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The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.

As part of the development, the committee held a June 9, 2026, hearing to solicit commentary from industry on the bills, during which committee Chairman Jason Smith (R-Mo.) called the “digital asset status quo is untenable. America needs clear tax rules of the road to remain the crypto capital of the world.”

Smith stated that cryptocurrency has “a market capitalization of over $2 trillion. That’s a massive industry by any measure, and nearly all other industries of a similar size enjoy clear tax policies.”

Chairman Smith noted that more and more people own cryptocurrency and “nearly a quarter of cryptocurrency holders earn less than $75,000 and the average crypto holder is nearly as likely to work in construction, manufacturing, or food service as tech or finance.”

The bills and discussion draft include:

• The Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (H.R. 9172)
• The Charitable Deductions for Digital Donations Act (H.R. 9173)
• The Digital Assets Voluntary Disclosure Program Act (H.R. 9174)
• The Tax Clarity for Mining and Staking Act (H.R. 9175)
• The Providing Analogous Rules for Digital Assets Act (H.R. 9176)
• The Less Tax Paperwork for Digital Asset Owners Act (H.R. 9178)
• The End Digital Assets Tax Shelters Act (Discussion Draft)

The proposed legislation address “three key gaps in the current tax regime that make it harder for Americans to fully participate in the digital asset ecosystem,”

First, he said, “common digital transactions like mining and staking do not fit clearly into existing tax law. In other places, the tax code is silent as to the treatment of digital assets. The ambiguity creates an opening for taxpayers to exploit the law and avoid paying taxes in some circumstances and creates unfair tax burdens on others.

Second, Smith stated that “digital assets do not receive the tax benefit nor the protection from anti-abuse rules long granted to traditional financial assets. The imbalance between digital assets and traditional financial assets creates a two-tier system that unintentionally favor certain assets over others.”

Third, “crypto owners face burdensome tax compliance that makes using digital assets in ordinary commerce almost impossible.” Smith noted that “31 percent of crypto owners would like to buy a cup of coffee at the local shop, yet each $5 cup of coffee bought with a digital asset generates two new pieces of tax paperwork,” which adds a significant burden to both the IRS and the taxpayer.

Ranking Member Richard Neal (R-Mass.) had mixed reviews on the bills. He described his initial observation as some of the bills being “quite sensible, providing clear rules of the road for taxpayers looking to comply with the law. Other provisions sought the common sense goal of alleviating burdensome paperwork requirements, especially in situations where it’s highly unlikely that there would be any tax associated with those transactions, and indeed there are provisions that would close loopholes that are specific to the digital asset industry.”

However, Neal also noted that “it appears there are some provisions that deviate substantially from general tax principles, providing a distinct advantage that are beyond some other investments. We want to be careful about putting a thumb on the scale, and as we all know, it’s much easier to put something into the tax code than it is to take it out.”

Lawrence Zlatkin, Coinbase vice president of tax, testified during the hearing that the bills “represent the most comprehensive effort to modernize digital asset taxation that we have seen to date. Most importantly, this legislation recognized a fundamental reality: market structure and tax policy go hand-in-hand.”

In particular, Zlatkin highlighted H.R. 9178, which he testified “is an important step forward towards making stablecoin payments practical while reducing unnecessary reporting noise,” as well as H.R. 9173, which “provides long-needed clarity for mining and staking rewards, helping ensure taxpayers are not forced into tax obligations before they’ve generated liquidity though an actual sale.”

Mike Kaercher, deputy director of the Tax Law Center at New York University, cautioned that as the bills move through the process, “I encourage policymakers to consider three tax policy principles most closely: parity, administrability, and guardrails to prevent abuse. Some of the provisions in these bills would make improvements consistent with these principles.”

Among those, Kaercher testified that for example, “one of the bills would extend anti-abuse regimes, like wash sale rules and constructive sale rules, to digital assets. That’s a good idea. Another example is the de minimis provision on qualifying stablecoins – a targeted approach with guardrails can reduce paperwork and compliance burdens without creating substantial hidden tax subsidies for digital assets, but the rule should remain targeted because a broader de minimis provision risks abuse and would favor investments in digital assets over those in traditional finance.”

On the provision of deferring tax on mining and staking rewards, Kaercher testified that deferral “isn’t just the distortive subsidy, it could also undermine administrability. Deferral increases complexity for taxpayers and makes it harder for the IRS to do its job.”

He also warned about the possibility of government bailouts if guardrails and policy are not correctly developed.

