By topic: Tax policy

Raise Hell: Save Your Employee Retention Credit

IRS Notice 2021-49 disallowing the employee retention credit to more than 50 percent owners who have certain living relatives has to be a mistake. It’s too illogical to stand. In fact, you have to question whether the notice is technically correct.

Payroll Taxes Embezzled; Owner Has Huge Business and Tax Problems

Do you own a business that withholds taxes from employees? If so, you need 100 percent assurance that the withheld payroll tax monies are going to the IRS and not into the pockets of an embezzler. This article explains how you can obtain such certainty.

Big Mistake: Filing Your Tax Return Late

What one mistake can you make with your taxes that will cause you to pay penalties of up to 47.5 percent? And when might that not even be the worst part? What could be worse than a 47.5 percent tax penalty? How about both the penalty and a full-blown IRS audit? That’s far worse.

Find the Winning Tax Law for Your IRS Audit

If you are suffering or about to suffer an IRS audit, you should know how your tax positions stack up against the IRS examiners’ positions. In most cases, you are discussing the facts, not the law, and you prove your facts with receipts, canceled checks, and logbooks. Once you get into the law, however, you need to know the rules that trump other rules. This article explains how you use the tax law, rulings, and other IRS documents to prove the legal side of your case in an audit. And this article helps you understand what the courts are looking for, should your case advance beyond the IRS audit to the courts.

New Law: Time to Benefit from the Work Opportunity Tax Credit

The Work Opportunity Tax Credit rewards your good deeds. And now, because of new legislation, the rules are in place for longer than usual. If you need to hire workers in your business, this dollar-for-dollar reducer of your taxes is one to know about.

Congress Closes the PayPal 1099-K Reporting Loophole

The PayPal loophole is going away seven months from now. You may remember the strategy where you can avoid giving 1099s to contractors and vendors when you use PayPal or a similar service as your payment platform. In the past, PayPal often did not have to provide those contractors and vendors with a 1099. According to lawmakers, this created a situation where those people who use PayPal have an easy ability to cheat (i.e., not report the income on their tax returns).

IRS Focuses on Cryptocurrency: Are You Ready?

If you are looking for a wild ride, examine cryptocurrency. Not only can it rise to $55,000 and then drop to $30,000 in a matter of weeks, but it can also trigger significant tax consequences. And now, the IRS wants to know about you and your cryptocurrency activities.

Disaster Strikes: Next Trouble, an IRS Audit

Disasters can happen at any time. As far as your business records go, you’ll be most equipped for a disaster if you’ve backed up and stored your most critical data online. To the extent you fail to do this, you’ll have to get copies of vital records from the IRS and other government agencies, your bank, clients, customers, and others. You’ll have to re-create other data as best you can.

Deducting Business Casualty Losses: You Don’t Need a Disaster

There’s much to know when it comes to business disaster losses. If business property such as an office building or rental property, a business vehicle, or business furniture or equipment is damaged or destroyed, you may qualify for a casualty loss deduction. And unlike personal casualty loss deductions, you don’t need a federally declared disaster for a business deduction. You may even be able to deduct the casualty loss on the prior year’s tax return and get a quick tax refund. But your deduction is limited to the property’s adjusted basis and is reduced by insurance recoveries

Congress Passes Corporate Transparency Act: What It Means for You

Today, you can form an LLC or a corporation in most states without revealing your identity to any government agency. But this pro-secrecy era is coming to an end because Congress passed the Corporate Transparency Act. Starting in 2022, the names and addresses of many LLCs’ and corporations’ beneficial owners will have to be provided to the U.S. Department of the Treasury. The information won’t be made public, but law enforcement will use it. The law impacts both new and existing LLCs and corporations which will have a new federal filing requirement.

Lawmakers Extend the Tax Extenders with the COVID-19 Relief Law

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 deals with the annual tax extenders. Congress made some of them permanent, while others got short- or long-term extensions. We’ll go through each and tell you how it fared in the legislation.

Secrets to IRS Penalty Forgiveness Using Reasonable Cause

The reasonable cause defense offers an opportunity to waive tax penalties, but only if you supply sufficient explanations and documentation. To assert a successful reasonable cause defense, you must demonstrate that you used ordinary business care and prudence regarding your tax obligations and that despite your best efforts, you were unable to comply with the law.

PPP Alert: New Shot for Your Tax-Free Cash

The new COVID-19 stimulus adds new money to the Paycheck Protection Program (PPP) for those who missed out on the first round. If you missed out, don’t do that again. The PPP money is a tax-free gift with no downside and all upside.

New PPP Forgiveness Rules for Past, Current, and New PPP Money

A new law makes the already terrific Paycheck Protection Program (PPP) better for everyone. It clarifies that the PPP money is tax-free and that expenses paid with the money are deductible. This applies retroactively to the inception of the CARES Act on March 27, 2020, so it benefits past PPP loans, current PPP loans that are outstanding, and new loans.

Round 2: Additional Tax-Free PPP Money for You?

If you have or had a Paycheck Protection Program (PPP) loan, you might qualify for a new, second round of PPP monies. To get a second-draw PPP infusion of money, you have to have 300 or fewer employees; suffered a 25 percent or greater loss in revenue during at least one quarter of 2020 when compared to 2019; and already used or plan to use your original PPP monies.

New Laws—COVID-19-Related Government Grants: Taxable or Not?

Billions of dollars in grants have been doled out to individuals and businesses in the wake of the COVID-19 pandemic. COVID-19-related grants to individuals are ordinarily not taxable, but grants to business are taxed unless Congress makes an exception. Congress has made some exceptions for businesses, as you will see in this article.

ABLE Accounts: A Great Deal for the Disabled and Their Families

ABLE accounts allow disabled individuals and their family members to save a substantial amount of money without losing government benefits. The money grows tax-free and can be withdrawn tax-free to use for a wide variety of expenses. But only people who became disabled or blind before age 26 qualify for these tax-advantaged accounts.

