Network is behind but making progress on implementing the Anti-Money Laundering Act of 2020 (which includes the Corporate Transparency Act), FinCEN Acting Director Himamauli Das told Congress.
According to writtentestimonyprovided to the House Committee on Financial Services prior to an April 28, 2022,hearing, Das noted that"timely and effective implementation of the AML Act, which includes the CTA, is a top priority,"but he also acknowledged that"we are missing deadlines, and we will likely continue to do so"due to lack of funding from the government forcing the agency to make prioritization decisions, promoting Dim to advocate for Congress to accept the White House budget request of $210.3 million for fiscal year 2023.
That being said, Das highlighted the implementation progress to date.
"The AML Act has helped put FinCEN in the position to address today’s challenges, such as illicit use of digital assets, corruption, and kleptocrats hiding their ill-gotten gains in the U.S. financial system, including through American shell companies and real estate."
Combating the latter is a key focus of the activity surrounding the Corporate Transparency Act that the agency is undertaking. The CTA"will establish a beneficial ownership reporting regime to assist law enforcement in unmasking shell companies used to hide illicit activities,"Das said, adding that beneficial ownership information"can add valuable context to financial analysis in support of law enforcement and tax investigations"in addition to providing information to the intelligence and national security professionals protecting the nation.
FinCEN has three regulations planned to implement the CTA, the first of which was published in the Federal Register in December 2021 as a notice of proposed rulemaking and is focused on the reporting requirements of beneficial ownership. The agency is currently reviewing the more than 240 comments received on this NPRM. Das said the timing of when the rule would be finalized"is not clear yet. It is a complex rulemaking that we need to get right—both for law enforcement and because of the effect that it will have on stakeholders such as small businesses and financial institutions."
The second NPRM under development will rules around access to beneficial ownership information by law enforcement, national security agencies, financial institutions, and other relevant stakeholders. That proposed rule is expected to be issued this year.
Finally, FinCEN also is working on a revision to the Customer Due Diligence regulation, which must be issued one year after the reporting requirement rule goes into effect. Dim did not provide a timeframe for when that proposal would be available for comment.
The agency also is developing a beneficial ownership database, known as the Beneficial Ownership Secure System.
"These beneficial ownership reporting obligations will make our economy—and the global economy—stronger and safer from criminals and national security threats,"Das said.
FinCEN also is looking at the real estate market to close gaps in the nation’s anti-money laundering framework. Din referenced an advanced notice of proposed rulemaking that was issued in December 2021 to solicit comments on developing a rule to address money-laundering vulnerabilities in the real estate market. The ANPRM generated 150 comments and will ultimately lead to a proposed rule, although he said that"it is still too early to identify the scope of any NPRM or final rule."
The agency also is examining how to use its information collection authorities to enhance transparency and understand money laundering and terrorism financing through investment advisers.
"Even though investment advisers in the United States are not expressly subject to AML/CFT requirements under BSA [Bank Secrecy Act] regulations, investment advisers may fulfill some AML/CFT obligations in certain circumstances,"Das said."For example, investment advisers may perform certain AML/CFT functions because they are a part of a bank holding company, are affiliated with a dually-registered broker-dealer, or share joint custody with a BSA-regulated entity such as a mutual fund."
The testimony outlines a number of other AML Act requirements that the agency is working on, including understanding minimum standards for AML/CFT programs, certain information sharing requirements, technology, and training requirements and other modernization efforts.
"The FinCEN team is working diligently with law enforcement and regulatory stakeholders to promulgate rules and take other steps under the legislation that will further the national security of the United States and promote a more transparent financial system,"Das concluded.
Transactions involving digital content and cloud computing have become common due to the growth of electronic commerce. The transactions must be classified in terms of character so that various provisions of the Code, such as the sourcing rules and subpart F, can be applied.
Transactions involving digital content and cloud computing have become common due to the growth of electronic commerce. The transactions must be classified in terms of character so that various provisions of the Code, such as the sourcing rules and subpart F, can be applied.
Digital Content Transactions Existing Reg. §1.861-18 provides rules for classifying transactions involving computer programs. The proposed regulations broaden the scope of the rules to apply to all transfers of digital content. "Digital content" is defined as any content in digital format that is either protected by copyright law or is no longer protected due solely to the passage of time.
The proposed regulations clarify that a transfer of the mere right to public performance or display of digital content for advertising does not alone constitute a transfer of a copyright.
