Final regulations have been issued on the deduction for qualified transportation fringe and commuting expense.
The new regulations were issued by the Internal Revenue Service and the Treasury Department to bring the tax code into line with changes made by the Tax Cuts and Jobs Act (TCJA).
The legislation that was passed into law in 2017 generally disallows deductions for qualified transportation fringe (QTF) expenses. It also does not permit deductions for certain expenses of transportation and commuting between an employee’s residence and place of employment.
The final regulations address the disallowance of the deduction for expenses as they relate to an employee of the taxpayer, and includes guidance and methods to calculate the amount of QTF parking expenses that is non-deductible.
The final regulations also spell out the disallowance of the deduction for expenses of transportation and commuting between an employee’s residence and their place of employment.
More information on the implementation of the Tax Cuts and Jobs Act can be found on the Tax Reform page of IRS.gov.
Some taxpayers notified they need to act on Qualified Opportunity Funds
The IRS is sending letters to some taxpayers, saying they need to do a little more work if they intend to self-certify as a Qualified Opportunity Fund, or QOF.
Taxpayers who attached or indicated they attached a Form 8996 to their return may get Letter 6250, Self-Certifying as Qualified Opportunity Fund. The letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.
In order to correct a 2018 self-certification as a QOF, a taxpayer should file an amended return or an administrative adjustment request (AAR).
If an entity receiving the letter fails to self-certify as a QOF, the IRS may refer the tax account for examination. Investors who made an election to defer tax on eligible gains invested in the entity could also be subject to examination for an invalid election.
In addition, taxpayers may get Letter 6251, Reporting Qualified Opportunity Fund Investments. This letter notifies taxpayers they may not have properly followed the instructions for Form 8949, Sales and Other Dispositions of Capital Assets, or don’t appear to have an eligible gain that would enable them to make a valid deferral election for gains invested in a QOF.
Taxpayers who intended to make a valid deferral election can file an amended return or an AAR.
Taxpayers who receive a letter but fail to act will lead the IRS to conclude the recipient may not have a qualifying investment in a QOF, and the account could be referred for examination. This in turn could result in the recipient owing taxes, interest and penalties on gains that were not properly deferred.
For more information, visit the Opportunity Zones page on IRS.gov.
Sources: IR-2020-274; IR-2020-275