“I think one thing for policymakers to consider on this is that if digital assets become a larger part of retirement accounts and the assets remain highly volatile, or in a worst-case scenario, crash, that would have an enormous impact on households’ retirement savings, and if that were to happen, I think policymakers would have to think about whether to respond with something like a bailout.”

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.

The final rules require plans and issuers to use claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), as specified in guidance, when providing any paper or electronic remittance advice to an entity that does not have a contractual relationship with the plan or issuer. These disclosures must be included along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the No Surprises Act.

The regulations also make several procedural updates to the federal IDR process. These include refinements to the open negotiation period, the formal initiation of the IDR process, and the dispute eligibility review procedures. Further, the rules address the payment and collection of administrative fees as well as certified IDR entity fees.

The agencies also finalized the definition of bundled payment arrangements, amended requirements related to batched items and services, and amended the rules for extensions of timeframes due to extenuating circumstances. Additionally, the regulation finalizes provisions that require plans and issuers to register in the federal IDR portal.

T.D. 10049

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.

The inflation adjustment factor for qualified energy resources is 2.0570. The reference price for facilities producing electricity from wind is 3.17 cents per kilowatt hour. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy have not been determined for calendar year 2026.

Phaseout Limits

For electricity sold during the calendar year 2026, the renewable electricity production credit is not subject to a phaseout under Code Sec. 45(b)(1) for electricity produced from wind. This is because the 2026 reference price for electricity produced from wind, 3.17 cents per kilowatt hour, does not exceed 8 cents multiplied by the inflation adjustment factor (2.0570). The phase-out of the credit also does not apply to electricity sold in 2026 and produced from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy.

Credit Amount Adjustments

The credit for renewable electricity production for calendar year 2026 under Code Sec. 45(a) is 3.1 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy. The credit is 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass facilities, landfill gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic renewable energy facilities.

Notice 2026-37

The IRS updated guidance relating to the energy community provisions in:

• Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

The IRS updated guidance relating to the energy community provisions in:

• — the Code Sec. 45 production tax credit for electricity produced from certain resources;
• — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
• — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
• — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.

Annual Statistical Area Category and Coal Closure Category Update

Notice 2026-39 publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category for purposes of qualifying for energy community bonus credit amounts or rates.

• (1) Appendix 1 lists counties and county-equivalents that qualify as energy communities because they meet the Fossil Fuel Employment threshold and the unemployment rate requirement for calendar year 2025.
• (2) Appendix 2 lists newly identified census tracts with either a coal mine closure or a coal-fired electric generating unit retirement, and census tracts directly adjoining those tracts.
• (3) Appendix 3 lists census tracts that newly qualify as coal closure census tracts because of location-data corrections issued since the publication of Notice 2025-31.

Notice 2026-39

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.

Before the legislative change, a covered employee generally was one of an ATEO’s five highest-compensated employees for the tax year at issue or an individual who previously held that status. The amended law broadens the definition to include any employee of an ATEO and certain former employees for taxable years beginning after 2025. However, individuals who were not covered employees under the pre-2026 rules will not become covered employees solely because they worked for an ATEO before 2026.

The forthcoming regulations are expected to eliminate references to the five highest-compensated employees standard and make conforming changes. The agencies intend to retain exceptions similar to the current limited-hours and non-exempt funds exceptions, but discontinue the limited-services exception because its rationale no longer applies. Until proposed regulations are issued, ATEOs may rely on Notice 2026-36. The Treasury Department and the IRS requested comments on the proposed rules by August 4, 2026.

Notice 2026-36

IR 2026-73

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.

“Fiscal Year 2025 was a pivotal year, as we began the process of implementing tax relief for hardworking Americans enacted as part of the Working Families Tax Cuts Act (WFTC),” said IRS CEO Frank J. Bisignano. “The numbers in the Data Book tell the story of an organization that serves as a key partner in the administration’s mission,” he added. The CEO also highlighted efforts to transform the IRS into a digital-first agency. These efforts would reduce paper processing through the “zero paper” initiative.

During the 2026 filing season, around 45 percent of individual tax returns claimed one or more of the new tax benefits from the WFTC. The average refund on a return claiming one of these deductions was over $3,200, as of May 27.

Further, online tools, including the IRS Online Account were upgraded to expand access and add new features. Expanded technology and advanced analytics would allow the Service to identify high-risk areas of non-compliance and tax fraud. Finally, more information can be found here.

IR 2026-74

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.

