tax 940 form | TaxConnections (2024)

IRS ramps up new initiatives using Inflation Reduction Act funding to ensure complex partnerships, large corporations pay taxes owed, continues to close millionaire tax debt cases.

More than $482 million recovered from 1,600 millionaires who have not paid tax debts

WASHINGTON — The Internal Revenue Service announce continued progress to expand enforcement efforts related to high-income individuals, large corporations and complex partnerships as part of wider efforts to transform the agency.

IRS Commissioner Danny Werfel noted Inflation Reduction Act resources continue to help in a variety of areas. In addition to earlier announcements focusing on further improving taxpayer service during the upcoming 2024 filing season, the IRS has focused IRA resources on strengthening enforcement to pursue complex partnerships, large corporations and high-income, high-wealth individuals who do not pay overdue tax bills.

The IRS shared today progress in its focus on people using partnerships to avoid paying self-employment taxes as well as new details on current enforcement priorities. The IRS is also continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt, with an additional $360 million collected on top of the $122 million reported in late October. The IRS has now collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with work continuing in this area.

“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act. We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” Werfel said. “At the same time, we are focused on improving our taxpayer service for hard-working taxpayers, offering them more in-person and online resources as part of our effort to deliver another successful tax season in 2024. The additional resources the IRS has received is making a difference for taxpayers, and we plan to build on these improvements in the months ahead.”

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WASHINGTON – With tax season rapidly approaching, the IRS reminds employers that Jan. 31 is the deadline for submitting wage statements and forms for independent contractors with the government.

Employers must file their copies ofForm W-2, Wage and Tax Statement, andForm W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31.

The Jan. 31 deadline also applies toForms 1099-MISC, Miscellaneous Income, andForms 1099-NEC, Nonemployee Compensation, that are filed with the IRS to report non-employee compensation to independent contractors. Various other due dates related to Form 1099-MISC, Form 1099-K and Form 1099-NEC, including dates due to the IRS, can be found on the forms’instructions.

The IRS offers afree electronic filing service for the Form 1099 seriesusing the Information Returns Intake System (IRIS). Filers can also use this online portal to prepare payee copies for distribution, file corrections and request automatic extensions.

New Filing Requirements

New electronic filing requirements affect Forms W-2 that are required to be filed in 2024. Businesses that file 10 forms or more must file W-2s and certain information returns electronically. SeeNew electronic filing requirements for Forms W-2for more information.

E-filing is the quickest, most accurate and convenient way to file forms. For more information on e-filing Forms W-2, employers can refer toEmployer W-2 Filing Instructions & Informationon the Social Security Administration’s website.

Key Points To Remember

• Extensions to file are not automatically granted. Employers may request a 30-day extension to file Forms W-2 by submittingForm 8809, Application for Extension of Time to File Information Returns, by Jan. 31.
• Filing Form 8809 does not extend the due date for furnishing wage statements to employees. A separate extension must be filed by Jan. 31. SeeExtension of time to furnish Forms W-2 to employeesfor more information.
• Filing by the deadline helps the IRS to fight fraud by making it easier to verify income. Employers can help support that process and avoid penalties by filing the forms on time and without errors.
• Penalties may be assessed for failure to file correctly and on time. For more information visit the IRS’Information Return Penaltiespage.
• Form 1099-K $600 reporting threshold delayed. This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

The IRS encourages employers and taxpayers to visitAbout Form W-2, Wage and Tax StatementandPublication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2GPDF, for more information.

IR-2024-06

New milestones in Paperless Processing Initiative: 225 times more forms scanned than in 2022, 51 additional forms and letters available for online response
IR-2023-148,

New improvements to customer callback option to better serve taxpayers during high call volume, customer callback option will now be available for up to 95% of callers seeking live assistance
WASHINGTON — One year into its modernization efforts under the Inflation Reduction Act, the IRS has made significant progress toward its goals of delivering world-class service, upgrading its technology and ensuring high-income taxpayers, large corporations and complex partnerships pay taxes owed.

As the IRS marks the anniversary of the Inflation Reduction Act, it is announcing two new milestones as part of its Paperless Processing Initiative: Scanning 225 times more forms than in 2022 and enabling taxpayers to reply to an additional 51 forms and letters online.

In addition, the IRS has met its targets to further improve its customer callback option, so taxpayers do not need to wait on hold during periods of high call volume. The customer callback option will now be available for up to 95% of callers seeking live assistance.

