While the Build Back Better Act's smorgasbord of tax incentives for clean energy, new taxes on large corporations and wealthy individuals, and tax relief for others remains stalled for now in the Senate, 2022 nonetheless dawns with the advent of at least one new tax provision, lapses of a number of others, and at least a couple of sets of required regulatory rules.
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The IRS posted frequently asked questions (FAQs) in November to further aid taxpayers and passthrough entities in their reporting and filing requirements under the final regulations, including worksheets for API holders' Schedules K-1, Partner's Share of Income, Deductions, Credits, etc., for tax returns filed after December 2021 in which a partnership or other passthrough entity applies the final regulations. The AICPA proposed clarifications and other suggestions with respect to the FAQs in a letter to IRS officials dated December 23, 2021.
Final regulations generally applicable to tax years beginning in 2022 and after were also issued for the IRS Section 4960 excise tax, equal to the corporate rate of 21%, on annual remuneration over $1 million to certain executives and other highly paid employees of applicable tax-exempt organizations (T.D. 9938). Also added to the Code by the TCJA, Sec. 4960 also applies the tax to "excess parachute payments." (See "Managing the 'Excess Compensation' Tax," for more.)
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Much attention recently has focused on the individual tax relief provisions for 2021 enacted by the American Rescue Plan Act (ARPA), P.L. 117-2, some of which would be continued for 2022 by the Build Back Better Act. Chief among them are ARPA's increases and expansion of the child tax credit, including its monthly advance payments, which have now ended as of the December 2021 payment. If and when the Build Back Better Act is passed with a renewal of that provision for 2022 (as passed by the House), the payments would resume, but the IRS has not said how quickly it could reset its systems to administer them.
Beyond those expiring provisions, a number of pre-ARPA "extender" items lapsed at the end of 2021. Few of them apply widely, except for one relatively common itemized deduction, the treatment of premiums for certain qualified mortgage insurance as qualified residence interest (IRS Section 163(h)(3)(E)(iv)). Since its introduction in 2007, this provision has expired repeatedly (including at the end of 2020) and been renewed (for 2021 by the Consolidated Appropriations Act (CAA), 2021, P.L. 116-260), sometimes retroactively.
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Another common item also renewed by the CAA from 2020 and slightly modified for 2021 but now expired is the charitable contributions deduction for nonitemizers (IRS Section 170(p)).
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