August 2024 Tax Updates

IRS Eases Requirements For Claiming R&D Tax Credit

On September 15, 2023, the IRS released a draft of a new form 6765, used to claim the R&D Tax Credit. The most significant changes are for small and medium businesses. Section G on the draft of form 6765 will be optional for “qualified small business” taxpayers that are electing the payroll tax credit and that have total qualified research expenditures equal to or less than $1.5 million and gross receipts equal to or less $50 million. Larger taxpayers that do not meet these requirements the IRS reduced the number of business components reported on Section G. Taxpayers must report 80% of their QREs in descending order by business component, with a maximum of 50 business components. The revised Section G is optional for taxpayers in 2024 but required for taxpayers of all size in 2025.

Tip Tax Proposal Gains Momentum

Not charging tax on tips is a proposal that has made it into bills introduced in both chambers of Congress. A bill that was introduced on June 18 would treat tips as gifts, excluding them from Social Security tax, unemployment compensation tax, and wage withholding. A bill introduced a few days later received more attention, and it would allow individual tipped workers to claim an above-the-line deduction equal to their reported cash tips. These include tips received in cash, check, or on a credit/debit card. This would change the current treatment of tips, which states that tips of at least $20 received by an employee in any month from one employment are considered wages that are subject to withholding and must be reported to the employer.

Required Minimum Distribution Rules Incorporate Secure, Secure 2.0 Act Changes

New required minimum distribution final rules provide that the required RMD beginning date is April 1 of the calendar year following the later of the calendar year in which the employee reaches applicable age, and the calendar year in which the employee retires from the plan employer. It would also allow the beneficiary to elect between the 5 or 10-year rule or life expectancy rule.