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Tax Alerts
October 24, 2020
Tax Briefing(s)

The Treasury and IRS have issued guidance on the recent order by President Trump to defer certain employee payroll tax obligations on wages paid from September 1, 2020, through December 31, 2020. Under the guidance:


The IRS has released the 2020-2021 special per diem rates. Taxpayers use the per diem rates to substantiate the amount of ordinary and necessary business expenses incurred while traveling away from home. These special per diem rates include the special transportation industry meal and incidental expenses (M&IEs) rates, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. Taxpayers using the rates and list of high-cost localities provided in the guidance must comply with Rev. Proc. 2019-48, I.R.B. 2019-51, 1390.


The Treasury and IRS have issued final regulations that limit the Code Sec. 245A dividends received deduction and the Code Sec. 954(c) exception on distributions supported by certain earnings and profits not subject to the integrated international tax regime created by the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). Proposed regulations and temporary regulations, issued on June 18, 2019, are adopted and removed, respectively.


Treasury has issued final and amended regulations on the rules for distributions made by terminated S corporations during the post-termination transition period (PTTP). These regulations apply after an S corporation has become a C corporation.


Final regulations clarify that the amount of the rehabilitation credit for a qualified rehabilitated building (QRB) is determined as a single credit in the year the QRB is placed in service. This is the case even though the credit is allocated ratably over a five-year period. The final regulations adopt without modification proposed regulations released earlier this year ( NPRM REG-124327-19).


The IRS has released final regulations that clarify the definition of a "qualifying relative" for purposes of various provisions for tax years 2018 through 2025. These regulations generally affect taxpayers who claim federal income tax benefits that require a taxpayer to have a qualifying relative.


The IRS has announced that Medicaid coverage of Coronavirus Disease 2019 (COVID-19) testing and diagnostic services is not minimum essential coverage for purposes of the premium tax credit under Code Sec. 36B.


The IRS has released guidance in the form of questions and answers with respect to certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and the Bipartisan American Miners Act of 2019 (Miners Act).


Final regulations provide additional guidance on the base erosion and anti-abuse tax (BEAT) under Code Sec. 59A. The regulations also address certain aspects of the BEAT under Code Secs. 1502 and 6031.


The start of the school year is a good time to consider the variety of tax benefits available for education. Congress has been generous in providing education benefits in the form of credits, deductions and exclusions from income. The following list describes the most often used of these benefits.

In recent years, Congress has used the Tax Code to encourage individuals to make energy-efficient improvements to their homes.  The credit is very popular. The Treasury Department estimates that more than 6.8 million individuals claimed over $5.8 billion in residential energy tax credits in 2009.

Whether for a day, a week or longer, many of the costs associated with business trips may be tax-deductible. The tax code includes a myriad of rules designed to prevent abuses of tax-deductible business travel. One concern is that taxpayers will disguise personal trips as business trips. However, there are times when taxpayers can include some personal activities along with business travel and not run afoul of the IRS.

As gasoline prices have climbed in 2011, many taxpayers who use a vehicle for business purposes are looking for the IRS to make a mid-year adjustment to the standard mileage rate. In the meantime, taxpayers should review the benefits of using the actual expense method to calculate their deduction. The actual expense method, while requiring careful recordkeeping, may help offset the cost of high gas prices if the IRS does not make a mid-year change to the standard mileage rate. Even if it does, you might still find yourself better off using the actual expense method, especially if your vehicle also qualifies for bonus depreciation.

The IRS's streamlined offer-in-compromise (OIC) program is intended to speed up the processing of OICs for qualified taxpayers. Having started in 2010, the streamlined OIC program is relatively new. The IRS recently issued instructions to its examiners, urging them to process streamlined OICs as expeditiously as possible. One recent survey estimates that one in 15 taxpayers is now in arrears on tax payments to the IRS to at least some degree.  Because of continuing fallout from the economic downturn, however, the IRS has tried to speed up its compromise process to the advantage of both hard-pressed taxpayers and its collection numbers.

Most people are familiar with tax withholding, which most commonly takes place when an employer deducts and withholds income and other taxes from an employee's wages. However, many taxpayers are unaware that the IRS also requires payors to withhold income tax from certain reportable payments, such as interest and dividends, when a payee's taxpayer identification number (TIN) is missing or incorrect. This is known as "backup withholding."

