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

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

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 1^st, 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 1^st, 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.

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.

Important Change Adopted by the IRS

If you are a business owner who receives cash payments of more than $10,000 from a single transaction or related transactions, you need to be aware of an important change in the reporting requirements. Starting with Jan. 1, 2024, you will have to file Form 8300, Report of Cash Payments Over $10,000, electronically through the FinCEN BSA E-Filing System. This is a mandatory requirement that applies to all businesses, regardless of their size or industry.

Beginning with 2024, businesses that receive cryptocurrency worth more than $10,000 in a single transaction will also have to report the transaction on Form 8300.

About Form 8300

Form 8300 is used to report certain cash transactions to the IRS and the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury. The purpose of this form is to help combat money laundering, tax evasion, terrorism financing and other criminal activities.

To file Form 8300 electronically, you will need to register with the FinCEN BSA E-Filing System, which is a free and secure government online service. You can find more information about the registration and filing procedures on the FinCEN website.

Exceptions to Electronically Filing Requirement

Your business can file a request for a waiver (Form 8508) from electronically filing information returns due to undue hardship. You must include on each Form 8300 the word “Waiver” on the center top when submitting a paper filed return.

If your business is required to file fewer than 10 information returns, other than Forms 8300, during the calendar year, your business may file Forms 8300 in paper form without requesting a waiver or you can choose to e-file them.

Another automatic exemption to electronically filing requirement is for religious beliefs, in which case you will have to write the words “RELIGIOUS EXEMPTION” on the center top when submitting the paper form.

E-filing, Late filing & Keeping Records

The deadline for Form 8300 is 15 days after a transaction of more than $10,000 takes place.

If you miss the deadline, you need to self-identify your late returns and file them as soon as possible. In case your business files electronically a late Form 8300 you must include the word “LATE” in the comments section of the form. If you file the form on paper, you must write “LATE” on the center top of each form (page 1).

You should keep records of each Form 8300 you file and the supporting documentation for it. You will receive a free email confirmation upon submission of the form through e-filing. But e-file confirmation e-mails alone don’t meet the record keeping requirement. In addition to saving the e-file confirmation, you must also save a copy of the form prior to finalizing the form submission.

Written Statement Requirement

Besides filing Form 8300, you also need to provide a written statement to each party whose name you included on the Form 8300 by January 31 of the year following the reportable transaction. You should include in your statement the following information about your business:

• name,
• address,
• contact person,
• telephone number,
• the aggregate amount of the reportable cash.

You must also indicate in the statement that you provided this information to the IRS.

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.

IRS Warns Taxpayers About A New Scam

The Internal Revenue Service (IRS) and its Security Summit partners have issued a warning to taxpayers about a new scam attempt. This scam involves a fraudulent letter with IRS heading sent by mail using a delivery service. The letter asks the recipients to send photos of their driver’s license, Social Security card, and bank account information to verify their identity in order to receive a refund. The identity thieves can try to obtain a tax refund and other sensitive financial information by using these photos.

What the Scammers Attempt To Do?

This scam is an attempt to steal personal and financial information from taxpayers. Meanwhile, the IRS and its partners remind taxpayers that they will never contact them by mail, phone, email, or text message to ask for personal or financial information. Consequently, taxpayers should never provide such information to anyone who contacts them unsolicited. In addition, they should report any suspicious communications to the IRS or the Treasury Inspector General for Tax Administration (TIGTA).

What Should You Do if You Receive Scam Mailing?

If you receive this scam mailing, you should not respond to it. In addition, you should also check your credit reports and bank accounts for any unauthorized activity, and report any identity theft or fraud to the Federal Trade Commission (FTC) and your local police department.

For more information on how to protect yourself from tax-related scams, click here.

Conclusions

In conclusion, you, as a taxpayer should be careful and watch out for red flags that can make you suspicious about the mail received. There are a few details that you should pay attention to, like:

• you are asked to send sensitive information,
• the letter includes contact information and a phone number that do not belong to the IRS,
• wrong punctuation,
• unprofessional wording and incorrect spelling,
• mixture of fonts, which is something that IRS does not use, as you can see in this example of scam wording: “A Clear Phone of Your Driver’s License That Clearly Displays All Four (4) Angles, Taken in a Place with Good Lighting”.

In any case, you should be aware that the IRS never initiates contact with taxpayers by email, text or social media regarding a bill or a tax refund.

Furthermore, if you receive a suspicious email, text or letter, you should contact the IRS directly. You should use the contact information found on the official IRS website at https://www.irs.gov/help/telephone-assistance and check the status of your account or your refund.

The IRS also warns us to be careful of unsolicited texts or emails that appear to be from friends or family, using possibly stolen or compromised accounts. In this situation, you should report these scam attempts to the IRS at phishing@irs.gov. Include:

• the email address or
• the caller ID of the unsolicited communication source,
• your email or phone number on which you received the suspicious messages,
• the date and time you received the communication

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.

New Initiative Launched by IRS

The Internal Revenue Service has announced a new initiative called “Paperless Processing”. This initiative’s objective is that by 2025 to allow all tax returns to be filed electronically. Another objective is that by 2024 to allow taxpayers to go paperless for the IRS correspondence. As a result, it will not be necessary to print and mail your paper forms to the IRS. Currently you are able to e-file some tax returns and forms, but with this initiative you will be able to e-file 20 additional tax forms.

Why IRS Wants to Adopt This Initiative?

The IRS wants to make an easy process for the taxpayers who will now be able to digitally submit forms. The IRS also want to make things easier for its IRS agents who will now be able to digitally process the forms received. In addition, this process will reduce paper waste and will streamline the tax processing.

This initiative is part of the IRS’ efforts to modernize its system and to improve customer service for the taxpayers. This will bring a couple of benefits for taxpayers, including:

• Fewer errors: electronic filing reduces the chances of errors or omissions related to your tax return(s), which can delay refunds or result in penalties
• More security: electronic filing protects your personal information from identity theft or fraud, as paper forms can be lost or stolen in the mail
• More convenience: you, as a taxpayer can file your return(s) anytime, anywhere, using your computer, smartphone, or tablet; you can also use IRS Free File, a free service that offers online tax preparation and filing options for eligible taxpayers
• Access to your data: IRS will digitize up to 1 million historical documents
• Better customer service: customer service will have easier access to IRS database and past paper returns, thus being able to answer more questions and resolve more issues; with this initiative the IRS will be able to process the refunds several weeks faster than it does now
• Better IRS enforcement: having a robust digital database, the IRS can extract data for advanced analytics and pattern recognition methods to go after wealthy taxpayers and big corporations that are trying to evade paying taxes by using complicated tax schemes

Conclusions

The IRS encourages all taxpayers to take advantage of Paperless Processing and file their returns electronically. However, taxpayers who prefer to file on paper can still do so. The IRS will continue to accept and process paper returns. But they warn that the taxpayers may experience longer processing times and delays in receiving their refunds.

In the meantime, if you have any questions, 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.