“The IRS is focused on improving and enhancing how we serve taxpayers,” said IRS Chief Executive Officer Frank J. Bisignano. “We are transforming the IRS into a digital-first agency that provides the best possible experience for taxpayers, and tools like this calculator are an important step in that effort,” he added.

The look-back interest is determined using a three-step process:

• Hypothetically reallocating income to prior tax year based on actual revenues and costs;
• Computing hypothetical tax overpayments or underpayments of tax; and
• Calculating interest on tax underpayments or overpayments.

Taxpayers and tax practitioners may submit feedback about the calculator, by emailing Stakeholder Liaison and including "Look-Back Interest Workbook Feedback" in the subject line. More information can be found here.

IR 2026-70

In what undeniably came down to the wire in the early hours of January 1, 2013, the Senate passed the American Taxpayer Relief Act of 2012, which, along with many other provisions, permanently extends the so-called Bush-era tax cuts for individuals making under $400,000 and families making under $450,000 (those above those thresholds now pay at a 39.6 percent rate). The House followed with passage late in the day on January 1; and President Obama signed the bill into law on January 2. Thus, the more than decade-long fight over the fate of the tax cuts, originally enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), accelerated under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and extended by Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) comes to an end.

In what undeniably came down to the wire in the early hours of January 1, 2013, the Senate passed the American Taxpayer Relief Act of 2012, which, along with many other provisions, permanently extends the so-called Bush-era tax cuts for individuals making under $400,000 and families making under $450,000 (those above those thresholds now pay at a 39.6 percent rate). The House followed with passage late in the day on January 1; and President Obama signed the bill into law on January 2. Thus, the more than decade-long fight over the fate of the tax cuts, originally enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), accelerated under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and extended by Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) comes to an end.

Prelude to the Fiscal Cliff

On May 26, 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The legislation was hailed as the largest tax cut in 20 years and dramatically changed the landscape of the federal tax code. Two years later, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) was signed into law and accelerated many of the tax cuts set in motion under EGTRRA. Originally scheduled to sunset, or expire, after December 31, 2010, Congress extended these popular provisions for another two years in late 2010 with the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. In 2010, Congress acted before the end of the year to extend the cuts. At the end of 2012, Congress and President Obama engaged in intense negotiations over the “fiscal cliff,” a term that came to combine many federal laws that had a deadline of December 31, 2012, including the Bush-era tax cuts. Congress then passed the American Taxpayer Relief Act of 2012 on New Year’s Day, 2013, effectively averting the fiscal cliff.

What Does This Mean for You?

The new law extends a majority of the Bush-era tax cuts in the same form as they have existed since 2001 or 2003 when initially enacted. However, major exceptions include a rise in rates, including a maximum 20 percent on capital gains and dividends, on higher-income individuals, as described above, and an increase in the estate tax rate from 35 to 40 percent. In addition to a general extension of the tax rates, many other provisions, including some not affected by the sunset of the Bush-era tax cuts, are significantly or permanently extended, including:

• Marriage penalty relief;
• Inflation protection against the alternative minimum tax (AMT);
• Deductions for student loan interest and tuition and fees;
• Enhanced child tax and child and dependent care credits;
• Simplified earned income credit;
• Deductions for primary and secondary school teacher expenses;
• Deductions for state and local sales taxes;
• Research credits;
• Energy-efficiency credits for homes and vehicles; and
• Many more provisions.

Unfortunately, the new law is also significant in what it does not do in one important respect. It does not renew the so-called payroll tax holiday that had been in effect during 2011 and 2012. As a result, employees and self-employed individuals will be paying 2 percent more employment tax on their earnings up to the Social Security wage base (which is up to $113,700 for 2013).

Finally, the American Taxpayer Relief Act also includes extensions of provisions that expired at the end of 2011, but now apply to the 2012 tax year. That means it has immediate effect on the 2013 filing season.

The landscape of federal tax law has changed once again, and with it the need to reassess present tax strategies. Please call this office if you have any questions about the new law or how it impacts you directly.

Beginning with 2012 Forms W-2, large employers must report the aggregate cost of employer-sponsored health insurance provided to employees. 2012 Form W-2s must be furnished to employees by January 31, 2013.

Beginning with 2012 Forms W-2, large employers must report the aggregate cost of employer-sponsored health insurance provided to employees. 2012 Form W-2s must be furnished to employees by January 31, 2013.

For tax years beginning on or after January 1, 2011, the Patient Protection and Affordable Care Act (PPACA) required that employers report the aggregate cost of employer-sponsored health insurance provided on Form W-2, Wage and Tax Statement. The IRS then exempted all employers from the requirement for 2011, making 2011 reporting optional.

