TAX Minute for Sept. 7

Wednesday, September 7th of 2022

TODAY’S DEADLINES

• FLORIDA DEPT OF REVENUE:

Electronic Payment Due for Retirement Contributions - (except universities) - For payments due in 2022, the last day you can make a timely electronic payment is listed below for each month.

NEW FORMS

IRS Form 706 United States Estate (and Generation-Skipping Transfer) Tax Return - For decedents dying after December 31, 2021.

Various dollar amounts and limitations in Form 706 are indexed for inflation. For decedents dying in 2022, the following amounts are applicable. - The basic exclusion amount is $12,060,000.
- The ceiling on special-use valuation is $1,230,000.
- The amount used in figuring the 2% portion of estate tax payable in installments is $1,640,000.

- The basic credit amount is $4,769,800.

The IRS will publish amounts for future years in annual revenue procedures. Estate tax closing letter fee. Effective October 28, 2021, a user fee of $67 was established for persons requesting the issuance of an estate tax closing letter (ETCL). See ETCL fee, later, for more information. Extension of time to elect portability. Effective July 8, 2022, Rev. Proc. 2022-32 provides a simplified method for certain estates to obtain an extension of time to file a return on or before the fifth anniversary of the decedent’s death to elect portability of the deceased spousal unused exclusion (DSUE) amount. See Extension to elect portability, later, for more information. Reminders Schedule R-1 is now a separate form. Beginning in 2019, Schedule R-1 will no longer be part of Form 706; instead, you will need to obtain a separate Schedule R-1 to complete and file with Form 706. Identifying exhibits. Copies of tax returns filed with Form 706 must be identified as exhibits to the Form 706. General Instructions. Purpose of Form. The executor of a decedent's estate uses Form 706 to figure the estate tax imposed by chapter 11 of the Internal Revenue Code. This tax is levied on the entire taxable estate and not just on the share received by a particular beneficiary. Form 706 is also used to figure the generation-skipping transfer (GST) tax imposed by chapter 13 on direct skips (transfers to skip persons of interests in property included in the decedent's gross estate). Which Estates Must File. For decedents who died in 2022, Form 706 must be filed by the executor of the estate of every U.S. citizen or resident: a. Whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $12,060,000; or b. Whose executor elects to transfer the deceased spousal unused exclusion (DSUE) amount to the surviving spouse, regardless of the size of the decedent's gross estate. See the instructions for Part 6—Portability of Deceased Spousal Unused Exclusion, later, and sections 2010(c)(4) and (c)(5). To determine whether you must file a return for the estate under (a) above, add: 1. The adjusted taxable gifts (as defined in section 2503) made by the decedent after December 31, 1976; 2. The total specific exemption allowed under section 2521 (as in effect before its repeal by the Tax Reform Act of 1976) for gifts made by the decedent after September 8, 1976; and 3. The decedent's gross estate valued as of the date of death. Gross Estate: The gross estate includes all property in which the decedent had an interest (including property outside the United States). It also includes:

• -  Certain transfers made during the decedent's life without an adequate and full consideration in money or money's worth,

• -  Annuities,

• -  The includible portion of joint estates with right of survivorship (see the instructions for Schedule E)

• -  The includible portion of tenancies by the entirety (see the instructions for Schedule E),

• -  Certain life insurance proceeds (even though payable to beneficiaries other than the estate) (see the instructions for Schedule D),

• -  Digital assets (see the instructions for Schedule F),

• -  Property over which the decedent possessed a general power of appointment,

• -  Dower or curtesy (or statutory estate) of the surviving spouse, and

• -  Community property to the extent of the decedent's interest as defined by applicable law.

