Small Business Taxes & ManagementTM--Copyright 2020, A/N Group, Inc.
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November 30, 2020
NewsThe IRS has released Conservation Easement Audit Technique Guide. While the document cannot be cited or relied on as the position of the IRS it's a good road map to what the IRS will be looking for if you take a deduction for a conservation easement. Taxpayers who are contributing property and their advisors should familiarize themselves with the guide.
Tip of the DayStructuring cash transactions . . . If you're in business you know the requirement to report cash receipts from a customer that exceed $10,000. Banks have a similar reporting requirement. (Cash includes more than just U.S. and foreign coin and currency.) The law contains a provision to prevent circumvention of the law by making several deposits under $10,000 to avoid the reporting requirements. For example, a customer gives you $12,000 for a construction job. To avoid the requirement you deposit $7,000 in one bank account and the following day put $5,000 in another bank. It's called "structuring" and the penalties can be confiscatory. In one case the taxpayer's activities involved more than 100 transactions over a two-year period in amounts totaling more than $870,000. The court ordered the taxpayer to forfeit the entire amount, and, in addition, the taxpayer was sentenced to 36 months imprisonment. If you're not familiar with the rules, talk to your accountant.
November 25, 2020
NewsThe IRS has substantially added to the list of parishes in Louisiana that qualify for relief as a consequence of Hurricane Delta that began October 6. As a result, Individuals and households who reside or have a business in Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Calcasieu, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson. Jefferson Davis, LafayetteDavis, Lafayette, Lafourche, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Tensas, Terrebonne, Union,and Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana, and Winn parishes qualify for tax relief. For more information, go to IRS Announces Tax Relief for Hurricane Delta Victims.
The IRS has added Avoyelles, Caldwell, DeSoto and Iberia Parishes to those that qualify for tax relief from the IRS as a result of Hurricane Laura that began August 22. Now individuals and households who reside or have a business in Acadia, Allen, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, DeSoto, Evangeline, Grant, Iberia, Jackson, Jefferson Davis, Lafayette, La Salle, Lincoln, Morehouse, Natchitoches, Ouachita, Pointe Coupee, Rapides, Sabine, St. Landry, St. Martin, St. Mary, Union, Vermilion, Vernon, Webster, West Feliciana, and Winn parishes qualify for tax relief. For more information, go to IRS Announces Tax Relief for Hurricane Laura Victims.
The IRS has issued final regulations (T.D. 9933) that provide guidance on how an exempt organization subject to the unrelated business income tax determines if it has more than one unrelated trade or business, and, if so, how the exempt organization calculates unrelated business taxable income. The final regulations also clarify that the definition of "unrelated trade or business" applies to individual retirement accounts. Additionally, the final regulations provide that inclusions of subpart F income and global intangible low-taxed income are treated in the same manner as dividends for purposes of determining unrelated business taxable income.
Tip of the DayTell your accountant about all asset dispositions . . . When doing your business return your accountant may uncover sales of business assets if you've shown the revenue separately in your records. But he probably won't find them if you disposed of them in other ways such as scrapping them. Assets that have been sold may produce a gain or a loss, but if an asset is scrapped there's a good chance you'll have a deductible loss. If the assets are located in a state with a personal property tax, they might be included on the rolls and continue to be taxed if they're not taken off the books.
November 24, 2020
NewsThe IRS has issued final regulations relating to Section 1031 like-kind exchanges. These final regulations (T.D. 9935) address the definition of real property under Section 1031 and also provide a rule addressing the receipt of personal property that is incidental to real property received in a like-kind exchange. The Tax Cuts and Jobs Act (TCJA) limited like-kind exchange treatment to exchanges of real property. As of January 1, 2018, exchanges of personal or intangible property such as vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain as like-kind exchanges. Also, like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment. An exchange of real property held primarily for sale does not qualify as a like-kind exchange. Under the final regulations, real property includes land and generally anything permanently built on or attached to land. In general, real property also includes property that is characterized as real property under applicable State or local law. In addition, certain intangible property, such as leaseholds or easements, qualifies as real property under Section 1031. Property not eligible for like-kind exchange treatment prior to enactment of the TCJA remains ineligible.
The IRS has issued proposed regulations (REG-123652-18) to except certain partnership-related items from the centralized partnership audit regime that was created by the Bipartisan Budget Act of 2015, and sets forth alternative rules that will apply. The centralized partnership audit regime does not apply to a partnership-related item if the item involves a special enforcement matter described in these regulations. Additionally, these regulations propose changes to the regulations to account for changes to the Internal Revenue Code (Code). Finally, these proposed regulations also make related and clarifying amendments to the final regulations under the centralized partnership audit regime.
Tip of the DayHow's your store's appearance? . . . Unless you run a feed and grain store, the only general store for miles, or something similar, appearance is important. Peeling paint, leaks in the ceiling, dirty changing rooms, etc. won't help you get or keep customers. Some years ago we were in a department store in a upscale town and noticed severely worn carpets and commented to a friend that it looked like they were about to close the store. That was close. They filed for bankruptcy, reorganized and then rehabbed the store. Even suppliers may get concerned if they see your store or office falling apart. A fresh coat of paint and a thorogh cleaning may be all that's necessary. The same goes for service businesses. You don't want to see your accountant using old computers and printers, and you don't want to see your contractor show up in a truck that looks like it just came through a war zone. If you can't take an objective look, ask a friend to take a walk around your facility.
November 23, 2020
NewsThe IRS has released it's 2020-2021 Priority Guidance Plan. This annual plan (updated during the year) sets forth guidance priorities for the Department of the Treasury and the Internal Revenue Service. See 2020-2021 Priority Guidance Plan.
Notice 2020-83 provides the 2020 Required Amendments List (2020 RA List). The Required Amendments List (RA List) applies to both individually designed plans qualified under Sec. 401(a) (qualified individually designed plans) and individually designed plans that satisfy the requirements of Sec. 403(b) individually designed plans).
Tip of the DayTax rates aren't only determinant . . . If you could compare tax rates in different jurisdictions to determine which offered the lowest taxes, that would make things easy. But that's not the case. Various provisions in the Federal tax code and in the various state laws make just applying rates less than accurate. On the Federal level consider Sue and Fred. They have no children and their taxable income is $172,750. Their tax bill would be $29,502. Sharon and Paul live next door and have three children ages 10, 12, and 14. Their taxable income is the same, but they get three child credits so their tax is only $23,502. You can't deduct more than $10,000 in state and local income taxes on your Federal return. Most states follow the Federal rules, but New York state allows you to deduct state and local taxes (except for income tax) in full. New York has a high tax rate but it taxes no portion of Social Security benefits and exempts the first $20,000 of an individual's pension from tax.