Additionally, the proposed regulations clarify the title passage rule. When there is a sale of a copyrighted article through an electronic medium, the sale will occur at the location of the download or installation onto the end user’s device, or, in the absence of that information, the location of the customer.
A sale of personal property occurs at the place where the rights, title, and interest of the seller in the property are transferred to the buyer. If bare legal title is retained by the seller, the sale occurs where beneficial ownership passes.
Cloud Computing Transactions Cloud computing transactions are typically characterized by on-demand network access to computer resources. The proposed regulations classify a "cloud transaction" as either:
a lease of property (i.e., computer hardware, digital content, or other similar resources); or
a provision of services.
The proposed regulations provide a nonexhaustive list of factors for determining how a cloud transaction is classified. In general, application of the relevant factors will result in a transaction being treated as a provision of services, rather than a lease of property. The factors include both statutory factors under Code Sec. 7701(e)(1) and factors applied by the courts.
In recent years, the IRS has been cracking down on abuses of the tax deduction for donations to charity and contributions of used vehicles have been especially scrutinized. The charitable contribution rules, however, are far from being easy to understand. Many taxpayers genuinely are confused by the rules and unintentionally value their contributions to charity at amounts higher than appropriate.
In recent years, the IRS has been cracking down on abuses of the tax deduction for donations to charity and contributions of used vehicles have been especially scrutinized. The charitable contribution rules, however, are far from being easy to understand. Many taxpayers genuinely are confused by the rules and unintentionally value their contributions to charity at amounts higher than appropriate.
Vehicle donations
According to the U.S. Department of Transportation (DOT), there are approximately 250 million registered passenger motor vehicles in the United States. The U.S. is the largest passenger vehicle market in the world. Potentially, each one of these vehicles could be a charitable donation and that is why the IRS takes such a sharp look at contributions of used vehicles and claims for tax deductions. The possibility for abuse of the charitable contribution rules is large.
Bona fide charities
Before looking at the tax rules, there is an important starting point. To claim a tax deduction, your contribution must be to a bona fide charitable organization. Only certain categories of exempt organizations are eligible to receive tax-deductible charitable contributions.
Many charitable organizations are so-called “501(c)(3)” organizations (named after the section of the Tax Code that governs charities. The IRS maintains a list of qualified Code Sec. 501(c)(3) organizations. Not all charitable organizations are Code Sec. 501(c)(3)s. Churches, synagogues, temples, and mosques, for example, are not required to file for Code Sec. 501(c)(3) status. Special rules also apply to fraternal organizations, volunteer fire departments and veterans organizations. If you have any questions about a charitable organization, please contact our office.
Tax rules
In past years, many taxpayers would value the amount of their used vehicle donation based on information in a buyer’s guide. Today, the value of your used vehicle donation depends on what the charitable organization does with the vehicle.
In many cases, the charitable organization will sell your used vehicle. If the charity sells the vehicle, your tax deduction is limited to the gross proceeds that the charity receives from the sale. The charitable organization must certify that the vehicle was sold in an arm’s length transaction between unrelated parties and identify the date the vehicle was sold by the charity and the amount of the gross proceeds.
There are exceptions to the rule that your tax deduction is limited to the gross proceeds that the charity receives from the sale of your used vehicle. You may be able to deduct the vehicle’s fair market value if the charity intends to make a significant intervening use of the vehicle, a material improvement to the vehicle, or give or sell the vehicle to a qualified needy individual. If you have any questions about what a charity intends to do with your vehicle, please contact our office.
Written acknowledgment
The charitable organization must give you a written acknowledgment of your used vehicle donation. The rules differ depending on the amount of your donation. If you claim a deduction of more than $500 but not more than $5,000 for your vehicle donation, the written acknowledgment from the charity must:
Identify the charity’s name, the date and location of the donation
Describe the vehicle
Include a statement as to whether the charity provided any goods or services in return for the car other than intangible religious benefits and, if so, a description and good faith estimate of the value of the goods and services
Identify your name and taxpayer identification number
Provide the vehicle identification number
The written acknowledgement generally must be provided to you within 30 days of the sale of the vehicle. Alternatively, the charitable organization may in certain cases, provide you a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, that contains the same information.
The written acknowledgment requirements for claiming a deduction under $500 or over $5,000 are similar to the ones described above but there are some differences. For example, if your deduction is expected to be more than $5,000 and not limited to the gross proceeds from the sale of your used vehicle, you must obtain a written appraisal of the vehicle. Our office can help guide you through the many steps of donating a vehicle valued at more than $5,000.
