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.
The organization in LTR 201649017 was found to be pursuing too narrow of a business interest to qualify as an exempt business league under IRC §501(c)(6), thus its request for exemption was denied.
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Read MoreUpdate: The 21st Century Cures Act was signed into law on December 13.
The U.S. Senate has approved the 21st Century Cures Act, agreeing to the House amendments to the Act. The bill contains, among numerous other provisions, a provision (Act Section 18001) that will exempt certain small business health reimbursement arrangements (HRAs), including those reimbursing private insurance premiums, from the $100 per day penalty for a non-compliant group health plan provided by adding a new exception to IRC §9831. The President has announced that he will sign the bill.
In Notice 2013-54 the IRS held that an employer that reimburses individual insurance policies would generally be found to have a group health plan that failed to comply with the requirements of the Affordable Care Act. Under IRC §4980D an employer operating a non-compliant plan would be subject to a $100 penalty per day per affected employee for the period the plan was operated.
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The IRS has issued the early release copies of the 2017 percentage method tables for income tax withholding in Notice 1036.
The tables are to be used to compute the taxes to be withheld from wages paid in 2017 by employers using the percentage method tables. They will eventually be published in Circular E for 2017.
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Read MoreTemporary (TD 9799) and identical proposed regulations (REG-102952-16) have been released by the IRS to implement the expanded due diligence rules imposed on tax preparers as part of the Protecting Americans from Tax Hikes Act of 2015. The PATH Act expanded the preparer due diligence requirements that originally applied to returns claiming an Earned Income Tax Credit (EITC), first added by Taxpayer Relief Act of 1997, to apply to returns claiming the Child Tax Credit (CTC), Additional Child Tax Credit (ACTC) and American Opportunity Tax Credit (AOTC).
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Read MoreThe IRS has adopted final regulations (TD 9798) to increase fees for entering into installment agreements and add new levels for determining a fee in proposed regulations (REG-108792-16). The changes take effect on January 1, 2017.
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Read MoreDue to an increase in phishing attacks directed at preparers, the IRS announced that many of those who have e-services access to transcripts and have used the service will in the past year will need to revalidate their accounts or risk losing access (IRS Website, Important Update about Your e-Services Account). However, those who registered after May 2016 will not be required to validate their identity, since the IRS has been using the “Secure Access” validation system since that date.
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Read MoreThe special rule for exclusion from income of cancellation of debt income related to the discharge of certain home mortgage debt (IRC §108(a)(1)(E)) was only extended by Congress through December 31, 2016 in the PATH Act. However, Congress did provide that the relief would apply to discharges after that date if certain events took place before December 31, 2016 that had the effect of entering into an agreement to cancel the debt at some later date.
In Notice 2016-72 the IRS provides guidance about how that “special rule” would apply to the Federal Housing Finance Agency’s (FHFA’s) principal reduction modification program (PRMP) and the Home Affordable Modification Program (HAMP).
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Read MoreA divided Tax Court has overruled its previous decision in the BMC Software, Inc. v. Commissioner, 141 TC No. 5, a case that was overturned on appeal by the Fifth Circuit, and found that accounts receivable established in a Revenue Procedure 99-32 closing agreement didn’t create related party indebtedness in the case of Analog Devices Inc., et al, v. Commissioner, 147 TC No. 15. The Court therefore allowed the company’s entire dividends received deduction under IRC §965.
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Read MoreThe Department of Justice has filed in the United States District for the Northern District of California for a “John Doe” summons to be issued to Coinbase, Inc. for a list of all United States persons who conducted transactions in a “convertible virtual currency” between January 1, 2013 and December 31, 2015 (In the Matter of the Tax Liabilities of John Does; No. 3:16-cv-06658, USDC Northern California). The key “convertible virtual currency” in question in this matter is Bitcoin.
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Read MoreIn Revenue Procedure 2016-57 the IRS has announced a new fast-track mediation program for small businesses and self-employed individuals, replacing the Small Business/Self-Employed Division Appeals FTM program found in Revenue Procedure 2003-41). The new program, the SB/SE fast-track mediation collection program (FTMC), replaces the old FTM program.
