• Skip to main content
  • Skip to primary sidebar

  • Home
  • About
  • Contact

Archives for October 2023

ERC Put on Hold

October 31, 2023 by Dana Lee CPA LLC Team

ERC Suspended

The IRS has recently announced that it will temporarily suspend the processing of new applications for the Employee Retention Credit through at least the end of the year. The reason the IRS provided for this decision was the increase in fraudulent claims for the ERC. Another reason stated for this decision was scam protection for the business owners.

Fraudulent Claims

In their announcement the IRS said that currently they are processing previously filed ERC claims that were received before their moratorium. Unfortunately, due to their increased concerns about fraud, the IRS warns that the processing times will be longer. IRS processing goal for the ERC claims will go from 90 days to 180 days. On July 26, the IRS announced that it was shifting its focus to review these claims for compliance issues. This includes intensifying audit work and criminal investigations on promoters and businesses that have filed dubious claims. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

Moreover, the IRS is in the process of finalizing details for a special withdrawal option. The option will be available soon for those who have filed an ERC claim but have not yet had their claim processed. This option can be utilized by taxpayers whose claims have not yet been paid. As a result, it will allow businesses to avoid potential repayment issues and the need to pay contingency fees to promoters. This option will be available to the filers of more than 600,000 claims that are currently awaiting processing. However, the IRS warns that those who have knowingly filed fraudulent claims or conspired to do so will not be exempt from potential criminal investigation.

If You Did Not File A Claim Yet

If you did not file a claim yet, we advise you to consult with a CPA, instead of hiring a tax promoter or marketing firm looking to profit from generating applications that charge contingency fees. You can see some of the warning flags regarding these aggressive promoters by clicking here. A CPA or an enrolled IRS agent should not charge you a fee based on the amount of the refund. The IRS also has a helpful guide with questions and answers regarding ERC, that you can see by clicking here.

If You Currently Have A Pending Application

In the case you currently have a pending application with the IRS, but the IRS did not process or pay the claim, the IRS recommends that you carefully review the program guidelines with a trusted tax professional, like a CPA and check the new question and answer guide. If you believe you submitted the claim improperly, even if your case is already under audit or awaiting audit, the IRS will allow you to withdraw your claim.

If You Received The ERC

In the case that you have already received an ERC that you now believe you claimed in error, the IRS intends to provide a settlement program that will allow you to repay the ERC claim. Per the IRS this settlement program will enable businesses to avoid penalties and future compliance action.

If you need help with your business tax and accounting, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Filed Under: Tax Regulations

IRS Warns of Art Donation Scams

October 24, 2023 by Dana Lee CPA LLC Team

Properly Claim an Art Deduction

If you are an art lover and you are interested in donating art to charity, you can claim a tax deduction for your donation. For tax purposes, you will need to keep track of the following details:

  • the name and address of the charity that received the artwork,
  • when (date) and where (location) you made the donation,
  • a detailed description of the artwork you donated.

There are different requirements for substantiation depending on the value of the art donated. If your donation is worth:

  • $250 or more, you need a written acknowledgement from the charity,
  • more than $500 but not over $5,000, you also need to complete a Form 8283, Section A, and attach it to your tax return,
  • more than $5,000, you need to complete Form 8283, Section B; this form requires signatures from a qualified appraiser and the charity; you also need to get a written appraisal of the donated art,
  • 20,000 or more, you need to do all of the above and attach a copy of the appraisal to your return; you should also have a high-resolution photo or digital image of the art and be ready to provide it to the IRS, if asked.

You can legitimately claim art donations, but you should be aware of some dishonest promoters. They encourage people, especially high-income taxpayers, to buy pieces of art, donate it later, and then falsely deduct an inflated donation amount. The IRS is actively investigating such promoters and it is auditing taxpayers to prevent these kinds of art donation scams.

How These Scams Work?