November 20, 2020
NewsThe Internal Revenue Service Advisory Council (IRSAC) today issued its annual report for 2020, including recommendations to the IRS on new and continuing issues in tax administration. The IRSAC is a federal advisory committee that provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public. IRSAC members offer constructive observations regarding current or proposed IRS policies, programs and procedures. The 2020 Public Report includes recommendations on 26 issues, which cover a broad range of topics, including:
Tip of the DayLiquidating stocks for a purchase? . . . If you've got to liquidate some of your portfolio to make the downpayment on a property, don't wait till the last minute. The lender will check on where the downpayment is coming from. Cash in the bank carries more weight than stocks in a portfolio. The lender is likely to see the value of the portfolio as a percentage (e.g., 70%) of cash--and they won't put a higher value on it simply because you've got a bunch of blue chips. You want to have your finances in order to avoid any questions. Another point, liquidating at the last minute could mean holding up the closing. And don't forget to factor in the tax you'll have to pay on the gain. You may want to sell additional stock to have the funds to pay the tax.
November 19, 2020
NewsRevenue Procedure 2020-51 (IRB 2020-50) provides a safe harbor for certain Paycheck Protection Program loan participants, whose loan forgiveness has been partially or fully denied, or who decide to forego requesting loan forgiveness, to claim a deduction for certain otherwise deductible eligible payments on (1) the taxpayer’s timely filed, including extensions, original income tax return or information return, as applicable, for the 2020 taxable year, or (2) an amended return or an administrative adjustment request (AAR) under section 6227 of the Internal Revenue Code (Code) for the 2020 taxable year, as applicable. For taxpayers that decide to forego requesting loan forgiveness, the safe also allows these taxpayer to claim a deduction for the otherwise deductible eligible payments on an original income tax return or information return, as applicable, for the taxable year in which the taxpayer decides to forego requesting forgiveness.
Revenue Ruling 2020-27 (IRB 2020-50) provides guidance on whether a Paycheck Protection Program (PPP) loan participant that paid or incurred certain otherwise deductible expenses can deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan. The revenue ruling also provides guidance if, as of the end of the 2020 taxable year, the PPP loan participant has not applied for forgiveness, but intends to apply in the next taxable year.
The IRS is advising employers who are filing Form 941, Employer's Quarterly Federal Tax Return and claiming an employer tax credit should read the instructions carefully and take their time when completing the form to avoid mistakes. For more information, go to COVID Tax Tip 2020-157.
Tip of the DayExtra space? . . . If you've downsized your business and have extra space you're renting you may be able to sublet it. Most leases contain a clause that allows you to sublet space, but there's also frequently a clause that requires approval of the subtenant by the landlord. Keep in mind that you'll still be responsible for the space and for the rent. Check your lease and it might be prudent to advise your landlord you're looking to sublet rather than surprising him.
November 18, 2020
NewsThe IRS has added Mendocino and Stanislaus to the counties in California that qualify for tax relief stemming from wildfires that began on August 14. As a result of the additions, individuals and households who reside or have a business in Butte, Lake, Lassen, Mendocino, Monterey, Napa, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Trinity, Tulare and Yolo counties qualify for tax relief. For additional information, go to IRS Announces Tax Relief for California Wildfire Victims.
Nonprofit corporations are strange entities because they don't have shareholders. In Clinton Deckard (155 T.C. No. 8) a corporation, W, was organized as a Kentucky nonstock nonprofit corporation. Two years later W filed a retroactive election for S corporation status as of the date of incorporation. The taxpayer, who was W's president and one of its directors then reported passthrough operating losses from W on his tax returns for the year of incorporation and the following year individual tax returns. The Tax Court held that as an officer and director of W, subject to the constraints of Kentucky law and W's articles of incorporation, the taxpayer had no ownership interest in W equivalent to that of a shareholder for purposes of applying the S corporation rules and was not entitled to claim passthrough losses from the corporation.
Tip of the DayCompany sports team . . . Sounds like a good morale builder. Your company's team in league play. You even let them play in the vacant lot next to the plant. Or just a friendly game at the company picnic. But then an employee gets hurt and sues the company. You could be liable. In one case an employee even managed to collect worker's compensation. Before jumping in on any sports or outside activities, check with your attorney and insurance agent. You don't want to be liable and not covered by insurance.
November 17, 2020
NewsThe IRS has added Beauregard, Lafayette, Rapides, St. Landry and St. Martin to the parishes in Louisiana that qualify for tax relief as a result of Hurricane Delta that began October 6. Victims who live or have a business in the area now have until February 26, 2021 to file various individual and business tax returns and make tax payments. As a result of these additions, the complete list of parishes affected in Louisiana include Acadia, Beauregard, Calcasieu, Cameron, Jefferson Davis, Lafayette, Rapides, St. Landry, St. Martin and Vermilion. For additional information on the tax relief, go to www.irs.gov/newsroom/irs-announces-tax-relief-for-hurricane-delta-victims.
Notice 2020-82 (IRB 2020-49) provides that the IRS will treat a contribution to a single-employer defined benefit pension plan with an extended due date of January 1, 2021 pursuant to Sec. 3608(a)(1) of the CARES Act, as timely if it is made no later than January 4, 2021 (which is the first business day after January 1, 2021).
The IRS has released (IR-2020-255) the Criminal Investigation Division's annual report, highlighting the agency's successes and criminal enforcement actions taken in fiscal year 2020, the majority of which occurred during COVID-19. A key achievement was the identification of over $10 billion in tax fraud and other financial crimes. The complete report can be found at www.irs.gov/pub/irs-pdf/p3583.pdf.
Tip of the DayPrivate rulings from your state . . . The IRS issues private letter rulings directed to taxpayers with questions about a transaction where the tax consequences are unclear. The rulings are public, but the name and other information is omitted so the taxpayer can't be identified. Many states have a similar procedure. Thus, if there are no regulations, case law, etc. on the topic you can request a written determination asking, for example, whether a certain item is subject to sales tax. You can usually rely on the letter ruling, but only if the facts are the same as stated in the request. The good news is you can avoid getting hit with taxes and penalties if you request a ruling and the state later takes a contrary position. The bad news is if you don't like the ruling, you're stuck with it. Even if the state doesn't charge for a ruling (we don't know of any that do; the IRS does), there is an expense on your part. Requesting a ruling makes sense if the amount involved is substantial or the issue will recur. Talk to your tax adviser.
