2023 Marcum Year-End Tax Guide

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deduction for the unamortized SRE expenditures or if the SRE expenditures are paid or incurred for property that is contributed to, distributed from, or transferred from a partnership. BONUS DEPRECIATION: The Tax Cuts and Jobs Act (TCJA) of 2017 initially allowed taxpayers to claim a depreciation deduction of 100% of the purchase price on qualifying property instead of deducting smaller amounts each year over the useful life of the property. Qualified property includes assets with a recovery period of 20 years or less, depreciable computer software, and eligible improvement property. This applies to both new and used assets as long as the taxpayer has not previously used the acquired property or received it from a related party. Beginning on January 1, 2023, bonus depreciation started to phase out and will continue for the next four years, as follows: • 2023 (1/1/23 – 12/31/23) – 80% bonus depreciation allowed • 2024 (1/1/24 – 12/31/24) – 60% bonus depreciation allowed

• 2025 (1/1/25 – 12/31/25) – 40% bonus depreciation allowed • 2026 (1/1/26 – 12/31/26) – 20% bonus depreciation allowed Without new legislation, bonus depreciation will be completely phased out starting January 1, 2027. IRS ANNOUNCES PAUSE ON NEW ERTC CREDITS: • IRS issued News Release IR-2023-169, stating it will pause processing new ERTC claims through the end of 2023. This is due to concern that a flood of new claims is, in fact, ineligible and are putting businesses at risk due to being pressured and scammed by aggressive promoters and marketing, • IRS is developing new initiatives for businesses that were victims of aggressive promoters, including a settlement program for improper ERTC payments received. This is expected to be rolled out in late 2023. The program will allow the business to avoid penalties and future compliance actions.

IRS USING AI AND OTHER TECH NOLOGY TO IDENTIFY SCHEMES TO AVOID TAXES The IRS recently announced the start of a sweeping effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations, and promoters abusing the nation’s tax laws. The effort will center on adding a greater focus on high-net-income/ worth individuals and partnerships. This group of taxpayers has experienced a decline in audit rates during the past decade. These changes will be driven with the help of improved technology, including Artificial Intelligence that will assist the IRS to better detect tax cheating, identify emerging compliance threats, and improve case selection tools to avoid burdening taxpayers with needless “no-change” audits. As part of the effort, the IRS will ensure audit rates do not increase for those earning less than $400,000.

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