New IRS Efforts to Destroy Tax Deductions for PPP Paid Expenses

Lawmakers and the IRS disagree on whether you are permitted to deduct the expenses you pay with your Paycheck Protection Program (PPP) loans. The problem started with poor drafting of the original forgiveness wording by the lawmakers. The IRS says it has to follow that bad drafting and disallow deductions for expenses paid with PPP loans. There’s much to this story, as you will learn in this article.

COVID-19: The IRS Goes Easy on Taxpayers Who Owe Back Taxes

Over 11 million taxpayers owe back taxes to the IRS. Following a brief suspension of most collection efforts, the IRS is again starting to go after delinquent accounts. But the IRS has promulgated a Taxpayer Relief Initiative that gives taxpayers more time to pay what they owe, obtain and modify installment agreements, and avoid tax liens.

If the SBA Made Six Loan Payments on Your Behalf, Are You Taxed?

The CARES Act requires the SBA to make six months’ worth of payments for non-disaster SBA loans, including 7(a) loans, 504 loans, and microloans. If you have such a loan, do you have to pay tax on these payments? The IRS has said yes in the past, but it could change its mind this time.

2020 Last-Minute Year-End Retirement Deductions

Does your business have a retirement plan for you and your employees, if any? It should. You have more new reasons in 2020 to get your retirement plan in place and perhaps make changes in existing plans.

Be Sure to Pay the PCORI Fee if You Have an HRA

Business owners who have established 105-HRAs, Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), and Individual Coverage Health Reimbursement Accounts (ICHRAs) to reimburse their employees for medical expenses need to pay an annual fee to help support the Patient-Centered Outcomes Research Institute (PCORI).

Government to Landlords: Drop Dead!

An unprecedented nationwide moratorium on evictions for non-payment of rent is in place through the end of 2020 (and for even longer in some states). But landlords may still be able to evict some problem tenants, and even sue for overdue rent. Other options include entering into payment plans with struggling tenants, seeking forbearance from lenders, and obtaining low-interest SBA loans. That’s the practical problem—and then you have the tax issues. Rental losses may or may not be deductible against non-rental income, subject to complex passive loss rules, as we explain here.

Raise Hell: Help Lawmakers Make PPP Expenses Tax Deductible

When it comes to the Payroll Protection Program monies, there are some flies in the ointment when it comes to forgiveness. The first fly is that when the loan is forgiven, the business expenses paid with the forgiven money are not deductible. The second fly is that the unforgiven expense rule discriminates against S and C corporations. So it’s time for you to kill flies, as you learn in this article.

PPP Loan Forgiveness for Partnerships and S and C Corporations

Thanks to new government guidance, we have clarity on how the self-employed and owner-employees treat their PPP loan forgiveness applications. The new PPP rules explain how you identify qualifying PPP compensation for partnerships, corporations, and the self-employed. The new rules also explain when you can apply for forgiveness. Let’s get started.

COVID-19 Relief If You Work Abroad or Travel to the U.S. to Work

If you live in a foreign country, you may have had to come back to the U.S. due to COVID-19. If you are a non-resident alien, you might not have been able to leave the U.S. due to COVID-19. In either situation, you could have big tax costs—but the IRS has provided you possible relief in either situation.

Q&A: Is the EIDL Advance Taxable?

The IRS issued guidance that business expenses used to create PPP loan forgiveness are non-deductible. If you received an EIDL emergency advance, you might wonder if that advance is taxable to you or reduces your deductible business expenses. The IRS hasn’t given specific guidance, but we’ll give you our opinion on how this money will be treated.

Q&A: Are PPP Loan Forgiveness Expenses Deductible?

Millions of small-business owners like you are getting PPP loans and looking forward to non-taxable loan forgiveness. But how does this impact your tax deductions for the expense payments you use to qualify for that forgiveness? The IRS just gave us its opinion, as you will find in this article.

Top Eight Changes in the SECURE Act You Need to Know

Our lawmakers did it again. They made more last-minute tax law changes, which the president signed into law on December 20, 2019. One such new law is called the SECURE Act. This new law made a lot of changes to how you save for retirement and spend money in retirement. Don’t worry, though. We’ll give you the most important provisions you need to know, and how they impact you regardless of age.

TCJA Changes Vacant Land Tax Strategies

The Tax Cuts and Jobs Act (TCJA) likely requires that you rethink the tax strategies you were using on your vacant land investments. And the TCJA changes may be such that you have to rethink vacant land as an investment, at least for the years impacted by the TCJA.

Know These Divorce-Related Tax Issues for Small-Business Owners

As with all financial transactions, divorce comes with tax consequences. And those consequences have changed for tax years 2018 and later thanks to the Tax Cuts and Jobs Act (TCJA). If you are thinking of divorce or are currently in the process, make sure to read this article.

New Individual Coverage HRA Turns the Clock Back to Pre-ACA Health Care Options

The ACA destroyed a lot of the advantages of the Section 105 medical reimbursement plan. While the QSEHRA was, and remains, a good option for small employers, something even better has arrived—for employers of all sizes—starting in 2020.

2019 Brings You New Partnership Audit Procedures

Congress changed the IRS procedures for auditing partnerships, and they apply beginning with your 2018 partnership tax return. Under the new rules, an audit can lead to a partnership-level tax at a 37 percent rate. We’ll explain the new rules and how your partnership can potentially avoid paying this new audit tax.

New Tool for Your Use: 2019 Section 199A Calculator

When planning your Section 199A tax deduction, avoid difficult calculations and save time by using the new 2019 Section 199A Deduction Calculator. Inside this article, you find the rules you need to know to find your QBI, Section 199A wages, and Section 199A property that can figure into your Section 199A deduction possibilities.

Q&A: Do I Get a 199A Deduction Working Abroad?

Many people just like you are self-employed and living and working abroad. Does your business income still qualify for the Section 199A deduction? This article tells you the answer to that question and describes other big-dollar tax breaks you might be entitled to receive.