November 16, 2020
NewsIn IR-2020-254 the IRS announced that starting December 13 it will begin masking sensitive data on business tax transcripts. The announcement provides 30 days for stakeholders to make any adjustments. The IRS began informing tax professionals of this change during the summer Nationwide Tax Forums. The agency previously masked sensitive data on individual tax transcripts two years ago. For example, only the last four digits will be visible for an employer identification number, social security number, and telephone number. For an individual's name or a business name, only the first four characters will be visible; only the first six for a street address. A tax transcript is a summary of a tax return. Transcripts are often used by tax professionals to prepare prior year tax returns or represent the client before the IRS. Lenders and others use tax transcripts for income verification purposes.
Tip of the DayHome equity loans dead? . . . You can no longer deduct the interest on a home equity loan or the interest on principal that exceeds the original amount on a refinanced home mortgage. Interest on amounts borrowed for home improvements such as adding a garage still qualify, but not if the principal is used for other purposes such as purchasing a new car. But even if the interest isn't deductible, it doesn't necessarily mean you shouldn't tap your home for funds. Borrowing at, say 3.25 percent, on your home is a lot cheaper than a personal loan at 9 percent. It may make sense to pay off credit card debt that could be at 15 to 29 percent. Borrowing for your business can make sense too, since interest on such a loan would be tax deductible if you structure it properly. Talk to your accountant or financial advisor.
November 13, 2020
NewsNotice 2020-76 extends the due date for certain 2020 health coverage information-reporting requirements under Sections 6055 and 6056 of the Code from January 31, 2021, to March 2, 2021. This notice also provides relief from the Section 6721 and section 6722 penalties for certain aspects of the 2020 information-reporting requirements under Sections 6055 and 6056.
The IRS’s Small Business/Self-Employed division wants to fill more than 150 Collection Contact Representative vacancies throughout the country. The pay scale ranges from GS-5 to GS-8. Collection representatives provide a full range of administrative and technical assistance for taxpayers and their representatives. The job announcements list the responsibilities and closing dates for Collection Contact Representative and for Collection Contact Representative (seasonal).
Tip of the DayBe prepared for more pandemic pain . . . Cases are rising, hospitalizations are rising, and deaths are rising. New York, New Jersey, Massachusetts and some other states took action by closing restaurants, bars, many stores, etc. earlier this year and eventually got the virus under control. But it's coming back with a vengance. Some states may lock down for a second time, some for the first. But even die hard states that don't require closing may find a de facto lockdown exists. If people are frightened to go to out, they may not, even if the state allows it. The bottom line? We could be looking at another economic pullback in the coming months that could be as severe as the one this spring. The only good news may be we're better prepared for it. Business owners should be careful to have cash available to handle any downturn as well as supplies and inventory.
November 12, 2020
NewsRevenue Procedure 2020-50 (IRB 2020-48) provides guidance for taxpayers wishing to apply Reg. Sec. 1.168(k)-2 and 1.1502-68 of the regulations, or to rely on the proposed regulations under Sec. 168(k) (REG-106808-19) that were published in the Federal Register on September 24, 2019 (2019 proposed regulations), for: (1) certain depreciable property acquired and placed in service after September 27, 2017, by the taxpayer during its taxable years ending on or after September 28, 2017, and before the taxpayer's first taxable year that begins on or after January 1, 2021; (2) certain plants planted or grafted, as applicable, after September 27, 2017, by the taxpayer during its taxable years ending on or after September 28, 2017, and before the taxpayer's first taxable year that begins on or after January 1, 2021; and (3) components acquired or self-constructed after September 27, 2017, of certain larger self-constructed property and placed in service by the taxpayer during its taxable years ending on or after September 28, 2017, and before the taxpayer's first taxable year that begins on or after January 1, 2021.
The IRS can't assess a penalty unless the initial determination of the assessment is personally approved (in writing) by the immediate suprervisor of the individual making such determination (or a higher official). In Sunil S. Patel and Laurie Mcanally Patel, et al. (T.C. Memo. 2020-133) the Court held that the Letter 5153 and the Revenue Agent's Report that was issued prior to a notice of deficiency was the first formal communication of the penalty to the taxpayer. Just because the agent's communication to the taxpayersd did not contain a 30-day letter (and therefore did not communicate appeal rights) did not preclude it from being the first communciation with the taxpayer. The Court held the IRS did not satisfy the supervisory approval requirement with respect to one of the years at issue.
Tip of the DayScammers know your weak points . . . Whether it's old school telemarketing calls or higher tech email schemes, the sign of a good con artist is knowing your weakness. Would you like a free medic alert device? What to wipe out your credit card debt? Settle your IRS debt for pennies on the dollar? Earn 20 percent a year on your money? There's a common theme here. Your only defense is to be skeptical, no matter how hard that is. But the old adage can work for you. If it seems to good to be true, it probably is (too good to be true).
November 10, 2020
NewsNotice 2020-75 (IRB 2020-49) announces that the IRS intends to issue proposed regulations to clarify that State and local income taxes imposed on and paid by a partnership or an S corporation on its income are allowed as a deduction by the partnership or S corporation in computing its non-separately stated taxable income or loss for the taxable year of payment, and therefore are not subject to the State and local tax deduction limitation for partners and shareholders who itemize deductions. The notice describing the forthcoming proposed regulations applies to these types of income taxes starting today, and also allows taxpayers to apply these rules to specified income tax payments made in a taxable year of a partnership or an S corporation ending after Dec. 31, 2017, and before the date the forthcoming proposed regulations are published in the Federal Register.
Tip of the DayBiden President-elect . . . It appears that Joe Biden will be our next President. Clearly, his take on many issues is very different from our current President. Despite much of the rhetoric during the campaign, tax rates will not go to 62 percent, we will not become a socialist state, and business will not collapse. On Monday, the stock market was far more interested in a COVID-19 vaccine than fears of confiscatory taxes. While Biden is seeking to raise the corporate tax rate to 28 percent and eliminate the 20-percent qualified business income deduction and raise the top rate back to 39.6 percent, it's unlikely he will be able to push through significant tax increases, given the makeup of the Senate. The only way any meaningful tax increases are likely is if the funding is necesaary to fight the pandemic and the its economic consequences, or similar required financing needs. On the other hand, additional reductions are equally unlikely.
