Tag: IRS

Additional Guidance On The Employee Retention Credit Issued By IRS

Posted on by info

On August 4, 2021, the IRS issued Notice 2021-49, which provides long overdue guidance for employers that have taken or are considering taking the employee retention credit (ERC) as initially made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and modified and extended under the American Rescue Plan Act of 2021 (ARPA). Generally, the maximum ERC for 2020 is $5,000 per employee, while the maximum for 2021 is $28,000 per employee.

The ARPA extended the ERC for wages paid after June 30, 2021 and before January 1, 2022. The IRS previously issued nearly 100 frequently asked questions (FAQs) and two notices (Notice 2021-20 and 2021-23) in an attempt to provide guidance on the ERC. However, these FAQs and notices fail to address some important questions, such as whether cash tips received by employees and wages paid to an owner with more than 50% ownership of a company are qualified wages for the ERC. Notice 2021-49 addresses this issue and clarifies other issues related to the mechanics of the credit. The notice also clarifies and provides additional guidance for several other important provisions of the ERC as modified by the ARPA.

In addition, on August 10, 2021, the IRS issued Revenue Procedure 2021-33, which provides a safe harbor for employers to exclude (1) the amount of the forgiveness of a Paycheck Protection Program (PPP) loan under the Small Business Act, (2) a shuttered venue operator grant under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), and (3) a restaurant revitalization grant under the ARPA from “gross receipts” for purposes of determining eligibility to claim the ERC.

Background

The CARES Act provides for a refundable tax credit for eligible employers that pay qualified wages, including certain health plan expenses, to some or all employees after March 12, 2020 and before January 1, 2021.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) amended and made technical changes to the ERC for qualified wages paid after March 12, 2020 and before January 1, 2021, primarily expanding eligibility for certain employers to claim the credit. The Relief Act also extended the ERC to qualified wages paid after December 31, 2020 and before July 1, 2021 and modified the calculation of the credit amount for qualified wages paid during that time. The Relief Act permitted employers to qualify for the ERC if they experienced revenue declines of 20% (previously 50%), and it changed the definition of large employer from an employer that averaged 100 employees to one that averages 500 employees, enabling businesses with 500 or fewer employees to take the ERC for all wages paid, rather than only for wage payments for which no services were provided. The Relief Act also allowed employers that received PPP loans to also take the ERC, retroactive to March 2020.

The following summarizes Revenue Procedure 2021-33 and some of the most significant issues addressed in Notice 2021-49.

Safe Harbor for Gross Receipts – Revenue Procedure 2021-33

Under Internal Revenue Code Section 448(c) for for-profit entities and Section 6033 for tax-exempt organizations, PPP loan forgiveness, shuttered venue operator grants and restaurant revitalization grants are not included in employers’ gross income but are included in gross receipts. Revenue Procedure 2021-33 provides a safe harbor for employers to exclude those amounts from gross receipts solely for determining ERC eligibility. The IRS said that Congress intended for employers to be able to participate in these relief programs and also claim the ERC. Therefore, including amounts provided under those relief programs in gross receipts for determining eligibility for the ERC would be inconsistent with Congressional intent.

Under the revenue procedure, an employer is required to consistently apply the safe harbor by (1) excluding the amount of the forgiveness of any PPP loan and the amount of any shuttered venue operator grant and restaurant revitalization grant from its gross receipts for all relevant quarters in determining eligibility to claim the ERC, and (2) applying the safe harbor to all employers treated as a single employer under the ERC aggregation rules.

Employers elect to use the new safe harbor by excluding amounts under those relief programs when claiming the ERC on Form 941, Employer’s Quarterly Federal Payroll Tax Form (or 941-X if filing an amended return). In other words, a separate “election” form is not needed. If an employer revokes its safe harbor election, it must adjust all employment tax returns that are affected by the revocation. Employers must retain in their records support for claiming the ERC, including their use of this new safe harbor for determining gross receipts.

Clarifications to the ERC Under Notice 2021-49

Applicable Employment Taxes

Notice 2021-49 confirms that, for the third and fourth quarters of 2021, eligible employers can claim the ERC against the employer’s share of Medicare tax (or the portion of Tier 1 tax under the Railroad Retirement Tax Act) after these taxes are reduced by any credits allowed under the ARPA for qualified sick leave wages and qualified family leave wages, with any excess refunded.

