Western CPE Blog
Breaking tax and accounting news and analysis from the experts at Western CPE.
Guest Post: Coronavirus Tax Summary
By: Edited ByDanny C. SantucciDisclaimer at bottom of summaryDanny Santucci, BA, JD, is a prolific author on tax and finance. Danny has 43 Self-Study courses with Western CPE. His practice emphasizes business taxa-tion, real estate law, and estate planning. Speaking to more than 100 groups nationally each year, he is known for spicing up his extensive expertise with an incredible sense of humor.Coronavirus Aid, Relief, and Economic Security (CARES) ActCoronavirus Aid, Relief, and Economic Security (CARES) Act, with a $2.2 trillion price tag, was signed into law on March 27, 2020, by President Trump. CARES will have a major impact on …
THE CARES ACT STIMULUS PAYMENT
By: The Coronavirus has infected our life in many ways. Family and friends are sick, quarantined or under a stay-in-place order. The stock market has crashed. The kids are out of school. Restaurants and shopping malls are closed. More than three million unemployment claims were filed in one week. Enough of the cable news . . .After a lot of talk and ten versions (one marked “final, final), Congress did something. President Trump signed into law on March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act, (the CARES Act, HR 748), a $2 trillion stimulus package to mitigate the …
CLIENT LETTER — STIMULUS PAYMENT
Dear Client,The Coronavirus has infected our life in many ways. Family and friends are sick, quarantined or under a stay-in-place order. The stock market has crashed. The kids are out of school. Restaurants and shopping malls are closed. More than three million unemployment claims were filed in one week. Enough of the cable news . . . If you are laid off or you have closed your business, you know the details.After a lot of talk, Congress did something. President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, (CARES Act), a $2 trillion stimulus package to …
MOST EMPLOYERS REQUIRED TO PAY SICK LEAVE IF ABSENCE RELATED TO CORONAVIRUS
Revised March 30, 2020MOST EMPLOYERS REQUIRED TO PAY SICK LEAVE IF ABSENCE RELATED TO CORONAVIRUS (IR-2020-57)The US has more than 65,000 (changing by the hour) people diagnosed with Coronavirus (COVID-19). Many more have symptoms, are quarantined for exposure, and are seeking medical testing. As a start to helping those affected (part one of two or maybe three stimulus bills according to Speaker Pelosi), Congress passed a sick leave bill.Tax practitioner planning. Apologies for the length of these abbreviated facts on the new sick leave provisions. There are more details. This is a summary.FOR YOU AND YOUR BUSINESS CLIENTSThe Families First Coronavirus Response Act (FFCRA), signed into …
The IRS Extends COVID-19 Pandemic Relief
The IRS extended COVID-19 pandemic relief for tax payments due on Apr. 15, 2020 until Jul. 15, 2020 in response to the ongoing Coronavirus Diseases 2019. The grant of relief is for PAYMENTS ONLY. It does not extend the filing deadline dates. Any person with a Federal income tax payment due on April 15, 2020 to be an affected person. Payments of federal income, including self employment tax, due on April 15, 2020 are postponed to July 15, 2020.For any postponed payments,No penalties,No interest orNo additions to taxwill be assessed for the period April 15 to July 15, 2020. Penalties, interest …
As of Today. . .Mnuchin Announces Delay in Tax Payments
Treasury Secretary Steven Mnuchin announced a three-month reprieve for the payment of taxes normally due April 15th. The deferral of the tax payment is interest and penalty free for 90 days — up to $1 million for an individual and $10 million for a corporation.Note. This change affects about $300 billion in tax payments, and is meant to improve the health of our virus-sickened economy.What do you need to do for your client?Secretary Mnuchin said that “All you have to do is file your taxes. You’ll automatically not get charged interest and penalties.” You’ll also need to communicate to your clients …
2020 Tax Season – Staff Meeting Agenda January
2020 Tax SeasonA staff meeting to start another tax season is a smart idea, whether your staff simply includes your spouse and an admin, or rather partners, preparers, reviewers, and bookkeepers. The Tax Cuts and Jobs Act (TCJA) included more than 100 changes to our individual and business returns, including the important QBI deduction. Communicating updated information to all staff who deal with returns is crucial. One year, I discovered that my most valuable team member didn’t know what I assumed was a simple “everyone-knows- that” change. Errors resulted from my assumptions, and I quickly understood the necessity of starting …