November 9, 2020
NewsThe IRS has released final regulations (T.D. 9930) providing guidance relating to the life expectancy and distribution period tables that are used to calculate required minimum distributions from qualified retirement plans, individual retirement accounts and annuities, and certain other tax-favored employer-provided retirement arrangements. These regulations affect participants, beneficiaries, and plan administrators of these qualified retirement plans and other tax-favored employer-provided retirement arrangements, as well as owners, beneficiaries, trustees and custodians of individual retirement accounts and annuities. The tables will apply to distributions in calendar years beginning on or after January 1, 2022. The new tables take into account longer life expectancies and, as a result, reduce the required minimum distributions each year. Under the old rules a 72-year old taxpayer's life expectancy would be 25.6 years; the new tables use a life expectancy of 27.4 years.
College students that are self-supporting may qualify for and Economic Impact Payment. The IRS is urging any eligible self-supporting college student who doesn't need to file a tax return to register by November 21 so they can receive an Economic Impact Payment before the end of the year. Some recent college graduates from 2019 and 2020 may not have received an Economic Impact Payment because they were claimed as a dependent by their parents or someone else. The IRS reminds these graduates they may be eligible for the Economic Impact Payments when they file their 2020 tax return in early 2021. For more information, go to www.irs.gov/newsroom/many-college-students-may-still-qualify-for-an-economic-impact-payment-review-the-guidelines-and-register-by-nov-21-at-irsgov.
The IRS has released draft copies of Form 8995, Qualified Business Income Deduction Simplified Computation, Form 8995-A and related Schedules A, B, C, and D. Schedule B is for aggregation of business operations and Schedle C is for loss netting and carryforward of the deduction. The IRS has also released draft copies of the instructions for several of these forms and schedules.
Tip of the DayPaycheck Protection Program . . . Got a PPP loan and are now applying for forgiveness? The SBA has a web page with details about the documentation required such as a lease agreement if you're claiming rent as a qualified expense, payroll documentation, etc. as well as answers to a number of other questions. In addition, the page has links to a number of other pages. Go to Paycheck Protection Program.
November 6, 2020
NewsRevenue Ruling 2020-23 provides guidance on the distribution of an individual custodial account in kind upon termination of a Section 403(b) plan. Notice 2020-80 is related to Rev. Rul. 2020-23 and requests comments regarding the protection of annuity and spousal rights under section 205 of ERISA with respect to a terminating § 403(b) plan funded through the use of custodial accounts.
Notice 2020-80 requests comments on the application of the annuity and spousal rights provisions of section 205 of the Employee Retirement Income Security Act of 1974, in connection with a distribution of an individual custodial account (ICA) in kind from a terminating Sec. 403(b) plan.
Tip of the DayEnd of meeting summary . . . Meetings can be extremely productive or a total waste of time. The outcome depends heavily on planning and control of the session. One thing you shouldn't forget is a quick summary of the most important points of agreement and a recitation of what each participant is supposed to follow up on. For short meetings that can be done verbally just before the group breaks up. For long meetings consider a written "to do" list for each participant.
November 5, 2020
NewsThe IRS, state tax agencies and the tax industry are warning (IR-2020-249) of a new text scam created by thieves that trick people into disclosing bank account information under the guise of receiving the $1,200 Economic Impact Payment. The IRS, states and industry, working together as the Security Summit, remind taxpayers that neither the IRS nor state agencies will ever text taxpayers asking for bank account information so that an EIP deposit may be made. The scam text message states: "You have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment into your account. Continue here to accept this payment …" The text includes a link to a fake phishing web address. The IRS does not send unsolicited texts or emails. The IRS does not call people with threats of jail or lawsuits, nor does it demand tax payments on gift cards.
When does the statute of limitations begin to run? In Robin J. Fowler (155 T.C. No. 7) efiled his 2013 tax return on October 15, 2014, which IRS's software reviewed and rejected for failure to include an Identity Protection Personal Identification Number (IP PIN). The taxpayer refiled his 2013 tax return with an IP PIN on April 30, 2015; the IRS's software reviewed and accepted the return. Thereafter, the IRS sent the taxpayer a notice of deficiency for the 2013 tax year on April 5, 2018. The IRS moved for partial summary judgment, and the taxpayer cross-moved for summary judgment, on whether the IRS issued a timely notice of deficiency. The parties dispute whether the taxpayer's first submission triggered the Sec. 6501(a) limitations period. The Court held the taxpayer's first submission triggered the running of the Sec. 6501(a) limitations period, notwithstanding the taxpayer's omission of an IP PIN. The Court also held the IRS's motion for partial summary judgment would be denied, and the taxpayer's cross-motion for summary judgment granted.
Tip of the DayBuying property from estate . . . If you inherit property from an estate your basis is equal to the fair market value at the date of the decedant's death. But what if you purchase property from the estate at a bargain? Your basis would be what you pay for the property. In one case a nephew who took care of the decedant for a number of years was allowed, by the terms of the will, to purchase a parcel of real estate for $200,000 whatever the market value. Other heirs received property and/or cash. As it turned out, the fair market value at the date of death was $950,000. The court held the taxpayer's basis was his purchase price.
November 4, 2020
NewsTelling the IRS that you never received the check may work for one or two, but not a series. In Robert J. Belanger (T.C. Memo. 2020-130) the taxpayer argued he never got the checks, nor did he have dominion and control over them. The IRS used the specific item method to show that the checks received belonged to his business. The address of the business and the taxpayer's home were one in the same and the taxpayer received the checks at his home. In addition, the details of how the taxpayer negotiated customers' checks for treasurer's checks in amounts of less than $10,000 at his bank and the use of the treasurer's checks during the taxpayer's criminal trial for unreported income. The Court found the IRS showed the taxpayer had unreported his income in the amount alleged. The Court also found the taxpayer guilty of civil fraud and liable for the 75 percent fraud penalty. The Court found the statute of limitations had not run because the period was extended to six years because the underpayments were due to fraud.
Tip of the DayDeposits to wrong account . . . One business owner delegated check deposits to an employee of 10 years. The employee deposited almost an entire months' checks into someone else's account. We're not sure how this was accomplished, but there's an easy way to prevent it--check your account regularly. If you only make deposits once a week, you should check after each deposit. In the old days you had to wait a month for your statement. Now there's no excuse, it only takes a minute or two. In most cases deposits show up in less than an hour after a deposit. In most cases you can also get an email or text notice of the deposit. The person checking should not be the person making the deposit. Reconciling the bank account at the end of a month will often catch most errors.
