Keeping CPAs Up to Date on Tax Matters
A site devoted to articles on current developments in federal taxes geared toward CPAs in tax practice.
In Action on Decision 2015-01 the IRS announced that it will not follow the Tax Court’s decision in four cases that were decided on the same day in 2004 that involved the interaction of the bankruptcy code and taxation of partners on cancellation of debt income.
Read MoreWhen a LLC “checks the box” by filing a Form 2553 to elect to be treated as a corporation and simultaneously elect S status, it must live by all the S corporation restrictions. That includes the restriction on only having one class of “stock” issued by the entity during the time it wishes to remain an S corporation.
In reality, there is no such federal tax entity as an “LLC”—the structure was originally designed when the first statute was adopted by Wyoming decades ago to be an entity for which there was no federal tax treatment specifically mandated. To this day the IRC does not have provisions outlining the tax treatment of “LLCs” but rather, under the check the box regulations found at Reg. §301.7701‑2 the entity is treated for federal tax purposes as one of the entities that the IRC knows about.
Read MoreThe concept of “placed in service” for purposes of beginning to deduct depreciation is often a tricky one to deal with in real life, and the date of placing an item in service may not be as simple as some might believe. Certainly, in the case of Stine, LLC v. United States, 115 AFTR 2d ¶ 2015-381, DC LA, the IRS’s view of a “bright line” test based on a when a building was open for business was rejected by the Court.
Read MoreIn press release TIGTA 2015-01 J. Russell George, Treasury Inspector General for Taxpayer Administration (TIGTA) warned of the threat of phone scams where the individual claims to represent the Internal Revenue Service in order to defraud individuals.
Phone scams have become the new favorite tool for those running scams since some individuals may mistakenly believe they are safe from scams and financial risks if they avoid online interactions. The criminal generally uses information obtained about the mark from various sources to convince them that they represent the IRS and, often, that unless the mark does something immediately (like give a credit card number, buy a prepaid debit card to send to the government, etc.) some dire result will occur.
Read MoreThe IRS announced relief for certain taxpayers who end up having to repay amounts related to advance payment of the premium tax credit in Notice 2015-9. The IRS announced that the relief will apply to liabilities under IRC §6651(a)(2) for late payment of a balance due for taxpayers unable to pay the balance due and under IRC §6654(a) for underpayment of estimated taxes. The relief will only apply to 2014 taxes.
Read MoreWhat happens if your IRA runs afoul of (or your custodian believes it runs afoul of) your state’s unclaimed property law and the account is forwarded to the state? Well, technically your funds are no longer held by an IRA custodian—a problem, as that creates a deemed distribution of the funds in the IRA.
This problem appears to be what confronted the taxpayer in PLR 201504021. The facts indicate that the IRA custodian, without the taxpayer’s knowledge, transferred the taxpayer’s account to “Division M of State N.” While the exact details are, as required, redacted, it seems reasonable to assume that “Division M” was the state’s unclaimed property department.
Read MoreThe IRS, in Chief Counsel Memorandum 201504011, decided that a class of taxpayers is effectively “exempt” from the provisions of IRC §263A. But it turns out not to be a win for these taxpayers.
Because the group of taxpayers who are found to not be subject to the rules of §263A are those who are growing marijuana under various state laws that make their business legal at the state law level, although the production and sale of the product remains illegal at the federal level.
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In order to qualify for “real estate professional” status for the taxpayer’s rental properties, the taxpayer must meet certain participation requirements in a real estate trade or business.
Read MoreIn the case of Perez v. Commissioner, 144 TC No. 4, the Tax Court took care immediately upon starting the opinion section by explaining what it wasn’t deciding, a somewhat unusual step. But, then again, this was a somewhat unusual case.
The issue in this case was whether Nichelle Perez had taxable income for payment she received for undergoing procedures to donate her eggs to infertile couples.
Read MoreAs Neil Sadaka crooned, breaking up is hard to do. And it certainly proved so for an accounting firm. The acrimonious breakup did result in a tax case, this time looking at liability for filing a false information return under IRC §7434.
The Sixth Circuit court of appeals was called by both parties to review decisions of the U.S. District Court in the case of Pitcher and Enders v. Waldman, et al, CA6, Case Nos. 14-3369/14-3392, on appeal from the U.S District Court for the Southern District of Ohio.
Read MoreThe turtle is not often referred to in tax discussions, but the Tax Court compared the taxpayer to a turtle in rendering its decision in the case of Jacobs v. Commissioner, TC Summary Opinion 2015-3.
Read MoreQualification for claiming the foreign tax credit was the key issue for Joel Evans in the case of Evans v. Commissioner, TC Memo 2015-12. Mr. Evans worked in the oil industry. While he was from Louisiana, he often was assigned to work overseas.
Read MoreIn Revenue Procedure 2015-15 the IRS provided the 2015 monthly bronze premium amounts for use in computing the premium based limitations on the shared responsibility payments under IRC §5000A.
Read MoreJust prior to the deluge of accounting method change requests triggered by the capitalization/repair regulations made final in 2014 the IRS has issued a newly consolidated and revised pair of Revenue Procedures dealing with changes in accounting methods.
Read MoreMistakes happen, but in this case the IRS allowed a tax advisers a “get of jail (not quite) free” card with regard to giving bad advice to a client due to an error in computing the taxpayer’s taxable income when preparing a return. In PLR 201503005 the IRS granted the taxpayer the right to revoke an election out of the installment basis of accounting.
Read MoreA number of hurdles must be cleared to obtain a deduction for alimony for federal tax purposes. In the case of Becker v. Commissioner, TC Summary Opinion 2015-2, the taxpayer ran afoul of the “pay child support first” provision found at IRC §71(c)(3).
Read MoreWhen discussing “Section 530 relief” regarding payroll tax issues we are not, as many initially assume discussing §530 of the Internal Revenue Code (which actually deals with Coverdell Education Savings Accounts). Rather that term refers to a provision in the Revenue Act of 1978 found in Section 530 of the act that provides relief from liability in certain cases from payroll tax liabilities.
Read MoreIn the case of Hartland Management Services, et al v. Commissioner, TC Memo 2015-8, the taxpayer argued that since the IRS put the wrong years on Forms 872, Consent to Extend the Time to Assess Tax, (which the taxpayer signed) the statute of limitations for the real years under examination had expired by the time the IRS actually issued notices of deficiency.
Read MoreIn Notice 2015-4 the IRS provided information on property qualifying for the credit under IRC §48 for placing in service small wind energy property.
Read MoreAn important new notice was issued on February 18 that provides relief for many affected taxpayers through June 30, 2015. See the write-up elsewhere on this site regarding Notice 2015-17.
Much confusion and angst has resulted from the recent discovery by some of the impact of a ruling issued by the IRS (with an identical DOL ruling) in September of 2013 that, for most employers, makes impractical the reimbursement of individual health policies.
This article tries to outline what the position of the agencies are, the underlying law that resulted in these rulings, plans that do and do not run afoul of these rules and how to deal with a client that has been operating in ignorance of these rules and running an impermissible arrangement.
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