Dramatically improved service in filing season 2023
Thanks to Inflation Reduction Act resources, the IRS delivered dramatically improved service in Filing Season 2023. IRS achieved an 87% Level of Service on its main taxpayer help line.

Through the end of Filing Season 2023, IRS answered 3 million more calls, cut phone wait times to three minutes from 28 minutes, served 140,000 more taxpayers in-person, digitized 80 times more returns than in 2022 through the adoption of new scanning technology, cleared the backlog of unprocessed 2022 individual tax returns with no errors, launched two new digital tools and enabled a new direct-deposit refund option for taxpayers with amended returns.
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Moore and Retroactivity – The Readers Digest Version

"The Little Red Transition Tax Book" – Everything you need to know about the 965bmandatory repatriation tax but didn't know to ask. A horrific abuse of #Americansabroad in a @citizenshiptax and #FATCA world! https://t.co/j7v1Asreek

— U.S. Transition Tax – Subpart F and #GILTI (@USTransitionTax) June 26, 2023

This history of the Moore case is described by Professors Brooks and Gamage as follows:

The taxpayers brought suit challenging the MRT, arguing that it was an unapportioned direct tax and therefore in violation of the Constitution.25 (They also argued that its seeming retroactivity was in violation of the Due Process clause of the Fifth Amendment,26 though this was not the main focus of the case, nor did the dissenters address it, nor do the petitioners raise the issue in the cert petition, so we put that claim aside.27) The district court dismissed the claim, and a three-judge panel of the Ninth Circuit unanimously affirmed the dismissal.28 The taxpayers’ subsequent petition for rehearing and rehearing en banc was denied.29

The Chamber of Commerce’s amicus cert brief filed on March 27, 2023 included on page 18:

The Constitution imposes numerous safeguards that prevent the government from making rapid changes that would unsettle expectations. Such principles “find[] expression in several [constitutional] provisions,” Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994), and often implicate tax laws.

First, “a retroactive tax provision [can be] so harsh and oppressive as to transgress the constitutional lim-itation” of due process. Carlton, 512 U.S. at 30. When “Congress act[s] promptly and establishe[s] only a modest period of retroactivity,” like “only slightly greater than one year,” a tax law’s retroactive effect has been deemed permissible. Id. at 32–33. But a tax law that deals with a “novel development” regarding “a transfer that occurred 12 years earlier” has been held unconstitutional. Id. at 34 (discussing Nichols v. Coolidge, 274 U.S. 531 (1927)). Here, of course, the Ninth Circuit called the MRT a “novel concept,” and it reached back—not one, not twelve—but more than thirty years into the past, long after companies made decisions about where to locate their long-term as- sets.2 App 6. The MRT’s aggressive retroactivity showcases the danger of unmooring income from its defining principle of realization. Erasing the realization requirement upends taxpayer expectations—leaving them looking over their shoulders for what unrealized gain Congress might next call “income.”

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June 26, 2023 – Great News! – The US Supreme Court Agrees To Hear Moore 965 Transition Tax Case!

A direct link to the Supreme Court site which will track the progress and filings of all briefs (including what are expected to be a large number of amicus briefs) is here.

The brief from the CATO Institute frames the question addressed to the Supreme Court as follows:

QUESTION PRESENTED

Whether Congress may levy income tax on a tax-payer who has not realized income.

What follows is a twitter thread (which I will continually update) which includes commentary, resources and general information about the appeal.

Huge news!! The US Supreme Court has agreed to consider the constitutionality of the IRC S. 965 @USTransitionTax. The issues include whether real tax can be imposed on deemed income that the person never received. The result may have some bearing on the 877A expatriation tax too! https://t.co/GeXLKp3SkA

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) June 26, 2023

Litigation against the 965 Mandatory AKA transition tax has come from two sources.
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There are about 57 million small businesses and self-employed taxpayers in the United States, including:

Corporations and partnerships with assets less than $10 million
-Sole proprietors
-Independent contractors
-Members of a partnership that carries on a trade or business
-Others in business for themselves, even if the business is part-time
-Gig workers (i.e., Uber/Lyft drivers, owners of Airbnb rentals, delivery services, etc.)
-The Taxpayer Advocate Service is sharing the following information with small business taxpayers to:

Help you meet their filing requirements
Share resources for information and tax return preparation
Help you file accurate returns
Small Business Filing Requirements

Generally, the federal tax forms you will need to file vary depending on the type of business:
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Part I – Prologue – A Tweet Worth A Thousand Posts

Part 6 – The 877A Exit Tax: While the non-US pensions of Americans abroad are subject to confiscatory taxation, US based pensions escape intact https://t.co/yBi3RH8nTe via @SEATNow_org

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) February 28, 2023

For a “Readers Digest” version of the post that is to follow, simply click on the link in the above tweet!

