The Internal Revenue Service Advisory Council (IRSAC) today issued its annual public report, including recommendations to the IRS on new and continuing issues in tax administration.

The 2024 IRSAC Public Report PDF includes recommendations on 37 issues covering a broad range of topics.

“IRSAC members have spent numerous hours analyzing issues in tax administration and the transformation work underway across the IRS,” said IRS Commissioner Danny Werfel. “The IRS is grateful for their hard work and valuable insights they spent on this year’s report, and we look forward to reviewing their recommendations.”

The top 13 general report issues are:

• IRS funding.
• Strategic Operating Plan assessment and analysis.
• Reporting level of service data.
• Hiring.
• Online Accounts promotion.
• Online Accounts technical support.
• Capabilities for business online tax accounts.
• Authorization techniques to enable businesses to utilize online accounts.
• Identity theft prevention and resolution.
• PTIN database and renewal system.
• Oversight of return preparers.
• Broadening continuing education for Enrolled Agents to include practice management topics.
• Process for issuing new and revised forms and obtaining comments.

The full 2024 IRSAC Public Report PDF was posted today to IRS.gov.

The IRSAC serves as a federal advisory committee to the IRS commissioner and executive leadership. It provides an organized public forum for discussion of relevant issues in tax administration. IRSAC members offer observations and advice regarding current or proposed IRS policies, programs and procedures.

In addition to receiving the public report today, Werfel thanked 12 members of the council whose terms end this year:

• Amanda Aguillard – Aguillard served on the Small Business/Self-Employed Subgroup.
• Samuel Cohen – Cohen served on the Tax Exempt/Government Entities Subgroup.
• Alison Flores – Flores served as Chair of the Taxpayer Services Subgroup.
• Jodi Kessler – Kessler served on the Tax Exempt/Government Entities Subgroup.
• Mason Klinck – Klinck served on the Taxpayer Services Subgroup.
• Jeffrey Porter – Porter served as Chair of the Small Business/Self-Employed Subgroup.
• Dawn Rhea – Rhea served on the Large Business & International Subgroup.
• Jon Schausten – Schausten served on the Information Reporting Subgroup.
• Tara Sciscoe – Sciscoe served on the Tax Exempt/Government Entities Subgroup.
• Wendy Walker – Walker served as Chair of the Information Reporting Subgroup.
• Sean Wang – Wang served on the Information Reporting Subgroup.
• Katrina Welch – Welch served as Chair of the Large Business & International Subgroup.

The IRSAC is administered under the Federal Advisory Committee Act by the IRS Communications & Liaison Division, Office of National Public Liaison.

Members represent the taxpaying public, the tax professional community, small and large businesses, tax-exempt and government entities, the payroll industry and academia. The IRSAC is organized into five subgroups: Information Reporting, Large Business & International, Small Business/Self-Employed, Tax Exempt/Government Entities and Taxpayer Services.

Source: IRS-2024-293, Nov. 20, 2024

The Internal Revenue Service reminds individual retirement arrangement (IRA) owners age 70½ and older that they can make up to $105,000 in tax-free charitable donations during 2024 through qualified charitable distributions. That’s up from $100,000 in past years.

For those age 73 or older, qualified charitable distributions (QCDs) also count toward the year’s required minimum distribution (RMD).

Generally, IRA distributions are taxable, but QCDs remain tax-free if sent directly to a qualified charity by the trustee. To make a QCD for 2024, IRA owners should contact their IRA trustee soon to ensure the transaction completes by year-end.

Each eligible IRA owner can exclude up to $105,000 in QCDs from taxable income. Married couples, if both meet qualifications and have separate IRAs, can donate up to $210,000 combined. QCDs don’t require itemizing deductions.

For those planning ahead, starting this year, the QCD limit is subject to annual adjustment, based on inflation. For that reason, the annual QCD limit will rise to $108,000 in 2025.

Reporting and documenting QCDs

For 2024, QCDs should be reported on the 2024 tax return. IRA trustees will issue Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., in early 2025 documenting IRA distributions.

The full amount of any IRA distribution goes on Line 4a of Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. Enter “0” on Line 4b if the full amount is a QCD, marking it as such.

Donors must obtain a written acknowledgement from the charity showing the contribution date, amount and confirmation that no goods or services were received.

For more details, see Publication 526, Charitable Contributions, and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

Source: IRS-2024-289, Nov. 14, 2024

The Internal Revenue Service will sponsor a free one-hour webinar designed to help the many businesses that must report their beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network.

Because this is not an IRS or tax-related requirement, FinCEN representatives will conduct the webinar on this new anti-money laundering provision. The webinar will take place on Tuesday, Nov. 19, 2024, beginning at 2 p.m. ET.

Many companies created or registered to do business before Jan. 1, 2024, must e-file their initial beneficial ownership information (BOI) to FinCEN by Jan. 1, 2025. In general, this means reporting the names and other information about the people who own or control the company. Exceptions and special rules apply.

During this free webinar, FinCEN will:

• Explain the Corporate Transparency Act.
• Provide Beneficial Ownership reporting resources.
• Analyze the BOI reporting requirement using the Small Entity Compliance Guide.
• Describe what happens if a company does not timely report BOI to FinCEN.

The webinar will also feature a live question-and-answer session. Though primarily aimed at tax professionals, anyone is welcome to attend.

