DOMESTIC PRODUCTION DEDUCTION CLAIMS TWO
April 22, 2021 - Douglas Myser
Domestic production deduction claims two. In our ongoing series on tax issues that can get individuals and businesses in trouble, which sometimes leads to the need for Tax Court help, we again discuss the IRS alert on improper corporate domestic production activities deduction refund claims. This provision of the law was repealed as part of the Tax Cuts and Jobs Act, passed by President Trump, effective after December 31, 2017. Yet, often taxpayers who are used to doing something on a tax return, don't bother to keep up with the tax code and make assumptions that the old code is still the new code. That gets many taxpayers into trouble. Often these claims can be viewed by the IRS as meritless, if they run several years after the change happened, giving the taxpayer plenty of time to realize the change in the tax code. "Meritless claims are harmful to tax administration and voluntary compliance. Any corporate taxpayer who is considering filing such a claim should reconsider. Taxpayers who have already filed can withdraw prior to IRS audit contact to avoid penalties," said Doug O'Donnell, Commissioner for Large Business and International Division of the IRS. Domestic production deduction claims two.
The IRS gave the following example to help illustrate this new procedure. In the normal course of a taxpayers business, a taxpayer offered insurance policies to customers by entering into insurance contracts with the customers over the Internet via taxpayers online website. The insurance policies are a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial or recurring payments, known as the premiums, the insurer promises to pay ofr loss caused by perils covered under the policy language. Taxpayer produced computer software that enabled customers to select, pay for, and manage their insurance policies through taxpayers website accessible over the internet. All customers had an option to view, update information, submit claims, print a report, and pay bills.
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