Recovery Startup Business

An ERC of up to $50,000 per quarter is available to “recovery startup businesses.” A recovery startup business is an employer that began carrying on a trade or business after February 15, 2020. The notice clarifies that an employer is not considered to have begun carrying on a trade or business until such time as the business has begun to function as a going concern and performed those activities for which it was organized.

The notice also states that a not-for-profit organization can be treated as an eligible employer due to being a recovery startup business based on all of its operations and average annual gross receipts. For ERC purposes, a not-for-profit organization is deemed to be a “trade or business.”

Further, a recovery startup business that has 500 or fewer full-time employees may treat all wages paid with respect to an employee during the quarter as “qualified wages.”

Finally, the aggregation rules apply when determining whether an employer is a recovery startup business, as well as to the $50,000 limitation on the credit. Thus, a recovery startup business would need to apply IRC Sections 52(a) (for related corporations), 52(b) (for related non-corporate entities, such as partnerships, trusts, etc.) and 414(m) (affiliated service group rules).

Qualified Wages

Qualified wages generally are determined differently based on whether the employer is a small or large employer, in that qualified wages for large employers are limited to wages paid to an employee for time the employee is not providing services due to a full or partial suspension of business operations or a decline in the employer’s gross receipts.

The notice clarifies the rule for qualified wages for a “severely financially distressed employer” (SFDE). An SFDE is an employer that, in the third or fourth quarter of 2021, has gross receipts of less than 10% of its gross receipts for the same quarter in 2019. For SFDEs, qualified wages are any wages paid in the quarter, regardless of the size of the employer. This is different from the standard ERC rule, which limits qualified wages for large employers to wages paid while the employee is not performing services.

Full-Time Employees Versus Full-Time Equivalents

Confusion abounds about the definition of “full-time employee” and whether “full-time equivalents” are to be included when determining whether an employer eligible for the ERC is a large or small employer. Notice 2021-49 clarifies that eligible employers are not required to include full-time equivalents when determining the average number of full-time employees. The notice also confirms that wages paid to an employee who is not a full-time employee may be treated as qualified wages if all other requirements are met.

Treatment of Tips and FICA Tip Credit

Considerable confusion has arisen as to whether tips count as qualified wages for the ERC, since customers (not the employer) generally pay the employee the tips. Notice 2021-49 clarifies that cash tips are qualified wages if all other requirements to treat the amounts as qualified wages are met. The notice also confirms that eligible employers are not prevented from receiving both the ERC and the FICA tip tax credit on the same wages.

Timing of Qualified Wages Deduction Disallowance

The IRS has provided guidance on the timing of the disallowance for wage deductions on the employer’s federal tax return relating to qualified wages claimed for the ERC. The IRS previously confirmed that employers must reduce the deduction claimed for employee wages on their federal tax return by the amount of qualified wages claimed under the ERC. Notice 2021-49 confirms that this reduction in the deduction amount must occur in the same tax year the ERC is claimed. Accordingly, if an employer files a claim for the credit for a prior tax year, it must also file an amended federal tax return to reduce the amount of the wage deduction claimed in the corresponding period.

Related Individuals

The IRS previously stated that wages paid to related individuals, as defined by IRC Section 51(i)(1), are not taken into account for ERC purposes. Notice 2021-49 clarifies that, by applying the ownership attribution rules, the definition of a “related individual” includes a majority owner (i.e., a person with more than 50% ownership) of an entity if the majority owner has a brother or sister (whether by whole or half-blood), ancestor or lineal descendant. The spouse of a majority owner is also a related individual for purposes of the ERC if the majority owner has a family member who is a brother or sister (whether by whole or half-blood), ancestor or lineal descendant.

Insight

Wages paid to a sole owner or majority owner will rarely qualify for the ERC, according to the guidance provided in Notice 2021-49, because of the way the ownership attribution rules are applied. The owner must have no family other than a spouse in order to treat his or her wages as qualified wages. Members of Congress have voiced their disagreement with this guidance. It is possible the IRS will revise their position regarding related individuals in future guidance.

Alternative Quarter Election for Calendar Quarters in 2021

The Treasury Department and the IRS have been asked whether an eligible employer must consistently use the alternative quarter election once it has been made. The Notice 2021-49 confirms that employers are not required to use the alternative quarter election consistently. For example, an employer may be an eligible employer due to a decline in gross receipts for the second quarter of 2021 using the standard quarter comparison; the employer could then use the alternative quarter election to be an eligible employer for the third quarter of 2021.

