Tax Tips: IRS releases final guidance for certain clean vehicle credits under the Inflation Reduction Act
WASHINGTON – The Internal Revenue Service issued final regulations today for the new and previously owned clean vehicle credits.
The final regulations provide rules regarding the critical mineral and battery components requirements for the new clean vehicle credit. Today’s guidance finalizes rules for taxpayers intending to transfer the new and previously owned clean vehicle credits to dealers who are eligible to receive advance payments as well as provides rules regarding the process for dealers to become eligible entities to receive advance payments of the transferred credits.
The final regulations also provide guidance regarding the IRS compliance process in the case of the taxpayer’s omission of a correct vehicle identification number.
Lastly, today’s regulations finalize the rules for qualified manufacturers of new clean vehicles to determine if the battery components and applicable critical minerals contained in a vehicle battery are foreign entity of concern (FEOC) compliant. For purposes of the FEOC-compliance requirements, the final regulations:
• Provide relevant definitions;
• Impose a due diligence requirement for battery components and applicable critical minerals;
• Describe the methods by which FEOC-compliance is determined; and
• Outline a reporting and review process for determinations of FEOC-compliance.
The Inflation Reduction Act allows a maximum credit of $7,500 per new clean vehicle, consisting of $3,750 in the case of a new vehicle that meets certain requirements relating to applicable critical minerals and $3,750 in the case of a new vehicle that meets certain requirements relating to battery components.
In addition to the critical minerals and battery components requirements and FEOC-compliance requirements, to qualify for the new clean vehicle credit, the vehicle must meet certain requirements, including satisfaction of an MSRP limitation, and the taxpayer claiming the credit must meet certain requirements, including income limitations.
The previously owned clean vehicle credit is a credit of up to $4,000 for the purchase of an eligible previously owned clean vehicle with a sale price of $25,000 or less that is placed in service during a tax year by a qualified buyer. To claim the credit, a qualified buyer must meet certain income limitations and the vehicle must meet specified eligibility requirements.
More information can be found on the Inflation Reduction Act of 2022 page on IRS.gov.
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Tax Tips: IRS provides guidance for the 2024 allocation round for the qualifying advanced energy project credit program
WASHINGTON — The Department of Treasury and the Internal Revenue Service today issued Notice 2024-36 for owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects and critical material projects.
On Feb. 13, 2023, the Department of Treasury and the IRS issued Notice 2023-18 to establish the program and announce an initial allocation round of credits. On May 31, 2023, the Department of Treasury and the IRS issued Notice 2023-44 to provide additional guidance for the program. Approximately $4 billion in credits were allocated in the first allocation round.
Today’s notice announces the second round of credit allocations for the program to allocate the remaining $6 billion credits. The notice also modifies appendices A, B and C of Notice 2023-44.
Like in the prior allocation round, the Department of Treasury and the IRS are partnering with the Department of Energy (DOE) to recommend projects. The DOE section 48C portal will open no later than May 28, 2024, for taxpayers to submit a concept paper and begin the process of seeking a section 48C credit allocation.
More information about IRA guidance may be found on the Inflation Reduction Act of 2022 page on IRS.gov.
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Tax Tips: Taxpayers could settle federal tax debt with an Offer in Compromise
When a taxpayer can't pay their full tax debt or if paying would cause financial hardship, they should consider applying for an Offer in Compromise. For assistance filing for an OIC from a legitimate representative, taxpayers are encouraged to check for a licensed enrolled agent or a reputable accountant in their area.
How an Offer in Compromise works
This is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed.
The goal is a compromise that's in the best interest of both the taxpayer and the agency. The Offer in Compromise application includes a fee of $205 and an initial payment. Low-income taxpayers don't have to pay either the fee or the initial payment. Taxpayers should review the instructions for Form 656-B, Offer in Compromise, to see if they meet the qualifications to have these initial costs waved.
Who’s eligible
Taxpayers can check their eligibility and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.
Review the Offer in Compromise booklet
Eligible taxpayers should download and review the latest version of the OIC booklet., to avoid processing delays. This booklet covers everything a taxpayer needs to know about submitting an Offer in Compromise including:
• Eligibility.
• Costs to apply.
• Application process.
• Forms.
Application evaluation
When reviewing applications, the IRS considers the taxpayer's unique set of facts and special circumstances affecting their ability to pay, including their:
• Income.
• Expenses.
• Asset equity.
Beware of Offer in Compromise mills
Offer in Compromise mills aggressively promote Offers in Compromise in misleading ways to people who clearly don't meet the qualifications, often costing taxpayers thousands of dollars.
An Offer in Compromise mill usually makes outlandish claims about how they can settle a person's tax debt for cheap. The promoter fees are often excessive, and eligible taxpayers pay the OIC mill to get the same deal they could have received on their own by working directly with the IRS. This takes unnecessary money out of the taxpayer's wallet.
In addition, not every taxpayer will qualify for an OIC. Some promoters knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing honest taxpayers money and time.
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