Final 2019 Form 1040 – 7 Changes to Note
The IRS has released its final version of the 2019 Form 1040.Say bye-bye to the “postcard” — sort of.For 2018, the idea of a postcard tax return resulted in the old and trusted Form 1040 transforming into an eight-page problem. The first two pages were each printed on a half sheet of paper to resemble a postcard-sized Form 1040 (although many software companies received IRS permission to cram the two half pages into one). Six schedules to support the “postcard” followed.For 2019, there have been some improvements. First, the six 2018 schedules have been cut to three for 2019. Schedule 1 reports additional income and …
The SECURE Act – Last Minute Legislation Includes Pension and IRA Changes
By: The Further Consolidated Appropriations Act, 2020, (HR 1865) was must-pass legislation or the government would have closed down on Dec. 21, 2019. Tacked onto the critical appropriation bill were many year-end tax changes — some retroactive. Included in the new law are pension and IRA reform provisions, extenders, disaster relief, and the repeal of a few ACA taxes.Below is a summary of major provisions of the Setting Every Community up for Retirement Enhancement (the SECURE ACT)1, the first pension and IRA overhaul since the 2006 Pension Protection Act.SECURE ACTThe bipartisan Setting Every Community up for Retirement Enhancement (SECURE) Act was passed …
Last Minute Appropriations Act Includes Extenders December 30, 2019
The Further Consolidated Appropriations Act, 2020, (HR 1865) was must-pass legislation or the government would close down on Dec. 21, 2019. Tacked onto the critical appropriation bill were many year-end tax changes — some retroactive. Included in the new law are extenders, pension reform, disaster tax relief, and the repeal of a few ACA taxes.Extender ProvisionsBelow is a summary of the most significant extender provisions (Division Q starting on Page 694) included in the Appropriations Act:INDIVIDUAL & FAMILYMEDICAL EXPENSE DEDUCTION 7.5% AGI LIMIT EXTENDEDFor taxable years ending before Jan. 1, 2021, the threshold for deducting medical expenses is 7.5% (was 10%) for …
IRS changes Form 1065 and the Form 1065 K-1 for 2019 December 17, 2019
The IRS released revised drafts of the 2019 Form 1065 and the 2019 Form 1065, Schedule K-1 (updated with final form links below). There are lots of changes from the prior year. It will save you time in your busy tax season if you take a moment now to review the changes and decide what additional information you might need from your partnership client. The draft forms are linked for your convenience.What’s New on the Draft 2019 Form 1065? Updated Links to Final Form 1065 & InstructionsSCHEDULE BNew Question 27 has been added to Schedule B to enter the number of foreign partners that transferred all or …
IRS Revises the Required Minimum Distribution Tables December 10, 2019
IRS says that we are going to live a little longer–or at least the RMD tables say that.In newly released proposed regulations, the IRS updated the life expectancy tables used for calculating required minimum distributions (RMD) from qualified retirement plans, IRAs and annuities. The tables were last updated in 2002.A 70-year-old IRA owner who uses the Uniform Lifetime Table to calculate her RMD under the existing regulations must use a life expectancy of 27.4 years. Using the updated tables in the proposed regulations, the account owner would use 29.1 years to calculate her RMD. For an IRA valued at $1 million, …
2019 Year-End Planning – A Special eTax Alert December 9, 2019
2019 Year-End PlanningThe Tax Cuts and Jobs Act made more than 100 changes that routinely affect our client’s 2019 tax return. When talking to your clients before year-end, here are a few items to consider in that discussion.A personal casualty loss is not deductible for 2018 to 2025. Remind clients that they should review their insurance coverage with their agent to make sure it is adequate. Federally declared disaster losses remain deductible.The 529 College Savings Plan has been expanded. Qualified distributions now include a withdrawal of up to $10,000 per beneficiary for elementary or secondary public, private or religious school …
Qualified Opportunity Zones – Are They Really Effective? December 3, 2019
