Daily Tax Update - October 18, 2016: Social Security Announces Increase to Benefits, Wage Base

Social Security Announces Increase to Benefits, Wage Base:  Today the Social Security Administration announced a 0.3% cost-of living adjustment (COLA) to monthly Social Security and Supplemental Security Income benefits for 2017.  The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.  In addition, the Social Security Administration announced that the maximum amount of earnings subject to the Social Security tax will increase to $127,200 from $118,500 beginning in January 2017, an increase of approximately 7.3%.  This change is based on the increase in average wages.  Of the estimated 173 million workers who will pay Social Security taxes in 2017, about 12 million will pay more because of the increase in the taxable maximum.  The Social Security Administration also released a fact sheet showing the effect of the various adjustments.  

IRS Releases Auditor Guidance for Identifying Foreign Goodwill:  The IRS has released an LB&I International Practice Service Process Unit (Unit), providing guidance to auditors for identifying foreign goodwill or going concern (FGWGC) for purposes of section 367.  The Unit notes that “[t]he identification of FGWGC (or determination that it cannot exist) is critical in properly applying IRC 367(d) treatment to the outbound transfer of [intellectual property,” and identifies a four-step process for making a determination of whether FGWGC exists.  The release of the Unit suggests that the IRS is likely to increase scrutiny of transactions claiming FGWGC.  

DTU IN DEPTH 

Changes in IRS Appeals Could Create Difficulties for Taxpayers:  Recent changes within the IRS Office of Appeals have resulted in clarifications and modifications to IRS Appeals policy.  Other proposed changes could cause delays and make the process more difficult for taxpayers.  For more in depth coverage, click here