Promoters encourage art loving people to buy different kinds of art, often at a lower price. This cost might also cover extra services from the promoter, like storing, shipping, and managing the art’s appraisal and donation. The promoters assure that the art’s actual value is a lot higher than what they’re selling it for.

These scams encourage buyers to donate artwork after owning it for at least a year and to claim a tax deduction based on a higher market value than what they originally paid for the art. The scammers may advise you to donate art every year and they may suggest you to buy a certain quantity of art in order to have a guaranteed tax deduction of a specific amount. They might even coordinate with certain charities to accept these art donations.

Red Flags

You should be careful when buying many pieces of art from the same artist, especially if these artworks don’t have much value outside of what the seller is advertising.

Also, be cautious if the sellers recommend specific appraisers for you to use. Appraisers supporting this art donation scheme often don’t provide enough details about the artwork. They might not consider important factors like rarity, age, quality, condition, the artist’s reputation, the price paid, and the number of artworks bought.

Conclusions

If you are approached by one of these scams promoters, you can report the scam on Form 14242, Report Suspected Abusive Tax Promotions or Preparers.

The IRS has a group of experts in Art Appraisal Services who can help you obtain a proper valuation of your donated art, if your item has a value of $50,000 or more. You will be charged a user fee for each request. You can find more information about how to make this request by clicking here.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Filed Under: Tax Regulations

Special Per Diem Rates

October 17, 2023 by Dana Lee CPA LLC Team

The IRS has issued the 2023-2024 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. These rates are effective from October 1, 2023, to September 30, 2024.

Rates

The special per diem rates include:

  • the transportation industry meal and incidental expenses (M&IE) rates,
  • the rate for the incidental expenses only deduction,
  • the rates and list of high-cost localities for purposes of the high-low substantiation method.

In this blog we focus on the high-low substantiation method.

High-Low Substantiation Method

The high-low substantiation method is a way for employers to give their employees a daily travel allowance. This covers things like hotels, meals, and other expenses. Instead of using different rates for different locations, this method uses just two rates for the entire Continental United States. This method is only for employers reimbursing their employees’ travel costs. It’s not for employees or self-employed taxpayers to calculate their own business expense deductions. If an employer reimburses its employees’ travel expenses within these limits, then these reimbursements are considered substantiated, or proven. Employees must still prove the time, date, place, and business purposes of the expenses within a reasonable period of time.

For purposes of the high-low substantiation method, the per diem rates are:

  • $309 for travel to any high-cost locality, of which $74 is considered for meals,
  • $214 for travel to any other locality within CONUS, of which $64 is considered for meals.

Example

For example, let’s consider that an employee from a company based in Texas is sent on a 3 days business trip to Atlanta, Georgia, which is considered a high-cost locality by the IRS. So, for this trip, the company can use the high-cost rate for Georgia. The total amount to be paid to the employee per the high-low substantiation method for travel expenses for this trip should not exceed $309 per day, so no more than $927 for the entire trip. This amount includes lodging, meals, and incidental expenses.

Please note that IRS updates the per diem rates annually, based on the General Services Administration’s rates that take effect on October 1 each year, so it’s always a good idea to check the current rates before planning a business trip. Also, remember that there are specific rules and requirements for using the high-low substantiation method, so it’s important to understand these before deciding to use this method. Check Publication 463 for more information about the high-low substantiation method.

50% Limitation for Meals

Something to consider: the Consolidated Appropriations Act, 2021 allowed businesses to fully deduct their restaurant meal expenses, instead of the previous 50%, for the years 2021 and 2022. However, starting from 2023, businesses can only deduct 50% of these expenses.

In the meantime, if you need tax and accounting services, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Filed Under: Tax Regulations

Proposed Regulations on Reporting Sales or Exchanges of Digital Assets

October 10, 2023 by Dana Lee CPA LLC Team

Proposed Regulations

The U.S. Department of the Treasury and the IRS have recently issued proposed regulations. These regulations would require brokers who facilitate transactions involving digital assets to report information to the IRS by customers.