November 3, 2020
NewsThe IRS has announced (IR-2020-248) a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS. The IRS assessed its collection activities to see how it could apply relief for taxpayers who owe but are struggling financially because of the pandemic, expanding taxpayer options for making payments and alternatives to resolve balances owed. The highlights of the taxpayer relief initiative are:
IR-2020-248 also provides information on other forms of relief such as offer-in-compromise, relief from penalties, and temporarily delaying collection.
Tip of the DayCritical checklist . . . In any substantial, unusual transaction there are usually many issues you don't normally deal with. You can't make a checklist to cover all of them, but you should make a checklist of the items that are most important. That goes for both business and personal transactions. Some items you probably don't even have to list--you'll definitely remember them. For example, you're buying a new home--four bedrooms and two baths are absolutely essential. That you won't forget. But will you remember to check for 500 gallons of oil storage, underground sprinklers, age of the roof, etc. Not enough outlets in the garage? That's not a big deal, you can put them in yourself. That's not something you need on the checklist. In business situations, the checklist can be much more important because you may be signing up for things that can't be easily changed. One business owner thought his attorney would check a purchase and sale agreement for a business being acquired. As a result the allocation of the purchase price was wrong and the purchase price wasn't contingent on certain employees remaining. The buyer considered both important.
November 2, 2020
NewsOn August 8, 2020, a Presidential Memorandum was issued, directing the Secretary of the Treasury to use his authority pursuant to Section 7508A of the Code to defer the withholding, deposit, and payment of certain payroll tax obligations. Treasury and the IRS issued Notice 2020-65 on August 28, 2020. The Notice allows employers the option to defer the employee portion of Social Security tax from September 1, 2020 through December 31, 2020, for eligible employees who earn less than $4,000 per bi-weekly pay period (or the equivalent threshold amount with respect to other pay periods) on a pay period-by-pay period basis. The IRS has issued additional guidance with instructions for employers on how to report the deferral on W-2s and instructions for employees.
Tip of the DayGuaranteeing a loan? . . . Unless it's required for a business in which you're the sole or principal owner, it's almost always a no win situation. First, why obligate yourself to pay off a debt where you will get no benefit? Even if there is a benefit, in most cases it's small compared to the risk. And it is a big risk. If the lender asks for a guarantee, in most cases he doesn't think much of the primary obligor. And, if the primary obligor doesn't pay, the lender will quickly come after you. Second, you'll get no tax deduction for the interest on any payments unless the primary obligor actually defaults. He could be in a terrible financial situation, but if you make the payments with the purpose of keeping him afloat, you'll still get no deduction. And that assumes that the tax law would allow a deduction for the interest if you otherwise qualify. For example, you guarantee your brother-in-law's car loan. He defaults and you pay the interest. That's personal interest and would not be deductible. Third, in some situations you may leave yourself open to more than the original obligation when the loan is open-ended. Finally, if you look for credit a lender who's looking at your credt score will add the amount guaranteed to your debt load.
October 30, 2020
NewsThe IRS has added Bienville, Bossier, Catahoula, Claiborne, Evangeline, Lafayette, Pointe Coupee, St. Martin, St. Mary, Webster and West Feliciana Parishes to those areas in Louisiana that qualify for tax relief stemming from Hurrican Laura that began on August 22. As a result, individuals and households who reside or have a business in Acadia, Allen, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Cameron, Catahoula, Claiborne, Evangeline, Grant, Jackson, Jefferson Davis, Lafayette, La Salle, Lincoln, Morehouse, Natchitoches, Ouachita, Pointe Coupee, Rapides, Sabine, St. Landry, St. Martin, St. Mary, Union, Vermilion, Vernon, Webster, West Feliciana, and Winn parishes qualify for tax relief. For more details, go to IRS Announces Tax Relief for Hurricane Laura Victims.
The IRS announced it is taking additional steps to better protect taxpayer data by implementing a new transcript format for businesses on December 13, 2020. Similar to our individual transcripts, the new transcript for businesses will partially mask the personally identifiable information of everyone listed on the tax return. All financial entries will remain fully visible to assist with tax preparation, tax representation and income verification. In order to assist you with associating the requested information with the correct taxpayer there will be a line (Line 5b) on the transcript request Form where a "Customer File Number" (CFN) can be placed. This is an optional 10-digit number that you provide to the IRS to be placed on your delivered transcripts for tracking purposes.
The IRS is again reminding (IR-2020-247) U.S. citizens, entities and resident aliens with a foreign bank or financial account that they have until Oct. 31, 2020 (December 31, 2020 if impacted by certain natural disasters), to file their 2019 Report of Foreign Bank and Financial Accounts (FBAR).
Tip of the DayRoth conversions . . . Moving money from a traditional IRA to a Roth comes at a tax cost. You'll have to pay tax on the amount of funds transferred out of the traditional IRA. Subsequent distributions from the Roth (after a five-year period) are tax free. Normally, deciding whether or not to make a conversion and pay the tax can be complex. In many cases paying tax upfront for benefits later carries a risk. But your income could be considerably lower this year. Depending on your tax situation you may be able to pay much less than in a normal year. It may be one of the few times that you'll legally beat the government. Talk to your tax advisor.
October 29, 2020
NewsThe IRS has reported that it has corrected the SOR issue in the IVES processing system but is unable to recover the missing and corrupted transcripts. It's asking that users resend those requests for transactions missing the transcript or transactions with a corrupted or incomplete transcript to the user's IVES site's dispute fax line listed in the announcement. For more details, click on the link at the beginning of this article.
Revenue Procedure 2020-46 modifies and updates Rev. Proc. 2016-47, which provides a list of permissible reasons for a taxpayer to self-certify eligibility for a waiver of the 60-day rollover requirement under certain eligible retirement plans. This Revenue Procedure modifies that list by adding a new reason: a distribution was made to a state unclaimed property fund.
