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.
This summary is taken from the summary of the proposed Protecting Americans from Tax Hikes Act of 2016 that was posted on the website of the House Ways & Means Committee on December 16, 2015. At the time this was prepared the law awaited action in both Houses of Congress, but for the moment it appears very likely this will be the bill that is finally passed.
Read MoreIn News Release 2015-136 the IRS has announced an initiative to contact businesses the service identifies as “at risk” for falling behind in payroll tax deposits.
The program, called the “Early Interaction Initiative”, is described in the release as noted below:
The initiative is designed to help employers stay in compliance and avoid needless interest and penalty charges. The initiative will seek to identify employers who appear to be falling behind on their tax payments even before an employment tax return is filed. The IRS will offer helpful information and guidance through letters, automated phone messages, other communications and in some instances, a visit from an IRS revenue officer.
The IRS describes how the program will operate as follows:
…[T]he new IRS initiative will monitor deposit patterns and identify employers whose payments decline or are late. Employers identified under this initiative may receive a letter reminding them of their payroll tax responsibilities and asking that they contact the IRS to discuss the situation. In addition, some employers may receive automated phone messages from the IRS providing information and assistance. Where appropriate, an IRS revenue officer will also contact some of these employers at their place of business.
As was noted earlier in 2015, the IRS has now provided a transcript alternative to the issuance of closing letters for Forms 706. The details of obtaining the transcript is found on the IRS website at https://www.irs.gov/irspup/Businesses/Small-Businesses-%26-Self-Employed/Transcripts-in-Lieu-of-Estate-Tax-Closing-Letters.
The IRS had earlier announced that the agency would no longer be issuing closing letters to estates that had filed Form 706 for forms filed on or after June 1, 2015. While the initial announcement had indicated there would be a method to request a closing letter, the IRS later suggested at an ABA conference that it would create a transcript system to replace estate closing letters.
Read MoreIn Notice 2015-86 the IRS issued guidance regarding the effect of the U.S. Supreme Court’s ruling in Obergefell v. Hodges on retirement plans and health and welfare benefit plans.
Generally the ruling notes that since the federal government was required to recognize same sex marriages that were valid at the time entered to following 2013’s decision by the United States Supreme Court in the case of United States v. Windsor there is a very limited impact of the Obergefell decision.
Read MoreAdvisers at times treat the statute of limitations related to tax returns as being broader than it actually is, believing that once a year is closed there is no ability for either the IRS or a taxpayer to make a change to an item on that return. As PLR 201548006 points out, that’s not the case. And, in this case, that works out to the taxpayer’s advantage.
Read MoreIn the case of Dorrance v. United States, CA9, 116 AFTR 2d ¶2015-5505, reversing DC Arizona, 111 AFTR 2d 2013-1280 a divided panel concluded that stock received from demutualization of an insurance company has a basis of zero. Note that this viewpoint is at odds with the holding of Federal Circuit Court of Appeals in the case of Fisher v. United States, 102 AFTR 2d 2008-5608 (2008), affd 105 AFTR 2d 2010-35 (2009) creating a split in the circuits on this issue.
Read MoreThe IRS took the interesting step of formally “blessing” a private letter ruling as “still valid” with regard to other taxpayers in Chief Counsel Advice 201549024. That is interesting because a private letter ruling is only binding with regard to the taxpayer who requested it, but it illustrates the fact that this “somewhat but not quite formal” guidance is still important to understand.
The issue in this case relates to how enterprises deal with expenses related to Enterprise Resource Planning (ERP) software. The IRS had issued PLR 200236028 that provided information on what the IRS position was the requirements to capitalize such costs and the periods over which the costs could be recovered.
Read MoreOn December 4, 2015 the President signed the Fixing America’s Surface Transportation Act (FAST Act) which contained a few tax provisions, including one reversing a change made in the original temporary transportation bill passed by Congress.
In Revenue Procedure 2015-57 the IRS provided relief to certain taxpayers with student loans.
Read MoreIn the case of Neighborhood Improvement Projects, LLC v. United States, case No. 2:15-cv-00523, 2015 TNT 230-21, the US District Court for the District of Arizona found that the IRS’s lien was superior to that held by a homeowner’s association on the property.
