The theory of disruptive innovation, introduced in these pages in 1995, has proved to be a powerful way of thinking about innovation-driven growth. Many leaders of small, entrepreneurial companies praise it as their guiding star; so do many executives at large, well-established organizations, including Intel, Southern New Hampshire University, and Salesforce.com.

Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation. As a result, the theory is sometimes criticized for shortcomings that have already been addressed.

There’s another troubling concern: In our experience, too many people who speak of “disruption” have not read a serious book or article on the subject. Too frequently, they use the term loosely to invoke the concept of innovation in support of whatever it is they wish to do. Many researchers, writers, and consultants use “disruptive innovation” to describe any situation in which an industry is shaken up and previously successful incumbents stumble. But that’s much too broad a usage.

The problem with conflating a disruptive innovation with any breakthrough that changes an industry’s competitive patterns is that different types of innovation require different strategic approaches. To put it another way, the lessons we’ve learned about succeeding as a disruptive innovator (or defending against a disruptive challenger) will not apply to every company in a shifting market. If we get sloppy with our labels or fail to integrate insights from subsequent research and experience into the original theory, then managers may end up using the wrong tools for their context, reducing their chances of success. Over time, the theory’s usefulness will be undermined.

This article is part of an effort to capture the state of the art. We begin by exploring the basic tenets of disruptive innovation and examining whether they apply to Uber. Then we point out some common pitfalls in the theory’s application, how these arise, and why correctly using the theory matters. We go on to trace major turning points in the evolution of our thinking and make the case that what we have learned allows us to more accurately predict which businesses will grow.

Read more: HBR

WASHINGTON —The Internal Revenue Service today reminded IRA owners age 70½ or over of their option to transfer up to $100,000 to charity tax-free each year.

These transfers, known as qualified charitable distributions or QCDs, offer eligible older Americans a great way to easily give to charity before the end of the year. Moreover, for those who are at least 72, QCDs count toward the IRA owner’s required minimum distribution (RMD) for the year.

How to set up a QCD

Any IRA owner who wishes to make a QCD for 2022 should contact their IRA trustee soon so the trustee will have time to complete the transaction before the end of the year.

Normally, distributions from a traditional individual retirement arrangement (IRA) are taxable when received. With a QCD, however, these distributions become tax-free as long as they’re paid directly from the IRA to an eligible charitable organization.

QCDs can be made electronically, directly to the charity, or by check payable to the charity.

An IRA distribution, such as an electronic payment made directly to the IRA owner, does not count as a QCD. Likewise, a check made payable to the IRA owner is not a QCD.

Each year, an IRA owner age 70½ or over can exclude from gross income up to $100,000 of these QCDs. For a married couple, if both spouses are age 70½ or over and both have IRAs, each spouse can exclude up to $100,000 for a total of up to $200,000 per year.

The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable, and no deduction is available for the transfer.

Report correctly

A 2022 QCD must be reported on the 2022 federal income tax return, normally filed during the 2023 tax filing season.

In early 2023, the IRA owner will receive Form 1099-R from their IRA trustee that shows any IRA distributions made during calendar year 2022, including both regular distributions and QCDs. The total distribution is in Box 1 on that form. There is no special code for a QCD.

Like other IRA distributions, QCDs are shown on Line 4 of Form 1040 or Form 1040-SR. If part or all of an IRA distribution is a QCD, enter the total amount of the IRA distribution on Line 4a. This is the amount shown in Box 1 on Form 1099-R.

Then, if the full amount of the distribution is a QCD, enter 0 on Line 4b. If only part of it is a QCD, the remaining taxable portion is normally entered on Line 4b.

Either way, be sure to enter “QCD” next to Line 4b. Further details will be in the final instructions to the 2022 Form 1040.

Get a receipt

QCDs are not deductible as charitable contributions on Schedule A. But, as with deductible contributions, the donor must get a written acknowledgement of their contribution from the charitable organization, before filing their return.

In general, the acknowledgement must state the date and amount of the contribution and indicate whether the donor received anything of value in return. For details, see the Acknowledgement section in Publication 526, available on IRS.gov.

For more information about IRA distributions and QCDs, see Publication 590-B, also available on IRS.gov.

Source: IRS-2022-201, November 17, 2022

WASHINGTON — Today, the IRS Independent Office of Appeals released its focus guidePDF for fiscal year 2023. Appeals is taking important steps to expand communications with external stakeholders and to improve taxpayer access to Appeals. Promoting transparency and taxpayer access helps Appeals fulfill its mission to resolve tax disputes in a fair and impartial manner without the need for litigation.