Tip of the DayPenalty abatement . . . The IRS takes a dim view of a taxpaper making an offer in compromise for $50,000 on a $500,000 tax debt when they've got $250,000 of cars in the driveway of a $2 million home on the beach. On the other hand, it is sensitive to problems not of the taxpayer's own making. While there's not much official guidance, you may be able to avoid a penalty for a late filed return or a late payment if you can show it was related to the COVID-19 pandemic. If you're in financial trouble you may be able to renegotiate an installment agreement. This won't work in every case, but if your problem is related to COVID-19, it's worth a try. There's another option. If this is your first, recent offense and you've got a clean record, e.g., paid and filed on time, made estimated tax payments, etc., you can use that to request an abatement. penalty
October 28 , 2020
NewsNew fraud patterns are constantly evolving, and as such, the IRS needs to adjust its existing filters and continue to expand its detection processes to include additional business tax return types. The Treasury Inspector General for Tax Administration (TIGTA) performed an audit to assess the IRS's continued efforts to detect and prevent business identity theft. The IRS defines business identity theft as creating, using, or attempting to use businesses' information without authority to obtain tax benefits. For example, an identity thief files a business tax return using the Employer Identification Number of an active or inactive business without the permission or knowledge of the owner to obtain a fraudulent refund. The IRS continues to take actions to improve its detection of business identity theft, including expanding the number of identity theft filters from 35 in Processing Year 2018 to 84 in Processing Year 2020. However, continued expansion of detection capabilities, to include other business return types, is needed. For example, TIGTA found that 36 business return types with refunds issued totaling $10.5 billion in Processing Year 2019 were not evaluated for potential identity theft. For the complete report, go to www.treasury.gov/tigta/auditreports/2021reports/202140004fr.pdf.
If you can donate long-term appreciated stock instead of cash to a charity, you can come out ahead on taxes. If you sell the stock for say, $110,000 and have a $100,000 gain, you'll pay $18,800 capital gain tax. So out of the $110,000 in proceeds you'll only be able to contribute $91,200. If you contribute the stock to the charity you'll avoid the capital gains tax (and the increase in your AGI from the gain) and be able to donate the full $110,000. In Jon Dickinson and Helen Dickinson (T.C. Memo. 2020-128) the taxpayer contributed stock in his employer to a donor advised fund. The stock was quickly redeemed by the company shortly after the contribution to the donor advised fund. The IRS claimed the transaction was really a redemption followed by a contribution of the proceeds. The Court found otherwise. It noted that the contribution of the stock to the fund was a completed gift and the IRS did not attempt to show otherwise. The Court also found there was no assignment of the income from the stock. The Court held the transaction was exactly what the taxpayer claimed it was.
Tip of the DayDon't tick off the auditor . . . An IRS examiner, sales tax auditor, etc. has discretionary powers. He or she can accept a somewhat questionable document or ask for additional proof of a deduction. The auditor can sample a few items and, if satisfied, move on or ask to see all the items in the category. As a result it makes sense to be cordial and provide the documentation requested in good order. The advice may appear to be common sense, but many taxpayers take an audit personally and think it'll pay to give the examiner a hard time.
October 27, 2020
NewsThe IRS has released Rev. Proc. 2020-45 2021 annual inflation adjustments for a number of indexed tax provisions in addition the tax tables applicable to next year. The top rate of 37 percent for married couples filing jointly now starts at $628,300, up from $622,050. The 12 percent rate now starts at $19,950, up from $19,700 for married filing joint. The standard deduction will be $12,550 for single individuals, $18,800 for head of household, and $25,100 for married, filing joint. The qualified business income threshold (Sec. 199A) will rise to $329,800 for married, joint and to $164,900 for single individuals. The gift tax exclusion is unchanged at $15,000. The threshold for excess business losses will be $524,000 (married, joint) and $262,000 (all other taxpayers).
The IRS has published (?Notice 2020-79) the 2021 inflation adjusted amounts for pension plans and IRAs. Many of the employee contribution limits are unchanged for 2021. The IRA contribution limit remains at $6,000; the catch-up contribution limit (age 50 and over) is not adjusted for inflation. The contributions limit for 401(k), 403(b) and most Sec. 457 plans is unchanged at $19,500; the catch-up contribution is also unchanged at $6,500. SIMPLE retirement limits are also unchanged at $13,500.
Tip of the DayTaxes under a new administration . . . What would change under a Biden administration? Any prognostication would be little more than guessing. He's got some plans in mind but where it'll end up is another matter. More than likely if your income is less than about $400,000 a year you might see a modest decline, depending on your circumstances. The state and local tax deduction could be revived and there could be more liberal credits for taxpayers with children. Those with incomes over the $400,000 level would probably see an increase. The top tax rate could go to 39.6 percent (the pre-Trump rate) and capital gains taxes could rise on taxpayers with incomes over $1 million. Corporate rates could increase to 28 percent. But, as usual, the devil is in the details. For many taxpayers in high tax state states, the $10,000 on state and local taxes hurt more than the tax rate reduction and other changes helped.
October 26, 2020
NewsThe IRS has added Napa, Shasta and Sonoma counties to the areas in California that qualify for tax relief stemming from the wildfires that began on September 4. As a result, Individuals and households who reside or have a business in Fresno, Los Angeles, Madera, Mendocino, Napa, San Bernardino, San Diego, Shasta, Siskiyou, and Sonoma counties qualify for tax relief. but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. For more information, go to IRS Announces Tax Relief for September California Wildfire Victims.
The IRS has announced it will resume issuing the 500 series balance due notices to taxpayers later in October. These notices were paused on May 9 due to COVID-19. Although the IRS continued to issue most agency notices, the 500 series were suspended temporarily because of a backlog of mail at the IRS due to COVID-19. The mail backlog is now caught up enough to account for the timely mailed payments. In late October or early November some taxpayers will begin seeing the updated 500 series notices with current issuance and payment dates.
You can take a deduction for a worthless debt. But you've got to be able to show the debt is worthless. In Malik H. Franklin (T.C. Memo. 2020-127) the taxpayer claimed two loans were worthless. The Court noted a debt is not worthless if the collateral securing it has value. The Court found he did not meet his burden of proving worthlessness in he year he claimed the deduction. In a second loan the Court noted that the taxpayer did not attempt collection during the year at issue and never brought suit to collect on the note. The Court disallowed the bad debt deductions.
Tip of the DayLimited customer base? . . . We've cautioned that can be dangerous. The recent problems with a large manufacturer demonstrates just how dangerous. In this case the customer isn't in danger of going out of business, but it's most important product line will be shut down for months. If that manufacturer is a major customer and you don't have adequate reserves to fall back on, you could be in for big trouble. Even if your business survives, it may be smaller, in financial difficulty, have to lay off skilled employees who may not return, etc. At best it can create big problems for your business planning. The consolidation in many businesses can severely limit customer options. Your best approach might be to find another market, either for your product or your manufacturing or service expertise. It's not easy, but failure to address the problem has been fatal for more than one company.
