The knowledge you need

For years construction companies and contractors have leveraged the Section 45L federal tax credit for the inclusion of energy-efficient systems in new residential construction. Originally passed in 2005, it permitted homebuilders to claim a federal tax credit for energy efficient home construction. Over the years the credit has been updated and modified to extend its value. Most recently, the Inflation Reduction Act (IRA) extended and enhanced the credit to allow homebuilders who construct, reconstruct, or rehabilitate energy efficient homes to receive a credit up to $5,000.  Unfortunately, many home builders have not claimed the credit because of a lack of detailed guidance from the IRS.  The good news is the agency recently released Notice 2023-65 which provides the long-awaited details.

Over the last year the IRS has issued several warnings about the number of ineligible Employee Retention Tax Credit (ERTC) claims being submitted. A central issue has been the large amount of misinformation about the program being spread by promoters and marketing companies. Business owners are led to believe that every business is entitled to receive the credit without any discussion about eligibility criteria or what happens if the credit is improperly awarded. What makes the situation worse are the aggressive radio, email and online marketing tactics used. Unfortunately, these bad actors pray on those who have little information about the credit resulting in ineligible claims.  

The IRS announced last week (in IR-2023-169) a moratorium on processing new ERTC claims through the end of 2023. The reason for the change is the increase in the number of ineligible claims that are being filed. It appears many of these are coming from businesses that have been pressured and scammed by aggressive promoters and marketing firms. The agency will continue processing claims received prior to September 14th but cautions it will now take longer due to increased fraud concerns.

On September 8, 2023, the IRS issued  a news release (IR-2023-166) detailing enforcement priorities over the coming year. Regulators will be shifting attention to high-income earners, partnerships, large corporations, and promoters taking advantage of tax laws. Specifically, the agency will target those groups that have experienced a sharp reduction in audit rates over the past decade. In addition, the IRS will also be relying on Artificial Intelligence (AI) to help detect tax cheating, compliance issues, and to improve case selection.

In May, Tennessee unanimously passed the Tennessee Information Protection Act (TIPA), outlining new data privacy protections businesses operating in the state must follow. It is similar to regulations already in effect in Utah, Virginia, Iowa, and Colorado. The legislation requires certain protections of personal information including genetic or biometric, demographic, immigration status, sexual orientation, information about minors (under 13), and precise geolocation information. Due to the comprehensive nature of the changes impacted businesses will have two years to achieve compliance.

Over the past few years, Congress has passed various legislation designed to make it easier to participate in and save money in an employer sponsored retirement plan. The growing retirement savings gap has long been an issue the government has been working to address. Efforts to change retirement savings started with the  SECURE Act of 2019 and mostly recently included additional reforms that culminated in the SECURE Act 2.0. The latter included many changes designed to encourage employers to start workplace plans and to make it easier for workers to participate. Many of the updates are significant and are scheduled to become effective over a 5-year period.

The alarming situation has prompted Congress into action calling for significant changes to make it easier for workers to qualify, participate in, and benefit from employer sponsored retirement plans. Most recently the SECURE Act 2.0 was signed into law which outlines changes to accelerate saving opportunities. Despite it’s sweeping nature, many in Congress are looking for more ways to streamline the process. One example is the Auto Reenroll Act of 2023 which was introduced in late July and allows employers to automatically reenroll non plan participants.

The Inflation Reduction Act, passed in August 2022, made significant changes designed to help counteract the effects of growing inflation. The legislation not only worked to reduce healthcare costs, but also focused on climate change, in part, by incentivizing the addition of energy efficient updates to homes and other dwelling units. The Energy Efficient Home Improvement Credit offers up to $2,000 for the installation of certain efficient appliances and systems. There is also a $150 credit for taxpayers that undergo a home energy audit. Unfortunately, there has been little guidance on what needs to be included in the audit.

Over the last few months, the IRS has issued several warnings about companies using misleading or deceptive practices to encourage businesses to apply. While past activities were focused on simply issuing warnings, the IRS recently announced a change in strategy. On July 26th, it was announced the agency will now increase scrutiny on dubious submissions while providing additional warnings and tips about aggressive marketing.

Fraud in any form is certainly unwelcome. Over the past few years there has been a significant increase in the amount of cyber attacks being perpetrated. In fact, there were over 232,972 individuals that fell victim to phishing attacks of various types in 2021. More specific to tax fraud, there has been a concurrent increase resulting in an average median loss was $278, 325. Given these numbers, the IRS has been working closely with state tax authorities, software companies, tax preparation firms, and payroll processors to defend against identity theft and fraud. A key purpose of the group, known as the Security Summit, is to reduce the amount of fraud through ongoing reporting and education.