The focus guide outlines the taxpayer service initiatives you can expect over the coming year, including:

Increasing stakeholder outreach – including to historically marginalized and limited English proficient communities—about the appeals process.
Improving access to in-person and video conferences and revising letters and notices to ensure taxpayers understand that it is generally their choice how to meet with Appeals.
Leveraging technology to improve how Appeals works and manages its cases.
Continuing the Practitioner Perspectives series in which tax practitioners share insights and feedback with Appeals employees. Recordings of prior panel discussions on Collection Appeals and Examination Appeals are available.
Developing training for Appeals employees on enhancing customer engagement.
“We are excited to share Appeals’ 2023 priorities,” said Andy Keyso, Chief of Appeals. “We will keep doing all we can to promote a positive experience for taxpayers and practitioners, while building upon our past accomplishments and applying lessons we learned from the challenges posed by COVID-19.”

A key success in 2022 is how Appeals addressed a significant increase in cases referred for settlement after the taxpayer filed a petition in the United States Tax Court. Many of these cases involved taxpayers without legal representation and resulted from communications challenges and difficulties in obtaining and sharing documents during the pandemic.

To avoid further delays, Appeals prioritized these docketed cases and dedicated additional resources to promptly resolve them. Appeals shared guidelinesPDF for how employees would streamline their approach to these cases with the public in April 2022. Under these guidelines, Appeals attempted to reach affected taxpayers by telephone shortly after receiving the cases. In addition, Appeals considered specific-dollar settlements, expedited tax computation, and streamlined internal documentation of proposed settlements. As always, Appeals Officers applied their professional judgment, including to accept oral testimony where appropriate, to settle the cases efficiently.

Using this approach, Appeals resolved all 7,500 docketed cases pending when the initiative began. To achieve permanent improvements to the taxpayer experience, the IRS is working to increase the number of cases resolved at the earliest stage possible—before a dispute arises.

“Ensuring that taxpayers and practitioners are satisfied with the appeals process is an ongoing goal for us,” said Shahid Babar, Acting Deputy Chief of Appeals. “The 2023 focus guide is a way to share with the public and with employees our ideas for continually improving how Appeals resolves tax disputes.”

Source: IRS

WASHINGTON – The Internal Revenue Service reminded families today that some taxpayers who claim at least one child as their dependent on their tax return may not realize they could be eligible to benefit from the Child Tax Credit (CTC).

Eligible taxpayers who received advance Child Tax Credit payments last year should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments last year can claim the full credit by filing a 2021 tax return.

The IRS urges grandparents, foster parents or people caring for siblings or other relatives to check their eligibility to receive the 2021 Child Tax Credit. It’s important for people who might qualify for this credit to review the eligibility rules to make sure they still qualify. Taxpayers can use the Interactive Tax Assistant to check eligibility. Taxpayers who haven’t qualified in the past should also check because they may now be able to claim the credit. To receive it, eligible individuals must file a 2021 federal tax return.

What is the Child Tax Credit expansion?

The Child Tax Credit expansion, which is a part of the American Rescue Plan, increased the amount of money per child families can receive and expanded who can receive the payments.

The American Rescue Plan increased the Child Tax Credit from $2,000 to $3,600 per child for children under the age of six, from $2,000 to $3,000 for children over the age of 6 and raised the age limit from 16 to 17 years old.

The American Rescue Plan Act of 2021 expanded the Child Tax Credit for tax year 2021 only.

Who qualifies for the Child Tax Credit?

Taxpayers can claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States and issued by the Social Security Administration before the due date of their tax return (including an extension if the extension was requested by the due date).

To be a qualifying child for the 2021 tax year, the dependent generally must:

• Be under age 18 at the end of the year.
• Be their son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant of one of these (for example, a grandchild, niece, or nephew).
• Provide no more than half of their own financial support during the year.
• Have lived with the taxpayer for more than half the year.
• Be properly claimed as their dependent on their tax return.
• Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid.
• Have been a U.S. citizen, U.S. national or U.S. resident alien.

What are the eligibility factors?

Individuals qualify for the full amount of the 2021 Child Tax Credit for each qualifying child if they meet all eligibility factors and their annual income is not more than:

• $150,000 if they’re married and filing a joint return, or if they’re filing as a qualifying widow or widower.
• $112,500 if they’re filing as a head of household.
• $75,000 if they’re a single filer or are married and filing a separate return.

Parents and guardians with higher incomes may be eligible to claim a partial credit. Claiming these benefits can result in tax refunds for many individuals. Individuals should file electronically and choose direct deposit to avoid delays and receive their refund faster.

Finding free tax return preparation

A limited number of  Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) program sites remain open and available to help eligible taxpayers get their tax returns prepared and filed for free by IRS trained and certified volunteers. Low- and moderate-income taxpayers as well as those age 60 and above can check to see if there is an available site in or near their community by using the VITA/TCE Site Locator.