  Note. Under the special rule of Regulations section 20.2010-2(a)(7)(ii), executors of estates who are not required to file Form 706 under section 6018(a), but who are filing to elect portability of the DSUE amount to the surviving spouse, are not required to report the value of certain property eligible for the marital deduction under section 2056 or 2056A or the charitable deduction under section 2055. However, the value of those assets must be estimated and included in the total value of the gross estate. See the instructions for Part 5—Recapitulation, lines 10 and 23, later, for more information. For more specific information, see the instructions for Schedules A through I. U.S. Citizens or Residents; Nonresident Noncitizens File Form 706 for the estates of decedents who were either U.S. citizens or U.S. residents at the time of death. For estate tax purposes, a resident is someone who had a domicile in the United States at the time of death. A person acquires a domicile by living in a place for even a brief period of time, as long as the person had no intention of moving from that place. See Regulations section 20.0-1(b). Decedents who were neither U.S. citizens nor U.S. residents at the time of death file Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States. Residents of U.S. Possessions. All references to citizens of the United States are subject to the provisions of sections 2208 and 2209, relating to decedents who were U.S. citizens and residents of a U.S. possession on the date of death. If such a decedent became a U.S. citizen only because of his or her connection with a possession, then the decedent is considered a nonresident not a citizen of the United States for estate tax purposes, and you should file Form 706-NA. If such a decedent became a U.S. citizen wholly independently of his or her connection with a possession, then the decedent is considered a U.S. citizen for estate tax purposes, and you should file Form 706. Executor. The term “executor” includes the executor, personal representative, or administrator of the decedent's estate. If none of these is appointed, qualified, and acting in the United States, every person in actual or constructive possession of any property of the decedent is considered an executor and must file a return. Executors must provide documentation proving their status. Documentation will vary but may include documents such as a certified copy of the will or a court order designating the executor(s). A statement by the executor attesting to their status is insufficient. When To File You must file Form 706 to report estate and/or GST tax within 9 months after the date of the decedent's death. If you are unable to file Form 706 by the due date, you may receive an extension of time to file. Use Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to apply for an automatic 6-month extension of time to file. Portability election. An executor can only elect to transfer the DSUE amount to the surviving spouse if the Form 706 is filed timely, that is, within 9 months of the decedent's date of death or, if you have received an extension of time to file, before the 6-month extension period ends. Extension to elect portability. Executors who did not have a filing requirement under section 6018(a) but failed to timely file Form 706 to make the portability election may be eligible for an extension under Rev. Proc. 2022-32, 2022-30 I.R.B. 101 (superseding Rev. Proc. 2017-34, 2017-26 I.R.B. 1282). Executors filing to elect portability may now file Form 706 on or before the fifth anniversary of the decedent’s death. An executor wishing to elect portability under this extension must state at the top of the Form 706 being filed that the return is “Filed Pursuant to Rev. Proc. 2022-32 to Elect Portability under section 2010(c)(5)(A).” For more information on this extension, see Rev. Proc. 2022-32. Note. Any estate that is filing an estate tax return only to elect portability and did not file timely or within the extension provided in Rev. Proc. 2022-32 may seek relief under Regulations section 301.9100-3 to make the portability election. Paying the Tax. The estate and GST taxes are due within 9 months of the date of the decedent's death. You may request an extension of time for payment by filing Form 4768. You may also elect under section 6166 to pay in installments or under section 6163 to postpone the part of the tax attributable to a reversionary or remainder interest. These elections are made by checking “Yes” on lines 3 and 4 (respectively) of Part 3—Elections by the Executor and attaching the required statements. If the tax paid with the return is different from the balance due as figured on the return, explain the difference in an attached statement. If you have made prior payments to the IRS, attach a statement to Form 706 including these facts. Paying by check. Make the check payable to “United States Treasury.” Please write the decedent's name, social security number (SSN), and “Form 706” on the check to assist us in posting it to the proper account. No checks of $100 million or more accepted. The IRS cannot accept a single check (including a cashier's check) for amounts of $100,000,000 ($100 million) or more. If you're sending $100 million or more by check, you'll need to spread the payments over 2 or more checks, with each check made out for an amount less than $100 million. The $100 million or more amount limit does not apply to other methods of payment (such as electronic payments). Please consider a method of payment other than a check if the amount of the payment is over $100 million. Paying electronically. Payment of the tax due shown on Form 706 may be submitted electronically through the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service of the Department of the Treasury. To be considered timely, payments made through EFTPS must be completed no later than 8 p.m. Eastern time the day before the due date. All EFTPS payments must be scheduled in advance of the due date and, if necessary, may be changed or canceled up to 2 business days before the scheduled payment date. To get more information about EFTPS or to enroll, visit EFTPS.gov or call 800-555-4477. Additional information about EFTPS is available in Pub. 966, Electronic Federal Tax. Payment System: A Guide to Getting Started.