Q&A: Claim 30% Tax Credit for a New Roof to Hold Solar Panels

You’re eligible for a generous 30 percent residential tax credit when you install solar equipment on a residence and have it in use before midnight on December 31, 2019. The IRS instructions for claiming the credit are not as clear as you would like. But nicely, the tax code reveals the answer.

Proprietors and Partners Mistakenly Pay Themselves Illegal W-2 Wages

Why is it wrong for the sole proprietor to pay himself or herself a W-2 wage? Also, why is it wrong for a partner to be paid by the partnership as a W-2 employee?

10 Proven Tax Reduction Strategies for the Self-Employed

We took a deep dive into the 263 strategy articles that apply to the self-employed and pulled out 10 that you should spend time with.

Dealer Got Mad, Sent Customer a Fraudulent 1099 to Get Even

An auto dealer sent its customer a bogus 1099 because the customer refused to return to the dealership and redo the “no interest” loan to an interest-bearing loan. The dealer made a mistake originally and then wanted the customer to help fix the problem—at the customer’s expense. The customer said no. Later, when the bogus 1099 showing interest income from the no-interest loan showed up in this customer’s mailbox, the customer took this dealership problem to the IRS.

Q&A: Making Rental Property Work with the Section 199A Deduction

You’ll find much to love about the new Section 199A tax deduction when you qualify for it. One area where you can find mass confusion is with rental properties. To avoid much of this rental property muddle, download the special report you find in this article.

Update on New Court-Approved Way to Defeat IRS Penalties

The Tax Court gave you a brand-new penalty relief strategy back in December 2017. Since then, both the Tax Court and the IRS have told us more about how they view tax code Section 6751(b). In this article, we update you on the most recent tax cases relating to your use of Section 6751(b)—and one of them is a big help to you in your battle against IRS penalties.

Q&A: Improvement Property Update

Congress wanted qualified improvement property to have tax-favored status under tax reform. But Congress made an error in writing the Tax Cuts and Jobs Act and made improvement property treatment worse than before. Did Congress fix its goof?

TCJA Tax Reform Creates Big Hazard in Loans to Your Corporation

Making loans to your corporation became more hazardous 33 years ago with the Tax Reform Act of 1986. That was pretty awful. But the new Tax Cuts and Jobs Act tax reform made things worse for tax years 2018 through 2025. If you operate your business as a corporation, you need to know how the rules apply when you loan money to your corporation.

TCJA Tax Reform Sticks It to Business Start-Ups That Lose Money

The Tax Cuts and Jobs Act tax reform added an amazing limit on larger business losses that can attack you where it hurts—right in your cash flow. And it works in some unusual ways that can tax you even when you have no real income for the year. When you know how this ugly new rule works, you have some planning opportunities to dodge the problem.

IRS Says TCJA Allows Client and Prospect Business Meal Deductions

You are not going to do this very often, but thank the IRS for showing you the path to your client and prospect business meal tax deductions. Remember, the Tax Cuts and Jobs Act eliminated tax-deductible entertainment, so the IRS’s new client and prospect business meal rules are important.

Defining “Real Estate Investor” and “Real Estate Dealer”

The first good news is that you can be both real estate investor and real estate dealer with respect to your real estate portfolio. The next good news is that you are in control, and by knowing just a few rules about dealer and investor classifications, you can do much to increase your net worth.

Q&A: Deduction for Defunct S Corporation Expenses?

You closed your S corporation and then paid expenses for it afterward. Can either you or the corporation deduct those expenses? We’ll explain what the law says, along with that one thing you need to consider for taking deductions for your leftover expenses.

How the TCJA Tax Reforms Hammer Personal Casualty Loss Deductions

The Tax Cuts and Jobs Act makes claiming a tax deduction for a personal casualty loss more difficult. And when you do qualify to deduct a personal casualty loss, you face a number of rules that add to your misery by making the loss deduction difficult. In select circumstances, you can use a safe harbor, which makes things a little easier.

Q&A: Tax Reform and the Cannabis Industry

Tax reform made a lot of changes that impact your choice of entity for your business. And if your business is in the cannabis industry, this is especially true. We’ll explain how Section 199A and other Tax Cuts and Jobs Act provisions impact your entity choice for a cannabis business.

Claiming the New Employer Tax Credit for Family and Medical Leave

In many business environments, you compete for employee talent in a variety of ways, including perhaps by implementing a medical and family leave policy. The good news on this front is that your federal government may have given you a tax credit (yes, that lovely dollar-for-dollar offset to your taxes) for what you wanted to do anyway.

Q&A: Statutory Insurance Agent Wins the 199A Tax Deduction

The life insurance sales professional who receives a W-2 with the statutory employee box checked is in a special tax category for income and employment tax purposes and also sits in a favored category under the new Section 199A deduction rules. But he or she may not be favored for 1099 income.

Q&A: Car Interest and Corporate Reimbursements

Say you operate your business as an S corporation and the S corporation reimburses you for your business use of your personal vehicle. If you have a loan on the personal vehicle, can your S corporation reimburse the business portion of the interest tax-free to you as it can with other reimbursed employee expenses? Find the answer in this article.

Reasonable Mileage

The law contains no reasonableness test for mileage. There are very specific rules for recording mileage. We recommend that you keep a mileage log for at least three consecutive months to prove your business-mile percentage.

Avoid Penalties—Give Notice of 2019 HRA Medical Plan on Oct. 2

You have three good reasons to get your qualified small-business health reimbursement account (QSEHRA) in place on or before October 2. First, this avoids penalties. Second, your employees will have the time they need to select health insurance. Third, you will have your plan in place on January 1.

New IRS Regs: Does Your Rental Qualify for a 199A Deduction?

Section 199A gives you up to a 20 percent tax deduction for your pass-through business income. Do your rental activities count? We’ll go over what the proposed Section 199A regulations say about your rental activities and whether those activities qualify you as an individual for this possible 20 percent tax deduction.