To see examples of the deemed income inclusions and the U.S. tax owing click on the links to Appendices, B, C and D below.

Outline And Structure

This post is for the purpose of alerting Americans abroad and their advisors to a particularly difficult and unjust aspect of renouncing U.S. citizenship. The punitive treatment of the non-U.S. pension is a reason for many Americans abroad to consider renunciation earlier (when they are not “covered expatriates”) rather than later (when they may be subject to the confiscatory rules applied to “covered expatriates”).

Part I – Introduction – The General Message
Part II: Relinquishment and the confiscatory case of the “ineligible” (non-U.S.) pension … A Deeper Dive
Part III: Relinquishment and the retention of the “eligible” (U.S.) pension … A Deeper Dive
Part IV – Conclusion
Appendix A – How Internal Revenue Code Sections 877A and 877 Lead To The Confiscation Of The Non-U.S. Pension
Appendix B – Dual Status tax return with a 1 million USD income inclusion on the day before expatriation
Appendix C – Dual Status tax return with a 1 million USD income inclusion on the day before expatriation with a $100,000 tax credit carry forward
Appendix D – Dual Status tax return with (1) a full actual distribution of the pension in Canada on the day before expatriation (generating a foreign tax credit in the current year)

Part I – Introduction – The General Message
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The Tax Cuts and Jobs Act (“TCJA”) made significant changes that affect international and domestic businesses, such as deductions, depreciation, expensing, tax credits and othertax items. This side-by-side comparison can help taxpayers understand the changes and plan accordingly.

Some provisions of the TCJA that affect individual taxpayers can also affect business taxes. Businesses and self-employed individuals should review tax reform changes for individuals and determine how these provisions work with their business situation.

VisitTCJA: International Taxpayers and Businessesregularly for tax reform updates. International and Domestic Businesses can find details and the latest resources on the provisions below atTax Reform Provisions that Affect Businesses.

International Provisions

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Tax Court in Brief | Palmarini Inc. v. Commissioner, Palmarini v. Commissioner | Recordkeeping and Constructive Dividends

Palmarini Inc. v. Comm’r, Palmarini v. Comm’r, T.C. Memo. 2022-119 | December 7, 2022 | Gustafson, J. | Dkt. Nos. 1719-17, 1723-17

Opinion

Short Summary:During tax years 2013 and 2014 (the “Tax Years”), petitioners husband and wife filed jointForms 1040, U.S. Individual Income Tax Returns. Petitioner wife worked as a procurement analyst for the U.S. Department of Defense. Petitioner husband worked as a cement contractor for petitioner corporation.

Petitioner husband owned an approximately 33% interest in petitioner corporation, with the remaining interests being owned by his brothers. Petitioner husband also was the sole member of a limited liability company (“LLC”) that was engaged in the business of affiliated online marketing. Petitioner husband viewed all accounts of petitioner corporation and LLC as his own and used them for both business and personal purposes. Petitioner husband also owned various residential properties and hired professional real estate management companies to manage the renting of the properties to tenants.

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The law requires each “United States person” who has a financial interest inorsignature authority over any foreign financial account to file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The form required is FinCEN Form 114.

This is one that should be pretty well known by now. The obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) with the US Treasury was initially imposed by the Bank Secrecy Act in 1970. Here are theInstructions to FinCEN Form 114 (FBAR). You canelectronically file Form 114 for free here.

What Is a Financial Interest for the FBAR?

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ThisInsightsblog is Part 3 of a 3-Part series focused on the unrelated business income tax rules for the nonprofit organization that is tax-exempt pursuant to section 501(c)(3) of the Internal Revenue Code (the “Code”).

Part 1—Tax Exemption and the Framework for the Unrelated Business Income Rules—provided an overview of the organizational and operational tests of section 501(c)(3) of the Code and alluded to the trigger for unrelated business income rules. Part 2–Unrelated Business Income Tax Rules, Modifications, and Exceptions—dived deeper into, well, the specific rules, modifications, and exceptions.

This Part 3 will dive deeper into the meaning of a trade or business that is “substantially related” to an exempt purpose of the tax-exempt organization.

“Substantially Related.”

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