Reporting took effect in early 2012, but only for large employers filing 250 or more Forms W-2 for the preceding calendar year (2011). Small employers are exempt from reporting for 2012 and beyond, until the IRS issues further guidance. An employer does not have to report the cost if it is not required to issue a Form W-2. This would be the case for a retiree or other former employee who does not receive compensation.

The aggregate reportable cost should be shown on Form W-2, Box 12, using Code DD. The IRS has reiterated that reporting is for informational purposes only, and that the cost of health insurance generally remains excludable from income.

Reporting applies to applicable coverage under any group health plan provided by an employer or employee organization, if the coverage is excludable from the employee's income or would have been excludable if provided by the employer. Costs for self-insured plans and plans of self-employed persons are covered, unless the only coverage provided by the employer is a self-insured plan that is not subject to COBRA continuation coverage requirements (e.g. a self-insured church plan). Coverage does not include long-term care; accident or disability coverage; coverage for treatment of the mouth; and coverage only for a specified illness or disease.

Reportable costs include both employer costs and employee costs for the health insurance, even if the employee paid his or her share through pre-tax or salary reduction contributions. The aggregate cost includes the cost of coverage included in the employee's income, such as the cost of coverage for a person who is not a dependent or a child under age 27.

However, costs do not include amounts contributed to an Archer Medical Savings Account, health savings account, or health reimbursement arrangement, and salary reduction contributions made to a flexible spending arrangement.

Reporting is required of most employers, including federal, state, and local governments, and churches and other religious organizations.

Please contact this office if you would like further information on how these new reporting obligations may apply to your business.

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of January 2013.

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of January 2013.

January 3
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates December 26-28.

January 4
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates December 29-January 1.

January 9
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 2-4.

January 10
Employees who work for tips. Employees who received $20 or more in tips during December must report them to their employer using Form 4070.

January 11
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 5-8.

January 16
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 9-11.

January 18
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 12-15.

January 24
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 16-18.

January 25
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 19-22.

January 30
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 23-25.

February 1
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 26-29.

February 6
Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 30-February 1.

President Obama’s health care package enacted two new taxes that take effect January 1, 2013. One of these taxes is the additional 0.9 percent Medicare tax on earned income; the other is the 3.8 percent tax on net investment income. The 0.9 percent tax applies to individuals; it does not apply to corporations, trusts or estates. The 0.9 percent tax applies to wages, other compensation, and self-employment income that exceed specified thresholds.

President Obama’s health care package enacted two new taxes that take effect January 1, 2013. One of these taxes is the additional 0.9 percent Medicare tax on earned income; the other is the 3.8 percent tax on net investment income. The 0.9 percent tax applies to individuals; it does not apply to corporations, trusts or estates. The 0.9 percent tax applies to wages, other compensation, and self-employment income that exceed specified thresholds.

Additional tax on higher-income earners

There is no cap on the application of the 0.9 percent tax. Thus, all earned income that exceeds the applicable thresholds is subject to the tax. The thresholds are $200,000 for a single individual; $250,000 for married couples filing a joint return; and $125,000 for married filing separately. The 0.9 percent tax applies to the combined earned income of a married couple. Thus, if the wife earns $220,000 and the husband earns $80,000, the tax applies to $50,000, the amount by which the combined income exceeds the $250,000 threshold for married couples.

The 0.9 percent tax applies on top of the existing 1.45 percent Hospital Insurance (HI) tax on earned income. Thus, for income above the applicable thresholds, a combined tax of 2.35 percent applies to the employee’s earned income. Because the employer also pays a 1.45 percent tax on earned income, the overall combined rate of Medicare taxes on earned income is 3.8 percent (thus coincidentally matching the new 3.8 percent tax on net investment income).

Passthrough treatment

For partners in a general partnership and shareholders in an S corporation, the tax applies to earned income that is paid as compensation to individuals holding an interest in the entity. Partnership income that passes through to a general partner is treated as self-employment income and is also subject to the tax, assuming the income exceeds the applicable thresholds. However, partnership income allocated to a limited partner is not treated as self-employment and would not be subject to the 0.9 percent tax. Furthermore, under current law, income that passes through to S corporation shareholders is not treated as earned income and would not be subject to the tax.