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Read MoreThe taxpayer in the case of The Malulani Group, Limited and Subsidiary v. Commissioner, TC Memo 2016-209 was facing a problem with its attempted §1031 exchange—it was unable to locate properties to identify as replacement properties as the 45-day period for doing in its deferred exchange was running down. The taxpayer decided to identify properties held by a related entity (MBL) as properties to be acquired in order to complete the transaction.
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Read MoreIf a taxpayer ends up with a worthless security, the loss from writing off that security is treated as a capital loss. While, generally, to have a capital gain or loss there must be a sale, IRC §165(g) provides a special rule for worthless securities.
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Read MoreThe IRS has announced an extension of the due date for providing Forms 1095-B and 1095-C to individuals in Notice 2016-70. The Forms 1095-B and 1095-C are used to report to individuals whether they possessed minimum essential coverage (MEC) for the year and, for employees of applicable large employers, whether they had an offer of MEC that provided minimum value as well as information to determine that offered coverage was affordable.
Individuals use that information to determine if they are subject to a shared responsibility payment for failure to have MEC for some or all of the year, as well as whether the individual qualifies for a tax credit that offsets a portion of the cost of any insurance they obtained from the applicable exchange.
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Read MoreThe IRS has granted educational institutions an additional one-year reprieve from penalties if they fail to provide information on the amounts actually paid to the institution for the year in question on Form 1098-T and rather provide information solely on the amounts billed to the student. No penalties will be assessed against institutions that report tuition billed rather than tuition paid on Forms 1098-T for 2017 per Announcement 2016-42.
Announcement 2016-17 originally provided a one year reprieve for 2016 Forms 1098-T from the law change enacted as part of the Protecting Americans from Tax Hikes Act of 2015.
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Read MoreThe “anti-Cohan” rule found in IRC §274(d) cost the taxpayer a deduction for expenses related to use of an Aston Martin in the case of Roy v. Commissioner, TC Summary Opinion 2016-77.
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Read MoreThe IRS has issued final regulations TD 9793 that eliminates the “36 month” non-payment testing period for certain lenders to issue Forms 1099C. The IRS believes that this rule had created confusion regarding the proper reporting of cancellation of debt income.
A taxpayer has cancellation of debt income generally upon the occurrence of the first “identifiable event” where it is clear that the lender has no intention of attempting to enforce collection on the debt and the borrower has no intention to repay the debt.
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Read MoreIn PLR 201645017 the IRS denied tax-exempt status to a religious organization that established a coffee shop that it planned to use to spread a religious message to members of the community. The exemption was denied because the IRS determined, under the facts of the case, that a substantial portion of the organization’s operations would be devoted to operating the coffee shop in a commercial manner.
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Read MoreTo most practitioners, at first glance the facts in the case of Fitzpatrick v. Commissioner, T.C. Memo. 2016-199 would appear to doom Christina Fitzpatrick to being liable for the 100% trust fund penalty related to unpaid payroll taxes for the wine bar that was partially owned by her husband and for which she worked.
These “bad facts” included the fact that:
However, despite that apparent level of control, the Tax Court found that Christina was not a responsible party based on other facts in the case.
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Read MoreDoes the fact that a taxpayer, by agreeing to defer receiving compensation in a year, earned the right to a 25% employer match in three years conditioned on the employee continuing to provide substantial services until that date mean the taxpayer now had a “substantial risk of forfeiture”? The question arises when looking at whether, under Reg. §1.409A-1(d)(1), this is an allowable deferral of income under IRC §409A.
In Chief Counsel Advice 201645012 the issue was considered.
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Read MoreScams to steal information from tax professionals just keep coming, and the latest is a phishing email detailed in IRS News Release IR-2016-145. This phishing scam is looking to obtain e-services credentials for tax professionals and, like most good phishing scams, the email looks just credible enough to get someone not paying attention (or simply not aware of how email and phishing works) to provide the requested information.
A good phishing email must look like something the recipient would expect to see—and often takes advantage of a mark’s awareness that something has changed, relating the email to that change. In recent years that’s quite often been to cloak the email scam in the guise of increased security (and, yes, I’m sure the scammers find the irony amusing).
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