Taxpayers that place new business assets other than real property in service through 2012 may claim a "bonus" depreciation deduction. Although the bonus depreciation deduction is generally equal to 50 percent of the cost of qualified property, the rate has been increased by recent legislation to 100 percent for new business assets acquired after September 8, 2010 and placed in service before January 1, 2012. Thus, the entire cost of such 100 percent rate property is deducted in a single tax year rather than over the three- to 20-year depreciation period that is normally assigned to the property based on its type or the business activity in which it is used.

A business with a significant amount of receivables should evaluate whether some of them may be written off as business bad debts. A business taxpayer may deduct business bad debts if the receivable becomes partially or completely worthless during the tax year.

Estimated tax is used to pay tax on income that is not subject to withholding or if not enough tax is being withheld from a person's salary, pension or other income. Income not subject to withholding can include dividends, capital gains, prizes, awards, interest, self-employment income, and alimony, among other income items. Generally, individuals who do not pay at least 90 percent of their tax through withholding must estimate their income tax liability and make equal quarterly payments of the "required annual payment" liability during the year.


The IRS has issued the limitations on depreciation deductions for owners of passenger automobiles, trucks and vans first "placed in service" (i.e. used) during the 2011 calendar year. The IRS also provided revised tables of depreciation limits for vehicles first placed in service (or first leased by a taxpayer) during 2010 and to which bonus depreciation applies.


In-plan Roth IRA rollovers are a relatively new creation, and as a result many individuals are not aware of the rules. The Small Business Jobs Act of 2010 made it possible for participants in 401(k) plans and 403(b) plans to roll over eligible distributions made after September 27, 2010 from such accounts, or other non-Roth accounts, into a designated Roth IRA in the same plan. Beginning in 2011, this option became available to 457(b) governmental plans as well. These "in-plan" rollovers and the rules for making them, which may be tricky, are discussed below.


Under the Patient Protection and Affordable Care Act (PPACA) enacted in March 2010, small employers may be eligible to claim a tax credit of 35 percent of qualified health insurance premium costs paid by a taxable employer (25 percent for tax-exempt employers). The credit is designed to encourage small employers to offer health-insurance to their employees.


The tax rules surrounding the dependency exemption deduction on a federal income tax return can be complicated, with many requirements involving who qualifies for the deduction and who qualifies to take the deduction. The deduction can be a very beneficial tax break for taxpayers who qualify to claim dependent children or other qualifying dependent family members on their return. Therefore, it is important to understand the nuances of claiming dependents on your tax return, as the April 18 tax filing deadline is just around the corner.


Have you already mailed (on paper or electronically) your Form 1040 for the 2010 tax year but only now noticed you made an error when preparing the return? If you need to correct a mistake on your federal income tax return that you’ve already filed with the IRS, it’s not too late to correct the mistake by filing an amended return, Form 1040X, Amended U.S. Individual Income Tax Return. The IRS considers an amended return filed on or before the due date of a return to be the taxpayer’s return for the period.


Legislation enacted during the past few years, including the Small Business Jobs Act of 2010 and the more recently enacted Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act), contains a number of important tax law changes that affect 2011. Key changes for 2011 affect both individuals and businesses. Certain tax breaks you benefited from in 2010, or before, may have changed in amount, timing, or may no longer be available in 2011. However, new tax incentives may be valuable. This article highlights some of the significant tax changes for 2011.

Included among the many important individual and business incentives extended and enhanced by the massive tax bill passed in late December is a 100-percent exclusion of gain from the sale of qualified small business stock. Under the Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) individuals and other noncorporate taxpayers should not overlook the benefit of investing in qualified small business stock considering the ability for qualifying taxpayers to exclude 100-percent of gain from the sale or exchange of the stock. There are certain limitations, however, regarding who qualifies for the tax break, holding periods, and what qualifies as qualified small business stock.

With the end of the 2010 tax year rapidly approaching, there is only a limited amount of time for individuals to take advantage of certain tax savings techniques. This article highlights some last-minute tax planning tips before the end of the year.