Online tax discussion groups, many of which are sponsored by state CPA societies for their members, offer useful places to discuss tax issues and become aware of what is going on in taxes.  It was when participating in such a group discussion that I became aware of a theory being proposed to allow working around the state and local tax deduction cap based on the proposed regulations[1] issued by the IRS in December regarding payments to charitable organizations not treated as charitable contributions under Proposed Reg. §1.162-15.

A topic that regularly comes up year after year in Tax Court cases is the issue of whether a document meets the requirements for protection under the timely mailed, timely filed rule found in IRC §7502(a).  In the case of Seely v. Commissioner, TC Memo 2020-6,[1] we have one of the infrequent taxpayer victories when faced with such a challenge.

A series of problems led to the Tax Court agreeing with the IRS that an employee stock ownership plan (ESOP) and trust (ESOT) were not qualified in the case of Ed Thielking Inc. v. Commissioner, TC Memo 2020-5.[1]

The Tax Court issued its third decision in two days dealing primarily with penalties, and the second published case on the matter, in the case of Frost v. Commissioner, 154 TC No. 2.[1]

The case generally is a rather standard case where the taxpayer fails to have records to back up deductions claimed on his Schedule C, as well as failing to show he had basis in the partnership in which he had claimed losses.

After announcing the start of business electronic filing on a Friday, the IRS came back from the weekend on Monday to give taxpayers the date when individual returns will be accepted.[1] However, while the announcements may have come only three days apart, the actual starting dates are much further apart.

While business returns will be accepted by the IRS on January 7,[2] the agency will not begin accepting individual returns until January 27, 2020.[3]

In the case of United States v. Kohls, Case No. 3:18-cv-00225, US DC SD Ohio[1] the executor of the estate argued that the IRS had failed to file its action timely.  The IRS was looking to collect over $320,000 in unpaid estate taxes, penalties and interest due on the estate tax return.  The issue turns on the date when the tax had been assessed, and whether the IRS was still within the time period imposed under IRC §6502(a)(1) to collect the tax following assessment.

The IRS has posted on their website that the agency will begin accepting electronically filed business returns on Tuesday, January 7, 2020.[1]  CPAs will need to watch their tax software to determine when their vendor has updated their software to be able to handle the filings.

The site still lists the beginning date for individual returns as to be determined early in 2020. Very likely the problem for individual returns involves modifications that will need to be taken into account due to the law changes made by Congress late in 2019.

The IRS quietly added more guidance in the virtual currency arena to their frequently asked questions (FAQ), this time adding new questions and answers related to how charities should deal with the receipt of a virtual currency donation, as well as how the donor deals with the donation.[1]

On the last day of 2019, the IRS released the updated auto mileage rates for 2020 in Notice 2020-05.[1]

The standard mileage rates for 2020 are:

• Business use: 57.5 cents per mile;

• Charitable mileage rate: 14 cents per mile; and

• Medical care and limited cases where moving expenses are still deductible: 17 cents per mile.

The Ninth Circuit Court of Appeals affirmed the Tax Court’s 2017 decision in the case of Messina et ux. et al. v. Commissioner.[1] The appellate decision explains why the IRS is allowed to argue substance over form for a transaction, but that argument will not generally be helpful for the taxpayer—as it failed to be in this case.

With the changes made to the Form W-4 for 2020, the IRS has issued Notice 2020-03[1] to give instructions on how to deal with withholding on periodic payments for pensions, annuities and certain other deferred income under IRC §3405(a).

The IRS has released a new set of proposed regulations on charitable contributions, quid pro quo issues and state tax deductions.[1]  But, most interestingly, these regulations omit any discussion of IRS actions to deal with state passthrough tax workarounds to the $10,000 limit on the deduction of most state and local taxes by individuals.

The IRS has decided to push back by one year the requirement that all partnerships report partners’ capital on Schedules K-1 on the tax basis of accounting in Notice 2019-66.[1]  The IRS had originally only provided the option to report capital on the tax basis of accounting on the draft Form 1065 for 2019.

The IRS received a number of comments on that requirement that indicated both that there was not a clear definition of the tax basis of accounting for these purposes and that many taxpayers would be unable to prepare such returns either at all for 2019 or at least not until much later than their partners expected to receive the K-1s.