Use a Conservation Easement Donation to Create a $63,000 199A Deduction

If you have high income and operate an out-of-favor specified service business, you may think your Section 199A deduction is gone for good. But there is hope: we’ll explain how a conservation easement may be the solution to your problem. And if the numbers work out, you could get a large tax windfall in the process.

New IRS 199A Regulations Benefit Out-of-Favor Service Businesses

Section 199A provides a valuable 20 percent tax deduction but denies it to certain “out-of-favor specified service businesses” when individuals have taxable income greater than $207,500 (single) or $415,000 (married). New IRS regulations are a welcome sight because they give more clarity and add leniency as to which businesses are out of favor (and which are not).

How to Find Your Section 199A Deduction with Multiple Businesses

Calculating your Section 199A deduction with one business is complicated. When you have multiple businesses, including businesses with losses, it gets even worse. We’ll clearly explain the rules related to multiple businesses along with how the new proposed regulations may allow you to aggregate certain businesses.

Q&A: Guide to Published TCJA Tax Reform Articles

Here’s a resource guide that gives you the Tax Cuts and Jobs Act tax reform articles published at the Bradford Tax Institute from January 1 through July 31, 2018, including for each article the (a) topic, (b) code section, (c) prior law, (d) new law, and (e) link.

How Capital Gains Can Destroy the New 199A 20 Percent Tax Deduction

As you likely already know, your Section 199A deduction depends on where you fall in the qualification process. For example, one qualification process is income below the thresholds that qualify you for the Section 199A deduction on your pass-through income regardless of business type. Another process is income in the phase-in range that qualifies you for a phase-in deduction. Here we explain what that income is and how it impacts your new tax reform Section 199A deduction.

IRS Clarifies Reasonable Comp. for S Corp. Owner’s 199A Tax Deduction

In early August, the IRS released its proposed regulations on new tax code Section 199A—the tax code section that created the 20 percent tax deduction that applies to S corporations and other pass-through entities. The good news in the new IRS regulations for S corporation owners is increased clarity on how to treat reasonable compensation for the Section 199A tax deduction.

TCJA: Convert Personal Vehicle to Business and Deduct up to 100%

Tax reform under the Tax Cuts and Jobs Act gives you bonus depreciation and favorable rules for converting your personal vehicle and other assets to business use. On the conversion, you can immediately qualify to deduct up to 100 percent of today’s fair market value on your existing personal vehicle.

Q&A: New Guide; How Tax Reform Transforms S Corporation Taxes

The Tax Cuts and Jobs Act (TCJA) has changed the way you can look at the S corporation as a tax planning entity. With the new Section199A deduction in play, the S corporation can help increase or decrease that deduction. To make this easier for you, simply download our new guide and get up to speed on how the S corporation works with the TCJA.

Tax Time Bomb: Passive Foreign Investment Companies

Passive foreign investment companies, or PFICs, are subject to some of the most complex provisions of the tax law. You may own one and not even know it. In this article, we give you the basic rules so that you know what PFICs are and the different ways you can pay tax on them (yes, you have options!).

What Did the TCJA Do to Your Tax-Free Supper Money?

The Tax Cuts and Jobs Act (TCJA) changed the landscape for a host of business meal and entertainment deductions. For supper money, the TCJA did damage, both short and long term. But the deduction continues in place, albeit damaged, for tax years 2018 through 2025.

Be Alert to the TCJA Tax Reform Attack on IRA Recharacterizations

The TCJA eliminates your ability to unwind a traditional IRA or other retirement plan transfer to a Roth IRA. This requires a change in your decision making for such transfers.

TCJA Changes Affecting Partnerships and LLCs and Their Owners

The Tax Cuts and Jobs Act made several beneficial changes that affect partnerships and their partners and LLCs and their members that are treated as partnerships for tax purposes.

Tax Reform Doubles Down on S Corporation Reasonable Compensation

Tax reform gave you a new 20 percent deduction on pass-through income. For S corporation owners, your reasonable compensation plays a key role in determining your Section 199A deduction. Here, we’ll explain what the law says on reasonable compensation and how you can come out ahead.

Hit with IRS Penalties? Pay $0 with IRS Mercy

As a small-business owner, you have good odds of someday facing a penalty for late filing and/or late payment of your or your corporation’s taxes. It’s likely you will think that you have to pay the penalties. But as you’ll learn here, when you know the rules of the road, you can travel the IRS mercy path and have those penalties forgiven.

Q&A: Does My Spouse Rob Me of My New Section 199A Tax Deduction?

When it comes to the new 20 percent Section 199A tax deduction, does a spouse in an out-of-favor business taint the Section 199A for you? The good news is no. But because of the multiple businesses, you may have a problem on the taxable income front.

How to Beat Some of the New TCJA Limits on State Tax Deductions

Tax reform went hard after your state and local tax deductions. The reduced deduction for your state income taxes has some states pretty riled up. The IRS is about to issue regulations that conflict with what the states are attempting to do. From your standpoint, count on the IRS winning for the moment, and use the clear planning opportunities you have available to you that will create more deductions for your property taxes.

TCJA Tax Reform Q&A: Does Moving W-2 Income and Employee Business Expenses to Schedule C Increase Taxes?

If you can qualify to move your W-2 income to Schedule C so as to enable those legitimate business expense deductions that you are losing to tax reform, should you do it? Maybe. You need to run the numbers to see if the new Schedule C taxes outweigh the monies you lost by not being able to deduct employee business expenses.

Don’t Let the Cliff Kill Your New Section 199A Tax Deduction

How will you fare with the new Section 199A tax deduction? This article can help you make sure that you realize the 20 percent deduction. It’s simply a tax gift if you qualify. And you can do some planning to help you qualify, but you may have to start now.

Do Your Business Losses Make You an IRS Target? If So, Do This

The tax law has always treated your hobby activities unfairly. Tax reform under the Tax Cuts and Jobs Act made that unfair treatment even worse by preventing you from deducting any business expenses against hobby income. In this article, you see a strategy that can save your bacon on your hobby activity.

