e-News for Tax Professionals 2024-41

1. Tax relief available to disaster victims impacted by Hurricane Milton in parts of Florida

Due to Hurricane Milton, the IRS announced businesses and individuals in 51 Florida counties are eligible for tax relief. Hurricane Debby and Hurricane Helene-affected taxpayers in six counties that were not previously eligible for relief will receive disaster tax relief starting on Oct. 5 and ending on May 1, 2025. Furthermore, under Hurricane Milton, taxpayers in 20 counties that previously received relief under Debby but not Helene will receive disaster tax relief from Aug. 1 through May 1, 2025. As a result, the deadline for filing various federal individual and business tax returns and making tax payments has been extended for all impacted taxpayers in Florida.

The IRS offers relief to any area designated by the Federal Emergency Management Agency (FEMA), and the same relief will be available to other states and localities that receive FEMA disaster declarations. The current list of eligible localities is available on the Tax relief in disaster situations page on IRS.gov.

In response to Hurricane Milton-related disruptions, the IRS will not impose a penalty when dyed diesel fuel with a sulfur content that does not exceed 15 parts-per-million is sold for use or used on the highway throughout the state of Florida. This aid is in addition to the limited relief provided in response to Hurricane Helene. The relief takes effect beginning Oct. 9 and will remain in effect through Oct. 30.

3. IRS assistance available to disaster victims of Hurricanes Helene and Milton; May 1 deadline for affected individuals and businesses

The IRS reassured victims today that it is prepared to offer the tax-related assistance they require to recover from the devastating hurricanes that have ravaged Florida and the Southeast in recent weeks. The IRS automatically gives taxpayers whose address of record is in a disaster-area locality more time to file returns and pay taxes. Currently, taxpayers in the entire states of Alabama, Florida, Georgia, North Carolina and South Carolina, and parts of Tennessee and Virginia, who received extensions to file their 2023 returns have until May 1, 2025, to file. Tax-year 2023 tax payments are not eligible for this extension. In addition, May 1 is also the deadline for filing 2024 returns and paying any tax due.

In the wake of a disaster, victims can find a wealth of information on IRS.gov to assist them in navigating common situations. Disaster victims can call the agency’s disaster hotline at 866-562-5227. The hotline is reserved for taxpayers with questions about disasters. Additionally, the IRS encourages affected taxpayers to review all federal disaster relief at DisasterAssistance.gov.

4. Disaster tax relief to Watch Fire victims of Arizona’s San Carlos Apache tribe; multiple deadlines postponed to Feb. 3

Individuals and businesses of the San Carlos Apache Tribe in the state of Arizona affected by the Watch Fire that began on July 10, now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments. The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this this includes the San Carlos Apache Tribe in Arizona. The same relief will be available to any other localities added later to the disaster area. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov.

5. IRS ramps up work on ERC claims, processes 400,000 claims worth about $10 billion

With roughly 400,000 claims – or roughly $10 billion worth of eligible claims – now being processed, the IRS announced that Employee Retention Credit (ERC) claims are still moving forward. As the agency works to manage a substantial number of claims from the intricate pandemic-era credit, work on small businesses and others is still ongoing. A significant number of the ERC claims came in during a period of aggressive marketing by promoters, leading to a large percentage of improper, ineligible claims.

The IRS encourages businesses that have received ERC payments to recheck eligibility requirements and consider the second Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP) to resolve improper claims without penalties or interest. The second ERC-Voluntary Disclosure Program will run through Nov. 22, 2024, and allow businesses to correct improper payments at a 15% discount and avoid future audits, penalties and interest.

6. Taxpayers reminded of Oct. 15 tax-filing extension deadline; disaster areas, combat zones, Israel granted more time

The IRS advises taxpayers to file their 2023 federal income tax returns by Oct. 15 to avoid potential late filing penalties. Military members and disaster-area taxpayers may have additional time to file. Those with an IRS address of record in areas covered by Federal Emergency Management Agency (FEMA) disaster declarations and those returning from a combat zone may qualify for additional time to file. Deadlines vary based on the type of disaster in a given area. Visit the Around the nation page on IRS.gov for information on all available disaster relief.

The 2024 IRS Nationwide Tax Forum Online will go live on Oct. 14, providing tax professionals access to interactive video seminars and downloadable resources and materials from the 2024 IRS Nationwide Tax Forum. This year, the Nationwide Tax Forum Online will launch 18 new seminars featuring IRS subject matter experts offering insights into the latest developments in tax law and IRS procedures. Courses can be taken for continuing education (CE) credit for a fee of $29, or they can be reviewed for free (no CE credit). Don’t miss this opportunity to stay informed about important tax changes and further your professional knowledge.