Gross Receipts Safe Harbor in Notice 2021-20

Notice 2021-49 confirms that the safe harbor rule that allows an employer to include the gross receipts of an acquired business that it did not own during a calendar quarter in 2019 continues to apply to employers that acquire businesses in 2021 for purposes of measuring whether there was a decline in gross receipts. In addition, an employer that came into existence in 2020 (e.g., the third quarter of 2020) should use that quarter to determine whether it experienced a significant decline in gross receipts for the first three quarters in 2021 and should determine whether it experienced a significant decline in gross receipts by comparing the fourth quarter of 2020 to the fourth quarter of 2021.

Insights

Guidance provided in Notice 2021-49 has created several opportunities for certain employers to obtain additional ERCs. For example, some restaurant employers may not have included cash tips as qualified wages for their previous ERC claims. Under the notice, those employers can now file amended returns to claim additional ERCs or employers who did not count amounts paid to full-time equivalent employees as qualified wages for the ERC may now do so. Revenue Procedure 2021-33 has also created an opportunity for certain employers that received PPP loan forgiveness, shuttered venue operator grant or restaurant revitalization grant to obtain additional ERC. Employers should review the contents of the notice and the revenue procedure with their tax advisor to determine if additional ERCs may be available, and if so, employers may file Form 941-X to request the additional credit or refund.

Employers should also determine if they may have claimed more ERC than they were entitled to based on the guidance in Notice 2021-49. For example, some small business owners may not have applied the ownership attribution rules correctly. If necessary, Form 941-X may be filed to correct the error. According to the notice, the IRS will not assess penalties for failure to timely pay or deposit tax if the taxpayer can show reasonable cause and not willful neglect for the failure.

​

H.R. 3684, the Infrastructure Investment and Jobs Act, proposes to end the ERC on September 30, 2021 rather than December 31 (but recovery startup businesses would remain eligible through year-end). That provision may or may not be included in the infrastructure bill that is eventually signed into law (which is expected in the next month or so).

Final BEAT Regulations Issued By Treasury

Posted on by info

On September 1, 2020, the Department of the Treasury and the Internal Revenue Service (collectively, Treasury) released final regulations under Section 59A, commonly referred to as the base erosion and anti-abuse tax (BEAT). The final regulations provide additional guidance on the application of the BEAT.

Details

Section 59A imposes on each applicable taxpayer a tax equal to the base erosion minimum tax amount for the taxable year. On December 6, 2019, Treasury published final regulations (TD 9885) under Sections 59A, 383, 1502, 6038A and 6655 (the 2019 final regulations) in the Federal Register (84 FR 66968). On the same date, Treasury also published proposed regulations (REG-112607-19) under Section 59A and proposed amendments to 26 CFR part 1 under Section 6031 of the Code in the Federal Register (84 FR 67046). On February 19, 2020, the Treasury Department and the IRS published a correction to the 2019 final regulations in the Federal Register (85 FR 9369).

The final regulations retain the basic approach and structure of the proposed regulations, with certain revisions. We’ve summarized some of the key aspects to the final regulations, below.
 
The final regulations retain the rule in the proposed regulations that permits the use of a reasonable approach to determine whether a taxpayer’s aggregate group meets the gross receipts test and base erosion percentage test with respect to a short taxable year of the taxpayer.  However, the final regulations clarify that excluding the gross receipts, base erosion tax benefits and deductions of a member from the taxpayer’s aggregate group when the member does not have a taxable year that ends with or within a short taxable year of the taxpayer constitutes an unreasonable approach.1 In addition, to provide guidance for taxpayers in determining whether a particular approach is reasonable and does not over-count nor under-count, the final regulations include examples of methods that may or may not constitute a reasonable approach.2
 
The final regulations provide that when a corporation has a deemed taxable year-end under §1.59A-2(c)(4), the deemed taxable year-end is treated as occurring at the end of the day of the transaction.3 Thus, a new taxable year is deemed to begin at the beginning of the day after the transaction. A taxpayer determines items attributable to the deemed short taxable years ending upon and beginning the day after the deemed taxable year-end by either deeming a close of the corporation’s books or, in the case of items other than extraordinary items, making a pro-rata allocation without a closing of the books.4 Extraordinary items that occur on the day of, but after, the transaction that causes the corporation to join or leave the aggregate group are treated as occurring in the deemed taxable year beginning the next day. For this purpose, the term “extraordinary items” has the meaning provided in §1.1502-76(b)(2)(ii)(C). This term is also expanded to include any other payment that is not made in the ordinary course of business and that would be treated as a base erosion payment.
 