Withholding rules

Withholding of the additional 0.9 percent Medicare tax is imposed on an employer if an employee receives wages that exceed $200,000 for the year, whether or not the employee is married. The employer is not responsible for determining the employee’s marital status. The penalty for underpayment of estimated tax applies to the 0.9 percent tax. Thus, employees should realize that the employee may be responsible for estimated tax, even though the employer does not have to withhold.

Planning techniques

One planning device to minimize the tax  would be to accelerate earned income, such as a bonus, into 2012. Doing this would also avoid any increase in the income tax rates in 2013 from the sunsetting of the Bush tax rates. Holders of stock-based compensation may want to trigger recognition of the income in 2012, by exercising stock options or by making an election to recognize income on restricted stock.

Another planning device would be to set up an S corp, rather than a partnership, for operating a business, so that the income allocable to owners is not treated as earned income. An entity operating as a partnership could be converted to an S corp.

If you have any questions surrounding how the new 0.9 percent Medicare tax will affect the take home pay of you or your spouse, or how to handle withholding if you are a business owner, please contact this office.

No use worrying. More than five million people every year have problems getting their refund checks so your situation is not uncommon. Nevertheless, you should be aware of the rules, and the steps to take if your refund doesn't arrive.

Average wait time

The IRS suggests that you allow for "the normal processing time" before inquiring about your refund. The IRS's "normal processing time" is approximately:

• Paper returns: 6 weeks
• E-filed returns: 3 weeks
• Amended returns: 12 weeks
• Business returns: 6 weeks

IRS website "Where's my refund?" tool

The IRS now has a tool on its website called "Where's my refund?" which generally allows you to access information about your refund 72 hours after the IRS acknowledges receipt of your e-filed return, or three to four weeks after mailing a paper return. The "Where's my refund?" tool can be accessed at www.irs.gov.

To get out information about your refund on the IRS's website, you will need to provide the following information from your return:

• Your Social Security Number (or Individual Taxpayer Identification Number);
• Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)); and
• The exact whole dollar amount of your refund.

 Start a refund trace

If you have not received your refund within 28 days from the original IRS mailing date shown on Where's My Refund?, you can start a refund trace online.

Getting a replacement check

If you or your representative contacts the IRS, the IRS will determine if your refund check has been cashed. If the original check has not been cashed, a replacement check will be issued. If it has been cashed, get ready for a long wait as the IRS processes a replacement check.

The IRS will send you a photocopy of the cashed check and endorsement with a claim form. After you send it back, the IRS will investigate. Sometimes, it takes the IRS as long as one year to complete its investigation, before it cuts you a replacement check.

A bigger problem

Another problem may come to the fore when the IRS is contacted about the refund. It might tell you that it never received your tax return in the first place. Here's where some quick action is important.

First, you are required to show that you filed your return on time. That's a situation when a post-office or express mail receipt really comes in handy. Second, get another, signed copy off to the IRS as quickly as possible to prevent additional penalties and interest in case the IRS really can prove that you didn't file in the first place.

Minimize the risks

When filing your return, you can choose to have your refund directly deposited into a bank account. If you file a paper return, you can request direct deposit by giving your bank account and routing numbers on your return. If you e-file, you could also request direct deposit. All these alternatives to receiving a paper check minimize the chances of your refund getting lost or misplaced.

If you've moved since filing your return, it's possible that the IRS sent your refund check to the wrong address. If it is returned to the IRS, a refund will not be reissued until you notify the IRS of your new address. You have to use a special IRS form.

IRS may have a reason

You may not have received your refund because the IRS believes that you aren't entitled to one. Refund claims are reviewed -usually only in a cursory manner-- by an IRS service center or district office. Odds are, however, that unless your refund is completely out of line with your income and payments, the IRS will send you a check unless it spots a mathematical error through its data-entry processing. It will only be later, if and when you are audited, that the IRS might challenge the size of your refund on its merits.

IRS liability

If the IRS sends the refund check to the wrong address, it is still liable for the refund because it has not paid "the claimant." It is also still liable for the refund if it pays the check on a forged endorsement. Direct deposit refunds that are misdirected to the wrong account through no fault of your own are treated the same as lost or stolen refund checks.

The IRS can take back refunds that were paid by mistake. In an erroneous refund action, the IRS generally has the burden of proving that the refund was a mistake. Nevertheless, although you may be in the right and eventually get your refund, it may take you up to a year to collect. One consolation: if payment of a refund takes more than 45 days, the IRS must pay interest on it.

If you are still worrying about your refund check, please give this office a call. We can track down your refund and seek to resolve any problem that the IRS may believe has developed.