OSCPA Report from the 2023 AICPA National Tax Conference
December 11, 2023
By Chad W. English, Vice Chair, OSCPA Taxation Team
I had the opportunity to attend this year’s AICPA National Tax Conference which was my first time attending the event. It was an event that I have been wanting to attend for some time and am very happy to have experienced it. Here are issue updates:
IRS Update
Several speakers talked about the current status of the IRS. These included Danny Werfel, IRS Commissioner; Amalia Colbert, IRS Commissioner of Small Business/Self-Employed; Erin Collins, National Taxpayer Advocate; Guy Ficco, IRS Deputy Chief, of Criminal Investigation; and Edward Killen IRS Commissioner of Tax Exempt & Government Entities.
The message from all of these speakers was similar. The main focus was recovering from COVID, rebuilding the IRS, and moving forward. The last three years have been tough for the IRS, taxpayers, and tax professionals. Goals for moving forward are digitalization and going away from paper, hiring more staff and providing appropriate training to meet taxpayers’ needs, better online access for taxpayers and tax professionals, better telephone and in-person service, address scams and fraud, improve processing time, and improving IRS transparency about processing delays. The IRS is current in processing paper filed returns but amended returns are still backlogged. The IRS Tax Pro Accounts are being encouraged to be used and the IRS plans to add more features to the Tax Pro Accounts. The IRS is increasing enforcement for large corporations, larger partnerships, and high net worth individuals. This has always been a goal, but the IRS hasn’t always been in a position to implement. The IRS is now in a position due to the funding under the Inflation Reduction Act to implement enforcement. A flow through entity division is being established that will focus on passthroughs of all sizes. There is a compliance initiative regarding balance sheet discrepancies from year-to-year. The IRS has identified 500 partnerships that it intends to send letters to.
SECURE 2.0
While SECURE 2.0 contains dozens of provisions, the highlights include increasing the age at which retirees must begin taking RMDs from IRA and 401(k) accounts, and changes to the size of catch-up contributions for older workers with workplace plans. Additional changes are meant to help younger people continue saving while paying off student debt, make it easier to move accounts from employer to employer, and enable people to save for emergencies within retirement accounts.
IRS Announces Delay in $600 Form 1099-K Reporting Threshold
The IRS has released Notice 2023-74, which delays the new $600 Form 1099-K reporting threshold for third-party settlement organizations for calendar year 2023. This is the second time the IRS has temporarily delayed implementation of this complex provision, enacted under the American Rescue Plan, which was originally set to take effect in 2022. The agency will treat 2023 as an additional transition year, meaning reporting is not required unless the taxpayer receives over $20,000 and has more than 200 transactions during the year. As part of a new phased-in approach to implementing the $600 reporting threshold, the IRS announced the threshold for the 2024 tax year will be $5,000. The IRS anticipates making updates to Form 1040 for 2024 that will make the reporting process easier for taxpayers who receive Form 1099-K. Fact Sheet 2023-27 contains additional details about this announcement. The IRS will continue to provide information about 1099-K reporting on their website at IRS.gov/1099k.
Corporate Transparency Act
This is a new reporting requirement for entities and is administered by FinCEN. Enacted in early 2021, it becomes effective for new entities on January 1, 2024. They must file within 30 days of formation. Existing entities formed before 2024 must file by January 1, 2025.
New corporations, LLCs, and similar entities will be required to report each beneficial owner as well as the applicant for the entity. A beneficial owner means an individual who either directly or indirectly exercises substantial control over the entity or who owns or controls at least 25% of the ownership of the entity. An applicant means the individual who directly files the document that creates a domestic entity or registers a foreign entity, or who is primarily responsible for directing or controlling this filing.
There are 23 exceptions to the new filing requirement including CPA firms, exempt organizations, and large operating companies (those with more than 20 full-time employees in the US, which filed a federal tax return in the previous year showing more than $5 million of gross receipts and which have operations at a physical location in the U.S.).
The Financial Crimes Enforcement Network (FinCEN) has updated its Frequently Asked Questions (FAQs) on the Beneficial Ownership Information (BOI) reporting requirements that will take effect on 1/1/24. The updated FAQs include new questions and clarification about reporting companies, beneficial owners, company applicants, reporting requirements, initial reports, and reporting company exemptions. The updated FAQs can be accessed on the FinCEN website at: www.fincen.gov/boi-faqs . FinCEN expects to publish further guidance in the future.