S Corporation Fringe Benefits after the Recent Tax Reform

More than 2 percent shareholder-employees of S corporations don’t catch a lot of breaks when it comes to the taxation of fringe benefits. But arming yourself with the correct information will help you maximize your deductions and avoid costly penalties.

Proving Travel Expenses after Tax Reform

Whether you operate your business as a corporation or as a proprietorship, you need to record your tax-deductible travel expenses in an IRS-approved manner. This means you need to know technically what a receipt is—and when you do or do not need one. By the way, the credit card statement is not a receipt.

Q&A: Loophole to Deduct Hobby Expenses after Tax Reform

Tax reform killed the ability for you to deduct expenses for your hobby activity. But if you sell items in your hobby activity, the IRS allows you to deduct the cost of those items—if you do this the right way. Not knowing this rule can cost you thousands of dollars in extra taxes.

 

Q&A: Changes to IRS First-Time Penalty Abatement

You hate IRS penalties; everyone does. The IRS’s first-time abatement procedure is a valuable tool to defeat IRS penalties. This article explains recent changes to this procedure and how they could affect your ability to qualify for this relief.

Tax Reform Makes Professional Gamblers Who Lose Money Suffer More

If you’re a professional gambler, tax law did you no tax favors before tax reform. But now, because of tax reform, tax law has you between a rock and a hard place for tax years 2018 through 2025. The recent tax reform gives you one choice only for those years.

Good News: Tax Reform Lands a Blow to AMT

You likely have to worry about alternative minimum tax (AMT) in addition to the regular federal income tax. Tax reform made changes to the tax law that significantly impact AMT. The changes could mean more money in your pocket and less going to the government.

Q&A: New Section 199A Guide

The new Section 199A deduction created by tax reform is a source of excitement and confusion for tax professionals and small-business owners alike. Download our new guide and get all the details.

Tax Reform Puts Screws to Hobbies

Hobbies have been mistreated by the tax law for a long time. But the most recent tax reform brings the grim reaper to the party and it’s not pleasant. This means you need to focus on making your activity a business and not a hobby.

Tax Reform Does Much to Help Your Rental Real Estate

The recent tax reform, known as the Tax Cuts and Jobs Act (TCJA), added some good benefits to your real estate rentals, both commercial rentals and residential rentals. Notably, your qualified business income from your real estate rentals creates a possible 20 percent tax deduction with no effort on your part. And if you want less taxable income, the TCJA gives you enhanced bonus depreciation and new avenues for Section 179 expensing.

Did Tax Reform Goof When Disallowing Deductions for Client Meals?

We, you, and just about everyone else have been looking for a ray of sunshine that would allow tax deductions for business meals with clients and prospects. In this article, you learn that lawmakers may have intended to grant deductions for business meals with clients and prospects in spite of how they put together the Tax Cuts and Jobs Act.

Tax Reform Punishes W-2 Employees—Get Even!

The recent tax reform created both winners and losers. One big loser is the W-2 employee who incurs out-of-pocket business expenses to earn his or her W-2 income. Tax reform simplified those W-2 employee business expense deductions by simply making them not tax deductible.

Tax Reform Attacks Home Mortgage Interest Deductions

The home mortgage interest deduction rules did not fare well in the recent tax reform. First, a chunk of your home equity mortgage interest is no longer deductible. Second, you now face a new lower ceiling on mortgages that can qualify for the home mortgage interest deduction.

New Court-Approved Way to Defeat IRS Penalties

You hate IRS penalties, right? Everyone does! There are a lot of strategies you can use to potentially defeat an IRS penalty. Thanks to the courts, though, you now have a brand-new way to beat an IRS penalty.

Helicopter View of Meals and Entertainment After Tax Reform

Tax reform has had a significant impact on the tax deductions you can now claim for business entertainment and meals. The chart in this article shows you how the Tax Cuts and Jobs Act treats 12 meal and/or entertainment events.

Tax Reform Imposes a Penalty Tax on Transportation Fringe Benefits

The old saying that “no good deed goes unpunished” could certainly apply to the transportation fringe benefits that lawmakers penalized with the recent tax reform.

Yes, Tax Reform Did Kill Prospect and Client Meal Deductions

You asked us to elaborate on how tax reform did away with client and prospect business meals. It starts with the Tax Reform Act of 1986, when business meals were by law placed in the entertainment category. As you know, so-called business-friendly tax reform killed deductions for business entertainment and, along with it, client and prospect meals.

Tax Reform Cuts Business Tax Deductions for Charity Golf Outings

Imagine this. You pay $1,000 for your golf foursome to play golf in the annual charitable golf outing. You have been doing this for years, and you were always able to deduct the full $1,000. Now, because of the new tax reform, your deduction is $300. Disturbing?

Tax Reform Creates an Unfounded Desire for the C Corporation

Has tax reform created a need for you to switch your S corporation to a C corporation? You will find the answer here. Also, you will find it interesting to see how we make the comparison easy with the chart in this article.

Q&A: How to Make IRS Penalties Go Away

Download your free resource guide titled Beating IRS Penalties, Your Guide to Reducing or Avoiding IRS Penalties.

Does Tax Reform Dislike Your Reputation or Skill?

Here’s a troubling thought. Did lawmakers put you in the out-of-favor tax group that denies you the 20 percent Section 199A deduction (a) because your business makes too much money and (b) it does so because of the reputation or skill of one or more of the business’ owners or employees?

Tax Reform: Wow, New 20 Percent Deduction for Business Income

The new 2018 Section 199A tax deduction that you can claim on your IRS Form 1040 is a big deal. There are many rules (all new, of course), but your odds as a business owner of benefiting from this new deduction are excellent.

Tax Reform Sticks It to Doctors, Lawyers, Athletes, Traders, and Others

The new Section 199A deduction is a very nice tax break for business owners, except for owners with high income who also fall into the out-of-favor group. In general, the out-of-favor group includes lawyers, doctors, accountants, tax professionals, consultants, athletes, authors, security traders, actors, singers, musicians, entertainers, and others.