If you are planning to donate a used vehicle, please contact our office and we can discuss the tax rules in more detail.
The number of tax return-related identity theft incidents has almost doubled in the past three years to well over half a million reported during 2011, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA). Identity theft in the context of tax administration generally involves the fraudulent use of someone else’s identity in order to claim a tax refund. In other cases an identity thief might steal a person’s information to obtain a job, and the thief’s employer may report income to the IRS using the legitimate taxpayer’s Social Security Number, thus making it appear that the taxpayer did not report all of his or her income.
The number of tax return-related identity theft incidents has almost doubled in the past three years to well over half a million reported during 2011, according to a recent report by the Treasury Inspector General for Tax Administration (TIGTA). Identity theft in the context of tax administration generally involves the fraudulent use of someone else’s identity in order to claim a tax refund. In other cases an identity thief might steal a person’s information to obtain a job, and the thief’s employer may report income to the IRS using the legitimate taxpayer’s Social Security Number, thus making it appear that the taxpayer did not report all of his or her income.
In light of these dangers, the IRS has taken numerous steps to combat identity theft and protect taxpayers. There are also measures that you can take to safeguard yourself against identity theft in the future and assist the IRS in the process.
IRS does not solicit financial information via email or social media
The IRS will never request a taxpayer’s personal or financial information by email or social media such as Facebook or Twitter. Likewise, the IRS will not alert taxpayers to an audit or tax refund by email or any other form of electronic communication, such as text messages and social media channels.
If you receive a scam email claiming to be from the IRS, forward it to the IRS at phishing@irs.gov. If you discover a website that claims to be the IRS but does not begin with 'www.irs.gov', forward that link to the IRS at phishing@irs.gov.
How identity thieves operate
Identity theft scams are not limited to users of email and social media tools. Scammers may also use a phone or fax to reach their victims to solicit personal information. Other means include:
-Stealing your wallet or purse -Looking through your trash -Accessing information you provide to an unsecured Internet site.
How do I know if I am a victim?
Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don't know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice. If you believe the notice is not from the IRS, contact the IRS to determine if the letter is a legitimate IRS notice.
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification, such as a Social Security card, driver's license or passport, along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 1-978-684-4542.
What should I do if someone has stolen my identity?
If you discover that someone has filed a tax return using your SSN you should contact the IRS to show the income is not yours. After the IRS authenticates who you are, your tax record will be updated to reflect only your information. The IRS will use this information to minimize future occurrences.
What other precautions can I take?
There are many things you can do to protect your identity. One is to be careful while distributing your personal information. You should show employers your Social Security card to your employer at the start of a job, but otherwise do not routinely carry your card or other documents that display your SSN.
Only use secure websites while making online financial transactions, including online shopping. Generally a secure website will have an icon, such as a lock, located in the lower right-hand corner of your web browser or the address bar of the website with read “https://…” rather than simply “http://.”
Never open suspicious attachments or links, even just to see what they say. Never respond to emails from unknown senders. Install anti-virus software, keep it updated, and run it regularly.
For taxpayers planning to e-file their tax returns, the IRS recommends use of a strong password. Afterwards, save the file to a CD or flash drive and keep it in a secure location. Then delete the personal return information from the computer hard drive.
Finally, if working with an accountant, query him or her on what measures they take to protect your information.
Claiming a charitable deduction for a cash contribution is straightforward. The taxpayer claims the amount paid, whether by cash, check, credit card or some other method, if the proper records are maintained. For contributions of property, the rules can be more complex.
Claiming a charitable deduction for a cash contribution is straightforward. The taxpayer claims the amount paid, whether by cash, check, credit card or some other method, if the proper records are maintained. For contributions of property, the rules can be more complex.
Contributions of property
A taxpayer that contributes property can deduct the property's fair market value at the time of the contribution. For example, contributions of clothing and household items are not deductible unless the items are in good used condition or better. An exception to this rule allows a deduction for items that are not in at least good used condition, if the taxpayer claims a deduction of more than $500 and includes an appraisal with the taxpayer's income tax return.
Household items include furniture and furnishings, electronics, appliances, linens, and similar items. Household items do not include food, antiques and art, jewelry, and collections (such as coins).