TODAY’S CRIMINAL CASES

1. Former owner of tax preparation business found guilty of tax crime. A Plano man was convicted at trial of concealing over $1 million in income from the IRS, announced U.S. Attorney for the Northern District of Texas Chad E. Meacham. After three days of trial, on Thursday, a federal jury found Raymond Griggs guilty of making a false statement on his income tax return. According to evidence presented at trial, between 2011 and 2013, Mr. Griggs ran a tax preparation business, Griggs Financial, LLC, located in the Dallas, Texas area. While Griggs Financial, LLC generated over $1.3 million in gross receipts in 2013, Mr. Griggs reported to the IRS that his business had brought in just about $340,000. That year alone, however, Mr. Griggs spent in excess of $1.4 million, including over $114,000 for entertainment, and tens of thousands of dollars for jewelry, travel, and flight lessons. Additionally, the evidence presented at trial showed that Mr. Griggs consistently underreported his business's gross receipts to the IRS by about $1 million for both 2012 and 2011.Mr. Griggs now faces up to three years in federal prison. IRS Criminal Investigation's Dallas Field Office conducted the investigation. Assistant U.S. Attorneys Donna Strittmatter Max, Fabio Leonardi, and Russell Fusco (fmr.) prosecuted the case. U.S. District Judge David C. Godbey presided over the trial.

2. Orleans Parish man charged with tax crime. U.S. Attorney Duane A. Evans announced that Joey J. Stevenson, from New Orleans, was charged on September 1, 2022, with failing to pay the United States Internal Revenue Service (IRS) employment taxes for his business, Community Care Solutions, Inc. The grand jury returned a one- count indictment that charged Stevenson with failure to pay over employment taxes, in violation of 26 U.S.C. § 7202. According to the indictment, Stevenson owned and operated Community Care Solutions, Inc., and from 2015 through 2019, he withheld payroll taxes from his employees' paychecks but failed to remit that money to the IRS. U.S. Attorney Evans reiterated that an indictment is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt. If convicted, Stevenson faces up to five years in prison. Stevenson also faces up to three years of supervised release after release from prison, a fine of up to $250,000 or twice the gross gain to Stevenson or the gross loss to any victims, and a mandatory $100 special assessment fee per count. U.S. Attorney Evans praised the work of IRS Criminal Investigation. Assistant United States Attorney Nicholas D. Moses is in charge of the prosecution.

3. Company owner sentenced for failing to turn over employee taxes. U.S. District Judge Rodney W. Sippel on Thursday sentenced the owner of a company who withheld taxes from employee paychecks but didn't turn them over to the IRS to five years of probation and ordered him to pay more than $700,000 in restitution. Blue 2.0 LLC owner Jonathan Michaelson, of University City, will have to pay $1,000 per month, or 10% of his monthly income, until the money is paid off. Michaelson withheld a total of $767,367 in income, Social Security and Medicare taxes from employee paychecks from tax years 2014-2017, but didn't turn that money over to the IRS. Michaelson was indicted in September 2021. He pleaded guilty in May to one count of willful failure to pay over tax. Charles Miller, acting Special Agent in Charge of the IRS Criminal Investigation's St. Louis Field Office, said, "IRS-CI takes employment tax crimes very seriously because of the impact these offenses have on employee benefits. Mr. Michaelson withheld taxes from his employees' income and instead of paying the taxes to the IRS as he was required to do, he used the money to enrich his personal lifestyle. Today's sentence serves as a warning for any employers considering defrauding their employees and honest taxpayers in this way." The case was investigated by the Internal Revenue Service. Assistant U.S. Attorney Gwendolyn Carroll prosecuted the case.