Tax Reform Eliminates Tax Benefits of Business Vehicle Trade-Ins

Tax reform no longer allows Section 1031 exchanges on personal property such as your business vehicle. The trade-in was the most common 1031 exchange of a business vehicle. Now, because of tax reform, the vehicle trade-in is simply the sale of the old vehicle to the dealer and the purchase of a new vehicle. The sale to the dealer creates gain or loss on the sale just as it would on an outright sale.

Tax Reform Wipes Out 50 Percent Business Entertainment Deductions

Lawmakers finally did it. First, they reduced the directly related and associated entertainment deductions to 80 percent with the 1986 Tax Reform Act. Later, in 1993, they reduced that 80 percent to 50 percent. And now, with the newest tax reform, lawmakers simply killed business deductions for directly related and associated entertainment.

Tax Reform Cuts Deductions for Employee Meals to 50 Percent

Lawmakers do not like businesses that feed their employees on the business premises. The new tax reform takes what last year was a 100 percent deduction for a meal served for the convenience of the employer, reduces it to 50 percent this year (2018), and then throws it into the compost pile with a zero deduction in 2026 and later years.

Tax Reform: Entity Choice—Proprietorship or S Corporation?

Will your business operation create the 20 percent tax deduction for you? If not, and if that is due to too much income and a lack of (a) wages and/or (b) depreciable property, a switch to the S corporation as your choice of business entity may produce the tax savings you are looking for.

Tax Reform Creates Taxes on Employee Fringe Benefit for Bicycles

You could (and can) deduct your costs for reimbursing employees for their qualified bicycle transportation costs. But tax reform now makes this bicycle transportation benefit a taxable event for your employees. As you will see in this article, even though the reimbursements are now taxable to the employees, you likely should continue the benefits.

 

Tax Reform: Will Section 199A Phase In or Phase Out Your 20 Percent Deduction?

If your pass-through business is an in-favor business and it qualifies for tax reform’s new 20 percent tax deduction on qualified business income, you benefit at all times, including being above, below, or in the expanded wage and property phase-in range. On the other hand, if your business is a specified service trade or business, it is in the out-of-favor group and you benefit only when you are in or below the phaseout range.

Tax Reform: Entertainment Deductions That Survived

Traditional business entertainment such as business meals and ballgames with clients and prospects died with tax reform. That’s a sad deal, really. On the good news front, your parties with employees remain deductible, as do your employee entertainment facilities and selected other types of entertainment.

Q&A: Say Good-bye to Unclaimed Tax Refunds

Even if you are not required to file a tax return, you need to file a return within the statute of limitations if you are due a refund and you want the cash. If you fail to file a return within the statute of limitations, you forfeit your refund and make a contribution of that refund to the government.

Update: 2018 Health Insurance for S Corporation Owners

In IRS Notice 2015-17, the IRS allowed S corporation owners in 2014 and 2015 to avoid the $100-a-day penalties on S corporation reimbursements of individually purchased health insurance and on providing insurance for the owners only. But 2016, 2017, and 2018 are new years, so what is that status now?

A Tax Break for American Builders—Including You (Yes, You)

You may not think of yourself as a manufacturer, but you might nevertheless qualify as one under tax law. There is a deduction for manufacturing that applies to a much broader array of activities than most people realize. There’s no catch and no recapture associated with this deduction—it’s just extra cash for your wallet. Find out if you qualify.

Arguing with the IRS: Making the Courts Help You (Part 2)

When you and the IRS disagree about an item on your tax return, you need authority on your side to either win your case or avoid a penalty. Court decisions can be a valuable authority to convince the IRS that you are right. We’ll discuss the various types of court decisions and which ones can help you the most.

Marijuana Taxation: Don’t Let Your Cash Go Up in Smoke!

The legal marijuana industry is booming across the U.S. But there are tax problems: since marijuana is still a federally controlled substance, selling it comes with costly federal tax consequences. The good news is that with knowledge of the law in this area and some planning, you can cut the tax bill that Uncle Sam would otherwise send you.

Passive Losses Don’t Destroy Your Tax-Favored Capital Gains

Suspended passive activity losses come about when the losses from all passive activities for the taxable year exceed the aggregate income from all passive activities for such year. These are losses above or beyond what you can deduct under the $25,000 offset for rental activities. When you sell your entire interest in a passive activity at a gain, you have a taxable gain and a jailbreak of those losses and maybe more.

Warning! The IRS Is Outsourcing Tax Debts to Private Debt Collectors

A new law requires the IRS to send its inactive tax debts to third-party private debt collectors. If this happens to you, you need to know how this program works including what to expect and what rights you have.

Unpaid Taxes? Goodbye Passport

If you have “seriously delinquent tax debt,” IRC Section 7345 requires the IRS to certify that debt to the State Department for action against you. The State Department then must refuse to issue or renew your passport, or it can revoke or limit the use of your current passport. To get your passport back, you need to get right with the IRS.

Yes, You Can Settle Your IRS Tax Debts for Less Than You Owe

The IRS can give you monetary mercy regarding your unpaid tax debts by settling them for less than you owe via the offer in compromise program. Like anything with the IRS, this process is not easy, but the result could save you tens of thousands of dollars. We walk you through how to determine whether you qualify and what you could end up paying.

Q&A: Tax Refunds on Unfiled Tax Returns

 

Enlist the Taxpayer Advocate to Help You Alleviate Tax Problems

You might have a friend in the government you don’t know yet. The Taxpayer Advocate Service is an independent office within the IRS that helps taxpayers solve IRS problems that they can’t seem to resolve through normal channels. In some circumstances, the advocate office can force the IRS to give you relief.

Lawbreakers Rejoice! New Law Wipes Away $100-a-Day Penalty

Do you have fewer than 50 employees? Are you in compliance with the Affordable Care Act? Whether you are in compliance or not, we may have some big news for you. First, if you failed compliance, a new law has likely just released you from the monstrous $100-a-day penalty ($36,500 per employee per year). Second, if you made changes to get into compliance, you may have overtaxed your employees. Now, with this new law, you may be able to undo some or all of that overtaxation.

