The IRS addressed a quirky interaction of bonus depreciation under IRC §168(k) and the luxury auto rules under IRC §280F in Revenue Procedure 2019-13. Absent this safe harbor method, taxpayers who opted not to elect out of §168(k) bonus depreciation for an automobile limited by §280F would find any basis in the automobile in excess of $18,000 would not be deductible until the end of the standard recovery period, which would begin in the seventh year after acquiring the vehicle.

Under the Tax Cuts and Jobs Act, a taxpayer is allowed to deduct 100% of the cost of qualifying assets in the year the asset is placed in service for assets placed in service between September 27, 2017, and January 1, 2023.[1] However, under the provisions most often referred to as the "luxury auto rules" a taxpayer's depreciation and/or §179 deduction for covered vehicles is capped at $10,000 for the first year.[2] This amount is adjusted annually for inflation.

Traveling is always a bit stressful, but it’s even worse than normal if something that was in your checked baggage isn’t in there when you arrive at your destination.  In the case of Schlieker v. US Transportation Security Administration, DC Colorado, No. 1:17-cv-01284 the items that turned up missing were tax documents that Mr. Schlieker claimed cost him a $5,000 refund.

Mr. Schlieker had checked bags for a flight from Phoenix to Denver in February of 2016.  His complaint indicated that he had “multiple files, folders and paperwork” that related to his tax return for 2015 in his luggage when he checked it.  However, when he arrived in Denver he discovered that the paperwork was no longer in his bag.  Rather, he had a notice from the TSA that his bags had been opened and inspected.  He concluded the paperwork had simply not been repacked when the TSA completed its inspection of his bag.

In Information Letter 2018-33 the IRS provided some guidance on situations when an employee may recover amounts transferred by error to an employee’s health savings account (HSA).

As a general rule, an individual’s interest in an HSA is nonforfeitable.[1]  However, the IRS in Notice 2008-59 provided for limited circumstances where an employer who funds an employee’s HSA account in error can recover the funds.

The IRS has issued a notice on their website (“IRS Update on Shutdown Impact on Tax Court Cases; Important Information for Taxpayers, Tax Professionals with Pending Cases”) dealing with issues that arise with taxpayers for whom the shutdown has created issues with their tax situation.  Although the shutdown has now ended (at least temporarily), many issues will continue for quite a period after operations resume at the Tax Court.

The final regulations under §199A state that the IRS may provide for methods of computing taxable wages.[1]  At the same time as the final regulations were issued, the IRS finalized a revenue procedure to provide for acceptable methods of computing W-2 wages.

Revenue Procedure 2019-11 provides for methods of computing W-2 wages for purposes of IRC §199A.  The revenue procedure was issued during 2018 in draft form, and the final version has no significant changes from the original proposed version.

New York has published guidance on how it will handle out of state sellers following the Wayfair decision in Notice N-19-1.  The Notice provides:

A business that had no physical presence in New York State but has both made more than $300,000 in sales of tangible personal property delivered in the state and conducted more than 100 sales of tangible personal property delivered in the state in the immediately preceding four sales tax quarters is required to register as a sales tax vendor, and collect and timely remit the applicable state and local sales tax. 1 The sales tax quarters are: March 1 through May 31, June 1 through August 31, September 1 through November 30, and December 1 through February 28/29.

Note that, unlike South Dakota’s requirement to collect the tax if a taxpayer has over $200,000 in sales or 100 transactions, in this case, the seller has to have both $300,000 in sales and more than 100 sales in a year.  However, while New York’s standard is more forgiving here than South Dakota’s, the announcement is not all good news for out of state sellers.

Update (March 22, 2019) - The IRS has now revised this relief to drop the percentage to 80% from the 85% provided in the Notice discussed below. See Special 2018 Underpayment Penalty Relief Expanded to Apply to Those That Paid in At Least 80% of Total Tax Due.

The IRS has announced a somewhat modest waiver of underpayments of 2018 estimated taxes in Notice 2019-11.

Due to changes in the tax law under the Tax Cuts and Jobs Act, the IRS modified the withholding tables and calculations. However, many employees simply used the withholding allowances they had used in the past rather than going through the IRS withholding calculator.  As well, the calculator does not necessary properly take all situations into account.

The US Supreme Court has agreed to look at under what circumstances a state can impose its income tax on a trust by granting certiorari in the case of North Carolina Dept. of Revenue v. Kaestner Family Trust, Case No. 18-457.

Last July the North Carolina Supreme Court decided that the state had no right to impose its income tax on a trust that, while it had a North Carolina beneficiary, was established in New York, did not have a North Carolina trustee and had no property in North Carolina.  (See the prior article on Current Federal Tax Developments that discussed the original case along with another case on state taxation of trusts at Two States Find Their State’s Statutes for Taxing Trusts Violate Due Process Clause.)

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The IRS announced that the agency will reopen the Income Verification Express Program and some user-fee based program (IRS Statement - IRS Reopens IVES, Some Fee-based Programs, www.irs.gov).  These programs had been suspended during the government shutdown.

The IRS statement notes the reasons why the agency is reopening these programs:

While the IRS remains closed during the partial government shutdown, the agency recognizes the immediate hardship incurred if information is not available through the Income Verification Express Service (IVES) program as well as by taxpayers who have been unable to certify their residency in the United States for certain tax treaty benefits or by those who have been unable to obtain photocopies of tax returns.

Photo by Finn Hackshaw on Unsplash