Fall is in the air and, for me, that means football Saturdays and being able to run a little easier. For tax practitioners, it also means wrapping up straggling individual returns for the Oct. 15 tax filing deadline, shifting into year-end tax planning and getting into the mindset of tackling next year’s tax season.
The constantly changing tax environment creates an abundance of issues to track. Here are five key developments to closely watch this fall.
Inflation Reduction Act
While this recent legislation does not have the broad-stroke tax changes originally discussed in President Biden’s Build Back Better agenda, there are still important tax provisions you need to know. Use the AICPA® Tax Section’s Summary of the Inflation Reduction Act; Energy Tax Credits and ESG Client Letter; and quick reference energy tax credits chart to get caught up.
Employee retention credit (ERC)
Not really breaking news, but we are still hearing noise regarding third-party vendors marketing aggressive ERC services to businesses. The ERC can be a potentially lucrative credit that allows you to show your expertise and value to your clients. However, there are many rules and gray areas surrounding the credit with severe consequences, such as potentially repaying ERC funds to the IRS. The AICPA Tax Section continues to monitor and provide support around this issue. Stay informed with the “Tax Section Odyssey” podcast and AICPA Town Hall updates. Educate your clients with this handout on dispelling ERC misconceptions.
IRS taxpayer services and penalty relief
While I would love to report that IRS taxpayer services have resumed normal operations, the IRS continues to be plagued with its backlog of unprocessed tax returns and correspondences and issues contacting the IRS. The AICPA applauds the IRS’ notice to provide penalty relief for prior year tax returns but has concerns about the Sept. 30 due date and the scope of relief. We continue to push for more IRS transparency.
Student loan forgiveness
In August, President Biden announced a three-part plan for student loan forgiveness. This forgiveness will not be taxable for federal tax purposes because of the American Rescue Plan Act provision, but state taxability is variable and changing. Clarity and guidance are still needed, but you can review the state tax guidance for taxability or exclusion of student loan forgiveness to track the latest developments.
The IRS continues to tweak the virtual currency question, as evident in the draft Form 1040 released a few months ago. The question states, “At any time during 2022, did you (a) receive (as a reward, award or compensation); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)? There is a lot to review here, including the IRS’ shift from the term virtual currency to the digital asset and the introduction of “financial interest in a digital asset.” Hopefully, clarifications will be forthcoming. In the meantime, the AICPA requested more information in an August comment letter and bookmark our virtual currency tax guidance and resources page for the latest developments.
BONUS: Statements on Standards for Tax Services (SSTSs)
The SSTSs are the enforceable tax practice standards for AICPA members and serve as the foundation for validating reputational integrity in the tax profession. The AICPA recently released proposed revisions to the SSSTs that include new standards on data protection, reliance on tools and representation of clients before taxing authorities. Look at the Exposure Draft and Invitation to Comment and provide your feedback by Dec. 31, 2022.
As fall evokes a period of change and transition, I like to be reminded that autumn is the season that teaches us that change can be beautiful.