If You Hear This Advice on How to Cut Your Taxes, Stay Away

Some tax strategies claim to help you avoid all your federal income taxes—no math required—simply by making a few straightforward arguments on your tax return. The problem is, they have no basis in law, and in fact constitute tax fraud. The end result will almost certainly be penalties and even jail time. Protect yourself from these scams by knowing how to tell the difference between fairy-tale tax strategies and the real deal.

Want to Leave the U.S.? You May Have to Pay These Taxes

Planning on leaving the U.S.? If so, you have two choices from a tax perspective, but neither is painless. The tax law that applies to foreign living and expatriation can be tricky, so it’s essential that you depart the country correctly.

Comments from Readers on Last Month’s Tax Cheat Article

 

IRS Pays Whistleblowers for Successful Audits of Tax Cheats

If you report a tax cheat to the IRS, you may receive a portion of any money recovered following an audit. For example, the IRS paid $104 million to a citizen who revealed that his Swiss bank employer was helping clients evade U.S. taxes. If you feel it is your civic duty to report a tax cheat, the IRS would be glad to hear from you and reward you for initiating a successful investigation.

Two-Person Seminar

A precedent-setting court case establishes that one-on-one training can count as a business seminar for tax purposes. Where do you want your one-on-one seminar to take place? Disney World? St. Thomas?

Unfiled Tax Returns? Back Taxes? IRS Penalties? Do This!

Has Your Swiss Banker Betrayed You to the Feds?

Facing IRS Penalties? Avoid Them with IRS Mercy; Here’s How

As a small business owner, you have good odds of someday facing a penalty for late filing and/or late payment of your or your corporation’s taxes. It’s likely you will think that you have to pay the penalties. But as you’ll learn here, when you know the rules of the road, you can travel the IRS mercy path and have those penalties forgiven.

Captive Insurance: Huge Tax Shelter

Do you have significant insurance needs? If so, the captive insurance company might save you money on your insurance, create a nice tax shelter, and produce a pile of cash. To achieve this agreeable result, you have to follow the rules and consider the tax code safe harbors.

Want a Big Deduction for Your New Vehicle? Here’s Good News

Lawmakers have yet to decide if they will retroactively enact bonus depreciation and the higher Section 179 expensing limits for 2015 purchases. But if you’re looking to buy a large SUV or truck for your business, you may be surprised to learn how fast you can write off the full cost of the vehicle even if lawmakers fail to extend the tax breaks. Knowing the write-offs may entice you to pull the trigger on that purchase immediately instead of waiting for changes in the law.

How to Deduct Mortgage Interest When You Need Someone Else’s Name on the Deed

How C-Corporation Owners Can Pay Zero Taxes on Gains: Tax Law Allows a Windfall “Wait to Sell” Strategy

2015 is the first year that stockowners can sell their C corporation stock completely tax free under Section 1202 of the tax code. If you started a C corporation or purchased stock recently and you qualify for this rule, you need to determine the date you acquired the stock and wait five years before you sell. This waiting period could save you thousands and even potentially millions of dollars in taxes.

How S Corporation Owners Can Cut Taxes by Keeping a Lid on Their Salaries

The number one way for S corporation owners to pay fewer taxes is to set the right salary. To do this, you want to find the salary sweet spot—an amount that is low enough to save you taxes but high enough to satisfy the IRS and not create a risk of audit. This article summarizes the important cases and rules you need to know in order to determine the right salary for your business.

U.S. Government Models Gambling Tax Law after Vegas Casinos

Are you a recreational gambler? If so, you likely know that you are required to keep income tax records that prove your gambling winnings and losses. If you don’t have the records, your winnings are taxable and your losses nondeductible. Holy smokes! That’s terrible. Don’t let that happen. See why you need the records. Learn what the IRS and the courts say your records must show. Spend a little time with this article so that you can avoid overpaying your taxes on your gambling activity.

Do You Make This Big Mistake with Your Independent Contractors?

If you have workers who are paid on a 1099 as independent contractors, you need to avoid one fatal mistake. When you make this fatal mistake, you subject your worker employment classification to either the tax court’s common-law seven-factor test or the IRS’s 20-factor common-law test. Both of these tests are hard on the employer and often result in harsh reclassification of the 1099 independent contractors to W-2 employee status.

 

This Mistake Causes You to Pay Your Payroll Taxes Twice

Is your last payment of payroll taxes in the hands of the IRS or in the hands of an embezzler? How would you know? There’s one easy way to know: simply use the IRS’s online service to check. But that’s a lot of trouble, so why bother? Because if the money has been stolen, you (1) are out the money and (2) have to pay that same amount to the IRS. If you have to pay twice, you are going to be furious. Don’t let this happen.

 

Tax Preparation Firm Charges Illegal Commissions

One of our subscribers encountered a tax preparation firm that charges a commission for amending past returns. Our subscriber asked this question: “Is such a commission legal?”

Prevent Payroll Embezzlement

You need preventative steps to ensure that you are paying the wages you think you are paying to your employees and that your payroll tax deposits are actually being sent to the IRS and not to an embezzler’s pockets.

Tax Tips for Lawns and Landscaping

You want repairs and maintenance deductions on your business and rental properties. Here are tax tips on finding tax deductions in your lawn, landscaping, and other land improvements.

Say Good-bye to Unclaimed Tax Refunds

Even if you are not required to file a tax return, you need to file a return within the statute of limitations if you are due a refund and you want the cash. If you fail to file a return within the statute of limitations, you forfeit your refund and make a contribution of that refund to the government.

How Much Does the New Health Care Law Cost You?

Most of this issue explains how you pocket money from the new health care tax credits. That’s nice. But you have to ask, who is paying for my tax credits?