Digital Assets
2023 has been an eventful year for the digital assets arena. Various types, such as convertible virtual currency and cryptocurrency, non-fungible tokens (NFTS), and stablecoins continue to evolve and expand into use areas that are new and uncharted. The IRS has issued additional guidance in 2023 and the presenters encourage practitioners to use the AICPA resources regarding reporting of digital assets. Also, practitioner’s should be aware of state reporting requirements.
ERC IRS announcement
• ERC Moratorium effective 9/14/2023 through the end of the year.
• The IRS is not reviewing or processing any new claims.
• More stringent process will increase review time from 90 to at least 180-day.
• IRS encourages people to review and consider withdrawing ineligible claims.
AICPA Updates and Initiatives
Revised Statements on Standards for Tax Services (SSTS) effective 1/1/2024.
• Three new standards related to data protection, reliance on tools, tax representation.
• Align to the current state of the tax profession.
• Address emerging needs.
• Reinforce member reputation.
Simplify Automatic Filing Extensions (SAFE) Act
• Creating a prior year safe harbor for extensions.
• Bipartisan House legislation - introduced with Republican and Democrat co-sponsors.
• No Failure to Pay Penalty for Individuals who pay 125% of prior year tax.
• Extension automatically valid (no penalties).
• Interest still runs on any taxes not paid by April 15.
• Flexibility for individual taxpayers and practitioners.
Section 174 R&D expensing
• AICPA supports repeal of TCJA amortization requirement or delay until 2026 - Comments May 9, 2023, February 14, 2023, and October 1, 2021.
• IRS issued IRS Notice 9/8/2023, clarifying amortization rules.
• Taxpayers are still required to amortize these costs. IRS to issue proposed regs (likely Spring 2024).
• Taxpayers can rely on the Notice until proposed regs.
• AICPA commented on Notice.
AICPA Warns Congress of Damaging Impacts During the 2023 Tax Filing Season in the Event of a Government Shutdown
• Under the “laddered” Continuing Resolution (CR) recently signed into law, continued funding for the Internal Revenue Service (IRS) expires at midnight on February 2, 2024.
• The IRS issued a letter to Congress on 11/27/2023. The letter offers recommendations to the IRS that could mitigate the long-term effects of a shutdown.
• The AICPA recommendations to the IRS include:
• Update the current Contingency Plan to include filing season specific activities.
• Take an approach similar to the IRS Fiscal Year 2023 Lapse Appropriations Contingency Plan, in which the IRS excepted 100% of the IRS employees by using the provided supplemental appropriations available through Section 10301 of the Inflation Reduction Act (IRA), Pub. L. 117-169.
• Provide automatic extensions of notices and collections until 90 days after the shutdown ending date.
• Keep all online systems and accounts accessible to taxpayers and tax practitioners.
• Retain more Chief Counsel attorneys to provide detailed guidance to taxpayers to meet their reporting requirements.
State Updates
• State PTE tax regimes continue to reign popularity.
• States continued to wrestle with state conformity issues.
• New York developed significant tax regulations.
• New Jersey adopted significant tax legislation.
• The cost-of performance/market-based sourcing provisions continue to stoke national controversies.
• Washington confirmed the constitutionality of the state’s capital gains tax.
Generative AI platforms
Usage of ChatGPT and other generative AI platforms has surged in 2023 and continues to be a hot topic. The growth of Artificial Intelligence from conversational applications such as Siri to the use of today’s cutting-edge generative AI technologies like ChatGPT have revolutionized the way professionals approach their work. But what does this mean for tax professionals and their clients now, tomorrow, and in the years to come? It was mentioned that part of the challenge will be keeping up with how quickly generative AI is expected to evolve and emerge. AI tools talked about were Claude, ChatGPT Code Interpreter, etc. due to their functionality but it was mentioned that there are hundreds, if not thousands, of generative AI tools on the market currently. Another topic that emphasized was, generative AI is only as good as the prompt that drives it. With that in mind, some organizations are hiring prompt engineers. People with the skills and backgrounds needed to communicate with generative AI systems. According to the Wall Street Journal, prompt engineering will come in handy at firms of any size.