IRS Sports Industry Campaign: Sport Teams and Owners Targeted

On January 16, 2024, the IRS Large Business and International division announced a new compliance campaign: the IRS Sports Industry Campaign.  While the announcement is recent and certain details are not yet available, let’s discuss the general direction of this IRS new compliance tax enforcement effort.

IRS Sports Industry Campaign: Background Information

In the mid-2010s, after extensive tax planning, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.

The first thirteen campaigns were announced by LB&I on January 13, 2017. Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018, five campaigns on October 30, 2018, and so on.  The IRS Sports Industry campaign is the latest one to be announced at the time of this writing.

IRS Sports Industry Campaign: What Does the IRS Say?

The IRS stated that it will conduct its Sports Industry Losses campaign to identify partnerships within the sports industry that report significant tax losses in order to determine whether the income and deductions driving the losses are reported in compliance with the applicable sections of the Internal Revenue Code.

IRS Sports Industry Campaign: Main Target

It is clear from the announcement that the IRS now decided to target sports teams for the losses that they are reporting.  It is indeed true — in the industry renowned for its high profits, the reporting of losses may look suspicious.  

However, when one looks at the fact that it is sports-related partnerships who report much of the losses, it becomes clear that the IRS is really after the beneficial owners of these partnerships.  Who are their owners? Ultra high-net-worth individuals, who are at the center of the IRS newly-funded (by the Inflation Reduction Act) effort to bridge the so-called “tax gap”.

Contact Sherayzen Law Office for Professional Tax Help

If you have been contacted by the IRS as part of this campaign, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

2017 Tax Filing Season Begins January 23 & Tax Returns due April 18, 2017

On December 12, 2016, the IRS announced today that the 2017 tax filing season (for the tax year 2016) will begin on January 23, 2017. The 2017 tax filing season e-filings will be accepted by the IRS starting that date. The IRS again expects that more than four out of five tax returns will be prepared electronically using tax return preparation software.

2017 Tax Filing Season Deadline is on April 18, 2017

The filing deadline to submit 2016 tax returns will be April 18, 2017 (Tuesday), rather than the usual April 15. The delay is caused by the fact that April 16 falls on a Saturday which would usually move the deadline to the following Monday (April 17). However, April 17 is the Emancipation Day, which is a legal holiday in the District of Columbia, and the final deadline is pushed to April 18, 2017 (under the law, legal holidays in the District of Columbia affect the national filing deadlines).

Early Paper Filing Offers No Advantage in the 2017 Tax Filing Season

Many software companies and tax professionals will begin accepting tax returns before January 23 and then they will submit the returns when the IRS systems open. It is noteworthy to state, however, that the IRS will begin processing paper tax returns only on January 23. Hence, there is no advantage to filing paper tax returns in early January instead of waiting for the IRS to begin accepting e-filed returns.

Some of the 2017 Tax Filing Season Refunds Could Be Affected by the PATH Act

The IRS also reminded the taxpayers that the Protecting Americans from Tax Hikes Act (the PATH Act) will have a direct impact on the timing of some refunds. In particular, the PATH Act requires the IRS to hold refunds that claim Earned Income Tax Credit (“EITC”) and the Additional Child Tax Credit (“ACTC”) until February 15. The hold applies to the entire refund, not just the portion associated with EITC and ACTC. Then, it will take several days for these refunds to be released and processed through financial institutions. With weekends and holidays, the IRS estimates that many taxpayers will not be able to access their refunds until after February 27, 2017.

The idea behind the new law is to protect the taxpayers by giving the IRS more time to detect and prevent tax fraud, which has become a huge headache for the IRS in the past few years.

2015 Inflation Adjustments to Tax Benefits

The IRS recently announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these 2015 inflation adjustments. In this writing, I would like to highlight main 2015 inflation adjustments.

1. 2015 inflation adjustments for income tax brackets. The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.

2. 2015 inflation adjustments for Standard Deduction. The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.

3. 2015 inflation adjustments for Itemized Deduction Limitation. The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).

4. 2015 inflation adjustments for Personal Exemption Amounts. The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)

5. 2015 inflation adjustments for Alternative Minimum Tax (AMT): AMT exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).

6. 2015 inflation adjustments for Earned Income Credit (EIC) amount. The maximum EIC amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.

7. 2015 inflation adjustments for Estate Basic Exclusion Amounts. Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.

8. 2015 inflation adjustments for Foreign Spouse Gifts. The exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.

9. 2015 inflation adjustments for Foreign Earned Income Exclusion (FEIE). The 2015 FEIE breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.

10. 2015 inflation adjustments for Annual Gift Exclusion Amount. The annual exclusion for gifts remains at $14,000 for 2015.