Qualified Opportunity ZonesQualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities by providing tax benefits to investors who invest eligible capital into these communities. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Zone Fund and meeting other requirements. For more information on the tax benefits of an Opportunity Zone Fund investment see the IRS FAQs.IRS RELEASES DRAFT FORM 8997 TO REPORT DEFERRAL OF GAINS INTO OPPORTUNITY ZONE FUNDSIf your client invests in a Qualified Opportunity Zone …
IRS Goes After Virtual Currency in a Big Way November 22, 2019
IRS GOES AFTER VIRTUAL CURRENCY IN A BIG WAYMoney can’t buy happiness, but Bitcoin can buy a Tesla and that may make you and the IRS happy!IRS has been talking about the taxation of virtual currency since 2014. Virtual currency (Bitcoin to some of us) is property. If I use property that I paid $10 for to buy something that is valued at $25, I have a taxable gain of $15. Since virtual currency is property, when I use my Bitcoin to buy something I’ll need to report the sale and its resulting gain or loss on my tax return …
Form 8332 – Don’t Claim the Same! November 13, 2019
What happens when parents claim the same dependent on their taxes?JASON DEMAR, THE NON CUSTODIAL PARENT, CLAIMED HIS SON BUT DIDN’T ATTACH A FORM 8332(Jason Demar v. Comm., TCM 2019-91)Both Jason Demar and his ex-wife claimed their son as a dependent. Jason Demar’s son did not live with him, but with Mr. Demar’s ex-wife. The IRS audited Mr. Demar’s 2015 tax return, and because he didn’t attach a Form 8332 to the return, disallowed the exemption, the child tax credit and the earned income credit.Note:The EIC is generally irrelevant in our practice because of our client base, but even for …
IRS Changes Form 990 Schedule B Reporting of Donor Information – Again and Again November 6, 2019
Judge says IRS Change to Donor Reporting is UnlawfulIn Rev. Proc. 2018-38, issued July 16, 2018, the IRS eliminated the donor disclosure requirement for all §501(c) organizations [other than 501(c)(3) organizations]. The U.S. District Court of Montana ruled on July 30, 2019 that the IRS decision to eliminate donor reporting requirements for certain tax-exempt organizations is unlawful. Specifically, the court held that the IRS did not follow the notice-and-comment requirements of the Administrative Procedure Act (APA) that would allow for public input prior to adopting the new rule. The court did not address the IRS’s ability to change reporting requirements.IRS REISSUES …
Change of Address – How to Notify the IRS and Why October 30, 2019
& Failure to Send Change of Address Form to the IRS Meant Taxpayers Missed the Deadline for Petitioning Tax CourtDeficiency Notice Went to Taxpayers “Last Known Address” (Damien and Shayla Gregory v. Comm., 152 TC No. 7 (Mar. 13, 2019))Damien and Shayla Gregory moved from Jersey City, New Jersey, to Rutherford, New Jersey. After they moved, they filed their joint 2014 Federal income tax return using their old address. While an IRS audit was ongoing, the Gregorys submitted Forms 2848 (POA) and 4868 (extension), showing their new address. The IRS mailed a notice of deficiency to the Gregory’s at their old …
Taxpayer Advocate Names Top 10 Most Litigated Issues October 23, 2019
According to The Taxpayer Advocate Service Report, here are the top 10 tax issues which generated court opinions from Jun. 1, 2017 through May 31, 2018 (the most recent data). These haven’t changed much from the prior year. The first nine were all the same, and only the trust fund recovery penalty was new, beating out last year’s “joint and several liability for spouses.” In descending order starting with the most litigated issue, they were:Accuracy-Related Penalty §6662(b)(1) and (2).Trade or Business Expenses §162(a) and related Code sectionsSummons Enforcement §§7602(a), 7604(a), and 7609(a).Gross Income §61 and related Code sections.Appeals From Collection Due …
5 Changes to Note on New Draft of 2019 Form 1065 K-1 October 11, 2019
The IRS has released a draft of the 2019 Form 1065 K-1. Whether you prepare partnership and LLC returns and their accompanying K-1s or whether you input your clients’ K-1 to their personal tax returns, the changes are important to note.5 Changes to Note on New Draft of 2019 Form 1065 K-1The partner’s capital account must be reported on a tax basis. In prior years, the partner’s basis could be reported as tax basis, GAAP, §704(b) book or other. Requiring tax basis reporting will help the IRS to target potential losses claimed in excess of basis.The partner’s beginning and ending §704(c) …