IRS Free File available until Nov. 17 to help more people receive credits

The IRS Free File program, available only through IRS.gov and offered in partnership the tax software industry’s Free File Alliance, offers eligible taxpayers brand-name tax preparation software to use at no cost. The software does all the work of finding deductions, credits and exemptions for which the taxpayer qualifies. It’s free for most individual filers who earned $73,000 or less in 2021. Some of the Free File packages also offer free state tax returns to those who qualify. Taxpayers who earned more than $73,000 in 2021 and are comfortable preparing their own taxes can use Free File Fillable Forms. This electronic version of paper IRS tax forms is also used to file tax returns online.

To help more people claim a variety of tax credits and benefits, Free File will remain open for an extra month this year, until November 17, 2022.

The IRS is sending letters to more than 9 million individuals and families who appear to qualify for a variety of key tax benefits but did not claim them by filing a 2021 federal income tax return. Many in this group may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, the Earned Income Tax Credit and other tax credits depending on their personal and family situation. The special reminder letters, which will be arriving in mailboxes over the next few weeks, are being sent to people who appear to qualify for the Child Tax Credit, Recovery Rebate Credit (RRC) or Earned Income Tax Credit (EITC) but haven’t yet filed a 2021 return to claim them. The letter, printed in both English and Spanish, provides a brief overview of each of these three credits.

These and other tax benefits were expanded under last year’s American Rescue Plan Act and other recent legislation. Even so, the only way to get the valuable benefits is to file a 2021 tax return. Often, individuals and families can get these expanded tax benefits, even if they have little or no income from a job, business or other source. This means that many people who don’t normally need to file a tax return should do so this year, even if they haven’t been required to file in recent years.

People can file a tax return even if they haven’t yet received their letter. The IRS reminds people that there’s no penalty for a refund claimed on a tax return filed after the regular April 2022 tax deadline. The fastest and easiest way to get a refund is to file an accurate return electronically and choose direct deposit.

Source: IR-2022-181, October 17, 2022

FL-2022-19, September 29, 2022
WASHINGTON — Victims of Hurricane Ian that began September 23 in Florida now have until February 15, 2023, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following the recent disaster declaration issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in certain areas will receive tax relief.

Individuals and households affected by Hurricane Ian that reside or have a business anywhere in the state of Florida qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after September 23, 2022, and before February 15, 2023, are postponed through February 15, 2023.

This means individuals who had a valid extension to file their 2021 return due to run out on October 17, 2022, will now have until February 15, 2023, to file. The IRS noted, however, that because tax payments related to these 2021 returns were due on April 18, 2022, those payments are not eligible for this relief.

The February 15, 2023, deadline applies to the quarterly estimated tax payments, normally due on January 17, 2023 and to the quarterly payroll and excise tax returns normally due on October 31, 2022, and January 31, 2023. Businesses with an original or extended due date also have the additional time, including calendar-year corporations whose 2021 extensions run out on October 17, 2022.

Penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the tax deposits are made by October 10, 2022.

If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer should call the telephone number on the notice to have the IRS abate the penalty. For information on services currently available, visit the IRS operations and servicespage at IRS.gov/coronavirus.

The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area should call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The localities listed above constitute a covered disaster area for purposes of Treas. Reg. §301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Under section 7508A, the IRS gives affected taxpayers until February 15, 2023 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after September 23, 2022, and before February 15, 2023, will be abated as long as the tax deposits were made by February 15, 2023.

Affected taxpayers that have an estimated income tax payment originally due on or after September 23, 2022, and before February 15, 2023, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before February 15, 2023.

The IRS also gives affected taxpayers until February 15, 2023, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (December 10, 2018), that are due to be performed on or after September 23, 2022, and before February 15, 2023, are postponed through February 15, 2023.

This relief also includes the filing of Form 5500 series returns that were required to be filed on or after September 15, 2022, and before February 15, 2023, are postponed through February 15, 2023, in the manner described in section 8 of Rev. Proc. 2018-58. The relief described in section 17 of Rev. Proc. 2018-58, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

Unless an act is specifically listed in Rev. Proc. 2018-58, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098 or 1099 series; to Forms 1042-S, 3921, 3922 or 8027; or to employment and excise tax deposits. However, penalties on deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the tax deposits were made by October 10, 2022.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. See Publication 547 for details.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684, Casualties and TheftsPDF and its instructions.PDF

Affected taxpayers claiming the disaster loss on their return should put the Disaster Designation, “FL Hurricane Ian” in bold letters at the top of the form. Be sure to include the FEMA disaster declaration number, DR-4673-FL– on any return. See Publication 547 for details.

Other Relief

The IRS will waive the usual fees and requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation “FL Hurricane Ian” in bold letters at the top of Form 4506, Request for Copy of Tax ReturnPDF, or Form 4506-T, Request for Transcript of Tax ReturnPDF, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case. Taxpayers may download forms and publicationsfrom the official IRS website, IRS.gov.

Source: IRS