Section 1.59A-2(c)(5)(ii)(A) provides that, if a member of a taxpayer’s aggregate group has more than one taxable year that ends with or within the taxpayer’s taxable year and together those taxable years are comprised of more than 12 months, then the member’s gross receipts, base erosion tax benefits and deductions for those years are annualized to 12 months for purposes of determining the gross receipts and base erosion percentage of the taxpayer’s aggregate group. To annualize, the amount is multiplied by 365 and the result is divided by the total number of days in the year or years.
 
The final regulations also adopt a corresponding rule to address short taxable years of members. Specifically, if a member of the taxpayer’s aggregate group changes its taxable year-end, and as a result the member’s taxable year (or years) ending with or within the taxpayer’s taxable year is comprised of fewer than 12 months, then for purposes of determining the gross receipts and base erosion percentage of the taxpayer’s aggregate group, the member’s gross receipts, base erosion tax benefits and deductions for that year (or years) are annualized to 12 months.5 This rule does not apply if the change in the taxable year-end is a result of the application of §1.1502-76(a), which provides that new members of a consolidated group adopt the common parent’s taxable year. But see §1.59A-2(c)(5)(iii) (providing an anti-abuse rule that applies to transactions with a principal purpose of changing the period taken into account for the gross receipts test or the base erosion percentage test).
 
The final regulations also adopt a corresponding anti-abuse rule to address other types of transactions that may achieve a similar result of excluding gross receipts or base erosion percentage items of a taxpayer or a member of the taxpayer’s aggregate group that are undertaken with a principal purpose of avoiding applicable taxpayer status.6
 
The final regulations provide that gross receipts of foreign predecessor corporations are taken into account only to the extent that the gross receipts are taken into account in determining income that is effectively connected with the conduct of a U.S. trade or business (ECI) of the foreign predecessor corporation, which would be consistent with the ECI rule for gross receipts of foreign corporations in §1.59A-2(d). Section 1.59A-2(c)(6)(i) clarifies that the operating rules set forth in §1.59A-2(c) (aggregation rules) and §1.59A-2(d) (gross receipts test) apply to the same extent in the context of the predecessor rule. Thus, the ECI limitation on gross receipts in §1.59A-2(d)(3) continues to apply to the successor.
 
If a taxpayer elected to forego a deduction and followed specified procedures (the “BEAT waiver election”), the proposed regulations provided that the foregone deduction would not be treated as a base erosion tax benefit.7 The final regulations explicitly clarify that, in order to make or increase the BEAT waiver election under §1.59A-3(c)(6), the taxpayer must determine that the taxpayer could be an applicable taxpayer for BEAT purposes but for the BEAT waiver election. §1.59A-3(c)(6)(i).
 
In addition, when a taxpayer does not make a BEAT waiver election (or when this waiver is not permitted), §1.59A-3(c)(5) and §1.59A-3(c)(6)(i) have no bearing on whether or how a taxpayer’s failure to claim an allowable deduction, or to otherwise “waive” a deduction, is respected or taken into account for tax purposes other than Section 59A.8
 
The final regulations include a provision for the waiver of amounts treated as reductions to gross premiums and other consideration that would otherwise be base erosion tax benefits within the definition of Section 59A(c)(2)(A)(iii) and provide that similar operational and procedural rules apply to this waiver, such as the rule providing that the waiver applies for all purposes of the Code and regulations.9 The BEAT waiver election affects the base erosion tax benefits of the taxpayer, not the amount of premium that the taxpayer pays to a foreign insurer or reinsurer (or the amount received by that foreign insurer or reinsurer). Therefore, for example, the waiver of reduction to gross premiums and other consideration (or of premium payments that are deductions for federal income tax purposes) does not reduce the amount of any insurance premium payments that are subject to insurance excise tax under Section 4371.
 
Regarding the documentation requirements to make the BEAT waiver election, §1.59A-3(c)(6)(ii)(B)(1) of the final regulations omits the requirement to provide a “detailed” description. Section 1.59A-3(c)(6)(ii)(B)(6) and (7) is also revised to make certain non-substantive, clarifying changes.
 