IRS Uses UBS Swiss Bank Account to Nail California Man with Tax Fraud

Swiss UBS AG and other supposed tax havens and secret banks are divulging the names of tax cheats to the U.S. government.

Inheritance Advice for the Family Home

Distributing the assets of an estate needs a tax plan to ensure the favorable results embedded in the tax law.

Federal Income Tax Rates to Increase?

Federal Reserve Board Chair Ben Bernanke told a House Budget Committee to address the government’s long-term fiscal shortfall with higher tax rates that do not impede economic growth.

More 1099s, Audits, and Enforcement

Treasury Secretary Timothy Geithner told the Senate Finance Committee that more 1099 reporting and IRS audits provide the solution to the tax gap.

Big Budget Deficit

The Congressional Budget Office estimates that this year’s federal budget deficit will top last year’s by more than 250 percent.

Weekly Lunches

Every business meal absorbs your personal consumption, and the IRS allows that consumption as a business expense almost all the time. But the IRS can, whenever it gets the urge, invoke Sutter to destroy your deductions.

AMT More Likely to Hurt You in 2008

In upcoming years, taxpayers with cash income greater than $50,000 are more likely to pay the AMT than taxpayers with cash income of $1 million or more. Fixing this will require a large tax package.

 

GAO Tells Senate: “Fiscal Outlook Is Bleak and Action Is Needed to Avoid Serious Economic Disruption”

In testimony before the Senate on January 29, 2008, the Government Accountability Office (GAO) said: “Under any plausible scenario, the federal budget is on an imprudent and unsustainable path. This budget imbalance will necessarily result in tax increases and spending cuts. (And all this is before Treasury Secretary Paulson’s first $700 billion bank bailout.)

 

AMT Patched, Mortgaged

In what is becoming an every year outrageous event, lawmakers patched the alternative minimum tax (AMT), adding $50 billion to the federal deficit.

 

Peanuts for Mortgage Relief

Despite the new law’s press, the Mortgage Forgiveness Debt Relief Act of 2007 only offers relief to a limited number of qualified homes.

 

Capital Gains Are Biggest Tax Expense

A government committee identified the capital gains’ 15% rate as the biggest tax expense from 2007 to 2011. This expense is growing, and just might prod some lawmakers to increase the rate that’s now available. Take advantage of current rates!

New Rules on Contingent Fees

With four exceptions, tax law prohibits contingent fees with regard to any matter before the IRS. The beauty of the contingent fee for the taxpayer is the certainty that you don’t pay if you don’t get a positive monetary result. This certainly beats the alternative: big payments, no results.

Putting Tax Practitioner’s Feet to the Fire

A new law makes tax preparers subject to higher penalties for errors, and establishes high standards for claims made on tax returns. The moral: if your tax advisor examines your issue and tells you that you can claim that deduction, you have a very solid claim.

Taxation of Social Security

Be alert to, and beware of, government studies. The result of a tax study is almost always bad news for you. In this case, we foresaw the problems with the 1986 tax “reform.” What’s on the radar next: the new social security study group and the AMT.

Jail Time for Not Filing Tax Returns

Anthony Lee was sentenced to seven months in prison and three months of home detention for failure to file his tax returns. He owed $76,853 in taxes and an extra fine of $10,000. Know the law!

The Value of Documents When You’re Arguing with the IRS

IRS auditors do most of the audits. They are not accountants (IRS agents are accountants); they might be wrong about tax law. It’s your responsibility to know the law and use it to prove your point. This article tells you how to use court rulings and documents that enforce your rights in your tax-law partnership.

IRS Releases Fees for 2007 Private Letter Rulings

Getting the IRS to give you an advance ruling on a transaction or deduction can be very worthwhile. It now costs money, but it might be worth getting the opinion you seek. If your ruling does not fit into the three major categories they list, your fees may vary. The highest fee is $50,000 for a pre-filing agreement.

Extenders Extended Again

Extenders delay the expiration of a specific tax law, which hides budget costs and allows lawmakers to shirk their responsibility to make good law. We summarize the current extenders to inform you of where you stand with the tax law.

Extenders Law Adds New Extender for Mortgage Insurance

In the latest installment of gimmicky extenders, lawmakers have created a one-year tax benefit window for deducting mortgage insurance. What are the lawmakers thinking? Presumably, they hope the mortgage insurance deduction will boost the housing market in 2007. If this works, look for an extension to 2008.

Actor Wesley Snipes Indicted for Tax Fraud

It matters not that you used a paid tax preparer to help you, you commit tax fraud and face jail time when you take illegal tax protestor positions on your tax returns.

Fiscal Lunacy Award #19

The federal budget is understated because it does not include amounts for tax extenders—tax laws that are scheduled to expire, but that will not expire because they will be extended. Yes, it’s lunacy.

Court Rules Taxation of Injury Settlement Is Unconstitutional

Winning a court case for physical or nonphysical injuries triggers tax laws that can dramatically impact the after-tax value of any cash you receive for injuries or damages.

Fiscal Lunacy Award #9

By using outside collection firms instead of IRS personal, the government is going to lose $8.6 billion a year in revenue.

Fiscal Lunacy Award #17

Government whacks 157 estate tax lawyers at a cost to taxpayers of $2.6 million a day.

The AMT Attack Creates Two Surprise Casualties

The AMT taxes the deductions you claim on your regular tax return. For example, the AMT taxes the deductions you claim for state income and sales taxes. Further, the AMT taxes the personal exemptions you claim for yourself, your spouse, and your dependent children. This is not a typo. It’s true. The AMT is the most unfair tax since direct confiscation of assets.

Heavy SUVs Still Tax Favored

Tax law continues to favor the heavy SUV over the typical passenger automobile. The heavy SUV qualifies for additional first-year expensing of up to $25,000 and it’s exempt from the gas guzzler tax.

IRS Revokes Letter Ruling

It is highly unusual for the IRS to revoke a private letter ruling. You can protect yourself from a revocation by making a proposed transaction the subject matter for the ruling.