IRS adds changes to tax filings, reporting standards on cryptocurrency

The Internal Revenue Service has been hard at work these last few weeks on issues ranging from streamlining reporting requirements for renewable-energy tax credits to finalizing rules on stock-repurchase taxes and crypto transactions. But accountants and tax professionals are keeping their eye on the upcoming election to anticipate more widespread regulatory changes on the horizon. 

The Republican party’s platform covers a wide swath of industry topics such as increased cryptocurrency interaction, unhindered artificial intelligence innovation and more, with further promises to prolong and make permanent the provisions of the Tax Cuts of Jobs Act of 2017 passed under former U.S. President Donald Trump.

Jonathan Traub, Washington national tax leader and managing principal at Deloitte Tax LLP, told Accounting Today this month that both the TCJA and external provisions such as the New Markets Tax Credit and premium credits for Affordable Care Act beneficiaries would be “front and center” next year.

“It just has to be,” Traub said. “It’s going to start out with a debate on the debt ceiling, which will set the tone for thoughts around the appetite of the new Congress, whoever the president is, to tolerate additional deficit spending or deficit-financed tax cuts, or whether they will tolerate them at all or not.” 

Read more: Project 2025 goals would transform wealth management landscape

The Democratic party’s platform is set to be released during the convention in August. In the meantime, experts are looking back at U.S. Vice President Kamala Harris‘ track record to see what legislative priorities the likely nominee could have.

Harris has historically focused on providing tax relief to those in the sub-$100,000 per year income bracket, as seen through the LIFT (Livable Incomes for Families Today) the Middle Class Act bill she proposed in 2018. The legislation would have provided up to $3,000 in tax credits for those filing as individuals and $6,000 to those filing as joint taxpayers, provided their income was less than $100,000.

Other measures included a proposed bill known as the Rent Relief Act, again for those with income under $100,000 per year, that would establish a refundable tax credit for those paying in excess of 30% of their gross income towards rent and utilities. The legislation drew sharp criticism from those who held that it would benefit landlords more than renters.

“Ultimately, Senator Harris’s rent relief bill would fail to address the root causes of the high cost of housing. … Instead, it would wind up benefiting landlords, not significantly improving the lives of renters and carrying a hefty price tag,” said experts with the nonpartisan Tax Foundation in a 2018 blog post.

Read more: How Kamala Harris may shift the crucial tax debate in this year’s election

For now, accountants and tax experts are accommodating new reporting requirements from the IRS for segments such as renewable energy, cryptocurrencies, corporate stock repurchases and more.

Read more about the agency’s recent changes and how different forms are changing in the coming months.

IRS introduces condensed reporting for renewable energy tax credits

To help hasten the reporting process for renewable energy and electricity tax credits, the Internal Revenue Service’s Large Business and International Division is changing up its filing standards for Forms 3468 and 8835.

If a taxpayer has more than 200 of either Forms 3468 for the investment credits or Forms 8835 for the Renewable Energy Production Credit, they can instead file a single instance of each form with the aggregated credit tally. The filing must have an attached PDF file recording all the necessary information of each facility or property being reported.

This change is in effect for the 2023 tax year.

Read more: IRS offers relief on reporting renewable energy tax credits

Andrew Harrer/Bloomberg

Regulations on corporate stock repurchase tax reach the finish line

The IRS, in conjunction with the Treasury Department, published a final rule on June 28 outlining the reporting and payment requirements for corporate stock repurchases encompassed by the Inflation Reduction Act.

Accounting Today’s Michael Cohn writes that under the act, which took effect in 2022, stock repurchases are subject to an excise tax equal to 1% of the aggregate fair market value of stock repurchased by certain corporations during the taxable year, subject to adjustments. Eligible deals start after Dec. 31, 2022.

The IRS’s final rule requires that tax to be reported on Form 720, “Quarterly Federal Excise Tax Return,” which is to be filed alongside the Form 7208, “Excise Tax on Repurchase of Corporate Stock.” The filing is required for the first full calendar quarter after the corporation’s taxable year ends.

Read more: IRS finalizes regs on stock repurchase tax

Samuel Corum/Bloomberg

Rules on selling, exchanging crypto finalized by IRS

Brokers handling the possession of digital assets for their clients in specific sale or exchange transactions will see changes in reporting requirements under new final regulations from the Treasury and the IRS.

The Form 1099-DA, which the IRS previewed a draft of this year, requires brokers to report on gross proceeds for transactions, adjusted basis on certain transactions, fair market value of assets and other transaction details.

Eligible parties include providers of custodial digital-asset trading platforms and digital-asset kiosks, as well as specified digital-asset hosted wallet providers and processors of digital-asset payments.

“Because of the bipartisan Infrastructure Investment and Jobs Act, investors in digital assets and the IRS will have better access to the documentation they need to easily file and review tax returns,” said Treasury acting assistant secretary for tax policy Aviva Aron-Dine in a statement. “By implementing the law’s reporting requirements, these final regulations will help taxpayers more easily pay taxes owed under current law, while reducing tax evasion by wealthy investors.”

Read more: IRS finalizes rules on selling and exchanging crypto

IRS provides guidance on emergency retirement plan withdrawals

Victims of domestic abuse or others with emergency personal expenses can now withdraw from eligible retirement plans, per new guidance from the IRS. 

Notice 2024-55 provides taxpayers with detailed information about exceptions added under SECURE 2.0 that took effect this year, such as properly defining an emergency personal expense distribution, identifying which retirement plans are eligible, outlining limitations on distributions and more.

Distributions can be received within a one-year time frame that begins on the date when a taxpayer suffered an instance of domestic abuse

Read more: New guidance on emergency distributions from retirement plans

Al Drago/Bloomberg

IRS previews revised Research Credit form

The IRS debuted a tentative version of an updated Form 6765, “Credit for Increasing Research Activities,” on June 21 following a wave of feedback about an earlier instance of the documentation.

The agency has worked to stem instances of fraudulent R&D tax credit claims by increasing its documentation requirements for roughly three years, but was met with pushback from users and tax experts decrying the standards as too burdensome. To address those concerns, the IRS eased up on some of the necessary standards.

In the preview of the revised draft of Form 6765, questions were shifted around, novel questions were added and a new Business Component Detail section was created to account for quantitative and qualitative details of each component. Qualified small-business taxpayers as well as those with both total qualified research expenditures of $1.5 million or less and $50 million or less of gross receipts can opt out of the aforementioned section.

The IRS said the final Form 6765 would be released at a later date, but did not provide any more specific information about its timeline.

Read more: IRS drafts revised Research Credit form