Rarely has there been such a major difference between the laws in effect in one year and the next. The maximum income tax rates next year could be as high as 43.4% on ordinary income (44.6% if the potential impact of reinstated limitations on itemized deductions is taken into account)
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TOPICS / TAX
Individual income taxation
Spousal payments are not child support
The Tax Court held that spousal support payments received by a taxpayer from her ex-husband prior to the fourth and final support reduction were alimony payments, not child support, since the final reduction was not clearly associated with a contingency related to a child. Generally, cash payments received by a
Income from partnership is self-employment income where taxpayer chose not to be a partner
The Eleventh Circuit Court of Appeals held that payments a taxpayer received from a nursing home business were taxable self-employment income despite the taxpayer’s convoluted attempts to characterize them as partnership distributions (Plotkin, No. 12-10620 (11th Cir. 11/27/12), aff’g T.C. Memo. 2011-260). The taxpayer operated nursing homes through various partnerships
New ITIN procedures issued for 2013 filing season
As the IRS promised when it issued the strict new individual taxpayer identification number (ITIN) procedures earlier this year, it has issued slightly easier procedures, effective Jan. 1, 2013, for the 2013 filing season (FS-2012-11). While some requirements have been eased slightly, others have been made more stringent. The IRS
Failure to enact AMT patch could push start of tax season to March for millions, IRS warns
As the end of the year approaches, media attention is focused on the “fiscal cliff,” but a much more immediate result of Congress’s inaction threatens the 2013 filing season: the alternative minimum tax (AMT) patch, which expired at the end of 2011. The IRS warns that the start of tax
Hurricane Sandy victims can take hardship distributions, loans from retirement plans
The IRS on Friday announced that it will allow taxpayers who have been adversely affected by Hurricane Sandy to take hardship distributions or loans from their retirement plans (Announcement 2012-44). To qualify under the announcement, hardship distributions made on account of a hardship resulting from Hurricane Sandy must be made
Modernized e-File is improving, but IRS can’t retire legacy system yet
The Treasury Inspector General for Tax Administration (TIGTA) on Wednesday reported on the IRS’s progress in retiring its Legacy e-File system and moving to the Modernized e-File (MeF) system (TIGTA Rep’t No. 2012-20-121). The IRS started to phase out the legacy system in 2004 with the introduction of an internet-based
IRS extends deadlines, provides relief for Hurricane Sandy victims
Late on Friday, the IRS announced various tax relief measures for individuals and businesses affected by Hurricane Sandy in Connecticut, New Jersey, and New York (e-News for Tax Professionals No. 2012-44). The relief applies to taxpayers in areas in those states declared a disaster area by the Federal Emergency Management
S.C. taxpayers’ Social Security numbers, credit cards hacked
The South Carolina Department of Revenue is providing affected taxpayers a year of credit monitoring after a hacker stole information including 3.6 million Social Security numbers and 387,000 credit and debit card numbers from its computer systems. State revenue officials announced Friday that the S.C. Division of Information Technology learned
Facing the tax cliff
You can’t pick up a newspaper or go online this fall without seeing stories about the coming “tax cliff” or “taxmageddon”—the time at the end of this year when the current tax rates for income, capital gains, gifts, and estates are scheduled to expire. Mostly overlooked by the news media
Charitable contributions of vehicles
Your clients may ask about donating used vehicles to charitable organizations. Donating a car is a good way to get a tax deduction, but increased scrutiny by the IRS means taxpayers need to have a good understanding of the rules related to the items claimed on their return. Clients should
What is an item of property?
The Tax Court held the IRS properly recharacterized income generated from the rental of semi truck tractors and trailers as nonpassive under the self-rental rule, since each tractor or trailer was considered an item of property under Regs. Sec. 1.469-2(f)(6). Generally, taxpayers’ passive losses are currently deductible only to the
Fiscal worries to persist regardless of who wins election
The “fiscal cliff” and long-term government deficit issues are weighing heavily on the minds of finance professionals, and they do not expect business conditions to improve regardless of the results of the Nov. 6 presidential election. Three-fourths of 949 executives who responded to a survey at the annual conference of
IRS announces inflation adjustments for 2013
On Thursday, the IRS released its annual revenue procedure making inflation adjustments to the gift tax annual exclusion and other items for tax years beginning in 2013 (Rev. Proc. 2012-41). The gift tax annual exclusion will increase from $13,000 to $14,000 in 2013 and the amount of foreign earned income
IRS issues interim ITIN procedures for 2011 tax returns on extension
The IRS has posted special instructions for certifying acceptance agents (CAAs) to use in certifying identification documents for 2011 tax year filers who are filing on extension—returns that are due by Oct. 15, 2012. The identification number issued under these special instructions will be valid until Oct. 15, 2013. A
IRS’s “Fresh Start” program expands payment options
Clients should always be encouraged to file their returns on time and pay as much of the balance due as possible, but those that cannot pay in full are not out of options. Changes the IRS has made as part of its “Fresh Start” initiative over the past two years
Responding to a 90-day letter
Under Sec. 6212(a) the IRS can issue a statutory notice of deficiency, also known as a 90-day letter, when it determines a deficiency in an income or estate and gift tax liability. A 90-day letter is a formal legal notice, sent by certified or registered mail. Taxpayers have a statutory
Tax Court’s denial of easement deduction deemed unreasonable
The First Circuit recently held that a Tax Court decision disallowing a couple’s deduction for a qualified conservation contribution of a facade easement was an unreasonable and overly restrictive interpretation of the extinguishment provision of Regs. Sec. 1.170A-14. The First Circuit viewed the Tax Court’s reading of the regulation as
Special per diem rates updated for 2012–2013
The IRS on Wednesday issued the annual update of special per diem rates for use in substantiating certain business expenses taxpayers incur when traveling away from home (Notice 2012-63). The notice provides the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and the rates and
AICPA urges Congress to quickly fix tax cliff
Congress must reach an agreement on expiring tax provisions as soon as possible because small businesses are being impeded from long-term tax and cash flow planning and prevented from making informed decisions. That is the message Jeffrey Porter, vice chair of the AICPA Tax Executive Committee, delivered to the House
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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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