The final regulations have been revised to state more explicitly that a deduction may be waived in part.10 Treasury also states in the preamble to the final regulations that the IRS plans to revise Form 8991, Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts, to incorporate reporting requirements relating to the reporting of deductions that taxpayers have partially waived.
 
Subject to certain special rules in connection with the centralized partnership audit regime enacted in the Bipartisan Budget Act of 2015 (the BBA), the final regulations explicitly permit a corporate partner in a partnership to make a BEAT waiver election with respect to partnership items.11 The final regulations also clarify that a partnership may not make a BEAT waiver election.12 In addition, the final regulations provide that waived deductions are treated as non-deductible expenditures under Section 705(a)(2)(B).13
 
Further, the final regulations provide rules to conform the partner-level waiver with Section 163(j).14 Specifically, the final regulations clarify that, when a partner waives a deduction that was taken into account by the partnership to reduce the partnership’s adjusted taxable income for purposes of determining the partnership-level Section 163(j) limitation, the increase in the partner’s income resulting from the waiver is treated as a partner basis item (as defined in §1.163(j)-6(b)(2)) for the partner, but not the partnership.
 
The final regulations clarify that a partner may make the BEAT waiver election with respect to an increase in a deduction that is attributable to an adjustment made under the BBA audit procedures, but only if the partner is taking into account the partnership adjustments either because the partnership elects to have the partners take into account the adjustments under Sections 6226 or 6227, or because the partner takes into account the adjustments as part of an amended return filed pursuant to Section 6225(c)(2)(A).15 If the partner makes the BEAT waiver election, the partner will compute its additional reporting year tax (as described in §301.6226-3) or the amount due under §301.6225-2(d)(2)(ii)(A), treating the waived amount as provided in §1.59A-3(c)(6).
 
The final regulations clarify that waived deductions attributable to a consolidated group member are treated as noncapital, nondeductible expenses that decrease the tax basis in the member’s stock for purposes of the stock basis rules in §1.1502-32 to prevent the shareholder from subsequently benefitting from a waived deduction when disposing of the member’s stock.16
 
The final regulations in §1.59A-3(b)(3)(iii)(C) expand the ECI exception, whereby a base erosion payment does not result from amounts paid or accrued to a foreign related party that are subject to tax as ECI, to apply to certain partnership transactions. The expanded ECI exception in §1.59A-3(b)(3)(iii)(C) applies if the exception in §1.59A-3(b)(3)(iii)(A) or (B) would have applied to the payment or accrual as characterized under §1.59A-7(b) and (c) for purposes of Section 59A (assuming any necessary withholding certificate were obtained).
 
The ECI exception reflected in §1.59A-3(b)(3)(iii)(C) also may apply in other situations, such as when (1) a U.S. taxpayer contributes cash and a foreign related party of the U.S. taxpayer contributes depreciable property to the partnership (see §1.59A-7(c)(3)(iii)), (2) a partnership with a partner that is a foreign related party of the taxpayer partner engages in a transaction with the taxpayer (see §1.59A-7(c)(1)) or (3) a partnership engages in a transaction with a foreign related party of a partner in the partnership (id.).
 
The general ECI exception reflected in §1.59A-3(b)(3)(iii)(A) would not apply if a U.S. person purchased depreciable or amortizable property from a foreign related party and that property was not held in connection with a U.S. trade or business. Similarly, when a U.S. person is treated as purchasing the same depreciable or amortizable property from a foreign related party under §1.59A-7(c)(3)(iii) because the foreign related party contributes that property to a partnership, the ECI exception does not apply even though the property becomes a partnership asset after the transaction and the partnership uses the property in its U.S. trade or business.
 
To implement this addition, the final regulations include modified certification procedures similar to those set forth in §1.59A-3(b)(3)(iii)(A) in order for the taxpayer to qualify for this exception. Specifically, the final regulations require a taxpayer to obtain a written statement from a foreign related party that is comparable to a withholding certification provided under §1.59A-3(b)(3)(iii)(A), but which takes into account that the transaction is a deemed transaction under §1.59A-7(b) or (c) rather than a transaction for which the foreign related party is required to report ECI. The taxpayer may rely on the written statement unless it has reason to know or actual knowledge that the statement is incorrect.
 