Tax pros: The Federal Register notice starting the official 30-day comment period for the draft Form 1099-DA was posted this week.

The IRS invites the public and other federal agencies to take this opportunity to comment on information collection requirements related to digital asset proceeds from broker transactions. Comments should be received on or before Nov. 6, 2024, to be considered. See IRS.gov for more information.

9. 2022 tax gap projections estimates released; taxpayers’ voluntary compliance rate remains steady

The tax gap projections for the 2022 tax year were released Thursday by the IRS. This comprehensive analysis projects a $696 billion gross tax gap for the nation. Data shows the discrepancy between the amount of actual tax paid on schedule and the estimated “true” tax liability. In comparison to the tax year 2014-16 estimates and the tax year 2017-19 projections, the new tax gap projections indicate an increase. A $200 billion increase over the years 2014-16 is projected for 2022.

“This is a critical study about the nation’s tax system, and the results underscore there remains a sizable tax gap between taxes that are legally owed but aren’t actually being paid,” said IRS Commissioner Danny Werfel. “While the bottom line for the new tax gap numbers shows the increase basically reflects growth in the larger economy, the size of the gap also vividly illustrates the ongoing need for adequate funding for the IRS. We need to focus both on compliance efforts to enforce existing laws as well as improving service to help taxpayers with their tax obligations to help address the tax gap. Since passage of the Inflation Reduction Act in 2022, we have taken important steps to begin improving tax compliance. While our recent work will not be fully reflected in the tax gap analysis for several years, we will continue to provide routine, interim updates on how enhanced enforcement on complex areas of tax evasion and delinquency impacts compliance.”

10. Treasury, IRS finalize rules on some syndicated conservation easement transactions

Final regulations were released by the Department of Treasury and the IRS designating certain syndicated conservation easement transactions as "listed transactions" – abusive tax transactions that must be reported to the IRS. Typically, investors in these transactions purchase a land-owning partnership interest and subsequently deduct a disproportionately large amount from their taxes as charitable contributions, based on an appraised value that is significantly higher than reality. Material advisors and participants will be required to use Forms 8886 and 8918 to report their involvement in these transactions going forward.

“These regulations send a clear signal on abusive syndicated conservation easement arrangements, which generate high fees for promoters and willing participants who gamed the tax system with grossly inflated appraisals,” said IRS Commissioner Danny Werfel. “As the Senate Finance Committee has shown in its review, abusive syndicated conservation easement transactions are operating too often as nothing more than retail tax shelters that let taxpayers buy deductions at the end of any given year.”

11. Proposed regulations provide clarification on the federal tax classification of entities fully owned by Tribal governments

The Department of Treasury and the IRS released proposed regulations pertaining to the federal tax classification of corporations or LLCs formed under United laws of the Tribes that own them and are fully owned by Indian Tribal governments (Tribes). According to the proposal, entities created in accordance with a tribe’s laws are referred to as tribal law entities. Additionally, the proposed regulations would make it clear that Tribal law entities owned by Tribes may receive the value of certain energy credits under the Inflation Reduction Act.

Interested parties may submit comments on this guidance through Regulations.gov. Please indicate IRS and REG-113628-21 in the submission. Written comments may also be mailed to CC:PA:01:PR (REG-113628-21) Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. A public hearing is scheduled for Jan. 17, 2025.

California tax preparation business owner Salvador Gonzalez was sentenced to six years in prison for preparing false tax returns for clients. According to court documents, Gonzalez prepared thousands of returns, claimed false deductions and medical expenses, which reduced the amount of income taxes his clients paid. Gonzalez caused a tax loss to the IRS of at least $28 million. In addition to his prison sentence, Gonzalez is ordered to serve one year of supervised release and to pay $403,908 in restitution to the United States. IRS Criminal Investigation investigated the case.

Revenue Procedure 2024-39 grants certain applicable entities under section 6417(d)(1)(A) of the Internal Revenue Code an automatic six-month extension of time to file an original or superseding Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e) of the Code), with any other relevant schedules and forms (such as Form 3800, General Business Credit, and any relevant source credit forms), to make an elective payment election as provided under section 6417(d)(3) and §1.6417-2(b).

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Issue Number: 2024-41

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