Certificates of completion will be offered, but no continuing education credits are available for this webinar. Closed captioning will also be offered.

Time: 2 p.m. (Eastern); 1 p.m. (Central); 12 p.m. (Arizona and Mountain); 11 a.m. (Pacific); 10 a.m. (Alaska); 9 a.m. (Hawaii and Aleutian) time zones.

Registration: Visit the Internal Revenue Service webinar website. Questions about the webinar can be emailed to the web conference team.

For more information about the BOI reporting requirement, including FAQs and a five-minute video illustrating how to file, visit FinCEN’s BOI page.

Source: IRS-2024-288, Nov. 12, 2024

The Department of the Treasury and the Internal Revenue Service today issued final regulations to provide guidance for the Advanced Manufacturing Production Credit established by the Inflation Reduction Act of 2022 (IRA).

The Advanced Manufacturing Production Credit provides a tax credit for the production and sale of statutorily specified eligible components to unrelated persons. Such eligible components include solar and wind energy components, inverters, qualifying battery components and 50 applicable critical minerals. The eligible components must be produced in the United States or a territory of the United States.

Generally, the final regulations define qualifying production activities, provide rules for the sale of eligible components to unrelated persons as well as special rules that apply to sales between related persons, and provide rules to address contract manufacturing scenarios.

The final regulations also provide definitions of eligible components, rules related to calculating the credit, including eligible production costs, and specific recordkeeping and reporting requirements.

More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.

Source: IRS-2024-281, Oct. 24, 2024

The days of the individual retirement account “stretch” are long gone. But the appeal of Roth conversions is enduring — especially under the current tax rates.

Expiring provisions of the Tax Cuts and Jobs Act at the end of 2025 that mean lower taxes on the conversion, the fact that Roth IRAs carry no required minimum distributions and, of course, the duty-free withdrawals for the owner or their heirs add up to a compelling case, according to Sarah Brenner, the director of retirement education with consulting firm Ed Slott & Company. The first Secure Act was a “game-changer for IRAs and Roth IRAs” due to the new obligation for beneficiaries to empty the accounts within a decade of inheritance, and Secure 2.0 “made some changes around the edges,” she said in an interview.

The situation for traditional IRA owners is “kind of like ripping off a Band-Aid,” in which they should just “get the pain over with,” Brenner said, pointing out that clients often have a misconception that “you’ve got to do it all” even though “it’s not all-or-nothing” because they could simply do a partial conversion as well.

“The Secure Act changed the game, and it has definitely led to, I would say, an even stronger case for Roth conversions,” she added. “You work with the rules you have, and you have a 10-year rule.”

After four straight years of pushing back the implementation of that rule, the IRS has indicated that it will be going into effect at the beginning of 2025. Next year was already going to turn into one of the most consequential for tax policy in recent decades because of the possible sunset of the lower tax brackets and many other parts of the Tax Cuts and Jobs Act that will be high on the agenda for the next occupant of the White House and lawmakers in control of Congress.

Tax experts have been extolling the continued virtues of Roth conversions since passage of the first Secure Act in 2019.

“Though considerations around Roth IRA conversions have changed as a result of the Secure Act, Roth IRAs still offer advantages to account owners and beneficiaries,” certified public accountant and planner Joseph Doerrer wrote the following year in the Journal of Accountancy. “Roth IRAs are tax advantaged, and owners of Roth IRAs aren’t required to take RMDs. This can prove helpful in retirement, as it allows a larger amount of assets to remain in the account. Not having to take RMDs can also help account owners avoid creating unwanted taxable income, giving them more flexibility in retirement. Beneficiaries will enjoy a simpler tax situation, versus beneficiaries of traditional IRAs, due to the tax-free nature of their distributions from the account.”

The politics that led to more tax revenue flowing into federal coffers are now affecting personal financial decisions among advisors and their clients in the wake of the two Secure Acts, Sheryl Rowling, a CPA, planner and technology firm founder, wrote last year for Morningstar.

“Now is the time to do Roth conversion planning,” Rowling said. “By delaying retirement distributions, your clients can have additional years to convert IRA funds to Roth at lower tax rates. These changes all seem to encourage, even require, a greater emphasis on Roth rather than pretax retirement contributions. Although this means more money to the IRS as contributions (or conversions) are made, the opportunity to permanently exclude future growth (and previously taxed principal) from taxation, coupled with the elimination of RMDs, should be a big win for taxpayers in the long run.”

The Roth conversion offers a “huge advantage” over traditional accounts in that clients “never need to take RMDs from their Roth IRAs when they’re alive,” Brenner noted. For those inheriting Roth accounts, their “very compressed timeline” to empty the IRAs within a decade is arriving alongside distributions that won’t have an effect on their taxable income, she said.

“I could just let that Roth IRA sit there and grow for 10 years and then everything would be accessible to me tax- and penalty-free. This is the type of proactive planning that people can be doing. Right now, we have historically low tax rates. We don’t know how long that’s going to last,” Brenner said. “It’s a good time for people to be thinking about converting their taxable traditional IRAs.”

For advisors and their clients, the decision comes down to a simple calculation that the “money is going to be taxed at some point,” she noted.

“You are going to have to pay a tax bill when you convert. No one likes paying taxes unless they absolutely have to,” Brenner said. “Somebody at some point is going to have to pay taxes, so it’s good to do it on your schedule.”

Source: AccountingToday