1. IRS to Share Immigrant Tax Data for Criminal Cases
The IRS has agreed to a new data-sharing arrangement that allows federal immigration officials limited access to tax data for use in criminal investigations. While the agreement includes safeguards and is restricted to criminal matters, it represents a shift in long-standing IRS privacy policies that have historically protected taxpayer information from being used in immigration enforcement.
Why It Matters:
This policy change raises important questions about taxpayer privacy and potential unintended consequences. Tax professionals may encounter increased concerns from immigrant clients about how their tax information is used, even when they've complied fully with tax law. The broader concern is whether such changes could discourage voluntary tax compliance, which is fundamental to the U.S. tax system.
Actionable Steps:
- Educate clients on what tax data is protected and under what circumstances it may be shared.
- Be prepared to respond to questions or hesitations from immigrant clients and clarify the limits of the new agreement.
- Follow updates from the IRS or Treasury on how this policy is implemented and whether any additional guidance is issued.
2. IRS Proposes to End Crackdown on Basis-Shifting Transactions
The IRS is proposing to withdraw regulations that treat certain basis-shifting transactions as "transactions of interest" (TOIs). Critics of the rule cited burdensome compliance requirements and retroactive enforcement, while opponents argue that it enables wealthy individuals to game the system.
Why It Matters:
This change could simplify reporting for businesses and advisors, reducing administrative load if finalized. However, it also raises questions about equity in tax enforcement and whether high-net-worth clients will benefit disproportionately.
Actionable Steps:
- Review clients involved in complex entity structures or asset transfers for potential impact.
- Keep an eye on finalized guidance and educate staff on regulatory shifts.
3. Business Group Pushes to Destroy BOI Records
In the wake of the rollback of BOI (Beneficial Ownership Information) reporting requirements for U.S.-based businesses, the National Federation of Independent Business (NFIB) is now calling for the destruction of millions of records previously submitted to FinCEN. The group argues that maintaining this sensitive information poses unnecessary privacy and security risks for small business owners.
Why It Matters:
Although U.S.-based businesses are no longer required to submit BOI reports, many already did so before the change took effect. This highlights ongoing privacy and data security concerns about how previously collected information will be stored, used, or potentially disposed of. For tax professionals, it's a reminder to stay vigilant as BOI policies continue to evolve.
Actionable Steps:
- Let clients know that BOI reporting is no longer required for U.S.-based businesses and clarify whether the original mandate impacted them.
- For clients who submitted reports, consider advising on steps to monitor their data and stay alert to potential misuse.
- Follow updates from FinCEN and advocacy groups, as further developments may affect data retention, client communications, or future reporting rules.
4. IRS Whistleblower Office Releases Operating Plan
The IRS Whistleblower Office has released a new operating plan aimed at improving how it handles claims. The integrated approach will focus on streamlining workflows, enhancing transparency, and increasing the program's efficiency and credibility.
Why It Matters:
This signals the IRS's intent to boost tax enforcement using insider tips. Firms advising large or complex organizations should be aware of increased risks and ensure airtight compliance processes.
Actionable Steps:
- Encourage clients to review fraud reporting procedures and compliance safeguards.
- Monitor areas where whistleblower claims are more likely, such as payroll, contractor misclassification, or offshore activity.
- Make sure clients understand that whistleblowers can be internal or external and how to proactively avoid scrutiny.