4. Former stockbroker sentenced to 6 and a half years in prison for 3.2-million-dollar investment fraud, cheating on taxes and grandparent scam. A former licensed stockbroker was sentenced today to 78 months in federal prison for committing several felonies, including running a securities fraud scheme in which he targeted low- income Hispanic victims to obtain more than $3.2 million via false promises of high returns from construction loans. Robert Louis Cirillo, of Chino Hills, was sentenced by United States District Judge David O. Carter, who also ordered him to pay $3,948,835 in restitution. Cirillo pleaded guilty on June 28 to one count of securities fraud, one count of filing a false tax return, and one count of conspiracy to commit wire fraud. From 2014 to 2021, Cirillo deceived more than 100 victims by lying to them that he would be investing their funds in short-term construction loans that would pay large return rates that ranged from 15% to 30% for a period of up to 90 days. As part of the scheme, Cirillo showed actual and prospective victim-investors fabricated bank statements that purported to show the investments' growth. In fact, Cirillo never invested the victims' money and instead used it for his own personal expenses, including credit card payments, a trip to Las Vegas, and two automobiles – a Jeep and an Alfa Romeo. Cirillo targeted members of the Hispanic community, many of whom were of limited means, for his fraudulent scheme. One victim invested her life savings of $20,000 in Cirillo's scheme. Cirillo admitted in his plea agreement to threatening his victims once they began to realize that he had defrauded them. For example, in July 2019, Cirillo said that if one of the victims tried to sue him, that victim could go "for the [expletive] hole in the [expletive] desert. Tell him to test me," according to court documents. In a separate scheme that occurred in the spring of 2021, Cirillo participated in a "grandparent scam" in which a senior citizen was tricked into believing that his grandson had been arrested for possession of illegal narcotics, which was false. Cirillo's co-conspirators convinced the 82-year-old victim to send $400,000 for his grandson's "bail" to a bank account that Cirillo had opened and controlled. Cirillo used some of that victim's money for his own personal benefit. Cirillo also filed false income tax returns for the years 2015, 2016 and 2017 by failing to report a total of more than $3 million in income. For example, on his 2017 federal income tax return, Cirillo reported a total income of $30,985, which failed to include more than $1.9 million in income he received from his investment fraud scheme. Cirillo's investment fraud resulted in a total loss of $3,237,262; his conspiracy to defraud the senior citizen resulted a total loss of $400,000; and the total tax loss incurred was $675,898. In a sentencing memorandum, prosecutors argued, "[Cirillo's] behavior was despicable, particularly because he was engaging in an affinity crime by exploiting members of the Hispanic community, most of whom were of modest means, and some of whom lost their life savings to [him]." IRS Criminal Investigation and the FBI investigated this matter. Assistant United States Attorney Charles E. Pell of the Santa Ana Branch Office prosecuted this case.

TODAY’S IRS NEWS & TIPS

IRS increases mileage rate for remainder of 2022. The IRS announced an increase in the optional standard mileage rate for the final 6 months of 2022 in recognition of recent gasoline price increases. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes, effective July 1, 2022.

2023 inflation adjusted amounts for Health Savings Accounts. Revenue Procedure 2022-24 provides the 2023 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code and the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided under Section 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations. For calendar year 2023, the annual limitation on deductions for:

- Individual with self-only coverage under a high deductible health plan is $3,850 - Individual with family coverage under a high deductible health plan is $7,750

Election workers: Reporting and withholding

Each election year, thousands of state and local government entities hire workers to conduct primary and general elections. To understand the correct tax treatment of these workers, you need to be aware of specific statutes that apply to them as well as whether they are covered by a Section 218 Agreement. Who Are Election Workers? Election workers are individuals hired by government entities to perform services at polling places in connection with national, state and local elections. An election worker may be referred to by other terms and titles, for example, poll worker, moderator, machine tender, checker, ballot clerk, voting official, polling place manager, absentee ballot counter or deputy head moderator. These workers may be employed by the government entity exclusively for election work or may work in other capacities

as well. Compensation paid to election workers is includible as wage income for income tax purposes and may be treated as wages for Social Security and Medicare (FICA) tax purposes. Election workers may be compensated by a set fee per day or a stipend for the election period. The election period may include attending training or meetings prior to and after the election. Election workers may also be reimbursed for their mileage or other expenses. To be excludable from wages, expense reimbursements must be made under an accountable plan.

A few simple steps can keep tax pros ahead of email and cloud-based scams. Even a savvy person can get duped by a phishing email if they don’t know the warning signs of a scam. It’s unfortunate when anyone is fooled by an identity thief, but tax pros especially need to be aware of evolving scams that steal client data. Criminals often pose as potential clients in fraudulent emails and texts. Securing their network to protect taxpayer data is a key responsibility for tax professionals, so they need to be aware of malware and scams. Tax pros are a common target for scammers who use phishing emails or texts to try and trick them into sharing personal information or clicking on malicious links and attachments that can compromise data. These criminals often pretend to be potential clients, exchanging several emails with the tax pro. Once they’ve earned the tax pro’s trust, they send an email with a link or attachment they claim is their tax information. When the tax pro clicks on the link or opens the attachment, malware secretly downloads onto their computer, giving thieves access to passwords or remote computer access. Once thieves are in the system, they can steal taxpayer data and their refunds. Thieves can use malware to take over a tax professional's computer system and steal refunds by identifying pending tax returns, changing the bank account information, completing the returns and e-filing them. Criminals will also use ransomware attacks to shut down a company. When the unsuspecting target opens a link or attachment, malware attacks the computer system to encrypt files. The thieves then hold the data for ransom. Storing taxpayer data on a cloud-based system with weak security is another risk. Thieves will often take advantage of weak security on cloud-based systems storing client data. Tax pros should ensure they're using strong multi-factor authentication whenever they use a cloud-based system. Once thieves access the system, they can use existing data from taxpayer returns to file new tax returns for the refunds. There are many forms of multi-factor authentication available text-based or email-based, authenticator apps, push notifications and Fast Identity Online or FIDO. More information is available on the Cybersecurity and Infrastructure Security Agency website. Tax pros can take a few basic security steps to help protect client data by:

• -  Using the two-factor or the multi-factor authentication option offered by tax preparation providers or storage providers to protect client accounts, even if passwords are stolen.