Read MoreLife is unfair, and the tax law often becomes part of that unfairness. But the mere fact that a result may be unfair is not enough to change its result as the taxpayer discovered in the case of Vargas v. Commissioner, TC Summary Opinion 2015-69.
Mr. Vargas filed a married filing separate return for 2013, reporting total adjusted gross income of $67,045, exemptions for himself and his son of $7,800 and itemized deductions that included $40,978 of employee business expenses. Mr. Vargas was a pilot flying internationally was expected to incur significant unreimbursed expenses.
Read MoreThe IRS has reminded those participating in the electronic filing program about their responsibilities with regard to their EFIN number in Fact Sheet FS-2015-27.
The IRS has expressed concern about legitimate EFIN accounts being “hijacked” by those perpetrating tax refund fraud by filing fraudulent returns and has indicated that the agency expects EFIN holders to take actions to secure and monitor their accounts at IRS e-services.
Read MoreThe IRS appears to be continuing to show its displeasure with attempts to use IRA funds to purchase businesses, most recently in PLR 201547010. The IRS denied the taxpayer relief for failing to complete a rollover of IRA funds within 60 days.
Read MoreIn the case of Mathews v. Commissioner, TC Memo 2015-225 the taxpayer protested that the IRS had abused its discretion by counting the taxpayer’s veterans’ disability payment as income in determining his ability to pay when deciding on the amount the taxpayer could pay under an installment agreement for unpaid taxes.
The taxpayer owed taxes from eight separate years running from 2000 to 2011. The IRS issued a notice of tax lien and the taxpayer for a collection due process hearing.
Read MoreIn Field Attorney Advice 20154601F the IRS critiqued a taxpayer’s application of the partial disposition rules contained in the proposed tangible property regulations at Proposed Reg. §1.168(i)-8 which are very similar to those contained in the currently applicable final regulations.
In the case in question the taxpayer was attempting to use those regulations to claim a loss on partial dispositions of buildings the taxpayer owned using the late partial disposition election available for a change in method to the revised tangible property regulations.
Read MoreIn Notice 2015-82 the IRS has increased the invoice cost limits for taxpayers without an applicable financial statement to $2,500 for the de minimis safe harbor under the tangible property regulations that took effect for tax years beginning in 2014.
Under Reg. §1.263(a)-1(f) a taxpayer may annually elect to apply the de minimis provisions that, effectively, “bless” a taxpayer’s capitalization policy up to certain limits on a per invoice level.
Read MoreThe IRS, along with certain payroll services, will be testing a 16 character W-2 Verification Code for the 2015 filing season the IRS announced on their website at https://www.irs.gov/Individuals/IRS-Tests-W-2-Verification-Code.
An important fact to note is that the IRS initially will not be doing anything with this code except to “test-and-learn” to see if it is useful in determining the integrity of W-2 information. Thus, to put it a bit differently, using or not using the code is not going to do anything for the moment to improve the chances that a taxpayer will not be subject to ID theft.
Read MoreA recent Arkansas U.S. District Court case involved the court resolving a number of not often raised in court questions regarding the interaction of the passive activity rules, the real estate professional classification, S corporations and stock provided to an employee that was subject to restrictions triggering treatment under IRC §83(b). The case in question is the case of Stanley v. United States, 116 AFTR2d ¶2015-5419, Case No. 5:14-CV-05236, U.S.D.C. Western District of Arkansas.
The issues arose regarding Mr. and Mrs. Stanley's claimed deductions for losses on Schedule E that arose from real estate related activities. Mr. Stanley took the position that he qualified as a real estate professional and that all of the various items reported on Schedule E were properly classified as a single activity under the passive activity rules.
Read MoreIn Chief Counsel Advice 201547006 the IRS discusses the condition under which an employer can exclude an amount from an employee’s income for payments made through the employee’s spouse’s group health plan.
Read MoreIn a pair of cases (Trout v. Commissioner, TC Summary Opinion 2015-66 and Podraza v. Commissioner, TC Summary Opinion 2015-67) the Tax Court applied the standard of “placed in service” to determine if the taxpayers in each case properly claimed a credit for purchase of an electric vehicle.
Read More