William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

TaxFacts Intelligence November 10, 2021

Posted by William Byrnes on November 10, 2021


Many small business clients jumped at the opportunity to take advantage of advance payments of the COVID-19 tax credits–often relying on limited and quickly-changing guidance in calculating the value of those credits.  Now, the IRS has announced that it will recapture excess payments of those tax credits as underpayments of tax.  It’s anticipated that this may be particularly problematic for S corporation shareholders who claimed those credits before the IRS released guidance on majority shareholder issues.  Are your clients prepared?

By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

IRS Releases Regulations Allowing for Recapture of Erroneous COVID-19 Tax Credits

Early in 2020, the IRS created procedures to allow employers to quickly take advantage of the FFCRA and CARES Act tax credits.  Now, the IRS has released temporary regulations that allow the IRS to recapture any of the tax credits credited to an employer in excess of the amount that the employer was actually entitled to receive.  The regulations provide that any amount of the credits for qualified leave wages, credits for qualified health plan expenses under sections 3131(d) and 3132(d), and any amount of the employee retention credit that were erroneously paid or credited to the employer can be recaptured.  Those incorrect tax credits will be treated as underpayments of  taxes and may be administratively assessed and collected in the same manner as the taxes. The temporary regulations also provide that the calculation of any credits erroneously claimed must take into account any amounts that were advanced to the employer under the processes established in 2020.  For more information on the employee retention tax credit, visit Tax Facts Online. Read More

Federal Court Sides With DOL on Form 5500 Statute of Limitations Issue

Recently, in Walsh v. Bowers, the Department of Labor (DOL) convinced a federal court to extend the statute of limitations for a fiduciary breach claim by relying on a Supreme Court interpretation of the “actual knowledge” standard.  Typically, the ERISA statute of limitations that applies for DOL investigations is the earlier of (A) six years after (1) the date of the last action that was a part of the breach or (2) if the case involves an omission, the last date on which the fiduciary could have cured the breach or (B) three years after the earliest date that the plaintiff had actual knowledge of the breach.  Typically, the DOL should have the relevant information in order to have actual knowledge of a breach when a plan files Form 5500 containing that information.  However, the DOL argued that a recent Supreme Court decision interpreting the definition of “actual knowledge” to mean actual knowledge should apply.  Relying on that case, the court allowed the DOL additional time because the DOL had yet to review the Form 5500 in question.  For more information on the current standard for investment advice fiduciaries, visit Tax Facts Online. Read More

December 31 Deadline for Maximizing QOZ Tax Deferral Benefits

December 31, 2021 is the final day for taxpayers to invest in a qualified opportunity zone (QOZ) and maximize the federal tax deferral benefit of these investments.  Taxpayers who invest capital gains according to the QOZ rules are not subject to immediate taxation on the gain.  Capital gains taxes are deferred (and federal income taxes are not required to be paid) until the end of 2026, or upon the individual’s disposition of the qualified opportunity fund (QOF) interest.  When the taxpayer eventually recognizes that gain, if the taxpayer has held the interest for at least five years, 10 percent of the federal income tax liability is eliminated (taxpayers who invested earlier can eliminate an additional 5 percent).  If the taxpayer holds the interest for at least 10 years, the increase in value is not subject to federal income tax when the interest is sold.  In order to hold the interest for the required five-year period, the taxpayer must purchase the interest no later than December 31, 2021.  For more information on the opportunity zone rules, visit Tax Facts Online. Read More

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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