• -  Keeping anti-virus software automatically updated to help prevent scams that target software vulnerabilities.

• -  Using drive encryption and regularly backing up files to help stop theft and ransomware attacks.

• IRS: Sept. 15 is the deadline for third quarter estimated tax payments. WASHINGTON – The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to submit their third quarter payment is Sept. 15, 2022. Taxpayers not subject to withholding, such as those who are self-employed, investors or retirees, may need to make quarterly estimated tax payments. Taxpayers with other income not subject to withholding, including interest, dividends, capital gains, alimony, cryptocurrency, and rental income, also normally make estimated tax payments. In most cases, taxpayers should make estimated tax payments if they expect:

  - To owe at least $1,000 in taxes for 2022 after subtracting their withholding and tax credits. - Their withholding and tax credits to be less than the smaller of:

  o 90% of the tax to be shown on their 2022 tax return or
  o 100% of the tax shown on their 2021 tax return. Their 2021 tax return must cover all 12 months.

  Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Publication 505, Tax Withholding and Estimated Tax, provides more information on estimated tax rules. The worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, has details on who must pay estimated tax. How to figure estimated tax. To figure estimated tax, individuals must figure their expected Adjusted Gross Income (AGI), taxable income, taxes, deductions and credits for the year. When figuring 2022 estimated tax, it may be helpful to use income, deductions and credits for 2021 as a starting point. Use the 2021 federal tax return as a guide. Taxpayers can use Form 1040-ES to figure their estimated tax. The Tax Withholding Estimator on IRS.gov offers taxpayers a clear, step-by-step method to have their employers withhold the right amount of tax from their paycheck. It also has instructions to file a new Form W-4 to give to their employer to adjust the amount withheld each payday. How to avoid an underpayment penalty. Taxpayers who underpaid their taxes may have to pay a penalty. This applies whether they paid through withholding or through estimated tax payments. A penalty may also apply for late estimated tax payments even if someone is due a refund when they file their tax return. To see if they owe a penalty, taxpayers should use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. Taxpayers can also see the Form 2210 instructions under the “Waiver of Penalty” section. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. Examples include:

• • • •

The fourth

• •

Casualty, disaster or another unusual situation.
An individual retired after reaching age 62 during a tax year when estimated tax payments applied.
An individual became disabled during a tax year when estimated tax payments applied.
Specific written advice from an IRS agent given in response to a specific written request. The taxpayer must provide copies of both.

and final 2022 estimated tax payment is due Jan. 17, 2023. Other IRS.gov resources
The Pay tab on the front page of IRS.gov provides complete tax payment information, how and when to pay, payment options and more. Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts

Form 2220, Underpayment of Estimated Tax by Corporations

The Treasury Inspector General for Tax Administration (TIGTA) today released the following. Audit Report titled Compliance Efforts Are Needed to Address Refund Claims Reported on Form 1139 That Are Based on The CARES Act Net Operating Loss Carryback. and the report titled Delays Continue to Result in Businesses Not Receiving Pandemic Relief Benefits.

FLORIDA DEPARTMENT OF REVENUE NEWS

August 2022 monthly sales and use tax returns were due on September 1, 2022. Your August 2022 sales and use tax return must be filed on or before Tuesday, September 20, 2022, depending on your filing method. You must file a tax return even if you do not owe tax. If you electronically pay only or you electronically file and pay at the same time, you must initiate your electronic payment and receive a confirmation number no later than 5 p.m. ET on Monday, September 19, 2022. If you file a paper return, your return and payment must be postmarked or hand-delivered by Tuesday, September 20, 2022. Tax returns and payments sent after the due dates noted above are subject to penalty and interest. Failure to receive a due date reminder is not grounds for waiver of penalties and interest charged for late filing or payment. If you have already submitted your return and payment, or you file and pay electronically, please disregard this reminder.