Besides collecting information about digital assets transactions, the IRS also intends with these proposed regulations to:

  • provide clarity,
  • provide guidance for taxpayers who engage in sales or exchanges of digital assets,
  • the IRS is also looking to improve compliance among high-income taxpayers who may have underreported or evaded taxes on their digital asset transactions.

Form 1099-S

Starting from January 1, 2025, the real estate professionals who are considered brokers for digital asset dispositions, will be required to report any digital assets used by buyers to purchase real estate. Furthermore, real estate professionals can be:

  • title companies,
  • closing attorneys,
  • mortgage lenders,
  • real estate brokers.

These professionals will need to report the fair market value of any digital assets given to sellers in real estate transactions on Form 1099-S for deals closed on or after this date.

Form 1099-DA

Brokers will need to report the gross proceeds from the sales or exchanges of digital assets starting on or after January 1st, 2025 on a new form called Form 1099-DA. In addition, the brokers would provide payee statements to their customers.

In some circumstances, the brokers would be required to include on these forms 1099-DA and statements the gain or loss and also the basis information for sales that occur on or after January 1st, 2026 and provide them to the customers, so they can have the information in order to prepare their tax returns.

Conclusions

If you have digital assets transactions, in addition to making sure you do the proper reporting on your tax return, you also need to be on the look out for these forms that you should receive starting with 2025.

In the meantime, if you need tax and accounting services, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Filed Under: Tax Regulations

Report Regarding IRS Performance

October 3, 2023 by Dana Lee CPA LLC Team

New Report Regarding IRS Performance

The TIGTA has released a new report on the IRS’ performance in storing business and individual tax account information. The report covers the fiscal year 2022 and highlights major challenges faced by the IRS.

Why TIGTA Did This Report?

The IRS is required to keep records of both individuals and businesses’ tax returns. The IRS uses microfilm cartridges to store photographic records of this sensitive tax documents. In addition, the IRS need to ensure that these records:

  • are protecting the rights of the Federal Government and the taxpayers,
  • are available to conduct business,
  • document IRS activities in a proper manner.

What TIGTA Found Out?

TIGTA findings:

  • according to the report, the TIGTA found that the IRS does not account, safeguard or controls in a proper manner the microfilm cartridges,
  • the IRS has not been conducting the required annual inventories,
  • the IRS did not adequately safeguard the sensitive taxpayer information stored on microfilm cartridges,
  • requests for tax account information stored on microfilm cartridges made by IRS employees working in various operating division functional areas were fulfilled inconsistently and incompletely,
  • the IRS did not adhere to the requirements for record retention and destruction; IRS does not have established procedures to identify and destroy microfilm cartridges within the required time frames for destruction.

Conclusions

The report concludes that the IRS needs to prioritize its resources and activities to address the most significant risks and opportunities for improving tax administration and taxpayer service. The report provides 13 recommendations for the IRS, among which some recommendations were to:

  • properly maintain request logs,
  • properly secure microfilm cartridges,
  • conduct a detailed inventory of the microfilm cartridges,
  • properly destroy microfilm cartridges with a processing year beyond 30 years.

The IRS faces many challenges and you can avoid a lot of IRS hassle if you have your books and tax records in order. If you need tax and accounting help with your business, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Filed Under: Tax Regulations

Primary Sidebar

Search

Archive

  • April 2025
  • February 2025
  • January 2025
  • December 2024
  • November 2024
  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • February 2023
  • May 2022
  • December 2021
  • November 2021
  • September 2021
  • July 2021
  • June 2021
  • February 2021
  • January 2021
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017

Categories

  • Business
  • Hurricane Harvey
  • QuickBooks
  • S Corporation
  • State
  • Tax Regulations

Copyright © 2023 · https://www.danaleecpa.com/blog