October 23, 2020
NewsThe IRS released today an early draft of the instructions to Form 1065, U.S. Return of Partnership Income, for tax year 2020 (filing season 2021) that include revised instructions for partnerships required to report capital accounts to partners on Schedule K-1 (Form 1065). The revised instructions are part of a larger effort by the agency to improve the quality of the information reported by partnerships to the IRS and furnished to partners to facilitate increased compliance. The revised instructions indicate that partnerships filing Form 1065 for tax year 2020 are to calculate partner capital accounts using the transactional approach for the tax basis method. Under the tax basis method outlined in the instructions, partnerships report partner contributions, the partner’s share of partnership net income or loss, withdrawals and distributions, and other increases or decreases using tax basis principles as opposed to reporting using other methods such as GAAP. For more information, see IR-2020-240>.
Form 4506-C has been published and Form 4509-C now available for use by IVES participants exclusively. The IVES program will continue to accept the Form 4506-T through February 28, 2021. On March 1, 2021, all IVES requests will need to be submitted on the Form 4506-C. You will still need to use the Qualified and Non-Qualified coversheets with the Form 4506-C.
Tip of the DayRead the fine print . . . While it might seem like a routine transaction, be sure to read the fine print. Or at least scan the bold headings. That's especially true if it looks like you're getting a special deal. One business owner signed up for a service that was cheaper than the competition, only to find it wasn't nearly as good as his previous service. When he went to cancel he discovered he signed up for a 3-year contract. The service was $2,500 a year and the penalty for early cancellation of the contract was $1,900. He paid the $1,900. As a business there's a good chance you won't have nearly the same protection as a consumer.
October 22, 2020
NewsRevenue Procedure 20-43 (IRB 2020-45) provides the inflation-adjusted maximum dollar amount that may be made newly available for excepted benefit health reimbursement arrangements or other account-based group health plans for plan years beginning after December 31, 2020, and before January 1, 2022. Due to indexing methodology requiring rounding down to the nearest $50 increment, this amount remains $1,800 for the 2021 plan year.
Revenue Ruling 2020-24 (IRB 2020-45) clarifies the federal income tax withholding and reporting obligations that apply for the year a payment is made from a qualified plan to a state unclaimed property fund.
Taxpayers will sometimes go through complicated transactions to save taxes. But the doctrine of economic substance can be used to challenge the transaction. In Sean L. Daichman and Linda E. Daichman (T.C. Memo. 2020-126) the taxpayers had income from a foreign limited partnership. The taxpayers transferred personal assets of cash and marketable securities to a wholly owned S corporation, which in turn immediately transferred those assets to a family limited partnership. A few weeks later, the taxpayers dissolved the S corporation and received the partnership interest as a liquidating distribution. In connection with the liquidation, they claimed a nonpassive loss deduction on Schedule E. The claimed nonpassive loss deduction reflected a substantially discounted value for the partnership interest versus the value of the underlying assets recently transferred to the partnership. The Court noted that the economic substance doctrine allows courts to enforce the legislative purpose of the Code by preventing taxpayers from reaping tax benefits from transactions lacking economic reality. The Court found the transactions in this case did not have economic substance.
Tip of the DayStarting a business? . . . Many individuals laid off from their regular job are doing so. Before taking the plunge ascertain if this is going to be a full-time activity or something to generate income before the next job comes along? Also evaluate your business idea objectively. Can you live off it after the pandemic is over? Biking has become more popular in recent years, but interest skyrocketed during the pandemic. In the past bike shops had a mixed history. Some did well, some struggled. But even for those that did well success generally didn't come easy. The pandemic has created a huge interest in biking, but will that interest continue after the crisis is over? It's hard to tell. Get some good, unbiased advice before taking the plunge.
October 21, 2020
NewsThe IRS is reminding return preparers to renew their Preparer Tax Identification Numbers (PTINs) now. All current PTINs will expire December 31, 2020. Anyone who prepares or helps prepare a federal tax return for compensation must have a valid PTIN from the IRS before preparing returns, and they need to include the PTIN as the identifying number on any return filed with the IRS. Tax preparers must pay a fee of $35.95 to renew or obtain a PTIN for 2021. The PTIN fee is non-refundable. For more information and links to registering, go to www.irs.gov/newsroom/irs-reminds-tax-professionals-to-renew-ptins-now-for-2021.
The United States provided written notification, dated August 18, 2020, to the Government of the Hong Kong Special Administrative Region of its termination of a reciprocal agreement to exempt from income tax certain income from the international operation of ships. This announcement provides that the termination shall take effect on January 1, 2021, and shall have effect for taxable years beginning on or after that date. For more information, see Announcement 2020-40.
Tip of the DayMind the store . . . You've seen the headlines from time to time--the bond trader who created a $8 billion loss for his bank--or some similar catastrophe. While the magnitude may be less, the impact may be just as significant for a small firm. The bookkeeper who embezzled $280,000 from a 10-person consulting firm over 18 months, the salesman who inflated his numbers to increase his commissions, etc. Don't assume the numbers from your bookkeeper are automatically correct. There are number of fairly simple tests that can be done to insure that the numbers represent the actual results. One of the easiest steps is to make sure your bank statement is reconciled each month--by someone other than the bookkeeper. Use a special bank account for electronic deposits and/or a special address for incoming checks. There are a number of relatively inexpensive steps that can be taken. If sales are up and your margins are the same you should be making more money. If not, why not? Accountants frequently compare last year's individual account totals to the current year. Percentage increases (or decreases) over a certain amount and those in larger accounts are investigated. Talk to your CPA. And use common sense.
October 20, 2020
NewsFinCEN announced that on October 14, 2020, it posted an incorrect message on its Bank Secrecy Act (BSA) E-Filing website. FinCEN removed it within 24 hours. The message incorrectly stated there was a new filing extension until December 31, 2020 for all filers of Reports of Foreign Bank and Financial Accounts (FBARs). The extension until December 31, 2020, however, is intended only as an accommodation for victims of recent natural disasters covered in FinCEN's October 6, 2020 notice ( https://www.fincen.gov/sites/default/files/shared/Notice-Extend%20FBAR%20Due%20Date%20for%202020%20Disaster%20Victims-Final%2020201005.pdf). FinCEN has coordinated with the IRS to address the concerns of filers who may have missed their filing deadline due to the October 14, 2020 message. Filers who file their 2019 calendar year FBAR by October 31, 2020 will be deemed to have timely filed. As set out in the October 6 notice, FBAR filers impacted by recent natural disasters continue to have until December 31, 2020 to file their FBARs.
