Daily Tax Update - November 6, 2013: IRS Offers Fast Track Settlement Program for Small Businesses

IRS OFFERS FAST TRACK SETTLEMENT PROGRAM FOR SMALL BUSINESSESToday, the IRS announced that it will offer a program “designed to enable small businesses under audit to more quickly settle their differences with the IRS.”

According to the IRS, “The Fast Track Settlement (FTS) program is designed to help small businesses and self-employed individuals who are under examination by the Small Business/Self Employed (SB/SE) Division of the IRS.  Modeled on a similar program long available to large and mid-size businesses (those with more than $10 million in assets), FTS uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation.  As a result, audit issues can usually be resolved within 60 days, rather than months or years.”  The IRS added, “The taxpayer or the IRS examination representative may initiate Fast Track for eligible cases, usually before a 30-day letter is issued.  The goal is to complete cases within 60 days of acceptance of the application in Appeals.”

SENS. REED AND GRASSLEY INTRODUCE CORPORATE SETTLEMENT TAX DEDUCTIBILITY BILL:  Today, Senators Jack Reed (D-RI) and Chuck Grassley (R-IA) announced that they are introducing legislation to “rescind tax write-offs for illegal corporate behavior.”

According to their summary, “Federal law prohibits companies from deducting public fines and penalties from their taxable income.  But under current law, offending companies may often write off any portion of a settlement that is not paid directly to the government as a penalty or fine for violation of the law.  This allows some companies to lower their tax bill by claiming settlement payments to non-federal entities as tax deductible business expenses. The Reed-Grassley bill (The Government Settlement Transparency & Reform Act) would require the government and the settling party to reach pre-filing agreements on how the settlement payments should be treated for tax purposes.  The bill clarifies the rules about what settlement payments are punitive and therefore non-deductible and increases transparency by requiring the government to file a return at the time of settlement to accurately reflect the tax treatment of the amounts  that will be paid by the offending party.”

MISCELLANEOUS GUIDANCE RELEASED:

Notice 2013-70 provides guidance in a question-and-answer format regarding the credits for nonbusiness energy property under § 25C and residential energy efficient property under § 25D of the Internal Revenue Code.