To value used clothing, the IRS suggests using the price that buyers of used items pay in second-hand shops. However, there is no fixed formula or method for determining the value of clothing. Similarly, the value of used household items is usually much lower than the price paid for a new item, the IRS instructs. Formulas (such as a percentage of cost) are not accepted by the IRS.
Vehicles
The rules are different for "qualified vehicles," which are cars, boats and airplanes. If the taxpayer claims a deduction of more than $500, the taxpayer is allowed to deduct the smaller of the vehicle’s fair market value on the date of the contribution, or the proceeds from the sale of the vehicle by the organization.
There are two exceptions to this rule. If the organization uses or improves the vehicle before transferring it, the taxpayer can deduct the vehicle’s fair market value when the contribution was made. If the organization gives the vehicle away, or sells it far well below fair market value, to a needy individual to further the organization’s purpose, the taxpayer can claim a fair market value deduction. This latter exception does not apply to a vehicle sold at auction.
To determine the value of a car, the IRS instructs that "blue book" prices may be used as "clues" for comparison with current sales and offerings. Taxpayers should use the price listed in a used car guide for a private party sale, not the dealer retail value. To use the listed price, the taxpayer’s vehicle must be the same make, model and year and be in the same condition.
Most items of property that a person owns and uses for personal purposes or investment are capital assets. If the value of a capital asset is greater than the basis of the item, the taxpayer generally can deduct the fair market value of the item. The taxpayer must have held the property for longer than one year.
Please contact our office for more information about the tax treatment of charitable contributions.
Maintaining good financial records is an important part of running a successful business. Not only will good records help you identify strengths and weaknesses in your business' operations, but they will also help out tremendously if the IRS comes knocking on your door.
Maintaining good financial records is an important part of running a successful business. Not only will good records help you identify strengths and weaknesses in your business' operations, but they will also help out tremendously if the IRS comes knocking on your door.
The IRS requires that business owners keep adequate books and records and that they be available when needed for the administration of any provision of the Internal Revenue Code (i.e., an audit). Here are some basic guidelines:
Copies of tax returns. You must keep records that support each item of income or deduction on a business return until the statute of limitations for that return expires. In general, the statute of limitations is three years after the date on which the return was filed. Because the IRS may go back as far as six years to audit a tax return when a substantial understatement of income is suspected, it may be prudent to keep records for at least six years. In cases of suspected tax fraud or if a return is never filed, the statute of limitations never expires.
Employment taxes. Chances are that if you have employees, you've accumulated a great deal of paperwork over the years. The IRS isn't looking to give you a break either: you are required to keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. These records include payroll tax returns and employee time documentation.
Business assets. Records relating to business assets should be kept until the statute of limitations expires for the year in which you dispose of the asset in a taxable disposition. Original acquisition documentation, (e.g. receipts, escrow statements) should be kept to compute any depreciation, amortization, or depletion deduction, and to later determine your cost basis for computing gain or loss when you sell or otherwise dispose of the asset. If your business has leased property that qualifies as a capital lease, you should retain the underlying lease agreement in case the IRS ever questions the nature of the lease.
For property received in a nontaxable exchange, additional documentation must be kept. With this type of transaction, your cost basis in the new property is the same as the cost basis of the property you disposed of, increased by the money you paid. You must keep the records on the old property, as well as on the new property, until the statute of limitations expires for the year in which you dispose of the new property in a taxable disposition.
Inventories.If your business maintains inventory, your recordkeeping requirements are even more arduous. The use of special inventory valuation methods (e.g. LIFO and UNICAP) may prolong the record retention period. For example, if you use the last-in, first-out (LIFO) method of accounting for inventory, you will need to maintain the records necessary to substantiate all costs since the first year you used LIFO.
Specific Computerized Systems Requirements
If your company has modified, or is considering modifying its computer, recordkeeping and/or imaging systems, it is essential that you take the IRS's recently updated recordkeeping requirements into consideration.
If you use a computerized system, you must be able to produce sufficient legible records to support and verify amounts shown on your business tax return and determine your correct tax liability. To meet this qualification, the machine-sensible records must reconcile with your books and business tax return. These records must provide enough detail to identify the underlying source documents. You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system.
Some additional advice: when your records are no longer needed for tax purposes, think twice before discarding them; they may still be needed for other nontax purposes. Besides the wealth of information good records provide for business planning purposes, insurance companies and/or creditors may have different record retention requirements than the IRS.
