Insights & News

AICPA Requests Circular 230 Guidance

March 17, 2021

AICPA Requests Circular 230 Guidance
The American Institute of CPAs (AICPA) requested guidance from the Department of the Treasury (Treasury) and IRS on Treasury Department Circular No. 230 (Circular 230) in response to recent judicial decisions (Loving v. Internal Revenue Service, 742 F.3d 1013 (D.C. Cir. 2014), Ridgely v. Lew, 55 F.Supp. 3d (D.D.C. 2014) and other related cases) that have restricted the scope of Circular 230 and the related Treasury Regulations (REG-138367-06). Circular 230 contains the rules governing the practice of attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, registered tax return preparers, and other persons representing taxpayers before the IRS. The letter recommends revisions to Circular 230 such as: (i) update the guidance to reflect the elimination of programs, like the Registered Tax Return Preparer Program, (ii) address the production of records to the IRS, and (iii) revise and clarify certain definitions. Additionally, the letter suggests adding provisions regarding confidentiality, privacy, data protection or record retention and to provide Frequently Asked Questions (FAQs) for practitioners. An update to the regulations governing practice before the IRS is listed in the Treasury and IRS’s 2020-2021 Priority Guidance Plan.

IRS Corrects Partnership Withholding Regulations
The IRS has released corrected Treasury regulations on the withholding of tax and information reporting with respect to interest in partnerships engaged in a U.S. Trade or Business. (See our prior coverage here.)

IRS Corrects PFIC Regulations
The IRS has released corrected Treasury regulations on the determination of whether a foreign corporation is treated as a passive foreign investment company (PFIC) for purposes of the Internal Revenue Code of 1986, as amended, and the application and scope of certain rules that determine whether a United States person that indirectly holds stock in a PFIC is treated as a shareholder of the PFIC. (See our prior coverage here.)

PA DOR Revises Sales & Use Tax Audit Bulletin
The Pennsylvania Department of Revenue (PA DOR) has revised its Sales & Use Tax Bulletin 2017-01, “Review of Large and Complex Refund Requests. The bulletin addresses the procedures for the review of large and complex sales and use tax refund requests. It provides that if a large refund request results in an audit being issued, the taxpayer will have the option to continue pursuing the refund through the appeal process or withdrawing the petition for refund and allowing the overpayments to be addressed in the audit. The audit will generally encompass the periods statutorily open to audit, which is the three prior years plus the current year. An audit may extend to additional periods if the taxpayer agrees to a waiver of the statute of limitations on assessments. The taxpayer’s due process rights for that period are fully preserved through the field audit process. Any refunds not granted in the audit for the audit period may be raised in a refund petition within six months of the mailing date of the notice of assessment or within three years of actual payment of the tax, whichever is later. The decision to conduct a field audit will be at the discretion of the PA DOR, but in general, refund petitions requesting in excess of $100,000, or multiple petitions in one year exceeding that threshold in the aggregate, are more likely to be referred for a field audit.

PA DOR Addresses Home Office Expense Deduction
The PA DOR, in its blog “Tax Talk,” released guidance regarding the ability of Pennsylvania taxpayers to deduct home office expenses on their Pennsylvania personal income tax return. Pennsylvania Personal Income Tax law permits a taxpayer to claim certain unreimbursed employee business expenses, including a deduction for home office expenses. The deduction is allowable for taxpayers who are temporarily working from home during the COVID-19 pandemic if they meet certain qualifications. The article notes that if a taxpayer does take the home office deduction on their Pennsylvania personal income tax return (PA-40), the taxpayer will have to pay Pennsylvania Personal Income Tax on the gain from the sale of their home on the portion of their home that was claimed as a home office.

NJ Announces Extension for Filing Certain Pass-Through Business Tax Returns
The New Jersey Department of the Treasury has announced that it will not assess penalties or interest against the following forms and associated payments if they are filed by 11:59 pm, April 15, 2021: (i) PTE-100, Pass-Through Business Alternative Income Tax Return, (ii) PTE-200-T, Partnership Application for Extension of Time to File Form NJ, and (iii) PTE Revocation of Election, New Jersey Pass-Through Business Alternative Income Tax Revocation and Claim for Refund. The extension requested by filing PTE-200-T is not affected and is still Sept. 15, 2021.

NJ Announces Corporation Business Tax Extension
The New Jersey Department of the Treasury has announced an automatic extension to file 2020 Corporation Business Tax returns (Forms CBT-100, CBT-100U, BFC-1, and CBT-100S) for certain filers. Taxpayers with returns (Forms CBT-100, CBT-100U, BFC-1, and CBT-100S) that have an original due date that falls anytime between Nov. 15, 2020 and April 15, 2021, are granted an automatic extension to file their tax returns by May 15, 2021. A taxpayer will not be charged late filing penalties if the return is filed by May 15, 2021. This extension applies only to the filing of the return and does not extend the time to make all required payments. Affected taxpayers that apply for an extension of time to file have six months from the original due date to file their tax returns.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

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