Formerly available only to large and midsize businesses and in a geographically limited pilot program for smaller entities, the IRS’s Fast Track Settlement program is now available to smaller businesses nationwide, the IRS announced Wednesday. Fast-track settlement allows the IRS and business or self-employed taxpayers under examination to use alternative
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TOPICS / TAX
Business tax
Act before the deadline: Exclusion of 100% of QSBS gain
Taxpayers have a short window in which to act if they want to take advantage of the Sec. 1202 provision that allows exclusion of 100% of the gain realized on the sale or exchange of qualified small business stock (QSBS). Unless the law is amended, for QSBS acquired after Dec.
When is a stock worthless?
When an S corporation’s stock becomes worthless, shareholders are treated as having disposed of their entire interest in the S corporation for passive activity loss purposes, allowing the shareholders to deduct suspended passive losses from the S corporation without regard to the passive activity loss rules. As demonstrated in Bilthouse,
New guidance on gift cards and deferral of income
Gift cards and gift certificates have an appealing feature that makes them desirable to both givers and receivers—convenience. Nowadays, many gift cards are not limited to a specific retailer; some gift cards are accepted by multiple merchants. Under prior law and guidance, revenue from gift card sales was recognized in
Business or hobby? The nine factors
The IRS may question taxpayers regarding whether an activity is a business or a hobby. If the activity is not engaged in for profit, it is subject to the hobby loss rules in Sec. 183, and its deductible expenses are limited to the amount of income it generates, further subject
New method for determining who gets Sec. 199 deduction under contract manufacturing arrangements
The IRS issued new guidance to examiners in its Large Business & International (LB&I) Division regarding how to determine which taxpayer is entitled to claim the Sec. 199 domestic production activities deduction in a contract manufacturing arrangement (LB&I-04-0713-006). The directive replaces earlier guidance (LB&I-4-0112-001) issued last year, which had used
Transfer pricing and its effect on financial reporting
This article examines the relationship between transfer pricing and an entity’s tax and financial reporting. Due to increased IRS audit procedures, transfer pricing has become one of the riskiest areas for multinational corporations from both a compliance and tax planning perspective. Amazon, AOL, Adobe, Hewlett-Packard, Microsoft, and other multinationals have
Rules for deferral of income from gift card sales clarified
The IRS issued guidance clarifying that taxpayers that sell gift cards can defer recognizing income from the sale of gift cards redeemable by an unrelated third party until the year after the payment is received (Rev. Proc. 2013-29, clarifying and modifying Rev. Proc. 2011-18). With the rapid growth in the
IRS updates special per diem rates for 2013–2014 travel expenses
On Wednesday, the IRS issued its annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home in 2013 and 2014 (Notice 2013-65).The notice provides the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and
Proposed regulations change definition of R&D expenditures
In proposed regulations issued on Thursday, the IRS provided guidance on the treatment under Sec. 174 of research and development (R&D) expenditures incurred in connection with the development of tangible property, including pilot models (REG-124148-05). The proposed changes would, among other things, settle the question of whether the sale of
Preventing a challenge to (un)reasonable compensation
As the IRS increases scrutiny of executive compensation, CPAs need to proactively advise their clients on how to withstand these inquiries. As a result of IRS training initiatives, three types of entities draw the most attention and therefore need good advice from CPAs. First, closely held C corporations are examined
IRS strikes out against Steinbrenner
In a family trust case, the U.S. District Court for the Middle District of Florida found in favor of the son of the New York Yankees’ late owner, George Steinbrenner, by ruling that a claim for refund was timely filed and that the date of payment was the correct starting
No constructive dividend from services rendered at cost
The Tax Court held that the sole owner of a construction corporation did not receive a constructive dividend in the amount of forgone profit when the corporation built a lakefront home for him and his wife at cost. The shareholder fully reimbursed the corporation for its costs, including overhead, and
IRS postpones employer health care penalty and information reporting
The IRS postponed for one year the large-employer health care penalty and certain information-reporting rules that had been due to take effect starting Jan. 1, 2014. The delay was informally announced July 2 on a Treasury Department blog, followed a week later by Notice 2013-45, which postpones to 2015 the information-reporting
Final regs. adopt differential income stream method for cost-sharing agreements
On Monday, the IRS issued regulations (T.D. 9630) that govern the application of the differential income stream approach to cost-sharing arrangements. The regulations finalized without change regulations proposed in 2012. At the end of 2011, the IRS published final cost-sharing rules under Sec. 482. The goal of the new regulations
Proposed small employers’ health insurance premium tax credit rules issued
On Friday, the IRS issued proposed regulations governing the Sec. 45R credit for small employers that offer health insurance coverage for employees (REG-113792-13). The proposed rules incorporate the provisions of Notices 2010-44 and 2010-82 (which were issued to provide guidance for employers claiming the credit between its original 2010 effective
Amounts on late-filed S corporation return were not disclosed on taxpayer’s return
For purposes of determining whether there had been a substantial understatement of gross income on a taxpayer’s return, the IRS Office of Chief Counsel determined that amounts on a Form 1120S, U.S. Income Tax Return for an S Corporation, filed after the three-year statute of limitation expired, were not considered
Revenue procedure provides liberal relief for late S corp. elections
On Wednesday, the IRS consolidated the provisions of a number of previous revenue procedures for requesting relief for late S elections under Sec. 1362, late qualified subchapter S trust (QSST) elections, late electing small business trust (ESBT) elections, late qualified subchapter S subsidiary (QSub) elections, and late corporate classification elections
“Private attorney general” can deduct his lawyers’ fees as trade or business expenses
In a case of first impression, a federal district court held that a taxpayer who zealously and single-mindedly pursued False Claims Act lawsuits against his former employer was engaged in the trade or business of prosecuting those lawsuits and he could deduct legal expenses related to that trade or business
IRS issues final rules on exceptions from REIT or RIC built-in-gain recognition
On Thursday, the IRS issued final regulations that provide guidance on the recognition of built-in gain in certain transfers of property from a C corporation to a regulated investment company (RIC) or real estate investment trust (REIT) (T.D. 9626). The final regulations adopt proposed regulations issued in April 2012 (REG-139991-08)
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SPONSORED REPORT
Preparing clients for new provisions next tax season
As the 2025 filing season approaches, H.R. 1 introduces significant tax reforms that CPAs must be prepared to navigate. These legislative changes represent some of the most comprehensive tax updates in recent years, affecting both individual and corporate taxpayers. This report provides in-depth analysis and guidance on H.R. 1.
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