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2021 Tax Updates - The Last Hurrah

Updated: Apr 24, 2023

Build Back Better Act

Senate passage of Build Back Better Act expected to miss the Christmas Target Deadline

Senate Majority Whip Dick Durbin (D-Ill.) acknowledged during a recent podcast that the Senate will be unable to pass the bill this calendar year for a variety of reasons.

  • There is still not an agreement on how to handle the deduction on state and local taxes (SALT) on the federal tax returns. Currently taxpayers are limited to a $10,000 cap, depending on your filing status. Version H.R. 5373 of this Act proposed the SALT cap to be increased to $80,000 for the next nine years.

  • Sen. Joe Manchin (D-W. VA.) has now asked for the bill to be scored as if the expanded child tax credit will be in effect for the next 10 years, compared to only one additional year as previousally passed by the House, under the expectation that this provisions will continue to be renewed rather then being allowed to expire. This request would raise the cost of the bill and puts the bills status of being fully paid for in jeopardy.

  • Elizabeth MacDonough, a key player for determining how each provision conforms to the rules which govern inclusions in the reconciliation bill, us currently unabailable due to personal reasons.

Senate Majority Leader Charles Schumer (D-N.Y.) had targeted December 25 as the deadline for passage of Build Back Better. In a December 6 letter to his Democratic colleagues in the Senate, Schumer said that the "goal in the Senate is to pass the legislation before Christmas and get it to the president’s desk."

Employee Retention Credit

Changes made to the Employee Retention Credit due to the implementation of the Infrastructure Investment and Jobs Act enacted November 15, 2021

A. Termination of Employee Retention Credit for Employers other than Recovery Startup Businesses.

Due to the amendments made by section 80604 of the Infrastructure Act, rules for determining whether an employer is an eligible employer due to a full or partial suspension of operations ( section III.D. of Notice 2021-20) or a decline in gross receipts ( section III.C. of Notice 2021-23) no longer apply for the fourth calendar quarter of 2021.

Any rules based upon the determination that an employer is an eligible employer due to a full or partial suspension of operations or a decline in gross receipts, such as rules relating to “severely financially distressed employers” discussed in section III.E. of Notice 2021-49, also no longer apply for the fourth calendar quarter of 2021. Further, references in Notice 2021-49 to eligible employers claiming the employee retention credit for qualified wages paid in the fourth calendar quarter of 2021 no longer apply unless the employer is a recovery startup business.

B. Failure to Deposit Penalties for Employers other than Recovery Startup Businesses.

Prior to the Infrastructure Act employers were allowed to reduce their employment tax deposits by the ammount of the employee retention credit for the fourth calendar quarter of 2021, assuming the business had a full or partial suspension of operations or a decline in gross receipts.

However, due to the termination of the employer retention credit for wages paid in the fourth calendar quarter of 2021 for employers that are not recovery startup business, the IRS will no longer waive future to deposit penalties for employers who have reduced their deposits in anticipation of the employee retention credit after December 20, 2021 unless the employer is a recovery startup business.

2022 Standards Mileage Rates Released

Notice 2022-3; IR-2021-151

The optional standard mileage rates may be used by taxpayers to compute their deductable costs of operating vehicles for their business, medical and charitable purposes. Some members of the military may also use these rates to compute their moving expense deductions (moving deductions are only allowed to members of the military under specific requirements).

  • 58.5 cents per miles for business users;

  • 18 cents per miles for medical uses; and

  • 14 cents per mile for charitable uses.

Charitable Contribution Deductions No Longer Allowed for Targeted Organizations

Ann. 2021-17 is a list of organizations which the IRS have revoked their non-profit status under 501(c)(3) and 170(c)(2).

Contributions made to the organizations listed below will no longer qualify for a taxpayer to claim the expense as a deductable charitable donation. This only applies to contributions made after December 17, 2021. Any contributions made prior to this date are still deductable as long as the taxpayer was (a) unaware of the revocations in status, (b) was unaware the revocation of status was imminent or (c) was not responsible for the activities or deficiencies which gave rise to the loss of the qualification.

However, if the organization properly files suite for a declaratory judgement order under code Sec. 7428 then contributions will continue to be deductable to the taxpayer with limitations. The maxaimum amount of individual contributions protected would be $1,000. This protection would not be allowed to anyone who is responsible for the acts or ommissions of teh organization which resulted in the revocations.

These charitable organizations include: A Greener Globe, A Positive Progress Service Inc., American Medical Missionary Care Inc., Arizona Bike Week Charities, Beam Global Initiatives, Community Worship Church, Dan Hartman Foundations for Music and Arts, Disabled American Veteran's (AKA Chapter 2 Cactus), DMC Foundation, Father's Rights Organization, Friends of Fiver Foundation, Kingdom Victories Outreach Ministries, Light of the World Inc., Michael Patrik Hollins Memorial Foundation, Moses Hill Cementery Inc., New World Sanctuary Foundation, Nia Comprehensive Center for Development Disabilities Inc., Real Pay It Forward Inc., Retreat and Rescue, Roife-Nissenbaum Trust, Sigma Theta Tau International Inc., Strength for the Journey Inc., Support Our Veterans Inc., SV Festival, Teen Leadership Foundation, The Alantis Educational Foundation, Thiry Thousand Feet Booster Club, Uplift Individuals in Christ, Walter's Family Foundation, Washington County Hospital Inc., You Are Loved LLC.

Latest Activity in Washington D.C.

Weekly Highlights

The IRS Large Business and International (LB&I) issued a new Practice Unit:

  • Base Erosion Anti-Abuse Tax Overview (12/17/2021)

  • Interest on Deferred Tax Liability (12/17/2021)

  • Examining Treaty Exemptions of Income - NRA Students, Trainees, Teachers and Researchers (12/17/2021)

  • Tax Shelters Promoter Investigations Under IRC 6700 (12/17/2021)

  • Flow-Trhough Entities Effects on FTC (12/17/2021)

The IRS released the applicable federal interest rates for January of 2022

The IRS announced that millions of American families will soon receive their final advanced Child Tax Credit payment for the month of December.

The IRS is allowing taxpayers who have had an offer in compromise accepted by the agency to keep their tax refunds instead of the previous policy of having those tax refunds applied to their oustanding tax debt.

The president declared a federal disaster area in Kentucky.

The IRS joined with several leading nonprofit groups to highlight a special tax provision which allows more people to deduct donations to qualifying charities on their 2021 income tax return. (IR-2021)

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