Victims of the California wildfires that began on September 4 may qualify for tax relief. Following the recent disaster declaration for individual assistance issued by the FEMA, the IRS announced that affected taxpayers in certain areas will receive tax relief. Individuals and households who reside or have a business in Fresno, Los Angeles, Madera, Mendocino, San Bernardino, San Diego, and Siskiyou counties qualify for tax relief. but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after September 4, 2020, and before January 15, 2021, are granted additional time to file through January 15, 2021. This includes individual and business tax filers that had a valid extension to file their 2019 return due to run out on October 15, 2020. This relief is separate from that provided for the California wildfires that began on August 14. See IRS Announces Tax Relief for September California Wildfire Victims for details on this relief.
Victims of Hurricane Delta that began on October 6 now have until February 16, 2021 to file various individual and business tax returns and make tax payments, the IRS announced. The IRS is offering this relief to any area designated by the FEMA as qualifying for individual assistance. Currently this includes Acadia, Calcasieu, Cameron, Jefferson Davis and Vermilion parishes in Louisiana, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The tax relief postpones various tax filing and payment deadlines that occurred starting on October 6, 2020. As a result, affected individuals and businesses will have until February 16, 2021, to file returns and pay any taxes that were originally due during this period. For more details go to Tax Relief for Victims of Hurricane Delta.
Tip of the DayRenting space . . . If you've got a commercial property (or even a residential property) and you need a tenant for vacant space quickly, consider a rent concession rather than dropping the asking price below the the market. Dropping the asking rent can annoy existing tenants and have longer term effects. Offering a certain number of months of free rent or paying for alterations can be disguised and, in many cases can be less costly than dropping the rent. If possible, spread the free rent over more than one year. Get advice from a professional.
October 19, 2020
NewsThe IRS has added Lassen and Tulare counties to the areas in California that qualify for tax relief stemming from the wildfires that began on August 14. As a result individuals and households who reside or have a business in Butte, Lake, Lassen, Monterey, Napa, San Mateo, Santa Clara, Santa Cruz, Solano, Sonoma, Tulare and Yolo counties qualify for relief. Taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. Go to IRS Announces Tax Relief for California Wildfire Victims.
The IRS has issued final regulations (T.D. 9926) that provide guidance related to the withholding of tax and information reporting with respect to certain dispositions of interests in partnerships engaged in a trade or business within the United States. The final regulations affect certain foreign persons that recognize gain or loss from the sale or exchange of an interest in a partnership that is engaged in a trade or business within the United States, and persons that acquire those interests. The final regulations also affect partnerships that, directly or indirectly, have foreign persons as partners.
The IRS is required to deliver any correspondence to a taxpayer's last known address. In Jill Beth Safedoff (T.C. Memo. 2020-125) the taxpayer aruged that the IRS did not properly "serve" the notice of filing of tax lien upon her. She asserted that the settlement officer failed to verify that the IRS satisfied the notice rquirements of Sec. 6320. The Court noted that the NFTL shall be sent to the taxpayer's last known address. A taxpayer's last known address is "the address that appears on the taxpayer's most recently filed and properly processed Federal tax return, unless the IRS is given clear and concise notification of a different address." The Court found the taxpayer failed to provide the IRS sufficient notification of any change of address. The Court found the notice was properly served.
Tip of the DayCheaper to hold them . . . In the past we've said it's far cheaper to retain a customer than find a new one. The same is often true of an employee. You should make every effort to retain employees. That could mean increasing the pay scale, flexible hours, retirement plan, sick day allowance, paying toward health insurance, etc. The cost to get a new employee includes management time to interview, the cost of ads or an agency, and, perhaps most importantly, the lower productivity of the work until he becomes familiar with the job. Losing a longer time employee can also create an impetus of other employees to leave. This is particularly tough time for many businesses. Most employees aren't looking for a raise, just a secure job. But keeping an employee when business is down 50 percent may not be feasible. There may be options such as work sharing, a shortened workweek, etc. Laying off an employee may be necessary, but consider your options carefully and talk to a professional and your accountant or finance person.
October 16, 2020
NewsIn response to the COVID-19 Pandemic and solely to implement the following provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), until further notice, the IRS is implementing the temporary procedures described below for digital transmission of Form 1139 and Form 1045. The IRS has released a number of frequently asked questions to assist taxpayers looking to claim quick refunds for prior year minimum tax liability and net operating loss deductions. Go to Temporary Procedures to Fax Certain Forms 1139 and 1045.
The Small Business Administration has updated its list of frequently asked questions on the Paycheck Protection Program (PPP) loan forgiveness and the Economic Injury Disaster Loans. To see the complete list go to https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-FAQs.pdf.
Tip of the DayTired of COVID-19? . . . Virtually everyone is. But it doesn't look like it's going away soon and we'll be feeling the economic effects for some time. How long is anyone's guess. If you plan for dealing with the pandemic is working, don't drop your guard. Make sure you can handle changes. If you've been dealing with the hope it'll be gone soon, you should think about changing your strategy. The economists at the Federal Reserve believe it will be several years before we've fully recovered. Let's hope they're wrong, but be prepared to deal with this on a long term basis.
October 15, 2020
NewsThe Social Security Administration (SSA) has released the cost-of-living adjustments for 2021. Based on the increase in the Consumer Price Index (CPI-W) for the fiscal year ended September 30, 2020, benefits will increase by 1.3 percent. The maximum taxable earnings base for Social Security will increase to $142,800 from $137,700. The reduction in benefits in the year an individual who reaches full retirement age will begin at $50,520. The IRS has issued final regulations (T.D. 9927) under Sections 1502 and 1503 of the Code. These regulations provide guidance implementing recent statutory amendments to Section 172 of the Code relating to the absorption of consolidated net operating loss (CNOL) carryovers and carrybacks. These regulations also update regulations applicable to consolidated groups that include both life insurance companies and other companies to reflect statutory changes. These regulations affect corporations that file consolidated returns.
Tip of the DayConsider bank services carefully . . . Banks, like many other businesses have various operations that have different margins. The basic bank services such as a checking account and the associated services such as wire transfers are generally very competitive. The real money is in selling you investments such as mutual funds, insurance, etc. Niche services such as credit card insurance, are often the most profitable. They're good news for the bank, but frequently overpriced and/or not necessary. Do some research and comparison shopping before committing.
Copyright 2020 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536