The final regulations provide that the partnership anti-abuse rule for derivatives does not apply when a payment with respect to a derivative on a partnership asset qualifies for the qualified derivative payment (QDP) exception.17
 
The 2019 final regulations include an anti-abuse rule that provides that if a transaction, plan or arrangement has a principal purpose of increasing the adjusted basis of property that a taxpayer acquires in a specified nonrecognition transaction, the nonrecognition exception of §1.59A-3(b)(3)(viii)(A) will not apply to the nonrecognition transaction. Additionally, §1.59A-9(b)(4) contains an irrebuttable presumption that a transaction, plan or arrangement between related parties that increases the adjusted basis of property within the six-month period before the taxpayer acquires the property in a specified nonrecognition transaction has a principal purpose of increasing the adjusted basis of property that a taxpayer acquires in a nonrecognition transaction. The final regulations modify the anti-abuse rule to now provide that when the rule applies, its effect is to turn off the application of the specified nonrecognition transaction exception only to the extent of the basis step-up amount. Second, §1.59A-9(b)(4) has been revised to clarify that the transaction, plan, or arrangement with a principal purpose of increasing the adjusted basis of property must also have a connection to the acquisition of the property by the taxpayer in a specified nonrecognition transaction.
 
The final regulations generally apply to taxable years beginning on or after the date of publication in the Federal Register. The rules in §§1.59A-7(c)(5)(v) and (g)(2)(x), and 1.59A-9(b)(5) and (6) apply to taxable years ending on or after December 2, 2019. Taxpayers may apply the final regulations in their entirety for taxable years beginning after December 31, 2017, and before their applicability date, provided that, once applied, taxpayers must continue to apply these regulations in their entirety for all subsequent taxable years.18 Alternatively, taxpayers may apply only §1.59A-3(c)(5) and (6) for taxable years beginning after December 31, 2017, and before their applicability date, provided that, once applied, taxpayers must continue to apply §1.59A-3(c)(5) and (6) in their entirety for all subsequent taxable years. Taxpayers may also rely on §§1.59A-2(c)(2)(ii) and (c)(4) through (6), and 1.59A-3(c)(5) and (c)(6) of the proposed regulations in their entirety for taxable years beginning after December 31, 2017, and before the date of publication in the Federal Register.
 
For additional details, including items not discussed in this summary, see the final regulations.  

UPCO Insights

Despite numerous comments, the final regulations retain the rule in the proposed regulations and do not permit a taxpayer to decrease the amount of deductions that are waived either by filing an amended federal income tax return or during an examination.

High-Income Individuals Income Tax Return Examinations To Begin July 15

Posted on by info

On May 29, 2020, the Treasury Inspector General for Tax Administration (TIGTA) issued an audit report titled “High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service”. The report focused on high-income nonfilers and the IRS’ nonfiler strategy.  For tax years 2014 through 2016, there were 879,415 high-income nonfilers with an estimated tax due of $45.7 billion. From this group, more than one-third of cases have not been selected by the IRS for an assessment.  The report indicated that the IRS has experienced decreased resources, which is likely a contributing factor in untouched cases. 

The TIGTA audit report issued seven recommendations that the IRS has agreed, partially agreed, or disagreed to:

  • Agreement:
    • Prioritize non-filers to ensure delinquency notices are issued to all high-income nonfilers.
    • Implement controls to ensure that high-income nonfilers are not shelved.
  • Partial Agreement
    • Reallocate resources to ensure that most, if not all, high-income nonfilers are subject to enforcement action.
    • Analyze the population of high-income nonfilers for tax years 2014-2016 and issue notices.
    • Reconsider working multiple tax year cases for all high-income nonfilers.
    • Implement controls that will assist to identify and prioritize high-income nonfilers who are repeat offenders.
  • Disagreement
    • Designate a senior management official with appropriate resources and specific non-filer duties to address nonfiling, including high-income taxpayers and repeat nonfilers.

In response to the TIGTA report, a spokesperson for the IRS announced that their Global High Wealth Industry Group (a specialized group within the Large Business and International Division) will initiate several hundred return examinations of high-income individuals, starting between July 15 and September 30 of 2020. The Global High Wealth group analyzes the whole financial picture of high-income individuals. The examination process includes not only the taxpayer’s individual return but also any related pass-through entities with a heightened focus on partnerships. When examining the pass-through returns, there will be an emphasis on ensuring the taxpayer is in compliance with the new tax laws of the 2017 tax reform legislation known as the Tax Cuts and Jobs Act. Additionally, there will be a renewed focus on the examinations of private foundations.