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  • Writer's pictureColin Ghira

CPA Business Insights – February 2024

Dear Citrus County business community, I am a CPA registered in both Florida and NYS, with over 18 years of professional experience working with small, medium, and large publicly traded companies. As we enjoy a business-friendly environment in Citrus County and Florida in general, I’d like to share some new developments and tips that could affect our businesses for 2024 and beyond.

1. High Income Individuals, Partnership – Under Fire

The IRS recently announced:

  • Millionaire Tax Recovery: Successfully reclaimed $482 million from 1,600 millionaires, showcasing a focused approach to high-wealth tax compliance.

  • Strategic Audits: Intensified scrutiny and auditing of high-income individuals, large corporations, and complex partnerships, leveraging advanced artificial intelligence techniques for precise targeting and efficient processing.

  • International Tax Fairness: Confronted tax avoidance by U.S. subsidiaries of foreign corporations through stringent transfer pricing compliance measures.

  • Technological Innovation and Talent Acquisition: Undertook significant modernization of technological infrastructure and streamlined operations, alongside recruiting over 560 skilled accountants to handle intricate tax cases.

2. Payments Received on Third Party Apps (CashApp, Venmo)

  • The IRS has announced a delay in implementing the new $600 threshold for Form 1099-K reporting by third-party payment organizations. Originally slated for tax year 2022, the implementation has been postponed. For tax year 2023, the existing threshold remains in place: payment apps and online marketplaces (such as CashApp, Venmo, FacebookPay, etc.) are required to send out Forms 1099-K to taxpayers who receive over $20,000 in payments and engage in over 200 transactions. Looking ahead to tax year 2024, the IRS is planning a new threshold of $5,000 to gradually introduce the reporting requirements.

  • IMPORTANT: This delayed implementation does not alter your tax obligations. It's crucial to understand that all income is taxable and must be reported on your tax return, regardless of whether you receive a Form 1099-K. This holds true unless the income is explicitly excluded by law. Be aware that some payment processors may opt to issue a Form 1099-K even if the transaction amount does not meet the threshold.

3. Employee Retention Credit (ERC) – IRS Intensifies Scrutiny

As 2023 drew to a close, the IRS ramped up its efforts against questionable ERC claims, issuing 20,000 disallowance letters and signaling further action, including a new voluntary disclosure program. The ERC, designed to offer a refundable tax credit to eligible businesses retaining employees during the COVID-19 pandemic, was well-intentioned, but fraught with challenges:

  • Complex Implementation and Communication: From its inception, the ERC's rollout was marked by confusion and unclear guidance.

  • Counterintuitive Tax Implications: The ERC's tax treatment can be perplexing. For instance, if a business received a tax credit in 2023 for the tax year 2021, it might seem logical to report this credit in the 2023 tax return. Contrarily, the IRS requires amending the 2021 tax return and, potentially, the 2022 return. Adding to the complexity, certain partnerships typically need to utilize the Administrative Adjustment Request (AAR) process, rather than simply amending prior filings.

  • Aggressive Marketing by ERC Vendors: Numerous vendors aggressively marketed ERC claims, promising substantial returns. However, the recent crackdown has seen many of these providers shutting down or moving on, leaving businesses to face potential liabilities.

4. Other Items

  • IRS launches Simple Notice Initiative redesign effort – IRS and simple in the same sentence. We are living in strange times.

  • Taxpayers should continue to report all cryptocurrency, digital asset income.

  • New Beneficial ownership information reporting carries significant penalties.

Disclaimer: This article is for informational purposes only and should not replace consultation with a qualified professional for specific advice

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